BUSINESS AND CORPORATE CORPORATE OCCUPATIONAL SAFETY AND SOCIAL PROJECTS ABOUT THIS ABOUT SEVERSTAL EMPLOYEES SOCIAL RESPONSIBILITY GOVERNANCE ENVIRONMENTAL PROTECTION AND INVESTMENTS REPORT Table of Contents Review by Chairman of PAO Severstal 2 Occupational Safety and Environmental 64 Alexey Mordashov 5. Protection Review by Chief Executive Officer of 4 Occupational Safety 64 AO Severstal Management Alexander Shevelev Environmental Protection 72 Power Consumption And Energy Efficiency 83 1. About Severstal 6 Core Businesses and Corporate Structure 10 6. Social Projects and Investments 88 Market Review and Corporate Business 16 External Social Programmes of Severstal: 90 Strategy Policy and Management Contribution to Sustainable Development of 90 2. Business and Corporate Social Responsibility 20 Severstal Regions Management of Social Responsibility and 22 Social Investments and Social Partnership 94 Sustainable Development in Severstal Support for Culture 96 Severstal’s Documents and Initiatives in 24 Corporate Volunteering 98 the Areas of Sustainable Development and Corporate Social Responsibility Employee Participation in Environmental 99 Initiatives and Collaboration with Communities Stakeholder Engagement 25 on Environmental Matters Severstal Awards and Rankings in 2018 34 7. About This Report 100 3. Corporate Governance 36 Approach Used to Evaluate the Significance of 102 Standards of Corporate Governance 38 Individual Topics for Inclusion in this Report Governing Bodies 38 Description of the Information 103 Governance Structure 39 Appendices 104 Risk Management 40 Managing Innovations 41 Quality Management 43 Customer Care 44 Transparency 45 4. Employees 46 Staff Profile 48 Policy and Management 49 Motivation and Compensation 49 Training and Development System 54 Engagement of High School and University 57 Students and Young Professionals Work Environment 59 Employee Benefits 60 Severstal Corporate Social Responsibility and Sustainable Development Report 2018 1 GRI 102-14 Chairman's Review Dear partners and colleagues: In 2018, Severstal achieved sustainable operating and financial results, and overall we believe we had a positive year. This was largely made possible by our efficient strategy, conservative CAPEX policy and employee engagement. We remain one of the global steel industry leaders and the most profitable steelmaker. Our competitive advantages include a low cost profile, the geographical location of our assets and a large share of high-value-added products in our sales portfolio. Maintaining our competitive edge requires not only investing in our operations, but also improving business performance, developing our corporate culture, responding promptly to changes in popular demand and customer needs, and expanding international cooperation. Severstal 2 Corporate Social Responsibility and Sustainable Development Report 2018 BUSINESS AND CORPORATE CORPORATE OCCUPATIONAL SAFETY AND SOCIAL PROJECTS ABOUT THIS ABOUT SEVERSTAL EMPLOYEES SOCIAL RESPONSIBILITY GOVERNANCE ENVIRONMENTAL PROTECTION AND INVESTMENTS REPORT We responded to these challenges by updating Severstal’s In October 2018, the Board of Severstal approved our long-term development strategy to include a large-scale innovative business goals in occupational health, industrial safety and environmental transformation. For the next five years, we have set an ambitious protection. By 2025, we are planning to reduce our LTIFR by goal to increase our EBITDA by 10-15% per year, adjusted for fifty percent from 2017, and completely eliminate workplace market factors. We are planning to increase our cost advantage fatalities. We have set specific goals in environmental protection. over the competition in the main product groups to 10% or For example, we have committed to reduce atmospheric more. Our priorities also include delivering outstanding customer emissions of pollutants by 7%. In 2018, Severstal invested experience and utilising new opportunities created by the 3.44 billion roubles in environmental protection. development of new technologies. Our assets play an important role in the development of local To achieve these goals, we are fostering a culture of continuous communities. Severstal helps address social issues, invests in improvement that we have enriched with three additional improving the quality of life in the communities, municipal elements, speed, inspiration and collaboration. We would like landscaping, and renovation of heath care, culture and sports to reinvent the approach of our employees to work, change the facilities. Last year, Severstal invested 1.86 billion roubles in culture and inspire our people to take initiative, experiment, external social programmes. build teams to overcome challenges, and involve external I am confident that with our renewed strategy, expertise and experts, including research institutions, laboratories, innovative engagement of our employees, we will be able to overcome our businesses and start-ups. future challenges and make an even greater contribution to the Our core business objective is, certainly, developing our operations sustainable development of our country! while meeting customer needs. However, a business does not operate in vacuum. We share the responsibility for the future of our country and need to maintain a continuous discussion with our business partners, communities and government authorities. Our renewed strategy and investment programme is fully aligned with the nationwide projects outlined by the national government. These include digital transformation, increasing non- primary exports, improving our competitive edge and reducing Alexey Mordashov our impact on the environment. Chairman of the Board of Directors Severstal Corporate Social Responsibility and Sustainable Development Report 2018 3 GRI 102-14 CEO's Review Despite the fact that Russia’s steel consumption did not increase in 2018, Severstal achieved positive operating and financial results. Our success was driven by our vertical integration that ensures our almost complete self-sufficiency in raw materials, as well as corporate performance improvement programmes. Yet as this alone is not sufficient to ensure future leadership, we have also decided to reimagine our corporate development strategy. Severstal 4 Corporate Social Responsibility and Sustainable Development Report 2018 BUSINESS AND CORPORATE CORPORATE OCCUPATIONAL SAFETY AND SOCIAL PROJECTS ABOUT THIS ABOUT SEVERSTAL EMPLOYEES SOCIAL RESPONSIBILITY GOVERNANCE ENVIRONMENTAL PROTECTION AND INVESTMENTS REPORT Further improvement of our cost advantage over the competition development. In 2018 we adopted long-term corporate goals will make us an even more customer centric company. We will in the areas of occupational health, industrial safety and pursue outstanding customer experience by going beyond the environmental protection. We disclosed our greenhouse gas sales of products and services and offering one-of-a-kind solutions emission data and started to publish bi-annual updates on our based on our deep understanding of customer needs. We need to OHSE performance and operating results. be ready to use new organisational and technology capabilities, We always consider the environmental component of all our such as agile methodology and digital operations and business performance improvement initiatives, and the new Severstal processes. All of this is only possible with the active involvement strategy includes a new environmental programme. This of our people and partners, and therefore requires further programme includes targeted environmental protection initiatives, development of our corporate culture. such as upgrades to our water treatment facilities or deep waste To deliver the newly announced strategy, we launched a large- recycling, and the use of the latest technologies to reduce our scale business transformation programme covering almost all environmental footprint. We continue reducing our environmental aspects of our operations. emissions and improving the energy efficiency of our operations. For example, we have set common goals for our upstream assets In the reporting year, we completed the first large project of the that mine raw materials and produce concentrate, pellets, hot Coke Battery Plant No. 4 upgrade programme at Cherepovets metal and steel, and for our downstream assets that include our Steel Mill. This project helped us increase coke production while flat-rolled and long product plants, pipe and tube plants, and significantly reducing our environmental footprint. We will Severstal Metiz businesses manufacturing downstream products. reduce the overall amount of dust by 690 tonnes per year, and This will help us avoid conflicts of interest between our individual its concentration in treated gas to 20 mg/m3, an outstanding businesses and focus on achieving common goals. We are also achievement for any steelmaker worldwide. In 2019 our going to subject all our processes to digital transformation. environmental projects will see a significant increase in funding, which will exceed 825 million roