sveza.com

SUSTAINABILITY 2019 REPORT CONTENTS

About Sveza 4 Sustainable Development and 16 Governance 38 Green Production 54 1 2 CSR Strategy 3 4

Governance Structure 40 Sustainable Forest Management 56 Key Achievements in Sustainable Development in 2019 6 Managing Sustainable Development Issues 18 Business System 41 Lowering Environmental Footprint 71 Key Events in the Company History 8 Stakeholders Engagement 23 Innovation Management 43 Responsible Consumption 77 Our Values 10 Quality Management 46 Industrial Safety And Labor Protection 85 Location of Operations 11 Customer-Oriented Approach 48 New Development Strategy 12 Ethical Business Conduct and Information Transparency 50 Markets Served 13 Activities, Brands, Products and Services 14

5 Local Communities 98 6 Employees 114 7 About the Report 138

Economic Impact on the Regions of Presence 100 Staff Structure and Personnel Policy 116 Appendices 143 Social Projects 104 Recruitment and Promotion System, Respect for Human Rights 118 Motivation and Remuneration 121 Evaluation of Employees Performance 123 Training and Development 124 Social Support for Employees 127 Corporate Culture and Volunteering 129

2 Sveza Sustainability Report for 2019 1 SUSTAINABLE GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT STRATEGY

It is worth noting that we have added value to customers, Our priority is to create a culture Dear friends! successfully advanced in all improve customer service in key of safe behavior for employees. MESSAGE FROM CEO these areas. In 2019, we started industries, and work to reduce This year, we joined the United our own procurement of raw delivery times. Therefore, the next step Nations Global Compact, an materials, discovered new markets, was a project that we international initiative whose strengthened our positions in We follow the previous course named as epidemiological participants strive to conduct previously developed areas, towards innovation both in the mini‑transformation. At the first and finished the year with good stage, we analyzed best practices their business for the benefit field of creating new types of financial results in general. and quick solutions to ensure of nature, society and future More than 7.6 billion rubles products, improving production safety during the epidemic. generations. Today this global have been spent on expansion technology and in improving The second stage is training of movement of responsible top and modernization of existing business processes. managers in the field of effective companies unites more than production facilities, as well as on management in crisis situations. 13 thousand participants from environmental, energy, and quality The coronavirus pandemic The third stage is aimed at nearly 160 countries of the world. improvement programs. will not affect the fulfillment maintaining sustainability. The Thus, we have pledged certain of our commitments task is to involve all employees in commitments in the field of However, the COVID-19 coronavirus regarding responsible forest the process of security measures corporate social responsibility pandemic has dramatically utilization and minimization of improvement, following these and sustainable development. affected the situation in the environmental impact. measures and consolidate the world, in the industry and at our results achieved. enterprises. Business plans for We always paid great attention However, this does not mean 2020, made at the end of last year, to the safety of workers, but in We also, of course, maintain our that we are starting to move have lost their relevance. Sveza, the context of the pandemic, obligations to ensure the financial in a new direction with a clean being an export-oriented company, this issue has become literally security of our employees. Despite slate. Responsible attitude largely depends on the dynamics vital. Sveza is included in the economic situation, salaries towards environment, concern of global demand. Therefore, we the list of system-forming were indexed in April this year. for the well‑being and safety of are closely monitoring not only organizations of the Russian employees, assistance to local the Russian restrictive measures Federation economy, which is During this difficult time, our communities in the regions introduced due to the pandemic, why the production process companies hand over personal where we operate have been the but also the situation in other does not stop even during protective and disinfection basis of our activities since the countries of the world. the pandemic. The Company equipment to medical institutions, establishment of Sveza Group. has already allocated about law enforcement agencies We conducted stress tests of our 50 million rubles to ensure and volunteers, and help to In the present report we business development, taking anti-epidemic safety measures. heat the homes of production summarize the results of our into consideration the possible Since the announcement of veterans, elderly residents and work in the field of sustainable duration and consequences the pandemic, the Company disabled people. development in 2019. of restrictive measures due to took steps by equipping all of coronavirus in different countries. its industrial areas with special Today, an open dialogue with In the reporting year, the Although we assume the marking system to maintain social society is more important Сompany launched a long-term possibility of production volumes distance, providing personal than ever. reduction, all the scenarios protective equipment and development strategy aimed considered are ultimately aimed at contact-free temperature Therefore, I am pleased to at strengthening its leadership protecting production, preserving check for employees. For this present you the first report on position and finding new workers associations and stability purpose, 7.3 million rubles were corporate social responsibility and growth points. of the Company. allocated for the installation of sustainable development of the thermal imagers at entrance Sveza Group. We challenged ourselves to Regardless of the development checkpoints. Enterprises have make the most efficient use of of the situation, nothing should intensified the disinfection of renewable forest resources, to change for our clients. premises and equipment, installed Chief Executive Officer improve the quality of service air recirculators, introduced Аnatoliy Frishman and to produce more and more They should still receive the additional routes for corporate products that meet a wide range products they need. We continue buses to reduce the number of of our customers’ requests. to produce products that bring passengers, and much more.

2 Sveza Sustainability Report for 2019 3 SUSTAINABLE GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT ABOUT SVEZA STRATEGY

ABOUT SVEZA 1

Economy People Environment

were planted 1.1 KEY ACHIEVEMENTS IN SUSTAINABLE 6 MILLION as part of in the world in production reforestation DEVELOPMENT IN 2019 No 1 of birch plywood 7,000 employees >1 TREES process

Lost Time Injury 1.2 KEY EVENTS IN THE COMPANY HISTORY 8 production Frequency Rate (LTIFR) 7 production mills 2.23 in 2019 have been spent 1.3 OUR VALUES 10 on environmental MILLION of products MILLION investment in MILLION projects over the 3 1.4 11 1.4 M per year 72 RUBLES training >240 RUBLES past three years LOCATION OF OPERATIONS

product sizes and proportion of female 1.5 NEW DEVELOPMENT STRATEGY 12 200+ thicknesses options 43 % managers 1.6 MARKETS SERVED 13 countries-customers on employee 90+ five continents 67 % engagement rate 1.7 ACTIVITIES, BRANDS, PRODUCTS AND SERVICES 14

4 Sveza Sustainability Report for 2019 5 SUSTAINABLE GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT ABOUT SVEZA STRATEGY KEY ACHIEVEMENTS IN 1.1 SUSTAINABLE DEVELOPMENT

Winning two categories in the Eco Best IN 2019 Awards contest, the independent public award for the best products and practices in the field of ecology, energy and resource conservation

Mill Sveza in Verhnaya Sinyachiha was ranked the best in the category “Charity Activities of Timber Industry Enterprises” in 2019 under Days of Mercifulness of the Sverdlovsk Region 1st position among companies in the timber industry in HeadHunter portal rating “100 Best Employers in Russia”, 3rd position among all companies in St. Petersburg and 36th position in Russia Sveza Active team in Uralskiy (Perm Region) received an award in The Company enterprises in Kostroma “Important Business” category of the and Uralskiy became winners in district competition “Youth–2019” the “Big Business” category of the Mill Sveza in Manturovo won 1st place all‑Russian award “Exporter of the Year” in nomination “Labor Protection” at the regional stage of the All-Russian competition “Organization of High Social Efficiency”. They also won 3rd place in the competition “The Best Specialist in the Fieldof Labor Protection of Kostroma Region”

295th position in the RBC-500 rating (+49, 2018 — 344) Sveza mills in Uralskiy and Verkhnyaya Sinyachiha are included in the Federal Sveza mills in Kostroma and Manturovo register of the all-Russian book of became winners in the “Social Partner honor. The Book of honor includes the of the Year” category in the regional most worthy organizations of various forms of ownership and areas of activity competition “The Best Industrial Enterprise ЕЖЕГОДНЫЙ РЕЙТИНГ КРУПНЕЙШИХ КОМПАНИЙ of Kostroma Region” that contribute to the socio-economic Winner of “Victoria” competition in development of their district, city, region, 355th position in “Expert-400” rating of the “Promotion of Sports” category as well as to improving the efficiency of the “Expert RA” rating Agency (Verkhnyaya Sinyachiha) their industry

6 Sveza Sustainability Report for 2019 7 SUSTAINABLE GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT ABOUT SVEZA STRATEGY

1.2 KEY EVENTS IN THE COMPANY HISTORY

1997 1999 2002 2006 2007 2012 2015 2018

Foundation of Acquisition of The Group was joined The Group of Companies Sveza Company Veliky Ustyug Plywood by OJSC Manturovo united under a single Mill Novator JSC, Plywood Mill, brand Sveza Acquisition of a stock of Vologda region Kostroma region shares in UIFK JSC, village of Pontonny The Sveza Group was Perm Plywood Mill LLC ZAO Fankom Tyumen Plywood Mill, joined by Fanplit JSC, became a part of Sveza became part of the Group, LLC, Tyumen joined Kostroma Group, Perm region Sverdlovsk region the Group

8 Sveza Sustainability Report for 2019 9 SUSTAINABLE GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT ABOUT SVEZA STRATEGY OUR VALUES 1.3 LOCATION OF OPERATIONS 1.4

Safety Sveza Group is one of the largest SVEZA‑Les LLC, which also sells Sveza mills are located in areas vertically integrated companies finished products of the mills in that are traditionally rich in in the timber industry. Production the target markets. In addition, the birch forests. The convenient Customer-oriented approach of plywood and other products Group has created an organization geographical location of the mills is organized at seven Russian that deals with the procurement of ensures optimal logistics. Delivery Teamwork mills. The activities of production raw materials, and the number of of products is carried out by sea, organizations are regulated other companies also exists inside rail and road transport. Efficiency by the management Company the Group. Respect for people

SVEZA-Les LLC in Sveza in Sveza in Kostroma read more p. 130 Saint Petersburg Saint Petersburg Production of plywood and Management Company Plywood production particle boards (Central office)

Sveza in Manturovo, Sveza in Novator, Sveza Resource, Kostroma region Vologda region Vologda region Plywood production Plywood production Forest operation

Sveza in Uralskiy, Sveza in Sveza in Tyumen Perm Region Verhnaya Sinyachiha, Plywood production Production of plywood and Sverdlovsk region particle boards Plywood production

10 Sveza Sustainability Report for 2019 11 SUSTAINABLE GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT ABOUT SVEZA STRATEGY NEW DEVELOPMENT 1.5 MARKETS SERVED 1.6 STRATEGY

In 2019, Sveza developed a new only in the field of creating new the environment. The Company 21 % 30 % 33 % long-term development strategy. types of products and improving was one of the first companies in It is designed to help the Company production technology, but also Russia to develop bioeconomics, take its business to a higher in improving business processes. which focuses on the use of level. The strategy is aimed at One of the links in the updated renewable sources of energy for the most efficient use of forest strategy of Sveza is the launch the sustainable development of resources by applying integrated of its own procurement. At the society and for the production of Sveza’s share in Sveza’s share in Sveza’s share in wood processing. The Company same time, Sveza strives to reduce products that people need. global production plywood production in plywood exports implements innovations not the impact of its enterprises on of birch plywood Russia from Russia Our Main Strategic Priorities 16+90+ 68 % countries around the world new countries where is the proportion of exports in where Sveza products are companies joined the list of Sveza sales delivered customers Customer Centricity Sustainable Operational Efficiency New Points of Growth Development Become a customer- Be the cost leader in Innovation is centric company Increase the level the industry the driver of the of environmental, company’s growth social and economic Main Industries — Consumers of the Development sustainability, reduce Ensuring raw of product risks material security Search and Company Products differentiation, brands integration of new and special products Reduced cost growth points Elimination of risks Sales growth in Construction Transport Furniture and Interiors current markets and Increasing the business segments personnel security and the personnel • Slab formwork • Buses • Furniture frames Sales development involvement in new markets and • Panel formwork • Trailers, semi-trailers • Furniture drawers segments Development of • Farm structures • Vans • Furniture for covering operations area Receiving additional • Industrial floors, decking • Minibuses • Wall panels bonus through service, sales channel • Scaffolding • Campers • Engineering boards management and • Carriers for animals • Floor underlays commercial terms • External finishing of buildings • LNG tankers • Laser forms • Interior decoration of • Boats, yachts • Toys, souvenirs buildings • Passenger trains • Audio speakers • Playgrounds • Airplanes

12 Sveza Sustainability Report for 2019 13 SUSTAINABLE GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT ABOUT SVEZA STRATEGY ACTIVITIES, BRANDS, 1.7 PRODUCTS AND SERVICES Plywood is one of the most eco-friendly types of woodworking products. Birch plywood is characterized by exceptional strength, surface hardness, unique ability to withstand heavy loads, beautiful wood texture, ease of mechanical processing, and the ability to maintain properties under different temperature conditions. Company product portfolio includes plywood and boards presented in more than 200 sizes and thickness options, fully produced from birch raw materials, including special sorts of plywood that meet the highest requirements of the application industries, which are produced under their own brands. Plywood

Laminated plywood Plywood of FC brand Plywood of FSF brand Specialized plywood products Film faced plywood covered with a High quality construction material for interior High quality plywood for indoor and outdoor 15 products with special performance characteristics, special wear-resistant material use with high durability and attractive appearance use with high strength and increased tailored to the needs of the end user moisture resistance Chipboard Total Production, m3

109

22

2019 Chipboard Laminated chipboard A construction material made of birch chips and a Base plate covered with high quality Plywood binder by hot pressing melamine films Boards

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SUSTAINABLE 2 DEVELOPMENT AND CSR STRATEGY

11 70% goals of sustainable of purchases are made development are supported by key partners who by the Company, 6 are follow the principles of identified as priority sustainable development 2.1 MANAGING SUSTAINABLE DEVELOPMENT ISSUES 18 for 2020 Sveza supports the 2.2 STAKEHOLDERS ENGAGEMENT 23 2030 Sustainable Development Agenda and the UN Sustainable 9 Development Goals stakeholder groups are among key stakeholders of Sveza Company

16 Sveza Sustainability Report for 2019 17 SUSTAINABLE SUSTAINABLE DEVELOPMENT AND GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT CSR STRATEGY STRATEGY

Sveza is undergoing a cultural Sveza is a reliable employer: The main directions of 2.1 and structural transformation the Company provides modern Sveza CSR while actively looking for job facilities in Russian regions • Improvement of the territories opportunities to create new where dynasties of experienced MANAGING SUSTAINABLE where the Company operates products. In its effort to become specialists work; it evaluates a leader in the timber processing the work of employees in a fair • Environmental education for industry, Sveza pays great way and provides them with a children and youth DEVELOPMENT ISSUES attention to taking care of nature comprehensive social package. • Caring for socially vulnerable and sustainable development. We believe that the safety of groups of the population: our employees is the top priority children, veterans and the In 2019, Sveza adopted a new long-term strategy based on four key priorities. It focuses on As part of the new strategy, and we do our best to provide elderly the Company intends to use the them with comfortable work customer-centricity, operational efficiency, sustainable development and new growth points. • Support for mass sports and The processes of change that take place in the Company involve its development with an tree as efficiently as possible, environment. Sveza develops because this is not only a matter corporate culture, provides healthy lifestyles emphasis on efficiency, as well as the ability to respond to economic and market changes. of profit, but also of preserving conditions for self-realization and • Support for projects in the field the environment for future development within the Company. of culture and art generations. In our activities, we It is important to note that our are guided by the principles of social policy applies not only to Sveza relies on three responsible production, rational our employees, but also to the main factors: use of forest resources, we strive territory where the Company Basic forms of CSR for integrated wood processing, operates. Here Sveza implements • Charity and sponsorship Managing the efficiency of we increase the share of green corporate social responsibility 1 • Corporate volunteering production processes energy and practice circular programs, provides charitable economy. Consumers of our assistance, and supports social • Educational activity Development of a business products can be sure that these infrastructure facilities. 2 • Participation in social programs system that includes a set products come from forests with within the framework of of principles, tools, and environmentally and socially multilateral cooperation practices that contribute responsible forestry approach. to business progress

3 Human resources management and organizational development Functional unit Area of responsibility The governance structure of SVEZA-Les LLC includes Department of Economics and Finance Economic development issues functional departments that are also responsible for economic, Environmental impact and other environmental and social topics Production Department environmental issues. Industrial that arise in the Group activities. safety and labor protection The following departments Human resource management, are responsible for making key Department of Organizational social issues related to labor Development and Personnel Sustainable decisions in the field of sustainable relations development: Development Internal and external communications, digital communications, product Increasing the business 1 Department of Communications promotion, corporate social personnel security responsibility, interaction with and the personnel local communities and corporate involvement volunteering

2 Elimination of risks Relations with authorities at all Department for Interaction with levels, including Supervisory Government Authorities authorities 3 Development of operations area Issues of forest management and reforestation control, support Purchasing and Logistics Department for small and medium-sized businesses

18 Sveza Sustainability Report for 2019 19 SUSTAINABLE SUSTAINABLE DEVELOPMENT AND GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT CSR STRATEGY STRATEGY

In 2015, at the historic UN summit implementing the goals lies with their business strategy with the Sustainable Development Goals Company Activities in New York, world leaders the UN member States. However, global priorities of the world adopted the 2030 agenda for the United Nations assigns a community. Sveza contributes to Social Sustainability sustainable development and the crucial role to business in achieving the implementation of the new sustainable development goals the SDG. The UN also challenges agenda, taking into account the 3.8 Universal health coverage, including protection • Voluntary health insurance for employees from financial risks, access to quality basic • Annual medical examinations (SDG). The main responsibility for responsible companies to align specifics of its activities. health services • Medical centers at all enterprises The Main Directions of Sustainable Development of Sveza • Payment for health resort treatment • Projects to support mass sports and Sustainable Development Goals Company Activities healthy lifestyles 4.4 Increase in the proportion of people who have • Partnerships in the regions of presence in Environmental Sustainability in-demand, including professional and technical, the field of personnel training skills for employment and decent work 6.3 Improve water quality by reducing pollution, • Modernization and construction of • Training sites based on the Сompany and eliminating waste discharges and minimizing the treatment facilities specialized educational institutions release of hazardous chemicals and materials, • Construction of local treatment facilities to • Student internships at the Сompany halving the proportion of untreated wastewater, ensure water circulation in a closed cycle enterprises and significantly increasing recycling and safe reuse of wastewater • Renovation of swimming pools for • Staff training programs hydrothermal treatment of raw materials • Additional professional education for employees of pre-retirement age 6.b Support of local communities to participate in • Participation of the Company and improving water management and sanitation employees in riverbank cleaning and 4.7 Knowledge and skills needed to promote • Environmental educational events for young improvement activities initiated by sustainable development, including through people and school children local communities training on sustainable development • Support of student projects in the field of 7.1 Ensuring access to affordable, reliably and • Energy supply to localities in the ecology and sustainable development modern energy supply regions of presence, including using carbon‑neutral fuel 8.2 Increasing productivity in the economy through • “Ideas Factory” project technical modernization and innovation • Production of fuel briquettes • Center of technological development • Provision of firewood to local residents and • Using machine vision to evaluate social infrastructure facilities product quality

11.6 Reducing the negative environmental impact of • Timely renewal of the 8.4 Improving global resource efficiency in • Reduction of energy consumption cities on a per capita basis, including focusing gas treatment plant fleet consumption and production systems, • Reduction of water consumption on air quality and the disposal of urban and and ensuring that economic growth is not other waste • Construction and launch of mini-thermal power plants that run on carbon- accompanied by environmental degradation • Reduction of waste generation neutral fuel 8.8 Protection of labour rights and promotion of • Participation in industry agreements on 11.7 By 2030, providing universal access to safe, • Improvement of the infrastructure of cities safe and secure working conditions Russian Federation timber industry accessible and inclusive green spaces and and towns where enterprises are located. • Health and safety management system public areas Improvement, construction of sports facilities and recreational areas • Employees compliance with safety regulations throughout the production chain 12.4 Environmentally sound management of • The reduction of waste placed in landfills • Reducing injury rates chemicals and all wastes throughout their life • Social and household standard cycle and reduction of their release to air, water • Increase in the portion of raw and soil materials used for production • Improving working conditions in the workplace 12.6 Use of sustainable production methods and • Preparation of sustainable • Virtual reality simulators for training reflecting information on the rational use of development reports employees in the field of safe resources in reports working methods

15.1 Conservation, restoration and management of • Sustainable forest management and 16.5 5 Reducing corruption and bribery in all their • Measures to implement the Anti-Corruption terrestrial and inland freshwater ecosystems management in accordance with FSC forms Policy of SVEZA-Les LLC and related legal and their services, including forests, wetlands, principles and criteria entities mountains and drylands • Preservation of high conservation value forests 16.10 Ensuring public access to information • Publishing press releases and social media posts 15.2 Implement sustainable management of all types • Reforestation, forest care and fire • Holding events for the press of forests, stop deforestation, restore degraded prevention activities forests and significantly increase afforestation • Preparation of sustainable and reforestation • Countering illegal logging development reports

20 Sveza Sustainability Report for 2019 21 SUSTAINABLE SUSTAINABLE DEVELOPMENT AND GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT CSR STRATEGY STRATEGY

Sustainable Development Goals Company Activities 2.1 Economic Sustainability STAKEHOLDERS 9.3 Increasing access of small-scale industrial and • Investment projects to support suppliers other enterprises to financial services, including of wood raw materials from among low-cost credit, and strengthening their SMEs through the allocation of funds integration into value chains and markets for the purchase of equipment, rent or replenishment of working capital ENGAGEMENT 9.4 Upgrading infrastructure and re-equipment of • Reduction of the raw material consumption industrial enterprises to make them sustainable coefficient at the veneer peeling stage due by improving resource efficiency and increasing to the installation of new equipment and the use of clean and environmentally friendly modernization of the existing one Approaches Towards Engagement technologies • Adjustment of equipment settings and additional training of personnel with Stakeholders

17.17 Promote effective partnerships between public • Participation in projects aimed at solving organizations, between public and private priority problems of the presence regions sectors, and between civil society organizations, We build relationships with stakeholders on the basis of equal dialogue and a balance of based on the experience and strategies of using interests. Sveza carefully examines the views of stakeholders on issues that are important partners resources to them and applies a wide range of interaction mechanisms. The Company uses feedback channels to assess the satisfaction level of stakeholders with various aspects of their activities, determine reasonable expectations and concerns of stakeholders and consistently respond to them, including through reporting in the field of sustainable development.

In preparation for joining the Six goals were later identified as UN Global compact, the Company priorities for 2020: The preliminary list of stakeholders analyzed the Group’s short-term included 24 categories of The Key Sveza Stakeholders are: development strategy in terms organizations and social groups of its contribution to promoting that have an impact on the sustainable development by achievement of individual goals Customers (B2B) minimizing negative consequences or on the work of the Company and maximizing the positive as a whole, as well as experience Consumers (B2C) impact on the social area and the impact of its activities/ the environment in the presence products. Directors of all Company Suppliers and contractors regions. In 2019, at the annual departments took part in the conference, the Company procedure for determining the Employees executives expressed their opinion list of key stakeholders. Based on State Authorities on the Group’s priority sustainable the results of the voting, a list of development goals in an online priority stakeholders was formed. Shareholder vote. The list below is not final and may be revised in the future. Media and social networks (journalists, bloggers, influencers)

Universities and educational institutions

NGOs, environmental activists

22 Sveza Sustainability Report for 2019 23 SUSTAINABLE SUSTAINABLE DEVELOPMENT AND GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT CSR STRATEGY STRATEGY

Key Interests Key Interests Stakeholders and Topics for Interaction Channels of Interaction Stakeholders and Topics for Interaction Channels of Interaction

Customers (B2B) • Competitive price • Bargaining State Authorities • Stable payment of taxes • Bargaining on inclusion of priority • Stable supply • Study of customer satisfaction • Ensuring raw material safety investment projects to the lists • Quality of products “Voice of the Client” • Responsible forest management • Investment agreements • Responsible forest management • Handling complaints and dealing • Research and development • Participation in the work of Advisory and with requests expert councils under governance • FSC certification. For more information, • Compliance with legislation • Participation in industry • Participation in industry associations and see the section “Independent Forest • Deep processing of raw materials certification” conferences and exhibitions business events • Attracting investments • Timely delivery • Client services on the corporate website • Vis-à-vis meetings and bargaining • Participation in the socio-economic • Social media • Media development of territories • Media • Customer events (visits to the Media and Social • Employment • Distribution of press releases and production facilities) Media (Journalists, • Environment, responsible water use and messages in social media Bloggers, Influencers) impact on atmospheric environment • Press conference • Sustainable production • Handling complaints and Consumers (B2C) • Economic stability • Round tables • Responsible forest management dealing withrequests • Responsible forest exploitation and • Press-tours to enterprises • Participation in industry • FSC certification management conferences and exhibitions • Quality and variety of products • Participation in the socio-economic • Corporate website • Product safety development of territories • Social media • Fast feedback in the confirmation of orders and resolution of claims • Media Universities • Research and development • Cooperation agreement • Production and delivery time and Educational • Career opportunities • Information meetings Institutions • Cooperation in the field of personnel • Career days Suppliers and • Transparency and accessibility of • Corporate website training for LPC • Internships at the enterprises procurement procedures Contractors • Email • Career guidance lessons, lectures and field • Sustainable production • Vis-à-vis meetings and bargaining trips • Occupational health and safety • Specialized exhibitions and business • Environmental impact events NGOs, • Responsible forest management • Publishing press releases and social media posts • Compliance with labor and • Conferences Environmental • FSC certification • Round tables and conferences environmental laws • Social media Activists • Biodiversity conservation • Public hearings • Long-term partnership • Media • Responsible reforestation • Prevention of forest fires • Working parties Employees • Competitive salary and social package • Corporate magazine • Resource saving • Safe working conditions • Single hot line • Reducing negative impact on • Training and development • Ethics Committee environment • Promotion opportunities • Informational meetings with management: cascade meetings and annual conference • The Survey “Voice of Sveza” • Collective bargaining A special group of stakeholders Consultations with such • Dialogues on goals consists of individuals and stakeholders are an integral part • Personnel committees organizations that have a of the FSC audit and include • Corporate Intranet portal legitimate interest in the products both questionnaires and direct • Social media and services that are generated in meetings. For more information, • Newsletters email the process of forest management, see the sections “Environmental • Information stand as well as those who are interested Responsibility in the Supply • Corporate events in the environmental and social Chain” and “Supplier Social effects of forest management. Impact Assessment”. • Training events and trainings • System of electronic distance learning • Electronic library

24 Sveza Sustainability Report for 2019 25 SUSTAINABLE SUSTAINABLE DEVELOPMENT AND GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT CSR STRATEGY STRATEGY

via their official representatives. bargaining and contract work Today, Sveza does not Suppliers and Contractors Non‑centralized spare parts with major manufacturers of evaluate suppliers according purchases are focused on local resins and films, support business to environmental and social suppliers with minimum delivery processes and implement criteria, with the exception The purchasing direction, which is companies in the industry. It should be noted that the priority times. Approximately 36% these strategic agreements. Employees of suppliers of plywood raw a part of purchasing and logistics Sveza signed a contract with the is given to the proposals of purchases (excluding purchases of from Procurement Service at mills materials and contractors who Department of the management largest European manufacturer industry leaders, global companies plywood raw materials) are carried conduct operational purchasing perform various types of work company, provides the goods and to purchase phenolic films specializing in the production of out in the regions of presence: activities for spare parts and or provide services on the services necessary for the stable used for plywood lamination. specialized equipment, regardless St. Petersburg, Kostroma region, indirect materials for production territory of Sveza enterprises. life of the Сompany. Approximately 16% of the total of their geographical location. Tyumen, Sverdlovsk region, within the framework of standard However, approximately 70% procurement volume, mainly in the Perm region, Vologda region. business processes (bargaining of purchases are made by key The category purchases direction field of services, is carried out in Taking into consideration For interaction with wood with suppliers, placing and partners who follow the principles provides Sveza mills with basic the regions of presence. the policy of centralization, suppliers, see also the section executing orders, communication of sustainable development and (resins and films) and indirect the part of procurements in “Supply Chain”. with suppliers). A special section implement various initiatives to materials for the plywood The investment purchases the category of “Maintenance on the corporate website* is open improve occupational safety and production. Chemical products direction provides investment and Repairs” is performed Management company for suppliers. health of employees, use modern are supplied by leading Russian programs with new equipment. directly via manufacturers or representatives conduct resource-saving technologies and reduce the negative impact on the environment, respect human rights and promote the sustainable functioning of the economy and social area in the presence regions. The vast majority of suppliers are 16% ISO 9001 and ISO 14001 certified. of the total volume of In June 2019, representatives of category purchases are leading Finnish manufacturers of made in the regions of industrial equipment, services and presence materials visited the Sveza mill in St. Petersburg and discussed prospects for cooperation. During the same period, a working meeting with suppliers was held at the mill in Tyumen, where they 36% were introduced to the rules of of purchases in working with Sveza Company. “Technical Maintenance and Repairs” category are carried out in the regions of presence 70% of purchases are made by key partners who follow the principles of sustainable development

* https://www.sveza.com/suppliers/

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Customers and Consumers

One of the features of plywood In 2019, the marketing direction was In turn, many customers, especially market is that 90% of Sveza allocated to a separate Department, the ones from abroad, have products are purchased by large which is tasked with promoting increased demands not only wholesale companies, and only Sveza products on the market, towards the quality of products, about 10% of the products are studying the needs of the industry but also on the environmental and delivered directly to end users. and specific customers in order to social aspects of the Company’s Sveza clients include about offer them in-demand solutions. activities. 400 distributors and traders. The high quality of Sveza products Sveza mills regularly undergo Customer-oriented approach has is largely the result of constant customer audits for compliance always been one of the Company’s communication with customers. with the requirements of key main focuses. In addition, Sveza Feedback from customers helps to customers. new long-term development adjust the operation of enterprises strategy focuses on customer- taking into consideration customer centricity. comments and preferences.

Transformation of processes and mechanisms for working In 2019, another study of the level of customer loyalty with clients is a key necessity for maintaining leadership positions. was conducted using the NPS (Net promoter score) That is why we are constantly methodology. The NPS level increased by 20 p.p. compared looking for solutions that allow to the previous period (from 26 to 46%), and loyalty across us to strengthen our position as a reliable supplier and improve all sales channels increased (by 28% on average for each the quality of interaction with channel). At the same time, the most important areas for the partners. Company’s development were specified: customer service, pricing, and logistics. In 2019, representatives of service for customers with the goods location, customers had to the Korean company, as well functionality of an online store is send a written request to the sales as auditors of the Argentine implemented. By filling out the Department. The new application Institute of standardization and form, the customer can quickly has also an English‑language certification visited the Sveza mill contact the region sales manager, interface, which makes it in St. Petersburg. Facility in Tyumen select the necessary products, convenient for foreign partners. had a planned production audit specify the quantity and delivery conducted by German Institute for methods. As part of the project aimed wood research. at operational efficiency The Company customers — improvement, a new customer Various channels are used to inform wholesale buyers — are able service was created — an electronic existing and potential customers: to control the location of shipment queue. This logistics product presentation at specialized orders by tracking the shipped tool allows planning shipments exhibitions, targeted distribution products. Currently, the evenly, minimizing downtime, of materials about products and system simultaneously tracks and providing customers product solutions, road shows, etc. from 1.5 to 2 thousand vehicles with affordable slots for that deliver Sveza products to transportation arrival. In 2019, the Company official customers. The service covers website sveza.com was updated all export vehicles, as well as A large amount of useful while improving the site sections sea containers. Data is updated information is properly arranged and launching new tools. daily, as information is received in the “Documents” section. The “Products” section is structured from shipping agents. More than The website also regularly by application areas and has a 150 Сompany customers have publishes news about the system of filters that makes the already joined the service. Сompany key events. search process easier. A feedback Previously, in order to find out the

28 Sveza Sustainability Report for 2019 29 SUSTAINABLE SUSTAINABLE DEVELOPMENT AND GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT CSR STRATEGY STRATEGY

at Central office. Employees of Cooperation with Employees other companies of the Group participate in it via teleconference. The meeting summarizes the An open and honest dialogue with issues (remuneration, bonuses, The Committee is headed by the results of the past quarter/year, employees is the basis of Сompany and other payments). All requests CEO. Members of the Committee defines priorities and sets tasks HR policy. Various communication were processed, and all employees discuss each concern separately for the current period. Each channels are used to get feedback. who requested for help received and make a collective decision. employee can send a question the necessary assistance. Each situation is reviewed during to the CEO in advance or ask A single hotline is designed to help one month to thoroughly analyze it during the conference itself employees get an answer to their Any employee who faces all aspects of the problem. and get an answer online. After question as quickly as possible, violations of Corporate Behaviour the meeting with the CEO, the respond to a complaint or problem, rules and who failed to resolve The Committee also provides information is broadcasted to and record important information the issue through their direct guidance on the provisions of the all employees in the course of or suggestions. Requests are supervisor can contact the Ethics Code of Conduct and deals with similar events at the mills. They are accepted by phone, email, or Committee. The request can be issues towards its improvement. conducted by enterprise directors through the corporate portal. sent to the Committee email In 2019, the Committee handled and production managers The service is available 24/7 and address. The Ethics Committee five requests from employees. with specific data on their It also has the option of contacting work of Commission on collective has options either to specifying the guarantees confidentiality and One of the requests was partially business unit. Information from the manager. Using personal bargaining and preparation of working place and department or objectivity of the investigation. confirmed, and administrative meetings is additionally posted account it is possible to plan a the draft Industry agreement on to remain anonymous. The Committee consists of: response measures were taken. in the corporate magazine, on vacation, order a certificate from the timber industry of Russian information stands and on the your working place and access Federation for 2018–2020. • Organizational Development All hotline calls are registered in a A series of cascading meetings is corporate portal. “My Training and Development” and Personnel Director; single database, and a responsible held on a quarterly basis, which portal which contains e-courses, The following issues are discussed person is assigned for each of the • Business Support Director; begins with a meeting between At the annual business books, and other useful during meetings with trade union requests, along with the time frame the CEO and members of labor conference, key managers information. For the convenience leaders: • Economics and Finance for solving the problem. In 2019, associations. The meeting is discuss the Company results of employees, information kiosks Director; • Implementation of enterprises the hotline received 186 calls. Most organized in a face-to-face for the year and determine its are installed at the mills and it is collective agreements; of them were related to personnel • Head of the Legal Department format at one of the factories or development priorities. This possible to access the personal meeting is traditionally joined accounts using them. • Interaction with administration by the shareholder, the CEO of to improve labor protection and Severgroup Alexey Mordashov. All of the above makes it possible industrial safety; to adjust and improve interaction • Events planned in cooperation “My Sveza” magazine, electronic process, increases the level of with administration; newsletters and news feed on the engagement and motivation in > 60 % corporate portal; TV screens at the Company. • Work of trade union of Sveza employees receive factories, as well as information representatives in commissions information during cascading meetings with the participation of stands are actively used to provide Trade Unions and committees, etc.; the CEO and the branch director employees with information. • children recreation activities, At the moment, the Company is The Company respects the health resort treatment of developing a single standard for right of employees to freedom employees (distribution of the design of information stands: of associations and collective vacation packages). their outlook and content will bargaining. Primary trade union be brought to a single format at organizations of Professional all mills. union of forest industry On the role of trade unions in workers of Russian Federation ensuring occupational safety and All employees can access the (Roslesprofsoyuz) operate at security, see section “Trade Union “SAP Personal Account”. Every Sveza enterprises in Kostroma, Participation in Occupational employee, regardless of their Manturovo, Novator and Uralskiy. Safety”. position, can access their personal page from any computer or mobile As a member of all-Russian device and get comprehensive industry Association of employers information on personal issues: “Union of Timber Producers and from the salary list and vacation Timber Exporters of Russia”, the balance to work tasks and results. Company participated in the

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State Authorities

In order to turn the forest industry Sveza Manturovo NJSC and In order to evaluate how into an investment-attractive administration of Kostroma region. investors comply with their industry that can bring significant The Company confirmed the obligations and to determine funds to the Federal and regional implementation of investments the status of projects that have budgets, the state uses the in the amount of 1.77 billion received priority status, on-site mechanism of priority investment rubles for the modernization inspections are conducted by an projects. An investor who has and expansion of the plywood interdepartmental Commission undertaken to build a modern mill operating in the region and that includes representatives deep wood processing enterprise completed the project on time. of Russian Ministry of industry that produces products with high Under the terms of the agreement, and trade, Federal forestry added value receives a forest the Company was granted tax and Agency and regional Executive resource from the state without other benefits, as well as most- authorities. conducting auctions or other favored-nation treatment in the forms of competitive procedures field of forest development. Participating in work of advisory and, in fact, at minimum rates for and expert structures, Sveza renting forest plots. In Perm region, the list of priority conducts a dialogue with the investment projects in the field state on issues related to the Sveza is in constant dialogue with of forest development includes effectiveness of state forest Federal and regional authorities, the “+40” project, which provides management, law enforcement including issues of improving for the expansion of production of forest legislation, protection of the investment attractiveness at Sveza mill in Ural region. forest resources. of the industry, ensuring the Modernization of existing lines Company’s raw material security, will increase the production of Company representatives and implementing its own birch plywood by 40 thousand participate in the following priority investment projects. m3 per year, as well as increase activities: Business and Public Organizations, Plans for significant investments labor productivity, energy • Council for the development in the development of existing and environmental efficiency of forest complex under Participation in Industry Events or new production facilities of the enterprise. 3.5 billion the government of Russian are accompanied by signing of rubles have been invested in Federation; cooperation agreements with the implementation of Sveza In order to keep abreast of the best In 2019, Sveza joined the “National Although not a member of these regional authorities. modernization projects in Uralskiy, • Expert Council on forestry, world market practices, to exchange Working Group on Voluntary organizations, Sveza actively including 2.4 billion rubles for the woodworking, pulp and paper professional experience and to Forest Certification” association, cooperates with the Russian Thus, in 2018, an investment construction of a mini thermal industry under the Committee participate in industry effective which unites all parties interested chamber of Commerce and industry agreement was signed between power plant. on economic policy, industry, solutions, we participate in activities in developing FSC certification and the Association of paper innovative development of specialized public organizations in Russia. Membership in industry specialists, as well as with and entrepreneurship of and industry associations. Association allows the Company the Russian Union of Industrialists State Duma; to have a greater influence on and entrepreneurs. • Working group on improving Sveza is a member of The European the Association activities both forest legislation under the Panel Federation and is a Member at the national and international At the regional level, the Company Federation Council; of The Lignin Club, an organization levels, to quickly obtain the enterprises are part of the chambers that unites participants of the forest necessary information and to of commerce and industry of • Expert Advisory Council for industry who are interested in build professional contacts with St. Petersburg, Kostroma, Vologda, the development of the forest creating a global ecosystem for the colleagues. Sverdlovsk and Tyumen regions, and complex of the Ministry of use of lignin. Perm region. industry and trade of the In 2019, Sveza also started Russian Federation; In Russia, the Company is a member the process of joining the In September 2019, the • Council for development of of the following associations: UN Global compact and joining Company management met forest complex under Governor the Union of timber producers the “National Global Compact with representatives of the of Vologda region. and timber exporters and the Network” Association in Russia, largest production enterprises of Association of furniture and which was successfully completed Cherepovets district at the premises woodworking enterprises in Russia. in early 2020. of St. Petersburg Sveza mill, on the

32 Sveza Sustainability Report for 2019 33 SUSTAINABLE SUSTAINABLE DEVELOPMENT AND GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT CSR STRATEGY STRATEGY

initiative of Cherepovets city branch cooperation. The Company was IV Business forum of industrial of the Union of industrialists and also visited by a delegation of enterprises and entrepreneurs of Universities and Educational Institutions entrepreneurs of Vologda region. Tallinn business club. the Kolpinsky district. An exhibition The delegation got acquainted of the Company products with Sveza mill in St. Petersburg The mill in St. Petersburg was was organized for applicants, Timber industry enterprises have specialized educational institutions Summer Internship Program and discussed the prospects for widely represented at the partners and students, and the been experiencing significant that are located near the mills and mill Director D. Alekseev made personnel problems in recent offer targeted training in technical Sveza has a summer internship a speech at the plenary session years. The number of secondary specialties. However, there is still program for University students dedicated to supporting business professional education institutions a gap in the training system for and graduates, which provides an and entrepreneurship. is decreasing, the number of future specialists in timber industry opportunity to observe how the students who are obtaining the between the training programs Company is operating from the The CCI of Kostroma region issues specialties needed by the industry and the real needs of the industry. inside. The three-month program certificates of origin, as well as in higher education institutions is To overcome this gap, companies is aimed not only at students of certificates of expertise for clients decreasing, and timber industry is of timber industry complex need specialized universities related to of Sveza Manturovo NJSC. Sveza not considered prestigious among to combine their efforts. logging, but also at future managers, mills are also part of the Union young people. accountants and administrators. of timber producers and timber The new educational platform Only the best candidates who exporters of Kostroma region. Sveza is constantly growing can help provide specialists have successfully passed the and developing: its production with specialized education for video interview, testing, and As a member of “Timber Producers capacity is increasing and new several new Sveza projects in office interview are invited to the of Prikamye” Association, Sveza directions are opening up. Vologda region: its own logging internship. is actively involved in planning In order to guarantee the stable and expansion of production at projects of local regulations on development of the Сompany the Сompany mill in Novator. The interns do not just perform development of wood production and create a personnel reserve, In addition to training, the routine duties, but they are also complex of Perm region and Sveza calculates the need for technical school will provide involved as full-fledged participants organization of joint profile events. personnel for several years to advanced training and professional in the work process. Each trainee come. Implementing a program retraining for specialists of must prepare and defend a project In April, a field meeting of to improve personnel security, the enterprises participating in the aimed at solving a specific problem participants of the National Сompany systematically interacts agreement on establishment of a that the Company is facing. Forest Forum was held on with higher and secondary training ground. The trainee works in a team of the territory of Sveza mill in Tyumen. The Company production site was visited by more than 50 guests, including In 2019, Sveza Group Participated in More than representatives of government Strengthening the Material 50 Industry Events, Including: authorities, business, industry Base of Educational associations and academia. Institutions • Russian Championship • Round table of the Association Tyumen mill is also a member of “Logger of the 21st Century” of furniture and woodworking the Union of builders‑employers of In Vologda region, a training in the village Oktiabrskiy, enterprises “Prospects of the Tyumen region. ground is being equipped on the Arkhangelsk region; Plywood Industry in Russia basis of Cherepovets forestry 2019–2023”, etc. and mechanical technical school • National Forest Forum in named after V. P. Chkalov with Tyumen and Perm; In addition, the Company products the participation of Sveza and • St. Petersburg International were presented at international a number of other companies Timber Industry Forum; exhibitions MosBuild/WorldBuild in the industry. Sveza invested • Second World BioEconomy (Moscow, Russia), Branchentag 2.25 million rubles. Thus, the Forum in Finland; Holz (Cologne, Germany), AWFS Company made it possible to (Las Vegas, USA), Kormarine establish training laboratory for • Nothern Light Summit; (Seoul, Korea), TIMBER ISRAEL automation of technological • Conference of the National 2019 (Tel Aviv, Israel), Cairo processes for training in the working group on voluntary WoodShow (Cairo, Egypt), specialties “Automated Process forest certification; BATIMAT 2019 (Paris, France). Control System”, “Locksmith” and “Electrician”.

34 Sveza Sustainability Report for 2019 35 SUSTAINABLE SUSTAINABLE DEVELOPMENT AND GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT CSR STRATEGY STRATEGY

experienced specialists, and their In 2019, Sveza mill in Tyumen to solve personnel problems in ideas are corrected and refined joined the summer internship cooperation with one of the local WorldSkills Russia 2019 together with other members of program and hired first students. schools, as well as the Ural State the team. After successful defence, More than 150 applications Forestry University, one of the Sveza in Kostroma has been “Electrical Work” competencies. they can get a job offer. The summer were submitted for five open leading universities in Russia in the helping organizers to prepare As part of the championship, internship program helps to improve positions from leading regional system of training personnel for competition sites for participants Sveza Company information stand the quality of technical education universities — Tyumen State the forest, chemical, and pulp and of regional WorldSkills Russia was organized on the basis of and reduce the gap between the University, Tyumen Industrial paper industries. The goal of the (“Young Professionals”) specialized educational institutions. education system and the actual University, Tyumen Agricultural partnership is to increase interest competitions for several years. All those wishing were told in needs of production. University of the Northern in the timber processing industry In 2019, competitions were detail about the development TRANS‑Urals. The trainees among young people, as well as to organized in 20 core competencies. programs that the Company offers At Sveza mill in Kostroma, students worked in the labor protection, implement the knowledge gained The total number of students for its employees. About a dozen were trained at production sites, in industrial safety and environment in the course of training. In March involved in the event was about students studying in the specialty the technology and quality service, service and in the service for 2019, Sveza employees took part 200 people. The mill provided of “Electrical Installation” filled the business support service, and organizational development in informational meeting with II–IV assistance in equipping booths out the intern questionnaires right the technical service. In 2019, and personnel. year’s students from Ural Institute for the “Electrical Installation” and there during the event. seven students of Kostroma state Graduates of specialized of Forestry Business and Road University took part in the summer educational institutions can Construction and the Institute of internship program. complete summer internship Forest and Nature Management. with the possibility of further Company representatives told the The target program of summer employment at St. Petersburg meeting participants about the internships is also held at the Sveza mill. In the reporting year, summer internship program. Students of Tyumen forestry tours for high school students in schoolchildren. As a result of Sveza mill in the village of Novator 12 people were trained in various engineering school and technical the city of Alapaevsk, Sverdlovsk cooperation within the framework in Velikiy Ustyug district. Senior services of the mill. In addition, A total of 52 people have school of construction industry region. In addition to exploring of the professional guidance students, master students, and the mill has started cooperation and urban economy visited Sveza the options for future professions, program “School — University — University graduates are invited to with St. Petersburg State Forest already taken part in the mill with a tour. Future carpenters students were told about the Enterprise”, students acquire the participate. In 2019, ten students Engineering University named after summer internship program, and woodworkers listened to the unique economic potential of the necessary applied knowledge participated in the summer S. M. Kirov. About 40 University including 19 people in 2019. technologist lecture and had a region territories, the history of at the stage of pre-university internship program by joining the students have already visited chance to observe eco-friendly Sveza Group, its products, and training, which must meet team of mill employees with official the mill with a tour. Open days In order to introduce students to wood processing. The event the areas of plywood application. the needs of real production. salary and their own work places are held twice a year at the mill, the Company, its products and coincided with International Sveza mill in Kostroma also In spring, Uralskiy schoolchildren in the technical service, business when schoolchildren, students and available vacancies, to tell young Forests Day. traditionally took part in the” Week presented their research papers support services, business system their parents can get acquainted people about the advantages Without a Turnstile “campaign and on responsible wood processing at development, labor protection, with the Company activities. of employment in the industry, Career Guidance for Students held a series of career-oriented the National Forest Forum in Perm. industrial safety and ecology. Sveza mill in Uralskiy has started Sveza specialists conduct active tours to the mill. During the In summer, a group of students career guidance. They use The Company is interested in summer holidays, children of the participating in the pre-university various platforms: they take part attracting young professionals and mill employees were given master training program of Ural Forestry in job fairs, open days of higher increasing the prestige of working classes on plywood production. Engineering University took part educational institutions, organize and engineering professions. in a four‑day training tour to the and conduct tours to production Career guidance activities help Five career guidance tours were mill and studied all the stages of facilities. students decide on their future conducted at the mill in Tyumen in plywood production. profession. Special attention 2019, and seven —­ in Manturovo. In order to demonstrate students is paid to working with high The tours for students of Uralskiy The Company is implementing what exactly is engineering work school students. and Nitvensk towns were carried a large-scale training and in timber industry, the Company out on a monthly basis at development program at the Sveza is preparing a series of videos During the year, career guidance Uralskiy mill. mill in Saint Petersburg. As part of about prestigious and highly paid tours for high school students the open days held twice a year, specialties in the industry. and students were held at all At the beginning of 2019, schoolchildren, students and their the mills. The “Day Without a Sveza mill in Uralskiy, Ural Forestry parents can get acquainted with The head of Sveza Business Turnstile” campaign is aimed at Engineering University and the activities of the mill. System in Manturovo mill held two implementing the early career Uralskiy Village School signed classes for students of Manturovo guidance program for young a three-way agreement aimed and Sharyinsky technical schools people. In September, employees at creating favorable conditions on the topic of using Business of Sveza mill in Verkhnyaya for professional orientation and System tools and lean production. Sinyachiha conducted a series of environmental education of

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GOVERNANCE 3

MILLION MILLION RUBLES RUBLES 390 351,9 3.1 GOVERNANCE STRUCTURE 40 invested by Sveza in economic effect from the projects aimed at improving implementation of proposals of the 3.2 BUSINESS SYSTEM 41 technology and product “Ideas Factory” program in 2019 quality (199 million rubles in 2018) 3.3 INNOVATION MANAGEMENT 43

3.4 QUALITY MANAGEMENT 46

No 1 44% 3.5 CUSTOMER-ORIENTED APPROACH 48 First place in the average of Sveza employees became Media Index among the the authors of ideas, a total of 3.6 ETHICAL BUSINESS CONDUCT AND 50 top‑4 companies in the 5,170 proposals were INFORMATION TRANSPARENCY industry implemented

38 Sveza Sustainability Report for 2019 39 SUSTAINABLE GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT GOVERNANCE STRATEGY GOVERNANCE 3.1 BUSINESS SYSTEM 3.2 STRUCTURE To create a sustainable competitive advantage, the Company implements its own way of conducting and improving business at all Group enterprises, which are called Sveza Business System (SBS). Sveza Group includes 18 private organizations, including both non-public joint-stock companies and limited liability companies. The Group is based on seven manufacturing A business system is a set of companies that produce plywood products and particle boards. In addition, Sveza Group management principles, tools Shift Meetings Meetings at the beginning and at the end of and practices that operate at all a shift, which provide shift feedback to the includes organization that deals with the procurement of raw materials, and a trade levels and are based on a culture foreman and allow to find out the reasons for the deviation from the schedule and determine organization that also serves as a management company for the Group production of continuous improvement. the activities for the next shift enterprises. The main goal of SBS is to increase the efficiency of all processes and involve each employee in the Problem A tool for fixing and organizing the process The management of production is performed by CEO. In accordance with the legislation process of achieving the Company Solving Board of solving problems that interfere with work. enterprises operating performance, CEO is appointed by Company and charters of industrial goals. The SBS implementation Available to all employees as well as determining the participants. Candidates for the enterprises, the Company mission process is managed by the organization values and strategic positions of functional directors is determined by the main management company business development direction of Sveza of management company are shareholder (participant). system development Department, Kaizen Teams Working in a group to solve a specific problem Group is carried out by the sole suggested by the Department and at enterprises it is managed related to quality, productivity, safety and working conditions, etc. Executive body, management for organizational development Production enterprises for the by the mills business system company, SVEZA‑Les LLC. and personnel, and approved production of plywood and development services. The function of the sole by CEO. Since January 11, 2017, particle boards (branches) are executive body of management A. S. Frishman is the CEO of managed by directors. Directors The SBS contains a number of Manufacturing Organization of focal improvements of Competition production KPIs by involving employees in organization in SVEZA-Les LLC, Sveza Group. of production enterprises are practices and tools that help to competitions. Determination of the shift that subordinate to the Operations improve business efficiency. provided the best quality (cost) indicators. Director, directors of functional The winners receive a cup and material rewards divisions of the management organization SVEZA‑Les LLC are subordinate to the General Ideas Factory A program for collecting and implementing employee suggestions for improvement Director of SVEZA‑Les LLC. Through the regulations on branches, job descriptions and issued power of attorney they are 5 С An efficient workplace organization system that helps to reduce operational time delegated with authority, as well as with responsibilities for solving economic, environmental and A system that motivates to achieve ambitious social issues. Branch directors, in Two-Tier Bonus System goals through monetary incentives. Upon turn, delegate responsibilities and reaching the basic goal for key performance authority to their subordinates indicators, the employee receives a bonus, if responsible for the relevant an ambitious goal is achieved the employee receives an increased bonus areas of activity, through orders, memorandums, service instructions and powers of attorney. Standard Operating A document describing the optimal course of Procedure (SOP) production operations, the lead time, as well as the tools and PPE necessary for this process

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This set of tools is basic and is The projects implemented in used in all production divisions 2019 using SBS tools resulted 3.3 of the Company. To respond in improvement of production, quickly to external factors and technological, and logistics INNOVATION requests the Department for processes and operations, Development of Business Systems improvement of product quality, engaged in the exploration and and cost reduction. implementation of new tools. MANAGEMENT

Severgroup enterprises, that makes it possible to replicate participate in the corporate contest Sveza Company being among the best suggestions at other “Best Idea”, and according to the them, introduce “Ideas Factory” — enterprises of the Group. Members annual results they are getting a system for collecting and of the technical Council, including awarded by the General Director implementing innovation the supervisor of suggestion of Sveza-Les LLC managing suggestions from employees. initiator, the technologist and organisation. Any Sveza employee has an the technical service employee, opportunity to suggest an idea for collectively decide on the improving any process. implementation, rejection or submission of the suggestion for An idea is a suggestion that revision. The initiator is provided Based on the results of 2019, provides for a new design or with feedback. 44% of Sveza employees modification of an existing became initiators of ideas product design, modification of Approved ideas are rewarded with and a total of 5,170 proposals production technology, as well as a cash bonus, and if the economic a new organizational suggestion effect is confirmed, the employee were implemented that saves material and financial receives an additional reward of resources. All incoming ideas are up to 10% of the achieved savings registered in a special system amount. The winners from mills

MILLION 351.9 RUBLES the confirmed economic effect from implementation of suggestions from “Ideas Factory” program in 2019

199 mln rubles in 2018 earn more by improving Effective application of production indicators, get more satisfaction Business System tools helps simple and clear from work Company to achieve its goals payment system MILLION in the field of sustainable 96.5 RUBLES development. In particular, improve working worth projects are currently in learn and develop conditions and the process of implementation due to SBS, Sveza employees professionally improve safety level have the opportunity to: in the workplace

provide achieve career growth goals

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Technological In total, during its operation, The HR robot selects candidates Development Centers the technological development for the positions of production center in St. Petersburg processed manager and sales support Those employee suggestions 312 ideas, 73 of them were specialists. The application provides that require significant financial accepted for further study. round-the-clock replenishment investment or technical For 55 projects, a preliminary of the database of applicants, development are transferred from calculation of the financial model reducing time resources for “Ideas Factory” to Technological was made with the planned searching, analyzing questionnaires Development Center (TDC). economic effect of about and conducting interviews. The first center of this kind started 1,595 million rubles per year. to operate as a pilot project in the Seven investment projects and At the mill in Kostroma, the second quarter of 2019 at Sveza two projects that do not require Company launched a virtual training mill in St. Petersburg. The task of investment were defended by simulator for practicing safe actions the center is to search, analyze and the investment Committee with a of personnel on the most traumatic implement innovative solutions in confirmed effect. machine — a birch veneer dryer. the Company aimed at improving With the help of virtual reality the efficiency of the technological The second TDC was opened at glasses, employees of the Company process, launching new products Sveza mill in Kostroma. acquire skills of safe behavior and reducing costs. In September, when working with this equipment. the mill hosted an IT&Digital Digital Innovation Virtual training helps to eliminate workshop dedicated to the latest the possibility of an accident in real information technologies and their The trend towards digitalization conditions. In the near future, the role in the development of Sveza in various fields of activity has development will be applied also at production process. It was also also affected such a conservative other Sveza mills. attended by Severstal and Siemens industry as the timber industry. digitalization experts. During the In the first quarter of 2019, the The Company is implementing an workshop, 98 ideas were suggested, Company launched a recruitment innovative project to detect defects 16 of them were accepted for system based on the Sever.AI using machine vision. Using a consideration by the mill TDC. platform using artificial intelligence. database of thousands of photos,

experts train the camera to “see” to traditional forms of collecting its existing stock, and it is still defects and to accurately classify and processing ideas within the practically unused. plywood sheets by sorts. Sveza mill Company, Sveza interacts with the in Manturovo (Kostroma region) infrastructure of the best industry The updated strategy of the was selected as a test site for using startups around the world through Company also involves expanding this system. a corporate venture Fund. the production portfolio and developing a whole line of Participation in Research and Along with other companies modern biological products. Development that are global leaders in the For more information, see the timber processing industry, Sveza section “Waste Management While building its development participates in the program of and Production of Biological strategy, Sveza is actively the industry-leading Finnish state Products”. searching for new opportunities to scientific and technical research produce products from renewable center (VTT). The program forest resources using the most is aimed at searching for an advanced methods of mechanical alternative to plastics based on the and thermochemical wood use of wood fibers. Sveza has also processing. In 2018, Severstal joined an international program created a separate department for for developing cost-effective development of venture projects applications of lignin, one of the in the field of new production two main substances that make up technologies and materials — wood, along with cellulose. Lignin Severstal Ventures. Due to being a is world number one renewable member of Severgroup, in addition materials as per the amount of

44 Sveza Sustainability Report for 2019 45 SUSTAINABLE GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT GOVERNANCE STRATEGY QUALITY MANAGEMENT 3.4

Sveza Group applies a single quality management system (QMS) for all its mills. The QMS of five mills meets the requirements of ISO 9001:2015 standard and is approved by independent certification bodies*. Each mill has developed a quality policy, defined the goals and objectives of the management system, and developed the main processes in the form of documented procedures. At the management company level, quality issues are the responsibility of the Operations Director and the head of technology development and quality assurance, and at enterprises — the heads of technology and quality services.

The mill production control Requirements for Flexural quality of products. The main systems are certified according to strength, tensile strength, part of the production capacity is the 2+ system in accordance with and cleavage meet European new or upgraded equipment from the requirements of the European standards (EN). Confirmation leading European manufacturers. standard EN 13986:2004+A1:2015, of conformity gives the right to which is confirmed by certificates apply the CE certification mark In order to improve the consumer and protocols of regular in the product marking. Sveza properties of products in Supervisory audits. products meet Russian, American 2018, the Company adopted and European requirements for a comprehensive investment Sveza’s quality standards are formaldehyde content. For more program for quality. As part of harmonized with Russian GOST information, see the section the program, all production sites (all-union state standards) “Environmental Characteristics of of the Group are equipped with 3916.1-2018. Sveza plywood Products”. modern control and measuring successfully passes regular tests devices-moisture meters and “Defect-Efficiency” in foreign laboratories* and meets At the mill in Saint Petersburg, multi-channel flaw detectors In order to minimize the high efficiency. The project will be international quality standards: plywood is certified according that can detect hidden defects. Project production of defective implemented at all other Company to the Mark III system for The introduction of innovative products and quality losses, the mills during 2019–2020. • EN 636:2012+A1:2015; transportation and storage of control methods allows not only “Defect‑Efficiency” project was • EPA TSCA Title VI; liquefied natural gas. The full list of to eliminate defects, but also to launched at Uralskiy and Novator It is expected that results of the • CARB ATCM; certificates confirming compliance prevent their occurrence. mills in 2019. The objective of the project are going to help reducing • DIN 68705-3:1981 (BFU 100). of Sveza products with project teams was to implement the level of defect in 2020. international quality standards is a systematic approach to solving The project success breaks the available on the Company website. problems that prevent defect stereotype that 0% defect level is In 2019, Sveza invested reduction, involve all staff in an unattainable goal. In order to maintain a high about 390 million rubles in the improvement process, and level of quality, a systematic reduce the level of internal approach to problem solving, projects aimed at improving defect by a third compared to multi-step monitoring, and an 8D technology and product the previous year. During the As a result of the methodology are used to identify quality. project implementation, personnel * TUV NORD (at the mill in “Defect‑Efficiency” project underlying deficiencies. Today, surveys, technical audits, visual Saint Petersburg), TUF CERT together for 2019, the defect rate with TUF THURINGEN, etc. Sveza mills are equipped with control of deviations, “Quality

** MPA Bremen, MPA Eberswalde, the most advanced technologies Day” and other methods of Sveza across the entire Sveza PFS TECO. and systems to maintain a stable Business System were performed. Group decreased by 29% The “Quick Victories” method, compared to the results aimed at finding solutions that do not require major technical of the previous period changes or financial costs, showed (from 2.2 to 1.56%).

46 Sveza Sustainability Report for 2019 47 SUSTAINABLE GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT GOVERNANCE STRATEGY

At the same time, the Сompany organic solvents, UV-lacquers Transformation of processes and 3.5 focuses both on product are completely non-toxic. Such mechanisms of work with clients innovations, introducing products are in demand in the is a basic element on the way to CUSTOMER-ORIENTED technically new or improved furniture industry, the production maintain a leading position in the products, and on process of toys, furniture parts and interior market of birch plywood. innovations, mastering new elements. Earlier, this Сompany technologies to improve launched a CNC machining Sveza cooperates with more than APPROACH production efficiency and center with a replaceable shop 150 carriers, using different types commercialization of products. for manufacturing parts of any of transport for transportation Customer-oriented approach is one of the five key values of Sveza. We are constantly looking for shape and complexity from of raw materials and finished solutions that allow us to strengthen our position as a reliable supplier and improve the quality Sveza marketing strategy is plywood boards. products. To ensure high-quality of interaction with partners. Moreover, the new development strategy of the Сompany already aimed at strengthening its market and timely delivery of orders, position in key segments and In 2019, Sveza launched a new the Сompany uses a single refers to customer-centricity, which means providing the highest value for the client at optimal application fields. The stability product SVEZA Hexa — birch logistics platform. In addition to costs for the Сompany. of the Сompany position is plywood with anti-slip coating road transport, the multimodal achieved largely due to the broad and embossed in the shape of a transport was also included To know diversification of the product regular hexagon. The product is in the unified information who our customers portfolio, as well as individual intended for floors of low‑tonnage environment in 2019. Increasing are approach to customers in commercial vehicles, as well as the level of automation of different markets. warehouses, children, sports Sveza transport logistics is an and concert grounds. It has a important step in improving We strive to produce personalized high level of wear resistance and customer service. It also made it products for different consumers, anti-slip properties. The new possible to optimize work with responding to a wide range of product will help the Сompany to road carriers, reduce the impact requests. Sveza Group portfolio expand its portfolio of products of the human factor and reduce includes 14 own plywood exported to the markets of Europe, transportation costs. brands. These are special North America and Asia. products that have distinctive characteristics and are designed to meet the requirements of end users. The Company strives to constantly increase the share of specialized high-margin products designed for the specific needs of 84% specific industries and customers. the OTIFIC indicator (delivery on time and in full) in 2019 Measure To know At the mill in St. Petersburg, the customer customers’ flagship of Sveza Сompany for 67% in 2018 experience and Customer Сentricity needs and how the production of specialized Сompany to increase the products, a new line for the performance efficiency of production of products with their business the application of UV-treated coatings was put into operation in 2019. The unique technology makes plywood particularly strong, resistant to mechanical damage and exposure to sunlight. The whole process is fully automated and absolutely eco- friendly, because unlike traditional lacquers made on the basis of

To do what customers need, while increasing own efficiency

48 Sveza Sustainability Report for 2019 49 SUSTAINABLE GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT GOVERNANCE STRATEGY

• random checks of employees, For example, during the tender In 2019, according to the 3.6 candidates and contractors; process, one of the contracting materials of the BSS inspections, • entrance control during organizations attempted to bribe two criminal cases were also ETHICAL BUSINESS employment and periodic a procurement specialist at Sveza initiated: on collusion between psychophysiological mill in St. Petersburg. The employee the bidders for asphalting the examinations. contacted the security service, territory of the mill in Manturovo which promptly responded and and against an employee of one CONDUCT AND INFORMATION attracted representatives of law of the supervisory agencies who Violation of the policy is fraught enforcement agencies. In 2019, the issued phytosanitary certificates with disciplinary measures for the head of the contractor company without conducting an inspection Company’s employees, including and his representative were fined of products in the interests of TRANSPARENCY dismissal, and for contractors who a large sum by a court decision. a timber supplier to the mill in have been caught in corruption, Penalties in accordance with the Verkhnyaya Sinyachiha. criminal, civil or administrative terms of the contract were also Anti-Corruption liability measures in accordance applied to one of the suppliers for with the legislation of Russian attempting to commercially bribe Federation. BSS prepares reports the controllers of the Sveza raw Sveza operates in a highly All new employees of the BSS provides prevention, detection on the results of internal audits, materials warehouse in Uralskiy for competitive market, and this Company must be informed with and suppression of violations which it introduces to the loyal acceptance of raw materials competition increases every the requirements of the policy of corporate principles and Company’s management, and in that do not meet the quality year. Nevertheless, the Сompany within ten days from the date of legislation of Russian Federation some cases sends applications to requirements. attaches great importance to starting work in the Company. The by employees and contractors the internal affairs bodies. conducting business in accordance electronic document management resulting from imperfect processes with generally recognized system has a mandatory e-learning within the Company, negligence ethical standards, rejects unfair course on Anti-Corruption Policy. and lack of proper control by competition and considers any In 2019, 48 managers and managers and responsible cases of bribery and corruption specialists attended the distance persons. on the part of employees or course “Anti‑Corruption Policy”. Sveza Mill in Novator Joined business partners unacceptable. The following preventive the Charter in the Area of Since 2014, the Сompany has been Employees of the Company are measures are used: Wood Turnover of Vologda implementing the Anti-Corruption required to report any known • inclusion of an anti-corruption Region Policy of SVEZA-Les LLC and cases of bribery and corruption, clause in contracts with related legal entities. as well as violations of the policy, contractors that provides to the immediate supervisor, to for penalties for unfriendly The Anti-Corruption Policy is In the first place, the policy the ethics Committee or to the influence; mandatory for all companies of regulates employee behavior Business Support Service (BSS), the Group. In addition, some mills • periodic audit of contracts in in areas such as gifts and which assesses risks and monitors participate in various regional which the initiators omitted the representation expenses, compliance with the policy. anti-corruption initiatives. Thus, inclusion of an anti-corruption hiring officials, and interaction Employees who inform BSS about Sveza mill in Novator joined clause; with third parties. The policy a corruption violation committed the Charter in the area of wood also regulates the procedure against them may be rewarded. • signing non-disclosure turnover of Vologda region. for evaluating organizations, agreements for confidential The Charter is a joint document of individual entrepreneurs and The main corruption risks are information; the government and the business individuals who are planning related to committing illegal actions • BSS participation in tender community on countering illegal to provide sponsorship or to the detriment of the Company’s procedures; actions on the forest products charitable assistance. interests and in the interests of market. The Charter participants • sending letters to contractors third-party legal entities and guarantee perfect transparency counterparty or cargo carrier, to requirements of the legislation about the need to comply In addition to the policy, anti- individuals in exchange for illegal of their business, confirm their purchase forest products directly of Russian Federation when with the requirements of corruption articles contain the remuneration (effecting the results commitment to the principles of from producers, processors, transporting forest products by anti-corruption policy and Code of Conduct for Sveza of the tender, granting preferences fair competition, and undertake commission companies or other road. legislation; Employees, as well as the Code in the form of more favorable to pay taxes on time and in full. bona fide participants, including of Business Partnership that is prices compared to competitors, • BSS meetings with contractors They take the obligation to show those who signed the Charter, currently being developed. additional volumes, concealment of on the subject of violations and good faith when choosing a as well as to comply with the poorly performed work, failure to abuses; submit penalties, etc.).

50 Sveza Sustainability Report for 2019 51 SUSTAINABLE GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT GOVERNANCE STRATEGY

Company official social media In September, immediately before experience and best practices” Information Transparency accounts is more than 11 million the Day of Forest and Timber topic. Representatives of state people per year. Processing Industry Workers, authorities, industrialists, heads of representatives of Sverdlovsk NGOs, scientists from Kostroma Sveza strives to develop free format. We try to maintain an integrated communications The Company businesses are open mass media visited Sveza mill and Vologda regions met to integrity in terms of interaction a high level of transparency strategy that provides for active to journalists and representatives of in Verkhnyaya Sinyachiha. After share best practices in the field with society. In 2018–2019, the and constantly interact with the cooperation of all services other interested parties. the Company presentation, of environmental protection and management company established media: we send out news about that interact with the external visitors were given a tour to the responsible nature management. a Corporate Communications events and new projects of Sveza, environment. In 2019, in order to In March, bloggers with over production facility, in modernization With the participation of Department and formed a team in prepare comments, organize press organize effective communication thousand followers, participants of of which significant funds have media representatives and the presence regions, which was events and public speeches of with target groups, the Company “Opening Russian Silver Necklace” been invested. regional authorities, the mill tasked with building relationships the Company experts. We always official website sveza.com was project, visited the production and held presentations of new with all stakeholders: employees, respond to requests from the updated. Museum of Sveza mill in Novator In October, Sveza initiated and equipment twice. customers and partners, as well as media and disclose as much to prepare posts in top blogs. The organized a round table on local residents. information as possible, taking into In 2019, the Group share in the total of 38 different events took “Socially responsible environmental account the fact that Sveza is not information field among the place in the mill museum in 2019 management in Kostroma region: We encourage effective a public company. leading companies in the industry and about 600 people visited communication with the external increased from 10% to 14%. it. “Channel 12 Cherepovets” environment and actively use all In all our communications, Publications about the Company production team prepared the story possible communication channels: we strive to comply with are published in three dozen of on implementation of “Novator +52” TV, print and online media, social ethical standards and rules of federal, regional and industry project for a documentary about media, speaking at public events, corporate behavior, demonstrate media. 39% are positive materials, development of Veliky Ustyug. and publishing reports. transparency and show respect for 59 % are neutral materials. human dignity. In 2019, Sveza Company became Any information about Sveza Sveza has accounts on a partner of Earth Hour, an annual operation can be found in official For more efficient use of resources Facebook, VKontakte, YouTube international campaign of the resources of the Company, it is and achieving a synergistic effect, and Instagram. The total coverage World Wildlife Fund (WWF), also available upon request in a the Company has implemented of information posts on the which aims to draw attention to the careful attitude to nature and the problem of climate change. In March, Sveza Group social media account published a series of video interviews with company employees, 14,000 in which they talked about their visitors per month on the Company attitude towards environment. official corporate websitessveza.ru and sveza.com In April, participants of the National Forest Forum in Tyumen visited Sveza mill. The Company production site was visited by about 50 guests, including representatives 2,737 of government authorities, publications (+18 % in 2019), business, industry associations and were published according to academia. On the second day of In December, Uralskiy mill of “Timber Producers of the Kama Medialogia.* the forum, one of the key topics and “Kommersant-Prikamye” Region” association and other of discussion was responsible newspaper held a business public members. Denis Maltsev, attitude to forest resources and lunch to discuss environmental Director of Sveza mill in Uralskiy, No 1 their effective application. The issues of forest management. and Alexander Protchenko, Company specialists told about the The meeting was attended by Head of the Forest Management The best average media Index voluntary certification of the supply among top 4 companies in the representatives of the Ministry Department at SVEZA-Les LLC industry. chain of timber products to the of Natural Resources of Perm were presenting speeches at the mill under FSC system and about region, the charity environmental meeting. plans to modernize and increase Fund “Inhabited Ural”, members the production capacity of Tyumen * https://www.mlg.ru/ enterprise.

52 Sveza Sustainability Report for 2019 53 SUSTAINABLE GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT STRATEGY

GREEN 4 PRODUCTION

MILLION > 1 MILLION 230 RUBLES trees planted by the the total expected economic Company in 2019 effect of environmental projects 4.1 SUSTAINABLE FOREST MANAGEMENT 56 aimed at energy saving by 2025 4.2 LOWERING ENVIRONMENTAL FOOTPRINT 71

4.3 RESPONSIBLE CONSUMPTION 77 MILLION MILLION 240 RUBLES 39 RUBLES 4.4 INDUSTRIAL SAFETY AND LABOR PROTECTION 85 invested in the implementation invested in forest of environmental projects fire prevention from 2016 to 2019

54 SvezaСвеза SustainabilityОтчет об устойчивом Report for развитии 2019 за 2019 год 55 SUSTAINABLE GREEN GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT PRODUCTION STRATEGY

Sveza is in the process of Volume of Road Construction and Exploitation, km 4.1 obtaining additional forest plots for priority investment projects Repair and Mill Year Construction reconstruction Content SUSTAINABLE FOREST in Uralskiy (annual estimated cutting area of 322 thousand m3) 2018 2.4 0 0 and Manturovo (annual estimated Novator 2019 1 1.6 0 cutting area of 175 thousand m3). MANAGEMENT Both investment projects have 2018 0 0 0 Uralskiy been approved at the regional and 2019 0.3 0.8 22.7 federal levels and are at the stage of rights registration to receive 2018 6 22,7 23.55 Verhnaya Sinyachiha Forest Management forest plots for rent. 2019 9.1 24 30.75 2018 1.6 30.3 195 Sveza annually organizes the Tyumen Sveza Group has a long-term Number and Area of Leased Plots in 2019 construction of logging roads 2019 1.5 25.1 195 lease of forest areas with a for the operation of leased total area of 457 hectares with Number of forest plots. a total estimated wood‑cutting Mill lease agreements Total area, ha 3 area of 989 thousand m in four Novator 6 97,080 regions of Russian Federation: Vologda, Tyumen and Sverdlovsk Uralskiy 1 41,964 regions and Perm region. General management of forest operations Verhnaya Sinyachiha 2 130,240 (strategy, development, budget Tyumen 3 175,939 and control functions) is carried out by the employees of the Forest Management Department in the Central office in Saint Petersburg. Actual Procurement, Thousand m3 In each region, there are also regional forest managers who 602.7 perform control functions over forest management. 475.1 Logging and forestry work on leased forest plots are carried out by contractors. By involving local contractors, Sveza provides jobs for the population and provides opportunities for development of small and medium-sized enterprises in the forest sector in the presence regions. In Vologda region, the management of leased land plots is carried out by Sveza 2018 2019 Resource LLC, a private logging Сompany established in 2019. Novator 123.5 290.5 Verkhnaya Sinyachiha 226.8 184.2 Uralskiy 125.0 79.6 Tyumen 0.0 48.5

56 Sveza Sustainability Report for 2019 57 SUSTAINABLE GREEN GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT PRODUCTION STRATEGY

Reforestation Works

Forest restoration is one of only with those suppliers of raw 2018 to 2,200 ha in 2019) using all the most important areas of materials and contractors who possible methods — from planting the Сompany forest policy. We can guarantee the restoration of seedlings and sowing seeds to >1,000,000 conduct forestry in accordance forest resources, and monitors Promoting Natural Reforestation with the principles of responsible their compliance with all legal (PNR). After reforestation, trees planted by the forest management and carry requirements in terms of seedlings and young trees are Company in 2019 out a full range of reforestation reforestation and forestry work. taken care of. In 2020, the plan is activities on leased forest plots. to plant almost a million seedlings. Sveza protects forests from fires In the reporting year, the forest The Company plans to intensify and makes efforts to ensure restoration work was completed the reforestation process using that their biodiversity and by Sveza in full. The Сompany the most modern technologies composition are preserved and increased the area of restored of seedlings with a closed root improved. The Сompany works plots by 24% (from 1,670 ha in system.

Volume of Reforestation Works, ha Verknyaya Novator Uralskiy Sinyachiha Tyumen Total

2018 2019 2018 2019 2018 2019 2018 2019 2018 2019

Natural regrowth 0 0 0 0 0 7.3 0 0 0 7.3

PNR 151.1 501.6 488 395.4 645.09 155.2 129.4 761.8 1,413.59 1,814.00

Planting seedlings 0 13.7 36 45.3 74.1 67.2 60.5 110.3 170.6 236.5

Sowing seeds 0 0 0 0 0 8.7 0 0 8.7 0

Combined 0 6.5 0 0 23 23 0 0 23 29.5 reforestation

Supplementing 0 0 46.5 83.3 17.1 18.2 0 0 63.6 101.5 forest crops

Reforestation 151.1 521.8 570.5 524.0 759.3 279.6 189.9 872.1 1,671 2,198 total:

Thinning in Young Stands, ha Ecology Projects

Cleaning Clearing The Company regularly conducts volunteers, including students public environmental events, which and schoolchildren. In September, 2018 2019 2018 2019 In order to reduce the attract residents of the regions. in support of “Ecology” national competition of valuable target Novator 42.2 147.4 28.7 31.4 More than 30 thousand new trees project, tenants of forest plots breeds with secondary ones and appeared as part of “All-Russian in Tyumen region took part in improve the breed composition, Uralskiy 53.9 45.7 93.5 129.8 Forest Planting Day” campaign reforestation. Sveza Tyumen clearing operations are with the participation of Sveza. Mill planted over 380 thousand 0 0 43 43 carried out. Verhnaya Sinyachiha This kind of event involve not seedlings of Scots pine on an area only employees of the Company, of 87.13 hectares. Tyumen 0 40.2 139.2 163.8 but also their families, as well as

58 Sveza Sustainability Report for 2019 59 SUSTAINABLE GREEN GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT PRODUCTION STRATEGY

Fire Prevention Measures in Forest Areas Own Logging

Forest fires have a negative A high probability of forest fires Due to regular fire-prevention Until 2019, Sveza used the services impact on almost all components occurs after the snow cover measures, there were practically of contractors for procurement of of ecosystems, damage forestry, disappears and with the beginning no forest fires on the forest wood on its leased forest plots. and harm human health and of stable warm weather. Therefore, plots leased by the Company. The updated strategy of the safety. Uncontrolled spread of the main work on fire protection is With the exception of two fires in Company assumes an increase fire is extremely destructive carried out in spring and should be Tyumen on the territory of forest in processing capacity, which for forest biodiversity, leads completed in the second quarter. management in 2018 and 2019 requires the introduction of its own to degradation of ecosystems, (the reason is careless handling of logging, which reliably ensures reduction of the number of forest In 2019, Sveza conducted a fire in a recreational area). stable supplies of plywood ridge. species of animals and plants, and spring fire prevention campaign deterioration of the composition on all leased forest plots in For information about fire safety In December 2019, Sveza of the forest fund. Forest fires Vologda, Sverdlovsk and Tyumen at enterprises, see also the section launched a pilot project of also cause significant economic regions, as well as in Perm “Measures to Improve the Level of its own timber procurement, damage. Buildings and structures region. The Company builds and Fire Protection”. which is implemented by Sveza near forest areas, infrastructure reconstructs fire roads in the Resource LLC. The planned objects, and even entire localities regions where it operates. In 2019, volume of harvesting in Totem are often destroyed. 250 km of new mineralized fire and Tarnog districts of Vologda lanes were created and more region is 250 thousand m3 per Sveza is a conscientious forest than 1,750 km of existing ones year, including 62 thousand m3 — user and is responsible for the were put in order. These areas are plywood ridge. Sveza Resource will implementation of fire prevention cleared of burnt wood residues be engaged not only in providing measures. Forest development (branches, dead wood), they have plywood mills with raw materials projects provide for a whole been mechanically treated, which from its own forest lease, but also system of preventive measures to prevents the spread of fire. in selling the procured wood to prevent forest fires. external consumers. Currently, the main volume of raw materials is supplied to Sveza woodworking mill in the village of Novator in the Velikiy Ustyug district of Vologda investments in timber procurement region, and the balance sheets are equipment and transport. Vertical MILLION RUBLES purchased by producers of pulp integration will allow the Company >270 and paper products. In addition to increase the raw material Investments in Sveza Resource for 2019. By 2028 will amount to to the most modern procurement security and sustainability of its 1.5 billion rubles. complexes for sorted procurement, growing business. Sveza Resource operates 35 units of specialized road construction, In 2021, in order to expand its Fire-prevention measures in forest logging and auxiliary equipment, own procurement operations, The goal is to increase the volume of raw material areas on leased forest plots also which has already been used to a separate department supplies from own lease by provide for the organization of build 15 km of logging roads. Sveza Resource will appear in city water intake sites and entrances of Manturovo (Kostroma region). to them, the arrangement of Thus, the Company has formed a In the next three years, it is 45 % recreation areas in the forest and complete production chain — from also planned to launch its own the installation of fire-prevention procurement of raw materials to procurement in the village of propaganda stands. In those regions sales of finished products. Own Uralskiy (Perm region). where a special fire protection timber procurement is intended regime is introduced by the decision not to replace, but to supplement MILLION of local authorities during the dry the resource base. Sveza does not 39 RUBLES 250 KM 1 750 КМ period, employees of factories and plan to abandon the raw materials were invested in of new mineralized of existing mineralized specialists of contractors conduct from existing suppliers, continuing fire prevention fire lanes were fire lanes were patrols in leased forests. to support them through created put in order

60 Sveza Sustainability Report for 2019 61 SUSTAINABLE GREEN GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT PRODUCTION STRATEGY

Independent Conservation of Biodiversity and Forests of Forest Certification High Conservation Value

All mills of Sveza Group, as well Managing the process of The value of any forest area fungi and microorganisms. Some as the management company, preparation for the certification is determined not only by the sites that perform important are certified according to in the Company is centralized. amount of wood growing on it, environmental and ecosystem FSC standards of the supply It provides for staff training, but also by the ecosystem that it functions are more valuable than chain (Chain of Custody, CoC) development of guidelines, forms. The forest absorbs carbon others. Therefore, all forests in and Controlled Wood (CW). procedures and techniques, annual from the air and stores it in wood Russia are divided into protective, Some branches also have forest control audits, verification of and soil, maintains a favorable whose main task is to maintain the management certificates for compliance with the requirements humid climate, retains precipitation forest environment and perform The Company is responsible for leased forest plots (Forest of standards and other FSC and moisture in the soil, feeds conservation functions, and the origin of wood raw materials Management, FM). Thus, documents by suppliers and streams and rivers with water, operational, intended for wood and uses timber from proven FSC certification confirms that contractors, as well as a full prevents erosion of riverbanks and production with the preservation legal sources in production. all products produced at the range of corrective measures, slopes, and is home to thousands and maintenance of protective and All products manufactured Company enterprises are the result if necessary. of species of plants, animals, ecosystem functions. under the Sveza brand meet of processing legally procured the requirements of Forest wood obtained from controlled or Best practices and successful Stewardship Council™ (FSC™), certified sources. experience in fulfilling certification (license code FSC™-C107425), requirements are scaled across all List of High Conservation Value Forests (Hcvf) Allocated under Certification on Leased Forest Plots a non-governmental non-profit Organizations certified according branches of the Group. In 2019, of Sveza Mill in the Village of Verhnaya Sinyachiha organization that develops to FSC standards sign a the FSC supply chain certificate the world largest voluntary Declaration of compliance with (license code FSC™-C144965) was Area covered by % of the total forest certification system. FSC FSC values, committing themselves awarded to Tyumen plywood mill, HCVF type forest, ha rental area certification is widely recognized directly or indirectly (through which joined Sveza Group in 2018. Forest areas with high biodiversity that is significant at global, 2,641.3 2.0 in all environmentally sensitive suppliers) not to participate in the This document was issued by the regional and national levels markets where Sveza products following unacceptable activities: NEPCon certification body based SPNA 2,471 1.9 are sold. For most high-profile on the results of a successful audit. • illegal wood procurement or Places where rare and endangered species are concentrated ­— — customers, the FSC certificate is a It confirms that the procedures trade of illegal timber or forest Places where endemic species are concentrated — — prerequisite for delivery. for controlling the supply chain products; and the Company due diligence Key seasonal habitats of animals 170.3 0.1 • violation of traditional or human system meet the requirements of Large forest landscapes that are important at the global, ­— ­— rights in forest management; FSC standards. regional, and national levels • destruction of high Forest areas that include rare or endangered ecosystems ­— ­— environmental values in the Sveza also requires FSC Forest areas that perform special protective functions 9,113.2 7.0 process of forest management; certification from contractors involved in timber procurement, Forests of special water protection significance 9,113.2 7.0 • significant onversionc of forests road construction, and forestry Forests that have a special anti-erosion value ­— — to plantations or non-forest operations. At the end of 2019, Forests of special fire protection significance — — land; preparation for certification of the Forest areas necessary to sustain the local population 5,380.9 3.6 • use of genetically modified wood supply chain was organized for four contractors of Sveza mill Forest territories necessary for preserving the original organisms in forest ­— ­— management; in Uralskiy, whose certification is cultural traditions of the local population planned for the beginning of 2020. • violation of any of the main ILO TOTAL: 17,135.4 13.2 conventions defined in the ILO Declaration on fundamental principles and rights at work.

62 Sveza Sustainability Report for 2019 63 SUSTAINABLE GREEN GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT PRODUCTION STRATEGY

of deciduous and coniferous trees is naturally overgrown, Supply Chain or reforestation is carried out artificially by planting coniferous forest crops. In addition, the area of For the production of rotary cut Since in forests of natural origin Average Number of Suppliers annual wood procurement usually veneer, from which plywood is the content of birch among other at Sveza Group Enterprises in does not exceed 1% of the area of made, the enterprises of the Sveza species usually does not exceed 2019 the leased plot, so such an impact Group use logs (ridges) of birch 40%, procuring a large amount of can be recognized as not exceeding of two botanical types: drooping veneer logs in one forest area is Mill Quantity the natural range of changes in birch (Bétula péndula) and downy impossible. For this reason, plywood 83 forest cover. birch (Bétula pubéscens). There are mills work with a large number of Saint Petersburg no restrictions on procurement for suppliers to provide raw materials. Novator 106 In addition to deforestation, this category of wood, provided In 2019, Sveza Group supply chain longer-term habitat transformation for by Russian legislation and included 577 suppliers of wood raw Kostroma 100 occurs in the area of logging roads international agreements. The materials, some of which served 67 and forest warehouses under timber used by the plywood for several mills simultaneously. Manturovo construction, but the scale of this mills is procured in 23 regions of Mills enter into contracts with such Uralskiy 132 impact is much smaller than the Russian Federation. suppliers independently. 119 area of annual deforestation. Verhnaya Sinyachiha Tyumen 87 Reforestation and logging also have Due to the work carried out, about An exception is the ban on logging some impact on biodiversity, but 15% of the leased Sveza forest around capercaillie streams and since they are aimed at restoring plots in Verkhnyaya Sinyachiha along rivers inhabited by beavers, forest ecosystems that have are excluded from forest use and where according to current already been disrupted by logging, At present, priority when In Most Cases, Sveza Group Enterprises Use a Chain of are preserved in accordance with legislation, wood procurement is they are more likely to have a concluding a contract for the Two or Three Links FSC standards. not allowed. positive impact. supply of forest products is given to direct loggers or tenants When working Part of the leased area of There are several regional protected With regard to the conservation working under a lease agreement with direct loggers Sveza Company in Verkhnyaya areas on the leased areas of Sveza of red book listed species and for a forest plot or under contracts the lessee of the Sveza Mill forest plot Sinyachiha is located in the regional in Tyumen. This is state complex their habitats, Sveza and wood for the sale and purchase of forest specially protected natural area biological reserve of federal procurement contractors use the plantations. (SPNA): the landscape reserve importance “Tyumensky”, a state long-established experience in When working “Bogs “Chistoe‑Alapaevskoe” and complex biological reserve of Russia within the framework of The suppliers of Sveza enterprises with traders the lessee of the the trader (supplier) / Sveza Mill forest plot contractor for timber “Strokinskoe”. The other part is regional value “Guseneevo” and forest management certification are both logging companies procurement / carrier / located in the regional protected natural monument of regional in identifying and preserving (tenants) and trader companies. contractor, carrying out area of Sinyachikhinsky genetic significance “Novoalekseevsky”. typical or key habitats of rare loading and unloading operations reserves of forest — forming breeds species during the survey of areas No. 2 and No. 3. Sections of these More detailed information about the where harvesting is planned and protected areas with a total area HCVF allocated under certification the subsequent allocation of Total Number of Wood Raw of 2,471 ha, which make up 1.9% of on leased sites of enterprises in cutting areas. Lists of key habitats Material Suppliers There are no chains with a large Funds within the framework Sveza lease area in Verkhnyaya Novator, Tyumen and Uralskiy will (key biotopes) are compiled number of links at the mills due to of investment projects can be Sinyachiha, are completely be provided in the next sustainable for each region, taking into the high risk of mixing wood and provided to suppliers for the 699 694 excluded from forest use. development report. account the recommendations the inability to trace the reliability purchase of logging equipment, of ecologists and included in the of its origin along the entire chain as well as construction Part of the leased land plots of There is no HCVF on Sveza leased regional recommendations for from the logger to the mill. equipment necessary for the Sveza Company in Novator are land plots in Uralskiy. the conservation of biodiversity construction of logging roads. located on the territory of regional in wood procurement. Sveza Sveza Group is actively working The duration of investment protected areas — Totemsky state Wood procurement on leased specialists consider this approach to reduce the number of links in projects is from one to three natural Zoological Reserve and forest plots has a direct impact to the conservation of rare species the supply chain, and encourages years. For more details, see the Kemsky State Natural Zoological on biodiversity and leads to the habitats to be quite reasonable. suppliers to do so. Various support section “Economic Impact on

Reserve. The protection regime transformation of habitats at 2018 2019 mechanisms and investment the Regions of Presence” of both these reserves does the site of logging. However, this projects are used to attract not provide for any significant effect is temporary: after two Tenants 125.0 79.6 direct loggers. restrictions on wood procurement. to three years, either the felling Traders 0.0 48.5

64 Sveza Sustainability Report for 2019 65 SUSTAINABLE GREEN GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT PRODUCTION STRATEGY

More detailed information on in the lists of the Convention Based on the verification Environmental Responsibility in the the environmental impact of a on International Trade in results for a given supply chain, particular supplier (sub-supplier) Endangered Species of Wild the mill can: can be obtained from the annual Fauna and Flora (CITES)*. Supply Chain • confirm the fulfillment of field checks. Each mill has its own obligations on the part of the Prior to the start of procurement, In the presence of such plots in the program, designed in such a way If violations of environmental Verification of Suppliers supplier and continue deliveries; the Company analyzes the lease timber harvesting area, mills may as to cover 20–25% of the total requirements are revealed, agreements for forest plots take one of the following measures Verification of suppliers also number of permanent suppliers the supplier is given time to • identify inconsistencies that and contracts for the sale and with respect to suppliers, provided includes field inspections, with field inspections per year. eliminate them. If the identified must be eliminated within the purchase of forest plantations for by the due diligence system interviews with stakeholders, Thus, all suppliers are tested inconsistencies are not eliminated time frame agreed with the of all suppliers for the absence that operates at each enterprise: study of information in the in 4–5 years. When scheduling within the timeframe set by the supplier; of wood harvested in high media, including on court cases inspections, priority is given to mill, the purchase of wood from • identify unrecoverable • refuse to purchase wood conservation value forests in the or the results of inspections by new suppliers for whom there is the supplier is terminated. inconsistencies and decide to from this site; supply chains, including: regulatory authorities in order to insufficient information or doubts terminate the supply of wood. • on the basis of the available identify claims against suppliers about their full compliance with During random field inspections, • territories with high biodiversity, documentation, make sure that for violations of environmental the requirements. in addition to familiarization Unscheduled inspections of significant at the global, national the logging was carried out in legislation with documents, inspections of supplies are carried out when or regional level; compliance with the forest use Field audits also assess a number of timber harvesting sites, lower a high risk of violation of • large natural landscapes; regime, legally established as environmental criteria: and intermediate warehouses, requirements for all categories of “Specially Protected Natural • rare and endangered • compliance with the rules for interviews of personnel of controlled wood is identified in the Areas” (SPNA) or “Especially ecosystems; timber harvesting, forest care, participants in the supply event of: Protected Areas” (EPA); chain, as well as consultations fire safety rules in forests, as • identification of epeatedr or • forests that have special with stakeholders are carried • make sure that the forest use well as sanitary rules in the part unresolved reprimands from protective functions for out: with forestries and other regime has been agreed with the related to timber harvesting; suppliers based on the results ecosystems. regulatory organizations, with local stakeholders, if for a given area • performance of work stipulated of scheduled inspections for the administrations and employees of it is not established by law as a by the lease agreement for a previous year; enterprises. protected area or SPNA. forest area, compliance with the established deadlines and performance of work in an appropriate manner; • compliance with the established Supplier Environmental Assessment regimes of protected areas, no violations of the law when harvesting timber in protective Desk Audit Field Audit forests and in specially protected areas, as well as the absence (before signing the agreement) (before delivery starts) of commercial harvesting in protective forests under the • Verification of documents on • Verification of an extended set guise of sanitary felling; the wood origin, as well as other of documents for assessing the • absence of cases of forest documents confirming the environmental and social aspects pollution as a result of logging reliability of the supplier of logging activities (pollution of soil, water and vegetation by spills of fuels • Analysis of open data on the • Inspection of timber and lubricants, the presence of supplier’s activities, including harvesting sites domestic and industrial waste in analysis of publications in the • Interviews with the supplier the forest); media, information on court cases (sub‑supplier) employees or the results of inspections by • no cases of harvesting wood regulatory authorities • Consulting with stakeholders contaminated with radionuclides, harvested in violation of the • Consulting with stakeholders requirements; • absence of facts of supply of wood species prohibited for * CITES — The Convention on International Trade in Endangered Species of harvesting, including those listed Wild Fauna and Flora.

66 Sveza Sustainability Report for 2019 67 SUSTAINABLE GREEN GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT PRODUCTION STRATEGY

• updating the summary table of the refusal to purchase timber, timber harvesting, storage of fuels with a trade union representative risk assessment of controlled were generally not identified. and lubricants without pallets or or interviews with employees of wood supply; Sveza mill in Tyumen refused to on unprotected pallets, lack of the enterprise are conducted in a purchase wood from four suppliers sorbent on the plots to eliminate confidential manner. Similar tools • identifying a high risk of mixing (approximately 20% of the number possible fuel spills. are used to ensure that there is no controlled wood with wood of of suppliers assessed in the discrimination based on gender or unknown origin. framework of field inspections), Currently, more than half of the race (nationality). which did not eliminate suppliers who had inconsistencies In 2019, as a result of inspections inconsistencies identified during promptly eliminated them and All inspections are carried out by at all mills, there were found scheduled inspections previously. provided supporting documents. Sveza Group in accordance with to have minor inconsistencies the National Risk Assessment for at 50–60% of controlled wood The most common violations that Controlled Wood (FSC-NRA-RU suppliers. Significant violations were noted during field inspections V 1-1), as well as in accordance with that would entail serious damage were: joint storage of industrial the current legislation, including to the environment and, as a result, and household waste in places of labor legislation, and legislation on personal data.

Supplier inspections also reveal Supplier Social Assessment that there is a risk of forced labor in logging. The mills have subcontracting, confirming that chain*. In addition, the National developed and are applying the labor of prisoners is not used Risk Assessment for Controlled Along with the environmental procurement of firewood and relation to the above forest areas, in their activities a system of for harvesting and transportation, Wood, which guides the mills in assessment, suppliers are also building materials, etc.), as well a media analysis is carried out. due diligence (DFA), according requests are made to the relevant their activities, determines the screened in terms of social aspects as forests of special cultural and to which at all mills (with the forestry and to the territorial risk of using child labor as low of their activities, including historical value (revered natural In supply areas classified as exception of Sveza mills in public observation commission for throughout Russian Federation. the observance of labor and sites, cult structures, places indigenous and traditional peoples, Kostroma and Verkhnyaya the observance of human rights in human rights. of military glory, architectural interviews are conducted with Sinyachiha), timber supplies from places of detention to confirm the As an additional measure monuments, etc.). Within the indigenous peoples to confirm organizations that are managed information. The purpose of the during field inspections, all All suppliers of plywood mills framework of cameral inspections, that there are no heated disputes by correctional labor institutions request is to obtain confirmation Sveza enterprises interview annually undergo an audit for the the location of traditional forest related to logging in the area and and where prisoners are used of the absence of violations of the HR specialists and supplier absence of wood harvested in use sites, cultural and religious the rights of indigenous peoples. are not allowed for harvesting rights of prisoners when harvesting employees to assess the risk of high conservation value forests in significance in relation to the place and hauling timber. To prevent wood at a particular enterprise. child labor in their supply chains. the supply chains. Such forests, of timber harvesting is checked In order to confirm the observance timber from such forest areas During the reporting period, in particular, include forests of using maps (http://hcvf.ru). To of the right of workers to self- from entering the supply chain, In doubtful cases and upon receipt not a single case of child labor particular importance for the local identify possible conflicts between organize and to conduct collective control of constituent documents of conflicting information, a field was detected in companies that population (picking mushrooms the supplier and local communities bargaining, inquiries are sent to the of suppliers and sub-suppliers check is carried out in order to are links in the supply chain to and berries, hunting grounds, and (or) the local population in trade union, face-to-face interviews is carried out at each mill. obtain additional information and Sveza mills. If organizations run by correctional clarify the situation related to the labor institutions are identified, violation of human rights or the use During consultations with five out of seven mills refuse to of forced labor in the harvesting stakeholders during field purchase timber from forest areas and transportation of timber. inspections (in person) and desk managed by these organizations. reviews (by phone or e-mail), In addition, as part of the Fulfillment of labor protection and Compliance with labor laws, In 2019, supplies from additional materials are collected annual field verification safety requirements, absence of no facts of their violations: At Sveza mills in Kostroma and organizations belonging to at all mills on the participation facts of their violation: program (which includes • Working and rest hours; Verkhnyaya Sinyachiha, when managed correctional labor of suppliers and sub-suppliers in 20-25% of suppliers annually), • Obligations to ensure safe • Sanitary provision of workers; identifying the organization’s institutions were not available at all the life of local communities, as working conditions for FSC and supply chain tracking affiliation with correctional of the Group mills. well as on the possible negative specialists at the mills verify employees assigned to the • Technological process; labor institutions, a request is consequences of forestry suppliers against a number of employer; • Employment contracts; made from the supplier and Sveza mills operate in accordance activities of tenants and loggers additional social criteria: • Labor protection and safety • Terms of payment of salary and sub-suppliers of documents with the laws of Russian on local population and / or local requirements for workers; other amounts due; describing the organization of Federation. Compliance with the communities. • Providing employees with • Procedures for dismissing timber harvesting, as well as Labor Code of Russian Federation personal protective equipment. employees. the use of prisoners’ labor in guarantees the non-use of

harvesting and hauling. When child labor by factories, which * Article 63 of the Labor Code of Russian submitting contracts for work and are the final links in the supply Federation.

68 Sveza Sustainability Report for 2019 69 SUSTAINABLE GREEN GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT PRODUCTION STRATEGY

In case of violations of social inconsistencies and requirements dismissing employees or the criteria, suppliers are informed were made to eliminate them timing of payment of salary and 4.2 of the non-compliance with within a period not exceeding 9–12 other amounts due (payment the established deadline for months. These include violations of vacations, payments upon elimination. If the violations are not of labor protection and safety dismissal), as well as obstruction LOWERING ENVIRONMENTAL eliminated within the established measures both by employers by employers of the right of time frame, the mills stop the work (lack of valid results of a special workers to self-organize and with the respective suppliers. assessment of working conditions) collective bargaining has not been FOOTPRINT and by employees (non-use of reported. In 2019, based on the results of personal protective equipment). remote (desk) inspections, as In the course of consultations with well as planned and unscheduled During the reporting period, no stakeholders, information was Environmental Policy and field inspections of significant conflicts with the local population received that the vast majority inconsistencies in the field of social and indigenous peoples over of suppliers and sub-suppliers Management impact, causing significant damage the development of places of (tenants and loggers) of Sveza to the local population and (or) traditional forest use, cultural and mills actively participate in the local communities, including religious significance, as well as social life of their districts, are The environmental protection indigenous peoples, as well as discrimination in the workplace socially responsible, open and The development strategy policy of Sveza Group* is aimed the life and health of workers, not on gender and racial (ethnic) cooperative companies, provide of Sveza Group is aimed at at minimizing the negative impact found at any of Sveza mills. grounds were identified. In the the local population with firewood taking a leading position in of production activities on the process of interviewing employees on preferential terms, in winter terms of business efficiency environment and provides for this It should be noted that in the of suppliers and sub-suppliers they participate in clearing among international a number of processes: course of field inspections, about during field checks of complaints roads, help local administrations • Reducing the concentration of 30–40% of Sveza suppliers about informal employment, financially or provide the necessary woodworking companies. pollutants in discharges; were found to have minor violation of the procedure for materials for the holidays. This implies a responsible attitude towards preserving • Reducing the concentration of pollutants in emissions; a healthy environment for present and future • Ensuring proper management of waste generated in the course generations. MILLION of the Сompany’s business >240 RUBLES activities, optimization of their are aimed at the implementation collection and disposal, in the of environmental projects from future, the transition to waste- 2016 to 2019 free production;

• Implementation of energy saving programs to reduce Management of environmental the consumption of energy issues at the level of Sveza Group and non‑renewable natural is carried out by the direction of resources, as well as water; labor protection, industrial safety • Reducing the consumption and ecology (HSE), which is part of raw materials per unit of of the production management output, harvesting wood raw of the management company. materials in accordance with Corresponding services also the requirements of sustainable operate at each enterprise, and forest management and forest they include environmental management. specialists.

* https://www.sveza.ru/upload/ iblock/85e/85e12c4dc488033e8a43ae24df1160d7. pdf

70 Sveza Sustainability Report for 2019 71 SUSTAINABLE GREEN GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT PRODUCTION STRATEGY

The Сompany engages Environmental Training in 2019 employees in activities to reduce environmental risks and Training topics Number of trainees improve indicators in the field of Ensuring environmental safety environmental protection, improves by managers and specialists the environmental education of environmental services and 23 system, including the study of legal environmental control systems and other requirements related Ensuring environmental safety when to the environmental aspects of working in the field of hazardous waste 35 enterprises. management

When implementing new evaluated in terms of the safety The Сompany has committed projects, we are always guided of their production for workers to launch effective tools for by the principles of a responsible and the impact on consumers. recording environmental manufacturer, so that technical In addition, HSE employees progress and production are required to take part in the impacts, including those on air development do not negatively approval of technical specifications and water, in 2020. affect the quality of life of for the modernization of residents and the environmental equipment in order to avoid the situation in the regions of risks of its non-compliance with presence. It is necessary to know safety standards. how the manufacture of new products will affect the volume For timely management decisions, and structure of wastewater, how regular internal environmental it will affect air emissions, the control is carried out. amount and structure of waste. Therefore, when developing and testing products, new materials are The forest industry plays an important role in tackling the Our Contribution to challenges of climate change. Climate Change Mitigation Forest Management Healthy, young, sustainably managed forests absorb more carbon from the atmosphere per and Climate Change Mitigation Development of unit area than almost any other production of bioproducts Implementation of type of land cover. A significant from wood waste innovative products The forestry sector of the Most of the exploitable forest In addition, as a result of climate part of the carbon contained see the section see the section areas in Russia are located on change, in particular due to in wood remains bound in the economy, which uses wood Waste Management and Innovation Management raw materials, is especially waterlogged soils, where the winters with little snow, the finished product. The production Production of Bioproducts susceptible to the effects use of heavy logging equipment accumulated moisture reserve in of wood products requires less in the spring-summer season is forest ecosystems is decreasing. energy and is accompanied by of climate change, which in difficult. Such plots are available for During prolonged droughts, much less harmful emissions than the long term may affect logging mainly in the winter period. the risk of forest fires increases, the production of artificial building Thus, a decrease in the transport during which significant amounts materials. the existing management Implementation of practice. There are certain accessibility of forests due to a of carbon are released into the sustainable forest Reduce the use of fossil decrease in the duration of the atmosphere. There is a growing Additional opportunities for fuels and use carbon risks and opportunities management practices neutral biofuels as an logging season due to an increase risk of insect pests and tree the Сompany are opening up alternative associated with climate in average annual temperatures can disease outbreaks. the growing demand for wood see the sections Reforestation and see the section change that cannot be cause a decrease in the volume of and biomass products, the Fire‑Fighting Measures in Energy Efficiency ignored. logging. development of renewable energy Forest Areas and biofuel markets, and the improvement of its production technology.

72 Sveza Sustainability Report for 2019 73 SUSTAINABLE GREEN GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT PRODUCTION STRATEGY

mill launched a unique veneer in 2018 ensured a more rational The park of cyclones is planned for Impact on Atmospheric Air dehydration press. Pre-pressing use of natural resources. The renovation at the mill in Uralskiy green veneer improves the drying emission of harmful substances in terms of investment program. line performance by an average of into the atmospheric air has 13 devices of this type will be The technological processes and in the case of fossil fuels, During mechanical processing of 4% and burns 20% less fuel. significantly decreased due to replaced here within four years. of plywood production are -greenhouse gases. wood raw materials, as well as multi-stage fuel combustion and accompanied by emissions during cutting and grinding of Due to the use of renewable the installation of modern gas of various pollutants into the When veneer is heated in dryers plywood and particle board, wood fuel sources, the launch of an cleaning equipment. atmosphere. The main sources and when decorative coatings are dust is formed. autonomous small combined heat of pollution are their own boiler applied to particle boards, as well and power plant at Manturovo mill houses, which provide the needs as in the process of pressing the The Company efforts are aimed of enterprises with thermal and boards and cooling the finished at reducing the concentration electric energy and use wood product, aldehydes (including of pollutants in emissions and waste and natural gas as fuel. formaldehyde) and other volatile preventing exceeding the Impact on Water Bodies The combustion of fuels in boilers organic compounds (VOCs) are regulatory permissible levels. produces, in particular, nitrogen released, which are part of many oxides (NOx), carbon monoxide resins used for the production of Water supply for Sveza mills is wells at one of its two production (CO) and sulfur oxides (SOx), plywood and particle board. carried out from surface water sites. Two mills (in Novator and sources, mainly through the water St. Petersburg) have their own supply and sewerage systems, as treatment facilities. Air Emissions of Significant Pollutants in 2019, t well as through own water intakes. In addition, Kostroma mill operates Nitrogen Sulphur Solid Carbon Mills oxide dioxide VOC particles oxide Miscellaneous TOTAL Saint Petersburg 110 — 44 48 959 6 1 167 Water Bodies Affected by the Company Water Intake and Wastewater Discharge Novator 205 — 8 20 2,438 — 2,672 Mill Water Intake Discharge Kostroma 114 1 19 — 731 5 871 drinking water industrial water Manturovo 186 32 5 514 4,108 1 4,845 Saint Petersburg WSS* Bol. Izhorka river Uralskiy 194 — 5 167 773 2 1 143 Novator Sukhona river Verhnaya Sinyachiha 319 178 77 2,089 3,658 83 6,404 Gorky reservoir Volga river through WSS Tyumen 182 — 6 44 1 110 — 1 341 Kostroma Kostroma groundwater water supply deposit Total for the Company 1,310 212 165 2 881 13,777 98 18,443 Unzha river Manturovo WSS Unzha river (independently and through water supply)

The enterprises carry out industrial equipment is installed in addition Uralskiy Votkinsk reservoir through water supply control of atmospheric air. For its to the existing system, it allows Verkhnyaya Sinyachiha WSS WSS implementation, independent reducing the concentration of Verhnaya Sinyachiha reservoir Vogulka river accredited laboratories are suspended particles in flue gases Pesyanoe lake 3 Tura river (through involved. Technical inspections from 0.87 to 0.35 mg/m . Due to (independently and Tyumen water supply) and maintenance, checking the the new gas cleaning system, the through water supply) performance of gas cleaning volume of ash emissions at the mill equipment and scheduled will be significantly reduced, which There are a number of water treatment makes wood fibers Water consumption at the preventive maintenance are will improve the environmental intensive processes in plywood and more plastic, which contributes to enterprises of the Group in 2019 carried out. situation in the village Novator. wood waste mills. In the production obtaining a veneer with a flat and amounted to 2,369 thousand m3 of plywood, at one of the stages of smooth surface during the peeling (1,940 thousand m3 in 2018). At Sveza mill in Novator, a line for Bag filters are installed at the the production process, the logs are process (cutting the trunk into cyclonic purification of exhaust mill in Kostroma, which ensure placed in a special pool with water veneer sheets). gases from fly ash generated 99% purification of emissions. at a temperature of 40–50° C for a during the combustion of solid fuel The captured dust is briquetted period of 20 to 36 hours depending was put into operation. The new for use as fuel. In 2019, the on the season. Hydrothermal * Water supply and sewerage facilities. WSS.

74 Sveza Sustainability Report for 2019 75 SUSTAINABLE GREEN GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT PRODUCTION STRATEGY

Responsible use of water storm sewers and modernize Kostroma resources involves: hydrothermal treatment pools. 4.3 The possibility of additional Sveza mill in Kostroma is located • rational water consumption; purification of water at treatment almost in the city center, on the RESPONSIBLE CONSUMPTION • accounting for quantity and facilities for the creation of closed bank of the Volga River. As part of quality control of used and systems is being considered. supporting the “Clean Volga” project, discharged waters: minimization the mill refused to ship raw materials of concentrations of harmful Novator for plywood production by water substances; transport. The enterprise has its own Efficient Energy Consumption • preventing the discharge of Sveza mill in Novator provides water intake and fish protection untreated wastewater into natural water supply to consumers facilities. Heat recuperators are water bodies; and purifies wastewater in the installed on the drying lines, which Development of thermal and • compliance with legal Samotovinskoye rural settlement take hot humid air, mix it with water electric energy at the enterprises requirements. of Velikoustyug district. In 2018, from the pool and return the heated of the Company produced due the mill implemented a project water back to the pool, where the to the combustion of mixed fuel to collect condensate from 5x5 wood is steamed. The Company (wood waste and natural gas). Uralskiy steam presses and return it to has developed a project for the Sveza consistently pursues a At Sveza mill in Uralskiy, the TPPs, which eliminates condensate construction of sewage treatment policy of energy saving and is reconstruction of treatment discharge from the presses. mills for storm sewers. Sveza steadily moving towards creating a facilities was carried out. Major employees were the first to respond closed-loop economy by recycling attention is paid to compliance with Saint Petersburg to the call of the local authorities and waste from the main production wastewater discharge standards. went out to clear the coastline, where to generate its own green energy. Within the framework of the project, The treatment facilities of the it is planned to make a pedestrian The Company implements several a mechanical grid, automatic enterprise receive not only waste zone along the Volga bank. major investment projects for the At the end of 2018, a mini‑thermal The mini-TPP project at Sveza mill mixers were installed, and the water from the mill, but also construction of power plants where power plant with a thermal in Manturovo received the Lesprom trays at the primary sedimentation household waste water from Manturovo waste from plywood production is capacity of 36 MW and an Awards 2018 industrial award in tanks were replaced and repaired. the village of Pontonny Based disposed (incinerated). electric capacity of 4 MW was the “Green Energy” category and Crushed stone was also purchased on the results of the pre-design To generate heat and electricity, put into operation at Sveza the Eco Best Awards in 2019. and biofilters, where biological study of the optimization of the an autonomous small combined The heat energy generated by mill in Manturovo (Kostroma wastewater treatment directly takes wastewater disposal system, it heat and power plant (mini-CHP) at incineration of waste (bark and region). The volume of place, were completely overloaded. is planned to reconstruct the Sveza mill in Manturovo draws water wood chips) is used for drying investment in the construction In addition, scientific support was networks and treatment facilities. from the Unzha river. To prevent the veneer and gluing plywood. of the facility amounted to more organized for the repair, operation The Company implements negative impact on fish spawning For this purpose, thermal oil than 1.2 billion rubles. and evaluation of the efficiency projects to improve technological grounds in the creek, diving works installations are used that heat of the structures. As part of processes to minimize the are being carried out to check the the coolant. Waste is also used to environmental investment projects, negative impact of production on effectiveness of fish protection generate electricity. The boilers the mill continues to upgrade the environment. devices, and the discharge of produce steam that turns the conditionally clean waters is turbines, which are connected in Uralskiy using its own energy Construction of the second stage redirected to Unzha. to generators that generate generation. Mini-TPP will create of a thermal oil boiler with a total electricity. the necessary amount of heat for capacity of 14 MW also continued In 2019, the mill in St. Petersburg Verkhnyaya Sinyachiha the village, reduce production at Verkhnyaya Sinyachiha mill in won in the “Rational use of In 2019, the Company average costs, and reduce the impact on 2019. The boiler house will supply water resources” nomination of To minimize wastewater discharges, specific electricity consumption the environment. the mill production with thermal the “Crystal Drop” competition, the possibility of using closed-loop was 212.5 kWh/m3 (+ 10.4%). energy. Another similar boiler which was organized by the technological processes is being The specific consumption of The capacity of the new steam plant with a capacity of 12 MW was branch of the State Unitary considered. In 2020, the Company natural gas increased and averaged production equipment will reach launched in 2019 at Sveza mill in Enterprise “Vodokanal of St. plans to start designing treatment 39.8 m3/m3 (+19.0). 80 MW, and electricity generation the village of Novator of Vologda Petersburg”. facilities for the treatment of storm will exceed 30 million kWh per region. More than 1.4 billion rubles water, industrial and domestic Construction of a mini-thermal year. In addition, the Company is have been invested in the wastewater. power plant worth 2.5 billion rubles starting to design a third station construction of these facilities. is nearing completion at Sveza mill for Sveza mill in Verkhnyaya In 2019, discharges of domestic in Uralskiy (Perm region). With the Sinyachiha (Sverdlovsk region) water as a whole for the Group launch of equipment, Sveza will be with an estimated cost of more amounted to 1,676 thousand m3 able to meet a third of its needs than 2 billion rubles. (926 thousand m3 in 2018).

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MILLION Raw Materials Conservation >200 RUBLES The total expected economic One of the main ways to improve effect of environmental projects aimed at energy conservation the efficiency of enterprises by 2025 is to reduce the raw material consumption coefficient (RMCC). This indicator reflects the amount BILLION of raw materials (plywood ridge) 7,1 RUBLES spent on the production of 1 m3 of plywood. Deeper processing volume of investments for the construction of power of wood allows you to get generation facilities the maximum useful product. Previously, the process of peeling veneer formed waste with a MILLION diameter of 80 mm, the so-called 130 RUBLES “pencils”, which were not used in will be invested additionally further production and were sold in the energy efficiency mainly to the local population for projects heating. Currently, the Company is acquiring modern equipment that allows you to halve the diameter of the “pencil” and own logging and have to import At the mill in St. Petersburg, due increase the volume of veneer significant volumes of plywood to the adjustment of equipment due to additional processing ridge from other regions. settings, additional training of of raw materials. The new lines personnel and other organizational allow to reduce the raw material In particular, due to the solutions, in 2019 it was possible consumption coefficient during implementation of investment to reduce the coefficient of raw the veneer peeling process by at projects, in 2019 Sveza mill in material consumption by 10%. least 2%. Reducing the coefficient Uralskiy reduced the consumption by 1% leads to a reduction in raw of raw materials by more than 6%, According to the results of work material consumption by about and in three years this figure was for 2019, the mills in Kostroma, Such installations provide air has significantly decreased due In addition to major investment 30 thousand m3 per year. 14%. Thus, every year Sveza saves Manturovo, St. Petersburg and cost‑effective ways to generate to multi-stage fuel combustion projects, each mill regularly about 80 thousand m3 of wood in Novator showed the best result heat and electricity from biofuels. and the installation of modern gas implements plans to improve This task is especially relevant Uralskiy, and this volume is enough in the industry in terms of raw New energy capacities allow cleaning equipment. energy efficiency: reducing the for Sveza mills in Kostroma for more than a month of the mill material consumption. enterprises to fully provide heat consumption of heat, electricity, region, which do not have their operation. and electricity to production. Such As part of the integrated water and compressed air. All mills equipment reduces the annual cost investment program to increase use cost-effective technologies: of purchasing energy resources productivity “+40”, a line for the use of energy-saving lamps, by replacing them with renewable drying and sorting veneer was the installation of various Environmental Characteristics of Products energy sources. The technologies put into operation in the second frequency drives (VFDs) and soft applied make it possible to convert plywood building in 2019 at starters. up to 100% of all waste generated Sveza mill in Uralskiy. Due to this In order to confirm the safety Formaldehyde-containing resins used for FSF plywood intended in the technological cycle (crushed measure, the site will reduce the In 2020, the Company will invest of products for customers, the are used all over the world for primarily for outdoor use. wood, sawdust, grinding dust, consumption of electricity and an additional 130 million rubles in Company regularly tests plywood the production of compressed bark) into energy, instead of consumption of up to 5 million energy efficiency projects. and other products in external wood materials, including Since formaldehyde is toxic, its disposing of waste at the MSW m3 of natural gas per year, which laboratories in accordance plywood, particle board and emission is strictly regulated — landfill. The emission of harmful will reduce production costs by with modern requirements and fiberboard. At Sveza Group in Russia by state standards for substances into the atmospheric 25 million rubles per year. methods. Samples for testing mills, urea-formaldehyde resins plywood (for coniferous, deciduous are selected by representatives are used for gluing FC plywood and laminated plywood), and in of independent bodies by intended for indoor use, while other countries — by state and random sampling. phenol‑formaldehyde resins are non-state technical regulations.

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Phenol formaldehyde in finished plywood also meets the new Currently, a significant part is which are produced by pressing Volume of By-Product products is contained as a strongly strict formaldehyde emission burned in our own boiler houses shredded dry wood waste. Production, Thousand m3 bound stable compound. Precise requirements introduced by to generate heat and electricity In European countries, where compliance with all technological Germany from 01.01.2020, the (for more details, see the section a course towards a gradual 516.9 539.1 requirements ensures not only high so-called E05, and this is also “Rational Energy Consumption”), abandonment of the use of fossil product quality, but also a low level confirmed by the test reports the rest is used for the production fuels and, first of all, coal, is taken, In 2019, Sveza Group received of formaldehyde release. and certificates of the German of particle boards, for snowing raw one of the main consumers of a certificate of product certification body MPA Bremen. materials and for sale. briquettes is the heat and power compliance with the new The safety and environmental generation market. Briquettes are EPA TSCA Title VI regulation friendliness of Sveza products As the requirements of European Sveza expands its product line used for heating the residential developed by the Us Federal is under constant internal and regulatory authorities regarding not only by adding new types of sector and at production sites. environmental protection external control. These products formaldehyde emissions are plywood, but also by releasing Compared to coal and natural gas, Agency (EPA). This document are declared in the GOST R system constantly being tightened, the various types of products from fuel briquettes during combustion 2018 2019 confirms the ultra-low level for safety (formaldehyde content Company is preparing for possible production waste. emit ten times less greenhouse Other 149.3 176.7 of formaldehyde emissions and release) and basic physical and changes and is working to improve gas CO2, have a high heat transfer, and the complete safety of mechanical parameters and meet the technology. Sveza is engaged The switch to renewable resources and after their combustion there is Splint 170.8 184.4 Sveza products for consumers. the requirements of sanitary and in research and engages research increases the demand for wood a minimum of waste (about 1% of Wood pencil 133.8 115.1 The certificate allows the hygienic standards in accordance laboratories to conduct tests in fuel, in particular for briquettes, the mass). Wood dust 63.0 62.9 Company to export its products with international standards. order to work out all the details to the United States. of the production process in All mills are recognized as advance and achieve a reduction in manufacturers of products with emissions without compromising ultra-low formaldehyde emissions quality, without increasing the and are exempt from mandatory cost of the final product for CARB*/EPA certification. All Sveza the consumer.

Waste Management and Bio-Products Production

Sveza Group enterprises produce more than 1 million m3 of plywood per year. However, finished products account for only about 30% of the total volume of wood used. 2 million m3 is accounted for by-products, which are mostly industrial waste. The Company new development strategy until Production of Fuel Briquettes from Wood Dust 2029 provides for 100% use of the forest resource. This is why All Sveza mills are equipped of pressing wood dust at a high the Company makes considerable with production shops for the pressure of 300–400 bar using The Company new investment in modernizing production of fuel briquettes a hydraulic press. No additional development strategy until 3 KG 2029 provides use of the equipment and building eco- from wood dust remaining after materials and binders are required of firewood can be forest resource for friendly production systems plywood sanding. Grinding during the pressing process. replaced by one focused on the rational use of raw dust makes up 3–4% of the The factories produce RUF briquette materials and waste recycling. total volume of wood waste. briquettes with a weight of 100 % The briquetting process consists 1 kg/piece.

* CARB, California Air Resources Board (California Board for the protection of air resources).

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Another bioproduct that is in wooden products, do not crack or The transition to the production steady demand in the retail and deform under the influence of the of bio-products provides the Construction Project of the Biotechnological Complex HoReCa markets is charcoal. external environment, do not need Company with an opportunity It is obtained by heating wood protection from rot and mold, to occupy its own niche in new without oxygen. Wood-polymer and have increased mechanical growing markets, earn additional The Company development composite materials are also strength. Production of coal and profit and prepare in advance for strategy until 2029 is aimed at promising bio-products. They wood-polymer composites will the update of forest legislation. rational use of resources in order consist of shredded wood (content begin in 2020. Starting from 2022, Russia plans to produce as many types of from 30 to 80%), thermoplastic to completely prohibit the disposal products as possible from fewer polymer and special chemical In the future, the new strategy of wood remaining as a result of amounts of raw materials. Sveza additives (modifiers). In particular, provides for the development of industrial activities, using ground is making significant investments boards are made of wood-polymer such areas as the production of disposal and incineration. in modernizing equipment and material, which, unlike ordinary textiles and biochemical products. building eco-friendly production systems in order to switch to 100% use of forest resources, and plans to develop such areas as textile production, biochemistry, and Using Waste for Storage of Raw Materials green energy generation. Since 2013, the Company has been developing a project to build a In order to ensure the stability of raw materials are covered with plywood. Thus, small‑fraction new generation biotechnological of logging and reforestation, will project of the enterprise and the production and smooth operation snow, tamped, and then covered wood waste is reused, and ensure the inexhaustible use of development of an environmental complex that will produce of the mills, the Company creates with a layer of sawdust, creating a production is guaranteed to be forest resources and improve the impact assessment (EIA), the reserves of raw materials for the heat-insulating layer. This method provided with high-grade veneer. high‑quality pulp and a significant ecological situation in the forests. infrastructure of the new mill is summer and autumn periods, when of conservation is one of the The volume of raw materials amount of clean energy from being worked out, the gas pipeline timber harvesting is carried out most environmentally friendly. prepared in this way at the renewable sources. In the process of preparing the is being designed, the options at a slower pace. To protect wood It makes it possible to maintain Company enterprises increases project, the Company considered for the power supply of the mill from cracks and rot, as well as the safety and optimal texture of every season. Production of pulp uses mainly several sites for the new mill in are being considered, and the from damage by fungi and insects, wood in a condition suitable for deciduous pulpwood, which is not Vologda region. The site in Suda issues of transportation by rail are snowing of timber is used. Wood the production of high-quality in demand in Russia and, as a rule, settlement of Cherepovets district being discussed. remains in cutting areas, causing was considered a priority, and damage to the environment. therefore the main activity was The biotechnological complex The total consumption of the pulp associated with this particular project is undergoing a mill is about 5.7 million m3 of wood territory. In 2014–2015, the stage of comprehensive assessment and raw materials. Thus, low-grade forming land plots for prospective expertise, which include taking wood that is not currently used construction was completed, and into account all environmental, can fully ensure the operation relevant public hearings were technical and socio-economic of the mill without harming the held. Then, a comprehensive factors. For their in-depth forest ecosystem and thus solve economic and financial assessment analysis, independent specialized the issue of waste disposal of the of the costs of implementing companies with a worldwide cutting area. the investment project, as well reputation were involved. as a social and environmental The conclusions of the experts Finished products and raw assessment of the consequences of will be used in the project materials supplied to the mill its implementation was continued. documentation, which will be must undergo a voluntary forest submitted to RosPrirodNadzor certification procedure under Environmental, geodetic, (environmental expertise) and the Forest Stewardship Council geological and hydrological GlavGosExpertise of Russia, (FSC) scheme. This event will works have been carried out at as well as presented to the dramatically improve the culture the future production site, and public. Only after this work is of forest management in the engineering and archaeological completed, the project receives region, will force loggers to surveys are continuing. Currently, an EIA, passes the State comply with all the requirements work is actively underway on the environmental assessment and

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documentation. The majority The construction of the mill will of residents of Vologda region have a significant multiplier effect. 4.4 in general and Suda rural Within a radius of 250–300 km settlement in particular support from the mill, it will be necessary INDUSTRIAL SAFETY AND the project and believe that its to create up to 4 thousand launch will help solve many socio- additional jobs in related and economic problems. service industries (logging, logistics, services). According LABOR PROTECTION In 2019, Sveza continued active to preliminary calculations, the open communication with project implementation process residents of territories where will involve various sectors of there is a request for information the economy, from construction Policy and Management in connection with the project to trade and services, as well (Yaroslavl region, Kostroma as enterprises of 21 districts of GlavGosExpertise, the investor region). A large-scale educational Vologda region. Sveza Group enterprises apply will decide on the future of campaign was carried out in the occupational health and safety this project. mass media of these regions. The construction of a new mill management system (OHSMS). It is Events were held with the opens up new prospects for the based on the principles formulated 1 People are the most The project entered the active participation of representatives of development of education field in the corporate policy in the important value of the phase of development in 2018, local communities: round tables, in Cherepovets. New training field of occupational health and Sveza Group. Nothing which prompted discussion of meetings with the population of programs designed to meet the safety. The system helps meet the Key Principles in the Field is more important than employees who the project among residents of the main interested territories needs of new industries will be requirements of Russian legislation of Labor Protection contribute to the Cherepovets district and the city (more than a dozen meetings provided with guaranteed jobs. in the field of occupational health Company’s business This will contribute to retaining of Cherepovets. The main topic of were held). At the same time, and safety and is based on the results public discussions is the ecological the Company relies on the able-bodied and ambitious youth basic principles of international well-being of the territory. For opinion of experts who do not in the city, which today needs to standards for occupational Cherepovets and the surrounding consider the issue of the negative be shown the prospects of working health and safety management area, this topic has always been transboundary impact of the with a decent salary. (ISO 45001, OHSAS 18001:2007). relevant due to the fact that biotechnological complex on there are a large number of large neighboring regions to be urgent. Strict compliance with all‑Russian In addition to the policy and 2 The health and safety 3 All accidents at work, industrial enterprises (Cherepovets and international rules and regulations on the health and management system is industrial incidents are metallurgical plant, PhosAgro) requirements at every stage safety management system of part of the Company’s preventable The environmental protection unified business system that were built in the Soviet Union system developed for the pulp of project implementation is Sveza Group for 2015–2020, times. It is important to note that mill has no analogues in the an absolute priority of Sveza. the Company has adopted a at the moment these enterprises number of supporting standards, world. It is able to provide a The presence of at least one are completely modernized and procedures, instructions and non-compliance with these show positive results in terms high level of environmental guidelines that regulate the of reducing the burden on the safety of wastewater and air requirements will become an procedure for safe work in environment. emissions. There are practically obstacle to making a positive various conditions, including the no enterprises with this level of decision on an investment project. standard for performing work by Sveza stands for the complete protection in the world. contractors. The main documents openness of the Company plans In order to provide the public with from this list are available on the 4 Each employee must 5 Ignorance, in connection with the new The positive social impact of the objective information about the corporate website. be responsible for misunderstanding or construction project for public project should also be taken into project progress on an ongoing both personal safety failure to comply with organizations, environmental account. Up to 77,000 jobs will be basis, Sveza expresses its readiness As a priority, the OHSMS considers and the safety of their legal or corporate colleagues requirements in the field activists and simply concerned created during the construction to form a public environmental proactive actions in the field of occupational health and citizens. This is why the Company period. At least 800 permanent monitoring group. of labor protection aimed at safety are unacceptable conducts two-stage public jobs (including outsourcing preventing accidents instead of discussions. All questions, companies) will appear on the Since objective results of a responding to negative events that comments and suggestions site of the mill after the mill is comprehensive assessment have have already caused someone to received during the period of put into operation. The main yet to be obtained, the Company public discussions must be taken principle in the analysis and considers it unacceptable to into account and submitted to the planning of human resources is spread false information about the

State Environmental Expertise as to focus on the local population possible negative impact of the * https://www.sveza.ru/documents/ part of the materials of the project (residents of Vologda region). mill on the situation in the region. standards/

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suffer, or have caused serious and ecology. The corresponding During the annual internal audit According to statistics obtained risks to property or environment. services are also available at of the accident prevention as a result of the analysis of the Top Sources of Danger Leading to In addition, the main task is to each enterprise. Their area of system, an assessment is made causes of accidents, the most Injuries in 2019 change the personal approach responsibility is labor protection, of the compliance of the Group dangerous at work are the moving of managers and each worker to industrial, fire and environmental enterprises with Russian and and rotating parts of machines security issues, to move to a more safety. In total, about international safety standards, and mechanisms, especially in Trouble Spots Corrective Actions conscious and safe performance 50 specialists of various profiles progress in the use of an OSHMS, those nodes where pinching or of operations by workers and work in the field of HSE. Line understanding and quality of entrapment of body parts or Moving and rotating parts of “Pinch Points” program their understanding of their own managers ensure compliance with the application of security tools. clothing (pinch points) can occur. machines and mechanisms responsibility. health and safety requirements The team of auditors includes Most often, such injuries occur Risk assessment of and regulations on site. experts from the management during maintenance or repair of pedestrian routes, checking stairs, Elevation differences For the management of HSE company, and experts from Sveza equipment when the protective eliminating roughness, issues at the level of Sveza Group, The HSE department interacts or Severstal may also be involved. devices provided by the design are road repairs the management company has with all functions and removed. “0 loaders” program Pedestrian and vehicle safety allocated the direction of labor accompanies all the main business “Human — Transport” program protection, industrial safety projects of the Company.

To assess and reduce/eliminate Identification, Analysis and the risks associated with moving equipment elements, a Elimination of Hazard Sources comprehensive “Pinch Points” program was launched in 2019. In order to guarantee the right of as well as take the necessary on a system of regular inspections In 2020, work with “Pinch Points” every employee to work safely, it measures to eliminate them. One of with the participation of managers should be among the priority areas is necessary to promptly identify the most effective ways to prevent at different levels. for improving the security system. deviations from the requirements, injuries, accidents, incidents or fires rules and standards of safety, is industrial control, which is based A significant proportion of accidents are related to elevation Basic Production Control Tools changes. In order to minimize this category of risks, work is underway to assess walking routes and check Participants Tool Objective stairs. The unevenness of the Recording problems and difficulties at work, Problem solving Board floor inside the production and Workers including issues related to labor protection warehouse premises is eliminated, Detailed analysis of a production operation to and periodic repairs of the road Production safety audit determine how to perform it as efficiently and safely surface of the territories are Main Sources of Danger, % as possible Foremen carried out. 2019 Employee-Leader dialogue to prevent accidents, Behavioral audit encourage safe behaviors and correct unsafe behaviour To improve the safety of 35 22 13 4 9 17 pedestrians on the territories Inspection of a separate area as a whole: monitoring Scheduled labor protection of Sveza production facilities, 2015 the operation of equipment, the state of transport, inspections 2018 roads, engineering systems the processes of transportation of interoperable products are Monitoring the production process, identifying and 44 18 15 11 8 3 1 being optimized and, as a result, Heads of eliminating hazardous conditions, making a decision on the acceptability of risk during work and choosing the number of loaders is being production, Risk assessment Moving and rotating parts of machines and mechanisms employees of HSE measures to reduce it, analyzing the causes of all reduced (program “0 Loaders”). injuries and microtraumas that have occurred with The application of special markings Height differences, fences, stairs, floor irregularities and technical their subsequent elimination service, director of and the installation of physical Safety of pedestrians and vehicles Identifying the cause of incidents and taking the mill Investigation of incident barriers are aimed at dividing the reactive measures Splinters flows of people and transport in Working with a manual tool Identification of the causes of hazardous behavior of time or territory (the program Dealing with violators employees; determination of measures of influence on “Human — Transport”). Protruding parts of equipment violators of labor protection requirements Other

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Training Results of Injury Prevention Measures

Improving labor safety depends not only on the availability of special protective equipment In 2019, there were a total of and the timely replacement of obsolete equipment. Only 10-15% of injuries are related to 29 accidents, including one technological causes. The remaining 85–90% are organizational and human factors. Therefore, fatal one. The main causes of injuries were: the Company strives to change the mentality of its employees, create a culture of safe work, and train employees in safe behavior. • dangerous actions of the employee;

• unsafe state of the work area;

Compulsory training in labor Foremen and production managers Corporate Trainings • gaps in risk assessment protection, regulated by law, are trained in production control in 2019, pers. and management in the includes more than 20 programs. tools. The new Last Minute organization of work. A total of 16,775 people were Risk Assessment (LMRA) tool Number of Training trainees trained. Another 2,500 people is designed to develop safety attended corporate trainings. measures for non-routine jobs that ABC of security 1.560 The increase in injuries in 2019 are carried out rarely or for the was affected by: In the process of adaptation for first time. First of all, managers Risk assessment 535 • gaps in staff competencies and all new employees at the mills, a and specialists are trained in the 405 risk management; mandatory group training “ABC of use of LMRA, and then workers are LMRA Security” is conducted. trained in this method. • low level of technical security of equipment (prevention of access to dangerous areas; blocking of The Level of Industrial Injuries at Sveza Mills Also, the Company’s enterprises dangerous energy; elaboration conduct interactive briefings with of procedures for safe 58 films and presentations as part of maintenance of equipment); a dialogue between employees • formal attitude to the tools of and the manager, as well as other production control; formats for involving employees in safety issues are used. • formal attitude to training personnel on security issues. 39 29 For example, the “Safety Formula” competition is held annually at the 29 mill in St. Petersburg. In 2019, the Number of Accidents at Sveza labor protection service prepared a Enterprises in 2019 23 brain-ring for the workers of Sveza mill in Uralskiy on knowledge of Mill Qty. 2015 2016 2017 2018 2019 the basics of safety. Central office 1 LTIFR 4.97 3.28 2.42 1.73 2.31 1 Saint Petersburg Number of accidents Novator 4 Kostroma 1 Manturovo 2 Uralskiy 5 Over the past five years, the Lost Time Injury Frequency 7 Verhnaya Sinyachiha Rate (LTIFR) reduced more Tyumen 8 than twice.

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Trade Union Participation in Labor Protection Improving the Level of Fire Protection at Enterprises

Trade unions exercise control over The collective agreement for Woodworking enterprises are The main cause of fires at the mills The Main Causes of Key Safety Rules compliance with labor protection 2018–2021 contains a section classified as a high fire hazard is the human factor. Fires in 2019, % 10 for Sveza requirements established by the “Occupational Safety and Health”, category. Sveza mills use dry wood regulatory legal acts of the Russian which formulates the obligations as a raw material, produce and Depending on a number of Federation. Occupational safety of the employer and the employee. store finished products, and also parameters (the method of I come to work sober, healthy, 1 committees (commissions) are This document also reflects issues receive significant volumes of easily extinguishing, the operation of and rested. formed at Sveza enterprises on a such as: combustible wood interoperational automatic systems, the duration parity basis from representatives and secondary products. of equipment downtime, damage 2 I know that smoking on the • remuneration for employees of the employer, trade unions assessment, the number of victims, territory of the mill is allowed engaged in work with harmful and representatives of the labor To prevent fire risks and etc.), all fires belong to one of five only in specially designated and (or) hazardous working collective. Together with the minimize their consequences, the categories. There have been no and equipped areas. conditions; employer, trade unions select Company conducts: critical fires in the past four years. Poor-quality cleaning and 70 I am sure that the use of • reduced working hours for 3 and train labor protection • operational measures aimed violation of requirements for personal protective equipment employees with disabilities of storing lumber and waste commissioners, members of at maintaining the order of Careful observance of all safety will save my life and health. groups I and II; labor protection committees workplaces and equipment; standards allows avoiding fires, Electrical equipment failure 11 (commissions) and organize their save lives and health of people, I stay away from suspended • reduced working hours for • mandatory scheduled fire drills; Violation of safety 8 4 effective work. protecting enterprises and products requirements during loads because it’s safe. employees who are employed fire operations in workplaces that are assigned • control measures for hot work; from fire. For this purpose, Trade unions also represent employees of occupational health Non-compliance with 6 5 I always follow the procedure classes 3.3 and 3.4 based • measures to maintain premises in regulations during operation of for blocking and isolating the interests of workers in the on the results of the special a basic safe condition; and safety, ecology service, fire equipment and violations of safety rules during work sources of dangerous energy investigation of industrial accidents protection employees and line assessment; • measures of the comprehensive when working on electrical and cases of occupational managers carry out constant multi- Other 5 • the duration of daily rest from investment program for equipment and engineering diseases, monitor the provision of level production control. the end of one shift to the fire safety. systems. guarantees and compensation in connection with the performance beginning of the next one is at 6 I always operate equipment of hard work, work in harmful, least 12 hours. with installed and serviceable dangerous and other special safety fences. working conditions.

7 I know that intra-factory transport is a source of increased danger.

8 I am always very careful when Dynamics of Fires at performing work or being near Sveza Mills railway tracks.

9 I always stop the dangerous actions of my colleagues, contractors, and visitors.

10 I am responsible for the safety of my subordinates. Before I assign a task to a subordinate, I personally make 2016 2017 2018 2019 sure that the subordinate can perform this task safely. Micro fire outbreaks 23 63 60 34 Minor fire outbreaks 6 18 19 14 Serious fire outbreaks of 2 degree 7 3 8 3 Serious fire outbreaks of 1 degree 2 0 4 0

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The measures of the comprehensive The equipment allows providing In the reporting year, more than investment program are aimed water to all fire extinguishing 68.4 million rubles were invested in Prevention of Occupational Diseases at eliminating risks: providing systems in the production during fire prevention. Fire safety training premises with fire alarm systems, the elimination of possible fires. is provided to all employees once fire extinguishing and spark The pumping station is completely a year, and fire safety training is In accordance with the legislation, extinguishing, updating the fleet autonomous and does not scheduled in each division. Internal a special assessment of working of fire trucks, as well as installing depend on the municipal water volunteer fire brigades have been conditions is carried out to classify fire zoning systems and evacuation supply system. set up at each site, and their organization activities as a safe systems. members are additionally trained in or dangerous type of production. In 2019, a project was completed the use of fire-fighting equipment. Based on the results of a special Almost all premises at enterprises to provide engineering and assessment of working conditions, are equipped with fire alarm technical security equipment for Professional rescuers from fire each workplace is assigned a systems, and production buildings the mill in Tyumen. Within the departments of the Ministry of corresponding class/subclass. and warehouses of finished framework of “Program to Improve emergency situations are also products are equipped with fire Fire Safety” project, the protection involved in training. In 2019, fire More than a quarter of the extinguishing systems. To extinguish of workers, technological and tactical exercises with the Company jobs are characterized the flame, both sprinkler systems equipment and material assets participation of employees of by optimal (1 class) and acceptable that use water and are connected to from possible fire in production Kostroma fire and rescue garrison (2 class) working conditions. pumping stations, and autonomous has been strengthened. were held on the territory of Sveza About a third of jobs are fire extinguishing systems that mill in Kostroma. associated with the presence of spray a special composition Daily preventive measures factors that affect the employee position. In order to reduce the measures aimed at reducing the are used. are carried out at enterprises, In January 2019, a fire occurred increases the risk of harm to health burden of labor, mechanization impact of harmful production including general control at Sveza mill in Verkhnyaya (3.1 CL.). 37% of jobs belong to the and various devices are used to factors in the workplace, ensuring In 2019, Sveza invested 20 million of production facilities and Sinyachiha in a bark warehouse. class of working conditions 3.2. help move loads. There are also comfortable work and reducing the rubles in the installation of a fire processes. Special attention is The Company took all possible Working on them is accompanied jobs with a combination of various severity of the labor process. pumping station and laying an paid to the production of fire and measures to eliminate the fire. by negative phenomena that lead harmful factors. underground water supply system welding works. However, even after the fire was to the early stages of occupational for the production of large‑format extinguished, smoke continued diseases. An extremely small Prevention of occupational diseases plywood at Kostroma mill. to rise from the hearth for some number of jobs (2%) is associated includes a set of organizational, time. The cause of the smoke with the possibility of diseases sanitary, medical and technical was spontaneous combustion of mild and moderate severity of the fuel mixture. The Ministry (3.3 grade). In the near future, it is of emergency situations and the planned to completely eliminate administration of Alapaevsk were such jobs. There are no working Distribution of Classes of Main Harmful Production informed about the incident. As the conditions under which severe incident caused public concern, the forms of occupational diseases Working Conditions in the Factors, % Company’s Director met with local can occur, as well as dangerous Group Based on the Results residents. After the incident, Sveza (extreme) working conditions at of a Special Assessment of developed a plan of measures to the enterprises of the Group. Working Conditions, % help avoid a repeat of the situation in the future. An automatic fire Noise prevails among the main extinguishing system is installed harmful production factors at the on the territory of the plywood combines (82% of jobs). In addition building No. 1. In the event of a fire to personal protective equipment, in the room, one or more sprinklers anti-noise screens on equipment located in the high temperature and anti-noise cabins for operators * MILLION zone are triggered. Water that is are used to reduce the impact of >68,4 RUBLES in the system under pressure is this factor. were invested in fire prevention immediately fed to the fire source. in the reporting year This eliminates possible damage The severity of the labor process 1 class 0.30 Noise 82 from getting wet in areas where in some workplaces is associated 2 class 27.00 Severity of the labor process 31 the temperature increase is not with lifting a certain weight 3.1 class 32.30 Chemical factor 7 recorded. The total investment in during the shift without the use the project was about 60 million of lifting devices, in others — with 3.2 class 37.00 APFD (Aerosols of 1 Predominantly Fibrogenic rubles. performing long work in a standing * Without VAT. 3.3 class 2.00 Action)

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Improving Working Conditions Responsibility in Supply Chain

All contractors that carry out fire safety, as well as standards, Failure by the contractor construction and installation, policies, procedures, and (subcontractor) or their repair, service and other types of instructions adopted by the Group. employees to observe the rules work on the Group territory must and requirements stated in the comply with the basic rules of All cases of violations by the standard, which entailed grave health, labor safety, fire, industrial contractor personnel are recorded consequences, may result in and environmental safety. These in acts that are considered by immediate stop work termination requirements are ruled by the the Commission from among and removal of such organization corporate standard “Ensuring the representatives of the or any of its employees from the the Safe Conduct of Contract Department of industrial safety, territory belonging to the Group. Work” — an integral annex to any labor protection and ecology and The reason for termination of contract concluded by the Group’s other interested departments. relations with the contractor enterprises for the performance If the information provided in may be, for example, any actions of work with the involvement the report is considered to be (omissions) that led to an accident, of employees of third-party justified, the contractor is subject including a fatal one, with an organizations. to penalties depending on the type employee of the Group or with of violation committed. In 2019, an employee of the contractor Verification of the contractor contractors were issued 127 fines organization. before entering into a contract for various violations in the field is made on the basis of a of labor protection and industrial questionnaire, which should safety and 24 fines for fire safety describe the state of the system violations. of labor protection, industrial, fire and environmental safety in the organization. This questionnaire is an integral part of the tender documentation. Sveza reserves the right to request copies of documents confirming the information specified by the candidate in the questionnaire.

For admission to work, employees The Company strives to All employees are provided with Air conditioning systems are of contracting organizations must create the most comfortable personal protective equipment: installed at the mills, and there are pass an introductory briefing. The and safe working conditions suits, special shoes, gloves, sanitary and hygienic laboratories specialists of occupational health, headphones, etc., noise-insulating for monitoring the air condition occupational, industrial safety and for employees. Most of the cabins are installed at the of the working area. A social and environmental protection service enterprises are equipped workplace. household standard has been of the enterprise check the level with reliable equipment that put into effect, which guarantees of competence of contractors Taking into account the continuous employees the opportunity to use in safety for the performance of allows you to automate the nature of production at the Sveza places for eating, comfortable work, as well as evaluate technical most dangerous production enterprises, special attention is changing rooms, and comfortable and project documents. Increased processes. paid to the installation of modern and clean showers. requirements are imposed when ventilation and fire alarm systems. conducting fire work.

The contractor is fully responsible for compliance with the legislation of Russian Federation in the field of occupational, industrial and

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The Company rented more buses Countering the Spread of to transport workers to the mills separately from the general Coronavirus Infection flow of passengers. At the same time, the salons are treated with disinfectants before and after the In the context of the COVID-19 coronavirus pandemic, Sveza production facilities, among flight. The Company canceled other system-forming enterprises in the country, continue to operate normally. Operational business trips and public events. headquarters have been set up in the management company and at all the mills of the Group, The mills of Sveza Company which monitor the situation and take all necessary measures to protect people. The Company have passed inspections by representatives interact with the authorities, including the heads of the constituent entities of Federal Service for Supervision Russian Federation and municipalities. of Consumer Rights Protection and Human Welfare and regional operational headquarters for The enterprises have introduced and signs of ARVI are not allowed are regularly carried out. At the monitoring compliance with special measures to localize on the territory of the mills. checkpoints of the factories, in sanitary requirements to combat the spread of the disease. Employees of the Company must locker rooms and in canteens, the spread of coronavirus The Company personnel are use hand sanitizers when entering bactericidal recirculators are infection. The representatives provided with personal protective any premises, as well as maintain installed, which destroy pathogenic of departments noted the high equipment in the required a safe distance. For this purpose, microbes. At the checkpoints of degree of effectiveness of the amount. Visual monitoring the appropriate markings were mills, remote temperature control measures taken. of employees health status is applied throughout the territory of systems are installed, which allow performed, as well as instrumental the mills. to quickly and accurately monitor The maximum possible number temperature measurement. the body temperature of everyone of Company employees was Employees, contractors, as well as At the checkpoints, as well as who enters. Set meals are served in transferred to a remote work Sveza mill in Uralskiy provided representatives of customers and at all industrial and household closed disposable containers. format. This required additional firewood for the veterans of partners with high temperatures sites, disinfection and ventilation efforts from IT Department to enterprise and elderly residents of provide such employees with the village, as well as residents of technology, to establish a secure the Urals with disabilities living in connection and the smooth houses with stove heating (a total operation of the corporate of 56 houses). More than two network. An information program hundred families of employees has also been developed to living in houses with stove heating support the situation with the will also receive 5 m3 of firewood. coronavirus. A closed Group “Sveza in Touch” was launched for Despite the fact that the Company the Company employees on the has developed a number of social network VKontakte. A series measures to protect the supply of information posters has been chain and financial stability, Sveza developed and placed at the mills. is considering various scenarios Coronavirus videos are broadcast for the development of events, but on corporate TV. in the implementation of any of them, the Company will continue Sveza is traditionally actively to fulfill its basic social obligations involved in solving social problems in the regions of its presence, in that arise in the regions of its particular with regard to water presence. Sveza mills in Kostroma supply and supply warm. and Manturovo donated masks, gloves and antiseptics to police officers, doctors and volunteers.

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LOCAL 5 COMMUNITIES

BILLION 3,4 RUBLES > 90% tax payments to budgets of of suppliers belong to small various levels, as well as various and medium-sized businesses non-tax deductions for the 5.1 ECONOMIC IMPACT ON THE REGIONS OF PRESENCE 100 Group as a whole in 2019 > 30 5.2 SOCIAL PROJECTS 104 organizations received financial and other material assistance

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Supplier support mechanisms Payments to the Budget, 5.1 provide funds for a period of one Million Rubles 5,018 month to one year, which can be ECONOMIC IMPACT used, for example, to pay for rent, 3,817 3,641 to carry out forestry activities, 2,994 or to replenish working capital. At the same time, the repayment 3,388 ON THE REGIONS OF of borrowed funds is made by products of our own production: birch logs for the production of PRESENCE shelled veneer. Sveza implements an investment 2015 2016 2017 2018 2019 program at all the Group Sveza Group enterprises are located in the North-West of Russia (Saint Petersburg, village of enterprises aimed at developing Novator of Vologda region), in Kostroma and the Kostroma region (town of Manturovo), in the local suppliers-loggers and Verhnaya Sinyachiha the construction and repair of Urals (village of Verkhnyaya Sinyachiha, Sverdlovsk region, village of Uralskiy of Perm region) and increasing the volume of logging infrastructure facilities, and the in the regions. Funds within Sveza mill in Verkhnyaya development of the settlement. in Tyumen. The territories of presence are interested in the creation of new modern enterprises the framework of investment Sinyachiha is a backbone The mill regularly allocates that carry out deep processing of timber, as well as in the modernization of existing industries. projects can be provided to enterprise and one of the largest funds for the improvement and This approach guarantees a significant financial contribution to the economy of the regions of suppliers for the purchase of taxpayers in the region. In the last organization of leisure activities presence, additional payments to the budgets of all levels, the preservation of existing and the logging equipment, as well as five years alone, transfers to the for residents. In 2019, a joint construction equipment necessary budget of the Sverdlovsk Region project with the administration creation of new jobs with a decent level of salary. for the construction of logging have exceeded one billion rubles. was implemented to build a skate roads. The duration of investment More than a thousand people work area, which provides an additional projects is from one to three years. here. A large number of employees opportunity for young people to Projects of Sveza Group are residents of the village and play sports. In addition, the mill for the reconstruction and In order to increase the volume neighboring villages. An increase rents gyms for employees and modernization of production of harvesting in the regions in the tax base, including due their families to train at the local facilities, an increase in the where the Company operates, to the annual indexation of physical culture and sports center. volume of products, contribute to Sveza enterprises enters into salary, has a favorable effect on Monthly lease payments help the the growth of trade turnover and strategic agreements with logging the socio‑economic situation physical culture and sports center improve the investment climate, companies for a period of three of the village: funds appear for reach self-sufficiency. provide a good incentive for years or more. This allows suppliers the development of enterprises to plan production activities for in related industries and have a a long period, as well as ensures beneficial effect on maintaining full utilization of the capacity social stability. of logging enterprises and guaranteed sales of plywood raw More than 700 organizations materials at market prices. supply wood raw materials to Sveza mills. The vast majority The Company mills, which BILLION RUBLES of suppliers (more than are located in small localities 3,4 90%) belong to small and (Verkhnyaya Sinyachiha, Novator, tax payments to budgets of medium‑sized businesses. At the Uralskiy, and Manturovo), various levels, as well as various non-tax payments for the same time, the Company tries to are actually the city-forming Group as a whole in 2019 give priority to local producers, enterprises that determine the which are based in the immediate economic and social well-being vicinity of each specific plywood of the territory. Many of them also mill, which also reduces logistics provide energy and water supply > 90% costs. Sveza orders not only to the housing sector and social provide loading for local facilities. of suppliers are SMEs suppliers, but also give them opportunities for development.

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Novator from local residents, and also The mill thermal power plant in in the mill activities also affect the purchase goods and services in the Novator not only provides residents socio-economic development of The village of Novator is Veliky Ustyug district. with heat and hot water, but also the territory. located in the Veliky Ustyug helps prevent problems caused District of Vologda Region. In order to provide raw materials by flooding. In spring, the mill Manturovo The Sveza plywood mill is the for growing production, in 2019 supplies city services with wood town‑forming enterprise for the the Company started logging ash, which is scattered along river The town-forming enterprise of village. The Company investment operations in the Totem district banks to speed up ice melting. Manturovo, Sveza mill, accounts for strategy aims to increase output of Vologda region. In the new “Blackening” of ice on the Sukhona about 90% of the shipment volume by 52 thousand m3 per year. The subsidiary, Sveza Resource LLC, and Severnaya Dvina rivers is a of the city processing enterprises implementation of such projects more than 100 jobs were created, traditional flood control measure and about 20% of the working as “Novator +52” not only helps to tax and non-tax deductions in 2019 in Veliky Ustyug. Sveza is also population of the municipality. More increase the output and increase amounted to 3.6 million rubles. preparing to implement a large- than 20 local small and medium- the competitiveness of Sveza scale coast protection project and sized businesses work at the mill on Group at the world market, but Residential fund village of Novator the construction of a flood wall. It is contract terms. The total number also allows to solve a number of is the main consumer (84%) of planned to strengthen the coastline of contractors’ employees is more important social and economic Sveza thermal power plant. The with a total length of more than than 100 people. Basically, they problems. More than 100 new jobs plant heats 32 apartment buildings, 800 m. About 2 thousand m3 of soil provide services in the field of will be created here for residents and also provides reliable and will be used to protect the Sukhona construction and repair, logging, of Vologda region, and tax uninterrupted heat supply to social coast from flood waves and erosion. transport, etc. deductions to budgets of various infrastructure objects: kindergarten, Together with the city and the enterprise allocates levels will increase by tens of school, library, community centre, In 2019, at the request All waste is processed here into a administration, Sveza mill in wood trimmings to the veterans millions of rubles. sports and recreation center, Samotovinsky village wood-based fuel mixture, which is Kostroma began work on the of production who live in houses outpatient clinic and shop. administration, which includes the used in the energy supply cycle of improvement of the walking area with stove heating. The mill Even before the construction is During the 2019–2020 heating village of Novator, Sveza provided the enterprise. The new mini-CHP from the central embankment to regularly provides assistance in the completed, the “Novator +52” season, from September to May, the road services with a brick break plant supplies heat and electricity the bridge over the river. improvement of social facilities — investment project is already 5,034 Gcal of heat was released in the required volume for the to the mill, and in the cold season the village sports stadium “Parus”, having a positive impact on to consumers. For its production, current repair of village roads. it heats 11 private housing buildings The Company was the first to educational organizations the district economy. About 805 tons of wood chips were and one apartment building. respond to the call of the city and kindergartens, as well as 300 employees of contracting used — an environmentally friendly Uralskiy authorities to put in order the a memorial in the municipal companies are employed at the and economical fuel that is formed Kostroma pedestrian path along the left recreation park dedicated to construction site and in related at the plywood mill as a result of its The vital activity of Uralskiy village Bank of Volga to the Ipatievsky the workers of the mill who died organizations, which rent housing own technological processes. depends entirely on the activities Sveza mills in Kostroma monastery. Here the grass during the war. of Sveza mills. About 20% of the and Manturovo are among was mown and fallen trees residents work here. As part of the largest taxpayers in the were removed. In 2020, the Tyumen the “+40” project, Sveza mill in budget of Kostroma region. embankment improvement work Uralskiy plans to expand plywood The improvement in economic will continue. The mill provides jobs for about production by 40 thousand m3 performance of the mills as a result 600 residents of Tyumen. per year and build a mini-thermal of the implementation of major Saint Petersburg Over the past two years, transfers power plant. These projects are investment projects has a positive to Tyumen Oblast budget included in the list of priority impact on budget revenues at The St. Petersburg Sveza mill, have exceeded 1 billion rubles. investment projects in the field of all levels. located in Pontonny, is one of The increase in the tax base is also forest development in Perm region. the town‑forming enterprises due to the annual indexation of After the project is launched, The timber industry is a region- of the village. The mill provides salary. The mill annually provides 20 new jobs will be created. In forming sector for the regional jobs for about 650 residents charitable assistance to promote total, taking into account the shift economy. In the structure of of Pontonny, the villages of extreme sports. nature of work, 47 people will be region export, plywood occupies Metallostroy and Saperny, the additionally employed. The new the first place, it accounts for city of Kolpino and other nearby mini-CHP not only guarantees 50% of supplies, another 15% are municipalities. The mill makes a uninterrupted power supply to occupied by other woodworking significant contribution to the the production processes of the products. About a third of the total social and economic well-being enterprise, but also creates the list of wood products produced in of the village. Pontonny Thus, the necessary amount of heat energy Kostroma region is produced by boiler house of the mill provides for the village. Significant changes Sveza mill in Kostroma. residential buildings with heat,

102 Sveza Sustainability Report for 2019 103 SUSTAINABLE LOCAL GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT COMMUNITIES STRATEGY SOCIAL PROJECTS 5.2 Environmental Education for Children and Youth Environmental education of were used, developed by the children left without parental care. children and youth is an important World Wildlife Fund (WWF) of At the end of the lesson, children area of Sveza social policy. Russia. Schoolchildren and teachers planted fruit trees donated by Social Projects and Charitable Assistance The Company goal is to create a of small rural schools accepted Sveza on the territory of the center. responsible and careful attitude with interest the unusual format of to the forest among children interactive lessons about forest and Another environmental lesson Sveza Company strives not only to be an attractive employer who cares about its employees, but and young people, to improve climate. Students and teachers of ended up by planting trees in also to help maintain a decent standard of living for residents of the regions where it operates. environmental culture and literacy. small rural schools were interested the schoolyard in the village of All the Group enterprises are actively engaged in social and charitable activities. In the regions of its presence, Sveza in the unusual format of interactive Uralskiy, Perm region. During the conducts environmental lessons at classes about the forest and climate. lesson, employees of Sveza mill told schools and thematic conferences, students about the environment, supports school forestry, organizes Thus, students of one of natural resources, environmental environmental camps and Kostroma schools took part in the safety and measures that can be subbotniks (community cleanup). environmental lesson “Can we live taken to reduce the negative impact without forest?”. In a playful way, on the world around them. Students In 2019, Sveza employees Sveza employees told the children discussed the problems of separate conducted more than 25 lessons about how useful the forest is and waste collection, water treatment in schools and school forestries what are the ways to restore it. and tree planting. in Vologda, Kostroma, Sverdlovsk Another lesson, “Forests of Russia”, regions, as well as in Perm was taught by the Company Students of 7-9 grades in the region. To conduct the classes, employees for the students of village of Suda of Vologda region “Lesomania” teaching materials Chentsovsky center for helping took part in a thematic team

Interschool Scientific and Practical Conference in Manturovo

Thematic conferences are an effective tool for environmental Almost all Sveza mills are The main directions of the and socially significant institutions education of young people. Their city‑forming enterprises and Company social and charitable and organizations for carrying goal is to promote environmental have an impact on the social activities are landscaping, support out repair and construction culture and responsible environment and daily life of local for sports and healthy lifestyle, care work, making sports equipment, environmental management, develop communities. All the Company for socially vulnerable categories teaching aids and handicrafts. project work skills, and involve enterprises implement charity of the population, assistance to About 30 organizations also young people in scientific and programs and participate in the schools, kindergartens, leisure and received financial and other practical activities. In autumn, on the construction and maintenance of sports institutions, and support for material assistance. A list of Sveza basis of one of the city schools of social infrastructure facilities. cultural projects. main beneficiaries is provided in Manturovo, an interschool scientific Appendice 2 of this Report. and practical conference on ecology As a charitable aid, the Company’s and responsible environmental enterprises donate finished management, initiated by Sveza products to various educational mill, was held. The conference was attended by 12 high school students from ten city district schools. The authors of the best works received valuable prizes.

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19th Meeting of School Forestries of Perm Region Childhood Support

As part of “Timber Producers of Prikamye” association, Sveza, Child support is one of the key Almost all Group enterprises Sveza mill in Uralskiy participated together with the regional directions of social initiatives participate in charity events in purchase of office supplies for education authorities, took part that Company implements in the dedicated to the beginning of primary school students before in organizing the 19th meeting of interests of local communities. the school year. Short before the new school year. The help was school forestries of Perm region. Sveza helps children educational, the beginning of school year directed to families from Nytva, The three-day meeting brought sports and leisure institutions, (First of September), all parents Grigorievsky, Novoilinsky, Uralskiy, together 120 students, members provides targeted assistance of first-graders at Sveza mill in Tchaikovsky, as well as the villages of school forestry departments to large families and families Manturovo received gift certificates of Opalikha, Rybkhoz and other who are engaged in environmental in difficult life situations, and for purchasing school supplies. settlements. Some of the gifts and educational activities, cooperates with charitable In addition, Manturovo branch were delivered to the children by conservation and enhancement organizations working in the provided charitable assistance to employees of Sveza mill. of forests. Within the framework field of prevention of social the city social service center for of the rally, there were individual orphanhood. the purchase of school supplies for Before the start of the new school “Forest Robinsonada” competitions, children from large and low-income year, Sveza mill in Verkhnyaya “Preservation of Forests” foresight The Company supports the families. In total, the mill helped Sinyachiha traditionally sessions, where children presented activities of the “Way Home” 85 first-graders get ready for school. congratulates first-graders. In 2019, cases on organizing the work program of Severstal, aimed The mill in Manturovo traditionally a big kid’s party was arranged for of school forestries within the to solve the problems of social participates in the preparation of all village children. 81 children were framework of implementation of orphanhood and prevent juvenile educational institutions for the awarded with gift certificates for “Ecology” national project, and delinquency. Since 2011, Sveza beginning of the new school year. the purchase of office supplies. On “Young Forester” competition. annually allocates about 2 million In summer of 2019, material support the terms of co-financing, the mill, rubles to support this program. was provided to secondary school together with the administration of No. 3. Every year, the Company the municipality of Alapaevskoye, game and learned from Sveza region, took part in an informative at a meeting of school forestries, In Veliky Ustyug district of Vologda purchases construction materials organized a summer vacation on staff in Novator about the use lesson about the world around them, and employees of the organizational region, the proportion of families in and provides special equipment the Black Sea coast for 22 children of forests for maintaining the which was conducted by teachers development service held a master difficult life situations is invariably for the production of technically of employees. About 50 New Year natural balance. After the lesson, of Vologda state University in class for children. high, therefore social assistance is complex works. gifts were sent to children left 12 students signed up for the exciting ways. in great demand here. In 2019, the without parental care. school forestry. In 2019, Sveza in Uralskiy with the Company allocated funds for “Way In the reporting year, the Novator In the territories of its presence, assistance of the Ministry of Natural Home” and “Start+” projects in mill provided free assistance Every year, Sveza mill in Kostroma The Company specialists Sveza actively cooperates with Resources, Forestry and Ecology the town of Krasavino and “Social to eight social infrastructure issues certificates to parents of conducted field career school forestries, which are created of Perm region on the basis of an Ambulance” project. In August facilities — schools, kindergartens, first-graders to prepare their guidance events for students of with the aim of educating children elementary school in the village of 2019, Sveza mill in Novator took sports clubs and creative teams children for school. In 2019, a big Veliky Ustyug high school No. 9 in a responsible attitude to nature, Uralskiy established the first school part in the charity event “Backpack of the city. In particular, the and No. 15. Krasavino. In 2019, transferring knowledge in the field of forestry “Friends of the Forest”. of Happiness”, one of the events Company provided plywood for more than 600 students from forestry and ecology. In Manturovo Waste paper collection became a of “Social Ambulance” project. repairing activities and for home the district schools took a tour urban district, the “Green World” joint project of schoolchildren and Sets of school supplies were economy classes for a number of of the corporate Museum and school forestry is successfully Sveza. Environmental campaign formed for 19 families and children educational institutions, as well plywood production facilities. functioning, established on the basis helped the participants send more received them at “First-Class Day” as for “Alyonushka” kindergarten The Company donated apple and of a secondary school in the village than 4 tons of secondary raw just before the beginning of the in the village of Novator, which is pear seedlings, flower seedlings to of Oktiabrsky. In June, employees materials for processing. school year. Sveza mill in Novator, mainly attended by children of the Veliky Ustyug center for helping of Manturovo mill visited one of the together with other enterprises mill employees. The kindergarten children left without parental children work sites. Sveza employees For children of primary school age, of the district, joined the “Family and children boarding school also care for landscaping the territory gave them a career guidance lesson the format of a summer eco-camp Circle” campaign, due to the received financial assistance from of the center and environmental and told them about the Company has been developed. The first such Company support in August the mill. In 2019, more than seventy education of the wards. and the mill. camp was organized by Sveza on 2019, the “Mother and Child” children of employees of Sveza mill the basis of a secondary school in rehabilitation camp in Santa Claus in Novator went to the first grade. More than 100 schoolchildren who Sveza mill in Tyumen actively the village of Uralskiy Together with Estate (Veliky Ustyug) was visited For them, the Company traditionally are having a rest in the children cooperates with Tyumen Society teachers, counselors and volunteers by the family with a disabled child prepared sets of school supplies and camp named after A. Yashin of Foresters, a school forestry; in of Sveza mill, 212 schoolchildren took from Krasavino. organized a visit to Santa Claus zoo. in Nikolsky district of Vologda 2019, the mill representatives spoke a course of environmental education.

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holiday with creative and sports advertising on board appeared at area. The mill employees cleared competitions was organized for the streets of Kostroma. Children the territory of school No. 400 Supporting Sports and Healthy Lifestyle the Children’s Protection Day. prepared posters on different of snow. Also, at the request of For several years, the mill has topics such as how to help a the school administration, lamps been patronizing two Kostroma drowning man, what to do if there were purchased. Last year, the Sports and healthy lifestyle are an Uralskiy “League West”, and young schools. Sveza in Kostroma is a is a fire in the house, and other mill representatives took part important element of corporate Every year, Sveza mill in Uralskiy amateur athletes play yard partner of children projects of the topics. Young rescuers hope that in the village festival of children culture. Sveza pays great attention supports professional and football. With the support of the regional branch of the all-Russian this form of agitation will attract creativity, where they congratulated to the health of its employees amateur sports, allocates funds Company, a traditional regional “School of Security” movement. the attention of adults. the participants on their creative and invests heavily in sports for the maintenance of sports tournament among children In 2019, the mill employees held and sporting achievements, infrastructure in the regions where facilities and the local sports and youth teams, an ice hockey a thematic safety flash mob Support of educational presented the heads of educational its mills operate. All enterprises institution “Sports Development tournament “Lesovik” among in the rehabilitation center for organizations located in the village organizations with certificates have sports halls. Each mill has Center”. With the support of the young men was held in the children in difficult life situations of Pontonny — one of the main for the purchase of necessary its own football and volleyball Company, local teams participate village. Right before the day of in Krasnoselsky district. They directions of charitable activities equipment. Every year the mill teams that compete in district and in the regional championships forest workers and the timber told kids how important it is to of St. Petersburg mill. In 2019, the implements the “Growing Together” regional tournaments and take among young men, veterans processing industry and within know the basics of safe behavior mill purchased office equipment program, which includes a series part in the annual corporate sports and amateur teams. Adult teams the framework of “Month of during summertime, and then they for kindergartens No. 8 and No. of study tours to the production competition. of Sveza successfully play in Road Safety” preventive action, planted fruit trees and bushes 39, and helped kindergarten No. 8 for children of employees, students the Perm region championship Sveza Company and traffic on the territory of the center. to purchase household items for of schools and specialized higher in football, the Perm region police in Nytvensky district In summer of 2019, as part of the the pupil’s bedroom. Secondary education institutions. In 2019, championship in hockey and the held a “multi‑sport” tournament “Summer WITHOUT Dangers” school No. 520 received assistance the mill was visited by more than regional volleyball tournament in Uralskiy. children project, a bus with social in the improvement of recreational 200 children and teenagers.

As part of the “Growing Together” program, Sveza in St. Petersburg conducted a field trip for employees children to the “Neptune” oceanarium, which was visited by about 75 children. Every year, the mill arranges an off-site event “Family Day” for the families of employees. For children, there is an entertainment program and a playground. In addition, Sveza implements a summer recreation program for employees’ children. Last year, about 40 children and teenagers had a rest in children health camps.

Art Subbotnik in Kostroma In 2019, Sveza mill in Tyumen, in honor of Children’s Protection Sveza Company in Kostroma facade and interior of the Day, bought gifts for children took part in Art Subbotnik building. “Children Polyclinic” from large families and families (community cleanup) of the project. Art reloading has been in difficult life situations. “Center for Social Initiatives” existing for several years. During By September 1, the Company non-profit organization. this time, the artists designed provided kits to employees’ Employees and volunteers of five children medical institutions children for a successful start of the center developed a design in Kostroma and five more in the new school year. project and prepared the facade other cities of Russia. The project of the children clinic for art was made possible due to the painting. And city residents, support of city administration, including employees of Sveza as well as partners, Sveza being mill in Kostroma, painted the among them.

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Sveza stadium in the village of Kostroma mill in Kostroma participates in the Uralskiy received an award from festival of working youth, where Tyumen Perm region football Federation for Sveza in Kostroma supports its teams of large city enterprises the high level of organization and employees’ passion for sports. compete in sports and creative In 2019, Sveza became a partner attendance of matches of Perm Mini-football and volleyball teams competitions. of the largest sports festival region football championship in were formed on the basis of the “Extreme EXPO” in Tyumen. 2019 season. In the reporting year, Company. Employees of the mill With the Company support, a More than 400 athletes from Sveza allocated 4.9 million rubles perform well at city and regional hockey rink with lighting for a dozen cities competed in for sports development in Uralskiy. level competitions. students and local residents parachuting, rock climbing, mixed was equipped on the territory martial arts, power extreme Manturovo Volunteers from Sveza Active of school No. 7. And in July, the sports, and cheerleading. and employees of the mill in second corporate sports contest The Company provided its For many years, Sveza mill in Kostroma took part in Volga Sveza was held in Kostroma. products for the construction of Manturovo has been filling and ecological half marathon, which Teams of all Sveza enterprises the main sports facilities. For the servicing the city only ice rink, was organized by the All‑Russian competed in shooting, long jump, 13-meter climbing wall and which can be used free of charge Athletics Federation, the running, football and volleyball the complex of skateboarding by all residents. The local hockey All‑Russian Ecological Movement competitions. For the first time a jumps, moisture‑resistant team also plays its home games “Green Russia” and Kostroma corporate tournament of this kind plywood was used, and for the here. In 2018, the Company Region Administration. More was held in 2018 in St. Petersburg. areas with non‑slip surfaces, arranged high-quality lighting at than 20 employees of the mill laminated plywood with a mesh the rink, and in 2019, it carried successfully covered the distance In 2019, Sveza Company became surface was used. The Company out major repairs to the court, of 3 km. Sveza in Kostroma also the general sponsor of one of the also supported the Russian adjacent locker rooms and gym, supported “Hello, Kostroma!” half most exciting mass sports events ice climbing championship, which the mill employees attend. marathon. With the assistance of in Kostroma region — snowkiting which was held in Tyumen in The mill provides annual assistance the Company, the All-Russian mass championship “WINDY GAMES December 2019. to FC Spartak and the local ski race “Ski Track of Russia” was 2019”. football team. also held here. Every year Sveza Verhnaya Sinyachiha Due to support of Sveza mill The Company encourages a men and junior women teams. Saint Petersburg in Verkhnyaya Sinyachiha, the healthy lifestyle for its employees Young basketball players born first skate-ground for extreme and their families. They annually in 2007— 2008, including several For the second year in a row, sports appeared in Alapaevsky receive gift certificates for children of employees of the Sveza mill in Saint Petersburg district of Sverdlovsk region. visiting the sports and fitness mill, with the financial support supports sports events in the When creating sports facilities, center, where the mill rents gyms of Sveza, represented Veliky village of Pontonny, where the Sveza plywood was used, which for sports. Ustyug at the “League of Friends” Company is located. In 2019, it has high strength and increased tournament in Ryazan. provided assistance in holding moisture resistance. It is possible Novator competitions in draughts, darts, to ride skateboards, roller skates, In 2019, Sveza held friendly table tennis, arm wrestling, BMX stunt bikes and scooters on The Company supports its football and volleyball matches volleyball, pionerbol, as well the sports ground. Extreme sports employees’ soccer and volleyball in Veliky Ustyug between Sveza as children and youth sports are very popular among young teams that compete in district mills from Novator and Manturovo. games and family competitions people, so the sports ground is and regional tournaments. In 2019, The sports festival gathered “Dad, Mom, Me”. In addition, specifically designed in a way so the mill team reached the third hundreds of spectators in the the mill provided plywood for that beginners can also use it. It is place in volleyball and second — stands. For them, during the the reconstruction of the village possible to practice here until the in football competitions of the breaks between matches, the stadium “Parus”. first snow. regional sports competition among Company arranged contests with a enterprises. Sveza in Novator drawing of branded souvenirs. Sveza also became a partner of also focuses on basketball, which the “Ultimate Strength” regional is popular in Vologda region. sports festival and supported the The Company supports varsity track and field competition in Verkhnyaya Sinyachiha.

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of Perm plywood mill received Sveza mill in Tyumen, in cooperation Assistance to Veterans and the Elderly financial assistance in the amount of with the city administration, 2.2 million rubles. organized the delivery of gifts for veterans. One of the directions of the assistance to 26 veterans, and to the brought the gifts home to those Employees of Sveza mill in Company social policy is to help Day of the Elderly — to 331 people. veterans who could not attend the Verkhnyaya Sinyachiha personally In addition to the insurance fees that the elderly and veterans. Special Pensioners holding the title of holiday. The Company regularly congratulated veterans on the Sveza, as a responsible employer, attention is paid to retired former “Honorary Worker of the Mill” are presents gifts to veterans of the occasion of Victory Day. About regularly and fully transfers to employees of the mills. Most of the given a free trip to the sanatorium mill on the occasion of birthdays 100 retired workers, former the pension Fund of Russia, the events in this area are dedicated to once a year and a bonus for the Day and anniversaries (from 90 years), employees of the mill, visited Company provides various types of the celebration of Victory Day and of Forest Workers. as well as for the New Year. the enterprise, which had been financial assistance to retired former the Day of the Elderly. established with their efforts. Such employees of enterprises. Permanent On the basis of a collective The mill in Manturovo annually In Uralskiy, the mill provides tours taking place on the occasion of employees who have reached the agreement, employees of the In 2019, Sveza mill in Kostroma provides free firewood to veterans transport for field events of the Day of the Elderly and Day of Forest retirement age (women — 55 years, enterprise, as well as pensioners supported the “Trophy-Victory living in houses and apartments society of labor and war veterans. Workers at Sveza mill in Verkhnyaya with preferential seniority — 50 years, living in houses or apartments with March” charity race on off-road with stove heating. On the occasion On Victory Day, a “Soldier’s Sinyachiha have become a tradition. men — 60 years, with preferential stove heating, are provided with vehicles, organized with the support of holidays, veterans receive gift Porridge” campaign took place seniority — 55 years) are paid a 4.5 m3 of wood waste once per a of the Regional Council of Veterans certificates for purchasing goods in the village — a field kitchen Sveza mill in Novator provided one-time bonus for many years of calendar year. In addition, financial and “Russian Roads” club. The race in stores. On May 9, a tour to the with soldier’s food for everyone financial assistance to the Council of conscientious work. The amount assistance or a gift certificate is is held annually in Kostroma region production facility was organized for was deployed. Also, as part of the veterans of Veliky Ustuyg district and of the bonus varies from 3 to provided on the occasion of the and brings together about 100 the veterans. “30 Days to Victory” campaign, the “Children of War” organization in 20 thousand rubles, depending on Day of the Elderly. participants from different regions of workers of Sveza mill in Uralskiy Krasavino for holding events in honor the duration of continuous work Russia. On May 8, a commemorative Sveza mill in St. Petersburg, on the and volunteers of the “Awakening” of Victory Day. experience at the enterprise. meeting dedicated to the Victory occasion of Victory Day, organized detachment of Children Art in the Great Patriotic War was held a traditional festive dinner for war Center personally visited and on the territory of the mill. Veterans veterans, home front workers and congratulated veterans of the and home front workers, employees residents of besieged Leningrad. Great Patriotic War and home Culture Support of the enterprise, as well as students The guests were congratulated by front workers. Sveza in Uralskiy of the sponsored school gathered the staff of the mill and students also finances regular course together at the monument for those of secondary school No. 400 in treatment of veterans of the mill In 2019, Sveza mill in Verkhnyaya who perished. Also for the Victory the village of Pontonny Volunteers in the dispensary. Members of the Sinyachiha and the Verkhnyaya Day, the mill provided financial from the central office and the mill public organization of veterans Sinyachiha local history museum jointly organized a museum exposition that tells about the history of the Company development. More than 200 exhibits are presented in the museum hall. An interactive model of plywood production workshop became the central piece of the exhibition.

In October, a field practical laboratory “Made in a Museum” was held in Kostroma with the support of Sveza. The event is In November, in Veliky Ustyug Due to the support of Manturovo the first stage of the X grant Sveza supported the popular show mill, the youth center “Yunost competition for the “Museums of “Time of Dance. Kids”. Sveza mill (Youth)”, the main city community the Russian North” projects. in Novator also provided financial centre, which has the only cinema The support program for regional and organizational support to Veliky in the city, children leisure facilities museums has been implemented Ustyug gymnasium in conducting the and the largest city stage resumed by Severstal since 2007. Total Dictation. The event in Veliky their work. The mill also provided special Ustyug district was held for the first uniform for employees of the time and attracted great interest of open‑air museum. local residents and the media.

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EMPLOYEES 6

About 6.1 STAFF STRUCTURE AND PERSONNEL POLICY 116 7,000 44% 4 % employees worked at total personnel security 6.2 RECRUITMENT AND PROMOTION SYSTEM, RESPECT FOR 118 seven mills in six regions of the in the Company HUMAN RIGHTS country in 2019 in 2019. 6.3 MOTIVATION AND REMUNERATION 121

MILLION 6.4 EVALUATION OF EMPLOYEES PERFORMANCE 123 69% 2 % 72 RUBLES 9 % 6.5 TRAINING AND DEVELOPMENT 124 employee satisfaction investment in recruitment rate based on the and training 6.6 SOCIAL SUPPORT FOR EMPLOYEES 127 “Career Opportunities” in 2019 factor 6.7 CORPORATE CULTURE AND VOLUNTEERING 129

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Almost two thirds of employees Payroll Number of Employees at the End of the Year, by Age 6.1 are in the 30–50 age group, which combines advanced professional < 21 20 STAFF STRUCTURE AND skills and good physical shape. However, Sveza, like other 21–30 1,224 companies in the industry, is facing the general trend towards an aging 31–40 2,433 PERSONNEL POLICY workforce and a gradual increase in the proportion of older workers. 41–50 1,964 about The management of personnel 51–60 1,118 Average Number of Employees by Main Regions of Presence issues in Sveza Group is carried out 7,000 by Department for Organizational Development and Personnel > 61 124 employees worked at seven mills in six regions of the of Management Company and country in 2019 Moscow 18 corresponding services at the enterprises. Saint Petersburg 882 Personnel policy of Sveza is Vologda region 871 primarily aimed at achieving the > 100 production goals of the Group YEARS 16% 2% new jobs were created within the Kostroma region 1,885 enterprises and is designed to 40 42 69% framework of the Sveza Resource project aimed to open its own solve the following tasks: the average new managers were employee logging facility age of employees appointed from the satisfaction based on the Sverdlovsk region 1,095 • Improvement of the personnel in 2019 personnel reserve “Career Opportunities” management system. in 2019 factor Perm region 1,480 • Recruitment, maintaining the The largest share of the quality and quantity of staff at Tyumen Company employees (27%) is 652 the optimal level, maintaining The Key Aspects of the Personnel Policy that Regulate in Kostroma region, where two the image of the organization in Work with Personnel are Recorded in a Number of Sveza enterprises are located. the labor market as an attractive Internal Documents Uralskiy mill in Perm region is the employer. • Internal labor regulations • Regulations on conducting largest on as per the number of • Adaptation of personnel, quick “Dialogue on Goals” for employees. integration of a new employee, • Regulations on employee managers, specialists and creation of a favorable social compensation workers The share of women in the total Distribution of Employees by and psychological climate in the • Code of Conduct for number of employees is 42%, • Regulations on rules for Gender and Category working team. Sveza Group employees which is four percentage points setting, revising and summing • Motivation and remuneration, higher than the same indicator • Regulations on bonuses up key performance indicators maintaining a competitive salary for the manufacturing industry for employees for the annual horizon in the country. At the same time, level. • Regulations on business trips • Procedures for dealing with their share among the Company • Training and development: violators of labor protection managers is even higher (43%), identifying employees with high • Regulations on entertainment requirements and among the “Specialists” potential and forming a talent allowance category, women predominate pool, maintaining the skills of • Regulations on conditions • Regulations on social Women Men (53%). Two women are among the employees at an optimal level. for admission and transfer guarantees and benefits Company top managers. Workers 2,192 3,231 • Corporate Culture Development of employees to work in Specialists 482 430 another locality Managers 235 313 • Regulations on provision of voluntary medical insurance and insurance under NS

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In the context of a shortage of At the end of 2019, Sveza Group showed the best result among 6.2 qualified specialists in the country timber companies in the “Russian Employers Rating”, which is timber industry, personnel security compiled by Headhunter according to market participants, RECRUITMENT AND is one of the Company strategic employees and job seekers, and took 36th place in the priorities. Sveza implements an integrated approach to solving the overall list. problem of the personnel reserve. PROMOTION SYSTEM, The main activities include: • career guidance lessons and Number of Newly Hired Employees in 2019 field trips for students of local RESPECT FOR HUMAN RIGHTS schools, colleges and universities; Central office 147 • systematic work with secondary and higher education institutions Saint Petersburg 134 Sveza mills the principles of an open personnel policy, which presupposes the search for the in the regions of presence in the Novator 109 necessary specialists in the external labor market, with the use of its own talent pool and most popular specialties; promotion of lower-level employees up the career ladder to higher positions. • the program of summer Kostroma 112 internships for students with subsequent employment based Manturovo 49 on the results of practice; Verhnaya Sinyachiha 67 • developed mentoring system; Uralskiy 172 • training program for employees with leadership potential; Tyumen 193

• joining efforts in the field of personnel training with other companies in the industry.

The most effective employees are promotion not only at the Group for searching and evaluating included in the personnel reserve. mills, but also requires respect candidates using artificial They get all the opportunities for for human rights from suppliers intelligence Sever.AI. The trained professional and career growth — of wood raw materials, which is computer program, acting on a in particular, they improve their regulated by the due diligence given algorithm, searches for the skills during training in internal and system adopted by all the necessary resumes in the database, external programs for managers Company enterprises. contacts applicants via SMS, and workers. It often happens in the e-mail, phone calls, messenger Company when ordinary specialists In addition, we strive to create a messages, conducts video 1,400 reach the level of foremen and safe and comfortable workplace, interviews with them and analyzes middle managers in a short time. to create an environment in which the results. Based on the results vacancies closed in 2019 our employees grow and develop of the analysis of the resume At the same time, all employees of as professionals every day. and video interviews, artificial the enterprise, including employees intelligence issues ratings, on the who have reached retirement A total of 983 people were basis of which the recruitment age, can undergo training. employed in 2019. The total specialist can conclude that the 44 % 4 % There are no age restrictions for real turnover of staff (all except applicant meets the requirements of the total either professional growth or for transfers) decreased compared to personnel security in the employment in the Company. the previous period and amounted Currently, the HR robot selects Company in 2019* When hiring, HR departments of to 14.29% (16.07% in 2018), candidates for the positions enterprises first of all evaluate undesirable turnover (voluntary of production manager and experience, professionalism and dismissal) — 6.58% (5.75% in 2018). sales support specialists. development potential. Sveza Sever. AI Technologies will allow does not discriminate on national, Sveza was the first Russian employees of human resources religious or gender grounds when production Company to services to significantly save * Based on the results of the applying for employment or implement an automated system working time. “Progress Reserve” committees.

118 Sveza Sustainability Report for 2019 119 SUSTAINABLE GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT EMPLOYEES STRATEGY Onboarding MOTIVATION AND 6.3 It is important for the Company to A new employee must subscribe to reduces stress levels and allows for quickly and efficiently adapt newly a chatbot for adaptation based on the fastest possible integration into arrived employees and employees the Teams platform and Vkontakte the Company culture. transferred to another department social network. During the first REMUNERATION to perform other functional duties three months, the virtual assistant The key role in the adaptation or to a management position. “Dasha” monitors the main stages process is assigned to the The Company has created unified of adaptation, communicates immediate supervisor of the Our goal is to be an attractive and Ratio of Standard Entry-Level Wages in Blue-Collar Occupations adaptation plans for all categories important information about the new employee, who prepares an reliable employer. Sveza Group to Minimum Salary in the Main Regions of Presence in 2019 of employees. The adaptation Company, answers questions, and adaptation plan for him, during the applies an integrated approach process is designed for three reminds of scheduled meetings. trial period meets with him and to the employee remuneration months. The adaptation process The chatbot is programmed in his mentor several times, checks system and guarantees a Saint Petersburg takes three months. such a way that it can provide the the implementation of the plan, decent wage. The Company has 1.73 1.80 Women necessary information or advice summarizes the first results of the adopted the Regulation on the Men “Welcome to Sveza!” one-day on almost all household and work, finds out what difficulties the remuneration of employees and Vologda region training is a must for all new administrative issues. If the chatbot newcomer faces and will help him the Regulation on bonus payments 2.00 1.84 employees and is designed to does not know the answer to a if there is a need. High results are to employees. Kostroma region quickly introduce a newcomer question, it gives the contacts of demonstrated by the mentoring 1.98 2.13 to the Company, talk about the a responsible manager who can system, when experienced workers Much attention is paid to production process, organizational help. This technical solution raises train young specialists, help improving the wage system with Sverdlovsk region structure and products. the employee level of awareness, them get used to the profession, the aim of increasing internal wage 1.80 1.75 and immerse themselves in the fairness and its competitiveness. nuances of production processes. The standard entry-level salary Perm region for blue-collar occupations tends 1.83 1.97 At the end of the probationary to average almost double the Tyumen region period, with a mutual decision to minimum wage. 2.16 2.57 continue working, the manager and the employee draw up an individual development plan, which sets out goals for the next year. The result of effective adaptation is a loyal, engaged employee who demonstrates high personal efficiency already in the first months of work.

Training sites on the basis of the Company and specialized educational institutions, internships for students and senior schoolchildren, internships at enterprises, the Leader Path project and the mentoring system break the stereotype about the timber industry as an insufficiently In 2019, 233 people under the technological industry. age of 30 were involved in Effective adaptation helps attract production. and retain young promising employees.

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Since 2017, the Group plywood To evaluate values and From 2020, after the mills have been conducting competencies of employees, the implementation of HR a comprehensive assessment “360 Degrees” method is also used, management tools in the of craftsmen. This tool allows which makes it possible to draw up you to identify focal areas for a comprehensive description of the new business is completed, professional development of employee. The evaluation process 100% of employees will be production managers throughout involves colleagues, immediate periodically evaluated for the year. Based on the results of supervisor, subordinates (if any), as performance and career the assessment, each of the heads well as the employee himself. of production sites receives one development. of four levels, which is formed Since the beginning of 2017, the taking into account a personal mills have also been running the assessment and assessment of program “Dialogues About Goals the team’s work. Employees with with Workers”, within the framework the first and second levels can be of which basic and ambitious goals considered as a personnel reserve are set for each employee. Their for higher positions. Level 3 and achievement and other production 4 employees receive a detailed successes are directly reflected in corrective action plan. the amount of salary. Salaries are indexed annually. Salary growth occurs due to the performance indicators (KPI) is HR employees regularly monitor annual revision of not only salary achieved, the employee receives a the dynamics of wage growth in part, but also bonus system when bonus, when an ambitious goal is the regions of presence, monitor the results are achieved for the achieved he receives an increased inflation forecasts and take these month, quarter and year. At the bonus. The implementation of the data into account when revising mills, bonuses are also provided “Base — Ambition” system at the salary. Thus, in the last three based on the results of quarterly Company mills allows employees years alone, the Company salaries production competitions between to achieve an increase in the have grown 1.6 times. In 2019, the the shift teams of the same amount of bonuses from 7 to salary increase in the Sveza Group section working on the same type 15% by improving the quality and averaged 3%. of equipment or using the same increasing the efficiency of labor. technology. One of the main goals of the Employees receive not only Company remuneration policy Employees can also receive a cash benefits provided by law, but also is to attract and retain highly bonus for participating in the work have an extended social package. qualified employees. At the end of of kaizen teams, for making an For more details, see the section 2019, the salary at the Company improvement proposal through “Social Guarantees and Benefits mills was on average 11% higher the “Ideas Factory”, as well as for for Employees”. than the average salary in the mentoring young or retraining corresponding region (in 2018 — employees. by 14%). The exception was Tyumen region, which is distinguished by All enterprises have a two-level a high concentration of oil and bonus system “Base — Ambition”, gas industry enterprises and ranks which motivates employees to 10th in terms of the average salary achieve high production results. in the country. When the basic goal for key

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6.5 Four Standard Tools are Used at Different Stages in Sveza TRAINING AND DEVELOPMENT Industrial Training System

The success and well-being of a Main directions of corporate For employees of working Professional Company largely depends on the training: professions, industrial training Competency Model Skills Matrix professionalism and competence is intended, which allows them a document that describes the a tool that helps you analyze • Professional training and of its employees. Sveza has to acquire the knowledge requirements for a particular what level the skills of each retraining programs for working profession and workplace in a employee are introduced a comprehensive and skills necessary for work. and engineering specialties. structured way personnel training and New employees receive development system, which applies • Functional training mandatory training under the to all functions and divisions and (competence development or guidance of mentors. Depending to all categories of employees — professional development). on the profession, it lasts from MILLION RUBLES 9% from top managers to workers in • Training and development one month to six months. 72 Training Diary production. programs for managers of At the end of the training process, were invested by Company in Industrial recruitment and training all levels (Severstal Business employees pass an exam and are a list of what an employee should Training Folder learn in his/her profession, in 2019, which is 9% more than the The Company applies the principle Academy, Leader Sveza, allowed to work independently. grouped by job functions and a set of professional training level of expenses in 2018 of mixed learning (70–20–10), School of Masters). For all new employees of the types of training. It is used for materials created by the planning on-the-job training and and uses various training formats: Company, regardless of their Company experts and based on • Business processes of the evaluating the employees’ level of real-world practices distance, group, individual. Internal position, the “Plywood Production knowledge and skills Company. trainers and external providers Technology” training is held 13,5 are involved in the training • Mentor development programs. once a quarter. The opportunity the average number of hours of process. The internal trainers are • Learning the tools of Sveza to study additional specialties training per employee in 2019. (Excluding distance learning) experts from various services and Business System. gives employees more Department of the Company, who, chances for promotion and • Mandatory training on industrial in addition to performing their professional growth. safety and labor protection. main work, conduct classes with One of the key elements of colleagues. • Learning foreign language. the personnel training system at Company enterprises is the “School of Masters” management program”. The program is aimed at professional training of line managers, developing their leadership skills and strengthening the authority of the master.

The “Sveza Leader” modular leadership training program aims to develop leaders and share experiences between employees from different regions.

The “Leader Path” program is designed to develop young to train and retrain employees In 2019, every fourth professionals with the potential to within the framework of state employee completed become leaders. As part of a two- programs. In such cases, training year program, the Company helps is carried out under contracts full‑time training in talented employees quickly grow with employment centers at the corporate or professional to a senior position. expense of the Company, with programs. subsequent compensation for In addition to its own professional money spent on education of development programs, the employees in the form of a state Company uses the opportunity subsidy.

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In accordance with the federal project “Elderly Generation” and 6.6 within the framework of the state program “Promotion of Population SOCIAL SUPPORT Employment” the constituent entities of Russian Federation promote professional training and additional professional education FOR EMPLOYEES for citizens of pre-retirement age. Sveza joined this program in 2019. The Company welcomes Social Guarantees and Benefits for Employees the desire of elderly employees to learn and helps them get additional skills before retirement to feel The composition of social The list of benefits includes of marriage, birth of a child, confident in the new environment. package for employees is payment for sanatorium and death of an employee or a close In the reporting year, Sveza mill regulated by Regulation on Social rehabilitation treatment, as well as relative), employees are provided in Kostroma helped 13 of its Guarantees and Benefits in force trips to children recreation camps. with financial assistance. Financial employees, who have less than in the Company and collective assistance is also provided for five years left to retire, gain new agreements. Compensation for food, delivery certain categories of employees knowledge. In 2020, the Company to the place of work and back by (war veterans, large families, plans to train 50 more people as The social package of Sveza official transport is also provided. and single parents). In addition, part of this project. employees provides for voluntary Certain categories of employees enterprises allocate funds to health insurance from the first day are provided with mobile service. purchase gifts for employees on of work. occasion of February 23 and March In case of the event which requires 8, also for employees children on significant expenses, and in the occasion of New Year and for different life situations (registration first-graders on Knowledge Day. Distance Learning

development in various disciplines required by the Company employees. In 2019, through the portal, managers, specialists and employees of the Company gained access to an extensive electronic library of the well‑known Russian publishing house of business literature “MYTH”. More than 700 books on business, marketing, time management and many other areas are now available through the portal “My Training and Development”.

Sveza cooperates with Skyeng, the largest online English language school. The Company provides In 2019, 1,535 employees Distance learning in the Company free training to employees who (22%) completed distance is implemented through the are determined by their managers learning in 7,448 courses. corporate portal “My Training and based on business needs and Development”. It contains more strategic goals. Other employees than 2.5 thousand e-courses, and their families receive a webinars and materials for significant discount on training.

126 Sveza Sustainability Report for 2019 127 SUSTAINABLE GREEN LOCAL ABOUT THE ABOUT SVEZA DEVELOPMENT AND CSR GOVERNANCE EMPLOYEES PRODUCTION COMMUNITIES REPORT EMPLOYEES STRATEGY Health of Employees CORPORATE CULTURE AND 6.7 Caring for the health of So, the medical center of Sveza of annual on-the-job medical employees is an important part mill in Kostroma functions as a full- examinations, which includes of the corporate culture and fledged polyclinic. In the two-story providing medicines and one of the focus areas of Sveza building, general practitioners conducting physiotherapy. VOLUNTEERING as a responsible employer. and narrow specialists from All enterprises have well-equipped medical institutions in Kostroma As part of VMI, the Company medical centers that allow to are constantly receiving patients. provides its employees with the get qualified help on the spot. The next stage of a comprehensive opportunity to check their health. Corporate Culture To do this, the employee does not approach to improving the health Thus, more than 500 people in need to go to the clinic, stand in of the mill employees was the Uralskiy took advantage of this line or wait for an appointment opening of a well-equipped offer and were tested under the Sveza develops a corporate culture based on shared values and a common attitude to work, with a doctor. Annual medical office for physiotherapy. More specialized programs “Healthy interaction with colleagues, clients and partners. The Company strives to create a comfortable examinations are held at the mills, than a hundred employees of the Heart”, “Healthy Endocrine organizational environment in which employees consciously approach their work, feel the specialist doctors come, and Company will be able to undergo System”, “Women’s Health”. free vaccination against seasonal an individual rehabilitation importance of their contribution to the overall result, and have opportunities for development diseases is provided. program based on the results In addition, the Company and growth. This approach is universal for all the Company assets and divisions. employees can improve their health in sanatoriums or undergo rehabilitation in the nearest medical centers based on the results of examinations. They are Sveza Corporate Culture is provided with additional benefits for health resorts, rehabilitation based on: and rehabilitation treatment and Company values organization of summer holidays for children of employees with Employee Code of Conduct partial payment. Code of Business Partnership The Company provides its employees with free and System for internal personnel high-quality food. In Uralskiy, reserve development. a Commission consisting of For more details, see the employees of the mill visits section “Recruitment and Promotion System, Respect corporate canteens on a for Human Rights” monthly basis and monitors the organization of food and Developed internal compliance with sanitary and communication system. hygienic standards for cooking For more information, see and storing food. the section “Interaction with Employees”

Feedback system. For more information, see the section “Interaction with Employees”

Adopted corporate symbols and traditions of the company

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Sveza Values

Safety Elimination of hazardous factors: Monitors and eliminates hazardous factors Efficiency Sets ambitious goals for himself/herself and the Setting and achieving team and achieves them Doesn’t make decisions to the ambitious goals: Occupational safety priority: detriment of safety Provides maximum upgrade rate

Implements and supports Critically evaluates the usual way of working, initiatives to improve labor safety looking for more effective solutions

Compliance with health and Follows himself/herself, requires others to Openness to new things: Open to the ideas of others safety rules: comply with the rules of health and safety Timely corrects targets when the situation changes Client-focused Complies with the agreed deadlines, standards, quality and service requirements Makes experiments, takes into account the Customer Satisfaction: lessons and learns from them Timely solves customer problems and Ability to try new things: excludes their repetition Supports others' experiments

Knows, understands, systematically Achieve goals in an optimal way with clarifies the needs of clients Achieving goals in an maximum return on the resources used Regular contact with clients: optimal way: Creates proposals and promptly corrects Develops successes, eliminates failures them in regular interaction with the client Analyzes problems in depth, taking into account Proactively finds and implements unique Problem analysis and both details and the "big picture" prioritization: Exceeding customer expectations: solutions, new opportunities that exceed Makes practical conclusions and sets priorities customer expectation Knows how to listen and explains clearly Teamwork Creates a positive atmosphere, inspires Ability to listen and Asks for and gives feedback. Creating a positive atmosphere: colleagues and subordinates give feedback: Celebrates successes, sincerely thanks Interact using both logic and emotion Knows, uses and actively develops strengths of Coordinates interests with the interests of his/her own, team, colleagues the business (team) Development of oneself Proactively develops and engages the Team priority: and others: Takes responsibility for the team's results, missing competencies incl. for failure Timely parts with those who do not develop Regularly and openly discusses with the team the Personally goes to production, to the current situation, goals and essence of changes department, to clients in order to understand Honesty and openness: Personal presence at production: Speaks about problems honestly and in a the situation, seek improvements and timely manner collectively solve problems

Actively requests and willingly shares experience, Offers and creates new sources of income for knowledge, information. the company Active participation in Applies the acquired knowledge in practice Business development: Creates joint value in working with partners knowledge sharing: Monitors and uses new opportunities in own and Builds and uses a network of professional other areas contacts both within the company and outside it Politeness and restraint: Communicates politely, controls emotions Achieves goals and solves problems, Respect for People including outside formal duties Takes care of people, takes into account their Caring for people: Self-organization for the purpose: feelings and emotions, needs and interests Is actively involved and involves others in the work of self-organizing teams Compliance with agreements: Keeps agreements and promises

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Code of Сonduct for Sveza Sveza Voice Research Cascading Meetings Sveza Active Program Engagement Level at Sveza 11 rules of Employees Enterprises, % Conduct for Sveza Sveza corporate culture implies Sveza has a system of cascading To develop corporate culture, the Employees Every new employee must read a free exchange of opinions and meetings, which assumes that Company launched Sveza Active 2018 2019 11 and accept Sveza Employee Code a feedback system. To do this, information from the CEO is program in 2019. Its main idea Central office 68 69 of Conduct when applying for a the tools as “360° Assessment”, vertically communicated to is to unite the most active and 1 We put safety first. job. It sets out the basic principles “Quick Feedback”, all employees. Such meetings involved employees of Sveza in Saint Petersburg 63 74 2 We treat others the way of corporate culture, norms and Ethics Committee, and the are an important element of the central office and at all mills. 60 60 we want them to treat us rules of working interaction, “Unified Hotline” are used. The corporate culture, they guarantee Any employee who is willing to Kostroma and provides specific examples most ambitious tool, the employee transparency in decision-making, invest time in his/her own creative 3 We openly talk about Manturovo 79 81 and algorithms of behavior in engagement survey, Sveza Voice provide access to information development and use his/her our problems ambiguous situations. In 2020, is annual anonymous sociological for all employees, and provide talents to strengthen Sveza brand Novator 76 66 4 We work as a team to achieve a standard of employee behavior survey in which everyone can an opportunity to directly get an as a socially responsible Company Uralskiy 68 63 a common goal will be developed and adopted participate. The purpose of answer to a question of concern can become a program participant. based on the Code. the survey is to determine how from Company leaders. For more 74 75 5 We do not mix work and Verhnaya Sinyachiha employees perceive the Company details, see the section “Interaction personal life 51 33 If an employee notices that the culture and give them an with Employees”. Tyumen 6 We treat the property of the rules and standards of conduct opportunity to express their opinion Company with care set out in the Code are violated, about various aspects of their work. 7 We do not disclose he/she can contact the Ethics According to the results of research, confidential information Committee, where each specific plans of corrective measures situation is reviewed with the are formed, which are aimed at When performing our work 8 participation of the Company CEO. improving problem areas. duties, we always act in the interests of Sveza Code of Business Partnership In 2019, more than 6.5 thousand 9 We do not accept gifts people, or 94% of the Company that may put us and our The Company is developing a Code employees, participated in the contractors in a dependent of Business Partnership, which sets engagement survey. In order to position out the principles of employee obtain objective data, the survey is interaction with suppliers and conducted by an external provider 10 We respect and value our customers, obligations to them using a method that allows covering customers and partners and expectations from partners. all the key topics for the Company. 11 We behave responsibly in the Every employee who interacts In 2018-2019, the work was focused public space with colleagues from external on five factors: “Processes”, organizations must comply with “Interaction with Related Parties”, the Code and inform partners “Recognition”, “Independence”, and about its content. “Satisfaction with Result”.

Improvement of current processes, cross-functional interaction and strengthening of direct dialogue between managers and employees allowed to ensure growth of 67% indicators for all five factors. Goals of Sveza Creating internal community of Strengthening the dialogue engaged and active employees between management and the Company employees Active Program: engagement rate in 2019 Based on the survey results, at Promotion of the Company employees all levels of management (from brand as an employer within Supporting development of the leaders of small teams to senior the Company region and local communities by participating in volunteer events management), discussions are held Increase of recognition and with teams, plans for corrective growth of the Company prestige outside actions are drawn up that will help eliminate problems and consolidate Raising awareness about Company projects and initiatives positive changes. among colleagues

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Sveza Active team in 2019 in all Since its creation, the Company Processing Industry Workers. and Duma of the city district of Areas of Activists Activity regions of presence consisted has developed a number of In 2019, the mill in Verkhnyaya Manturovo. In addition to the of more than 180 people. About traditions that support team Sinyachiha together with the ceremonial part, entertainment 100 events and actions with the cohesion. Corporate events help village administration organized programs are also organized for participation of activists were held, to develop mutual understanding festive events for residents, guests. External Brand Internal among them: community cleanups between employees, give an employees and their families. Support Communications (subbotnik), charitable events on opportunity to celebrate the More than 150 best employees It is common for Sveza to the occasion of Victory Day, various achievements and successes of of the mill were awarded with celebrate together not only its • Ecology • Informing about key master classes for schoolchildren, both the Company and individual certificates. In Manturovo, the professional holiday, but also • Social projects initiatives and Company organization of playgrounds in employees and teams. best workers of the city-forming New Year, March 8 and February news • Sports initiatives villages, participation in bike races, enterprise were awarded with 23, to participate in contests and • Development of the • Support for large marathons, in business events as On the third Sunday of September, letters of commendation and sports competitions together. home region corporate projects Company representatives and all Sveza enterprises traditionally gratitude from the administration See “Support for Sports and much more. For more details, see celebrate a professional holiday — of Kostroma region, Kostroma Healthy Lifestyle”. the “Corporate Volunteering” the Day of Forestry and Timber regional Duma, administration section. Corporate Events Corporate Volunteering

The results of internal research show that it is important for people to understand their value for Corporate volunteering is one of important areas of corporate social responsibility of Sveza the Company, to be able to develop professionally, and move up the career ladder. Group. Volunteering develops social skills, increases professional self-esteem and employees satisfaction with their work, gives a sense of being needed and unites the team.

Main Directions of Environmental: Corporate Volunteering: Support for projects and initiatives in the field of environmental protection (eco-lessons, eco-workshops, etc.)

Social Regional Assistance for veterans Projects for and the elderly, children, development of disabled, etc. territories of presence

Best in the Profession this competition, representatives 14 first-place finalists went to the of two specialties: “Veneer Sorter” super final of the competition, A new element of the corporate and “Repairman”. All Sveza mills which was held on November 21 in culture is competitions for the passed the qualifying stages, St. Petersburg. All participants of title of “Best in the Profession”, which included written testing and the super final received diplomas which encourage employees to practical tasks. The participants and gifts, which were presented to Sports achieve high performance in their who scored the highest number of them by Anatoly Frishman, CEO of Development of sports in professional activities. In 2019, a points at the end of the selection Sveza. the region and support of total of 197 people took part in process received cash prizes. corporate sports teams

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Hundreds of volunteers from The most important activity In September, on the world Company team of volunteers got of forest resources, held quizzes the Company employees of corporate volunteers is cleanliness day, Sveza team, the first place in the corporate about the forest in the Central 16 annually participate in various participation in environmental together with representatives of classification of the tournament. office and at the mills. The events environmental environmental and social events. projects and campaigns. other socially responsible companies, were organized by participants of community cleanups were held in 2019 took part in the next stage of the all Earlier, teams from Sveza mills Sveza Active program. Corporate volunteering in the In July — August, Sveza in Russian ecological tournament on from Uralskiy and Verkhnyaya Company is mostly developing Saint Petersburg supported “Clean Games” — “Cleanliness Cup” Sinyachiha took part in the In 2020, Sveza Group intends within the framework of Sveza the Eco-life project of AIESEC in St. Petersburg. The all-Russian “Clean Games” eco-quest. to pay more attention to the Active program. Thus, Sveza Active international student organization. campaign “Clean Games” is aimed at Employees of Sveza Group in development of corporate team of the mill in St. Petersburg AIESEC activists conducted attracting public attention to acute Kostroma, Uralskiy and Verkhnyaya volunteering and involvement of > 2,000 organized a series of community trainings for Sveza employees on environmental problems, improving Sinyachiha also participated new employees. trees were planted by cleanup (subbotnik) in Pontonny. the UN sustainable development the environment and environmental in environmental campaign employees Volunteers from Sveza Active in goals, life without plastic, and education. Participants are divided “All‑Russian Forest Planting Day”. Verkhnyaya Sinyachiha conducted everyday environmental habits. into teams and compete in the speed tours to production facility for In turn, Sveza employees told and quality of cleaning the territory. On the last Friday of September, retired people, former employees them about the practices of The goal of the competition is to on the initiative of the Forest Sveza Active team in Uralskiy of the mill. During the charity responsible forest management score as many points as possible for stewardship Council, the Day of (Perm region) received an yoga marathon “Goodness in and the principles of FSC the collected garbage. responsible attitude to the forest award in the “Important Palms”, volunteers from Sveza certification. Sveza employees and is celebrated. Sveza joined the mill in Uralskiy raised funds youth community activists held Sveza supported the campaign in FSC-Friday celebration and, in Business” nomination in for purchasing developmental a joint environmental clean-up in Alexandrino Park, located in the order to draw employees attention district competition equipment for “Smart Baby” early Pontonny, where the Company South-West of Saint Petersburg. to the problems of conservation, “Youth–2019”. aid service. St. Petersburg mill is located. As a result of the competition, the restoration and enhancement

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ABOUT THE 7 REPORT

This document is the first sustainability report of Sveza Group (also referred to as “Company” and “Group” in the report) for 2019 . The report also includes information about significant events that go beyond the reporting period, but due to their 7.1 APPENDICES 143 importance should be reflected in this report. In the future, the Company intends to carry out an annual reporting period.

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• materials of Federal media, The document contains considered significant outside Economy Community Environment local and corporate press, in information about the values the organization. This information particular — publications in 1 Economic performance 3 Health and safety in 7 Water use and impact on and strategy of Sveza Group, regarding contractors is provided social media; the workplace water resources key events and results, principles in the relevant thematic sections. 2 Employee compensation of social responsibility and • materials of Company (by regions) compared to 4 Employment 8 Compliance with the employees feedback and results the market environmental legislation sustainable development, data on The report mostly provides 5 Employee training and the impact of Company production information on topics that of their surveys. education 9 Use of raw materials activities on the economy, society were selected as significant by and environment in the regions stakeholders. When determining the materiality 6 Impact on local communities, 10 Discharges and waste, including of its presence, as well as on its level, the working group took including cooperation and wastes recycling and reuse into account the significance of development programs interaction with stakeholders. To determine the content of 11 Energy consumption and these aspects for the Company, the report in accordance with energy efficiency The report was prepared in GRI Standards, a materiality key stakeholders, the materiality accordance with GRI standards, assessment procedure was in terms of the global context and the “Core” version. The report performed with involvement of the business obligations, including Materiality Matrix: presents the results of the interested parties’ representatives. those set out in international analysis of Sveza Group priorities In order to determine the main and Russian documents and 1 9 in the field of sustainable topics to be reflected in the initiatives, including the UN Global 3 8 development, comparison with report, a survey of stakeholders Compact and the Sustainable 10 6 the UN sustainable development was conducted. A total of Development Goals. 2 5 4 goals, and data on the Company 71 questionnaires were received, 7 contribution to achieving the including 62 from representatives In this regard, additional 11 priority SDG. The report also of external stakeholders topics were included such discloses information on topics (local communities, non-profit as “Assessing Environmental that are significant in connection organizations, business partners, Aspects of Suppliers Activities”, with the requirements of Forest media and social media users, “Land Resources and Impact on stewardship Council for companies state and local authorities). Biodiversity”, “Air Emissions”, that are responsible for the use Nine questionnaires were received “Impact on Local Communities, of forests while using wood from from internal stakeholders — Including Cooperation and proven sources in production. employees of the Company. In the Development Programs”, questionnaire, the respondents “Anti‑Corruption”, “Assessing The report mainly discloses rated the significance of each Suppliers Compliance with Labor information on the management topic based on a 10-point scale. and Human Rights”, “Interaction Company SVEZA-Les LLC, on the At the same time, the most with Trade Unions and Collective Influence on stakeholders' assessment and decisions Company operating in the field complete list of topics provided Bargaining”. of harvesting forest resources, by the GRI Standards was SVEZA Resource LLC, as well as on considered. For each topic, the Based on the above stated Significance of environmental, economic and social impacts seven production branches of the average score was calculated analysis, the working group Group that carry out woodworking for the both participating approved the following list of and production of plywood and categories, and the final score was the most significant topics to be boards. Indicators of financial and obtained for each topic. Based disclosed in the report. The document contains data management approaches and with the participation of all economic performance are given on the survey results, a ranking collected within the corporate all of the Company’s most key divisions of the Group. taking into account a number of of topics and a materiality matrix reporting system, including significant impacts. service companies of the Group were compiled. Topics with a information received from the In order to ensure the quality that perform the functions of a final score exceeding 8 points divisions in response to the Indicators of sustainable of the report, working group financial and leasing agent. were highlighted as the most requests made in accordance development for other categories, followed key principles set out significant ones. with the recommendations of the in particular for the environment, in the GRI standards. The report Such topics as “Occupational GRI Standards. The report includes are mainly given for all the major is balanced by providing both Health and Safety” and In addition, in order to data for 2019 calendar year, and operating enterprises. positive information about the “Environmental and Social identify material issues for the where it seemed significant — Company achievements and critical Responsibility”, as well as stakeholders, the following in dynamics for a number of years Coordination of preparation of the information about areas that “Respect for Local Communities aspects were analyzed while in a row. In terms of material report for 2019 was carried out require development. Compatibility Rights” and “Anti-Corruption” are preparing the report: aspects, the report describes by Communications Department of the report will increase as

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the Company develops a data correctness are checked at the The report on sustainable collection system and is able to level of departments which present development is prepared in 7.1 present information in dynamics them, as well as at the level of Russian and English. External over several years. Accuracy and the functional divisions of the certification was not performed. APPENDICES reliability of data included in management Company. Links to To request additional information the report was ensured during external and internal sources on the report subject, as well the information collection and that guide the Company in the as to express your views on consolidation using standard field of sustainable development this publication and make your Table of Report Compliance with GRI Standards procedures and confirmed by are provided in the text of the suggestions for improving Sveza the departments responsible report. In order to ensure that the non-financial reporting, please Significant topic for preparing the corresponding document is clear and accessible contact Daria Morachevskaia, block of information. The data to various groups of stakeholders, CSR and Brand Manager, e-mail: Elements of GRI Standards reporting Place in the report/comment is subject to internal approval, the authors of the report avoided [email protected] and its completeness and special terms and abbreviations. General Reporting Elements 1. Organizational Profile Legal Entities whose Financial Statements are Included in the Consolidated Financial Statements 102-1 Name of organization SVEZA‑Les LLC

Activities, brands, products, and services Activities, brands, products and services Company Name Major Activity 102-2 Putilkovo, Krasnogorsk district, Location of headquarters Plywood Segment 102-3 Moscow region SVEZA, LLC Holding Company 102-4 Location of operations Location of operations Ownership and legal form Governance structure SVEZA-Les, LLC Sale of plywood and particle boards 102-5 102-6 Markets served Markets served SVEZA Ust-Izhora, NCJSC Plywood production 102-7 Scale of the organization Sveza in 2019 SVEZA Kostroma, NCJSC Production of plywood and particle boards 102-8 Information on employees and other workers Staff structure and personnel policy SVEZA Novator, NCJSC Plywood production 102-9 Organization supply chain Supply Chain SVEZA Uralskiy, LLC Production of plywood and particle boards Significant changes to the organization its 102-10 Own logging Perm plywood mill, JSC Granting of loans and other types of credit supply chain 102-11 Precautionary principle or approach Environmental Policy and Management SVEZA Verkhnyaya Sinyachiha, NCJSC Plywood production 102-12 External initiatives Independent forest certification SVEZA Manturovo, NCJSC Plywood production Business and public organizations, 102-13 Membership in associations Uralskiy municipal service, LLC Providing public services participation in industry events

Fantrans, LLC Providing transportation services 2. Strategy

Tyumen plywood factory, LLC Plywood production 102-14 Statement from senior decision-maker Message From CEO Improving the Level of Fire Protection at Tyumen plywood, LLC Sale of plywood Enterprises Economic Impact on the Regions of Presence SVEZA Bioproduct, LLC Sale of other products related to the production of plywood 102-15 Key impacts, risks and opportunities Identification, Analysis and Elimination of Hazard Sources Cellulose Segment Lowering Environmental Footprint Innovation Management Vologda pulp, LLC Construction of a pulp mill

UK Suda, JSC Service organization 3. Ethics and Integrity Our Values 102-16 Values, principles, standards, and norms of behavior Logging Segment Anti-corruption SVEZA Resource, LLC Timber cutting 102-17 Mechanisms for advice and concerns for ethics Cooperation with Employees

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Elements of GRI Standards reporting Place in the report/comment Elements of GRI Standards reporting Place in the report/comment 4. Governance 102-55 GRI content index Table of report compliance with GRI Standards 102-18 Governance structure Governance Structure 102-56 External assurance About the report 102-19 Delegating authority Governance Structure Economy Executive-level responsibility for economic, Governance Structure 102-20 environmental, and social topics 201 Economic Performance Consulting stakeholders on economic, Supplier Environmental Assessment 102-21 environmental, and social topics 103-2 Management approach disclosures Governance Composition of the highest governance body Financial implications and other risks and Forest management and climate Governance Structure 102-22 and its committees 201-2 opportunities due to climate change change mitigation

Defined benefit plan obligations and other 102-23 Chair of the highest governance body Governance Structure Assistance to Veterans and the Elderly 201-3 retirement plans Nominating and selecting the highest 102-24 Governance Structure governance body 201-4 Financial assistance received from government Sveza Training System Anti-Corruption Policy of SVEZA-Les LLC and Conflict of interest 102-25 Related Legal Entities. 202 Market Presence Role of highest governance body in Governance Structure 103-2 Management approach disclosures Staff Structure and Personnel Policy 102-26 setting purpose, values and strategy Role of highest governance body in Ratios of standard entry level wage by gender Report is approved by the CEO 202-1 Motivation and Remuneration 102-32 sustainability reporting compared to local minimum wage 5. Stakeholders Engagement 203 Indirect Economic Impacts Approaches Towards Engagement Indirect economic impacts Economic Impact on ohe Regions of Presence List of stakeholder groups 103-2 102-40 with Stakeholders Participation of Trade Unions in Labor Protection. 203-1 Management approach disclosures Collective bargaining agreements 102-41 Assistance to Veterans and the Elderly 203-2 Investment in infrastructure and gratuitous services Approaches Towards Engagement Identifying and selecting stakeholders 102-42 with Stakeholders 204 Procurement Practices Approaches Towards Engagement 102-43 Approach to stakeholder engagement with Stakeholders 204-1 Proportion of spending on local suppliers Suppliers and Contractors

102-44 Key topics and concerns raised Stakeholders Engagement 205 Anti-Corruption

6. Reporting Practice 205-1 Operations assessed for risks related to corruption Anti-corruption

Entities included in the consolidated Communication and training about 102-45 About the Report Anti-corruption financial statements 205-2 anti‑corruption policies and procedures 102-46 Defining report content and topic boundaries About the Report 205-3 Confirmed incidents of corruption and actions taken Anti-corruption 102-47 List of material topics About the Report 206 Anti-Competitive Behavior Restatements of information Absented 102-48 Legal actions for anti-competitive behavior, Absented 206-1 anti‑trust, and monopoly practices 102-49 Changes in reporting Absented 102-50 Reporting period About the Report Environment 102-51 Date of most recent report About the Report 301 Materials

102-52 Reporting cycle About the Report 301-1 Materials used by weight or volume Forest Management

102-53 Contact point for questions regarding the report About the Report 301-2 Recycled input materials used Waste Management and Bio-products Production

Claims of reporting in accordance with the About the Report Reclaimed products and their packaging materials Waste Management and Bio-products Production 102-54 GRI Standards 301-3

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Elements of GRI Standards reporting Place in the report/comment Elements of GRI Standards reporting Place in the report/comment

302 Energy 308 Supplier Environmental Assessment

New suppliers that were screened using 103-2 Management approach disclosures Efficient Energy Consumption Environmental Responsibility in the Supply Chain 308-1 environmental criteria assessment Energy intensity Efficient Energy Consumption 302-3 Negative environmental impact in the Environmental Responsibility in the Supply Chain 308-2 supply chain and countermeasures 302-4 Reduction of energy consumption Efficient Energy Consumption

303 Water and Effluents Social Area Employment 103-2 Management approach disclosures Impact on Water Bodies 401

303-1 Interactions with water as a shared resource Impact on Water Bodies 103-2 Management approach disclosures Staff Structure and Personnel Policy Recruitment and Promotion System, New employee hires and employee turnover 303-2 Management of water discharge-related impacts Impact on Water Bodies 401-1 Respect for Human Rights

304 Biodiversity Benefits provided to full-time employees that are not Remuneration, Social Guarantees and Benefits 401-2 provided to not temporary or part-time employees for Employees Operational sites owned, leased, managed in, or Conservation of Biodiversity and Forests of adjacent to, protected areas and areas of high The total number of employees who were 304-1 High Conservation Value biodiversity value outside protected areas entitled to parental leave in 2019 and took this leave was 341 (5% of the total number of Significant impacts of activities, products and Conservation of Biodiversity and Forests of 401-3 Parental leave employees), including 337 women and 4 men. 304-2 services on biodiversity High Conservation Value According to the results of three months of 2020, 31% came out of vacation, 11% left, and Conservation of Biodiversity and Forests of 58% remain on parental leave Habitats protected or restored 304-3 High Conservation Value 402 Cooperation with Employees 305 Emissions 2 months — article 74 of the Labor Code of 103-2 Management approach disclosures Impact on Atmospheric Air Russian Federation on changing working Minimum notice periods regarding conditions, 402-1 Nitrogen oxides (NOx), sulfur oxides (SOx) and operational changes 3 months — article 75 of the Labor Code of Impact on Atmospheric Air 305-7 other significant air emissions Russian Federation on changing the owner of an organization 306 Waste 403 Occupational Health and Safety Waste Management and 103-2 Management approach disclosures Bio‑products Production Industrial Safety and Labor Protection 103-2 Management approach disclosures Policy and Management Waste generation and significant Impact on Water Bodies 306-1 waste‑related impacts 403-1 Occupational health and safety management system Trade Union Participation in Labor Protection Waste Management and Management of significant waste-related impacts 306-2 Bio‑products Production Hazard identification, risk assessment, Results of Injury Prevention Measures 403-2 and incident investigation 306-3 Significant spills Absented Identification, Analysis and 403-3 Occupational health services Water sources that are significantly affected by the Elimination of Hazard Sources Impact on Water Bodies 306-5 organization’s wastewater discharge Worker participation, consultation, and 403-4 Trade Union Participation in Labor Protection 307 Environmental Compliance communication on occupational health and safety Training and Education 103-2 Management approach disclosures The Policy and Environmental Management 404

Penalties were imposed on two enterprises in 103-2 Management approach disclosures Sveza Training System connection with violation of legal requirements to accumulation of fluorescent lamps (Kostroma) Non-compliance with environmental laws Average hour of training per year per employee Sveza Training System and violation of water consumption rules 404-1 307-1 and regulations during water extraction and wastewater Programs for upgrading employee skills and discharge (Tyumen) for an overall amount of Sveza Training System 182 thousand rubles. 404-2 transition assistance programs

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Elements of GRI Standards reporting Place in the report/comment Elements of GRI Standards reporting Place in the report/comment

9,1 %, including: Operations with significant actual and potential Absented 99,8 % of women and 98,6 % of men 413-2 negative impacts on local communities Percentage of employees receiving regular 404-3 including: performance and career development reviews 99,0 % workers 414 Supplier Social Assessment 99,3 % of managers 99,5 % of specialists 414-1 New suppliers that were screened using social criteria Supplier Social Assessment 405 Diversity and Equal Opportunities Units with significant actual and potential negative Supplier Social Assessment 414-2 impacts on local communities Age, years Women Men

31–40 2 4 415 Public Policy 405-1 Diversity of governance bodies and employees 41–50 — 12 415-1 Political contributions Absented

51–60 — 4 416 Customer Health and Safety The basic salaries of men and women for different categories of employees in the Ratio of basic salary and remuneration of Assessment of the health and safety impacts of Company do not differ, since the gender aspect 416-1 Environmental Characteristics of Products 405-2 women to men product and service categories is not taken into account when assigning wages for equal work Incidents of non-compliance concerning the health Absented 416-2 and safety impacts of products and services 406 Non-Discrimination 417 Marketing and Labeling Incidents of discrimination and corrective actions Absented 406-1 taken Requirements for product and Environmental Characteristics of Products 417-1 service marketing and labeling 407 Freedom of Association and Collective Bargaining Incidents of non-compliance concerning product 417-2 Absented Interaction with trade unions and service information and labeling Operations and suppliers in which the right to Environmental responsibility in the supply chain 407-1 freedom of association and collective bargaining Incidents of non-compliance concerning may be at risk There is no risk of violation of the right to use 417-3 Absented freedom of association and collective bargaining marketing communications

408 Child Labor 418 Customer Privacy

Supplier Social Assessment Substantiated complaints concerning breaches of Inapplicable. There is no collection of Operations and suppliers at significant risk for 418-1 customer privacy and losses of customer data personal data of consumers 408-1 incidents of child labor Due to the specifics of the industry, there is no risk of child labor at the Company’s enterprises

409 Forced or Compulsory Labor

Supplier Social Assessment Operations and suppliers at significant risk for 409-1 incidents of forced or compulsory labor There is no risk of using forced or compulsory labor at the Company’s enterprises

411 Rights of Indigenous Peoples

Incidents of violations involving rights of Absented 411-1 indigenous peoples

413 Local Communities

103-2 Management approach disclosures Social Projects and Charitable Assistance

Operations with local communities engagement, Social Projects and Charitable Assistance 413-1 impact assessments, and development programs

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Appendice 2 List of Organizations that Received Financial and Other Assistance

List of Organizations that Received Assistance with Finished Products and Wood Waste Company Benefactor • Secondary school No. 400 named after Alexander Nevsky, Saint Petersburg village of. Pontonny Company Benefactor • Administration of Samotovinsk rural settlement • 20th squad of the Federal fire service in Saint Petersburg • All-Russian society of disabled people, Veliky Ustyug district organization • Youth club “Z” • Veliky Ustyug comprehensive boarding school for students with disabilities Saint Petersburg • The reconstruction of “Parus” stadium • Kindergarten “Alyonushka”, village of Novator • Federal scientific center for rehabilitation of disabled people named after G. A. Albrecht • Kindergarten “Vasilek”, village of Valga • Veliky Ustyug district organization of the Novator • Veliky Ustyug city Council of veterans all-Russian society of disabled people • Veliky Ustyug district Council of women • Veliky Ustyug comprehensive boarding school for students with disabilities • Children and youth sports school of Veliky Ustyug • Center for additional education, Veliky Ustyug • Functional multi-sport federation, Veliky Ustyug • Evening (shift) secondary school, Veliky Ustyug • Sports and recreation centre, village of Novator Novator • Goluzin secondary school, village of Novator • Novator community centre • Kindergarten “Alyonushka”, village of Novator • Kostroma regional charity anti-cancer Fund • Veliky Ustyug cultural and leisure center “Until Trouble has Affected Everyone”

• Krasavin psychoneurological boarding school • Kostroma regional public educational and training organization “Knowledge” • Shelter for homeless animals “Good Heart”, Veliky Ustyug Kostroma • ANO “Center for Social Initiatives” • Kostroma state University • Kostroma regional branch of the all-Russian public organization of veterans • Energy technical school named after Chizhov Kostroma (pensioners) of war, labor, the armed forces and law enforcement agencies • ANO “National ballet “Kostroma” (repair of dance classes) • Kostroma regional charity anti-cancer Fund • Administration of the city of Sharia “Until Trouble has Affected Everyone” Manturovo (XXV interregional festival “We are from the Vetluga-River”) • The youth center “Yunost” • Secondary school No. 3 • “Faithful Hearts” charity foundation (animal shelter) • Integrated social service center for the population of Manturovo • Manturovo complex center of social service for the population Verhnaya Sinyachiha Alapaevsk and Alapaevsky district • Sports and recreation complex “Spartak” • “Orion” sports and fitness center • Secondary school No. 3 • Novoilinsky Cossack Cadet Corps named after Ataman Ermak Uralskiy • Manturovo Central district hospital • Secondary school of Uralskiy • “Orion” sports and fitness center • Interactive playground “Woodpile” at a city event Verhnaya Sinyachiha “Working Tyumen” (the Day of the city) • Secondary school No. 3 • Children creativity center • Closing the “Labor Summer”(temporary employment program for Tyumen teenagers and youth “Mayor’s Detachments”) • Kindergarten “Beryozka” Uralskiy • The competition “Extreme Expo”: manufacturing climbing walls • Society of disabled people “Nadezhda” (“Hope”)

• “World Skills” professional contest • Hospital palliative care department in the village of Uralskiy

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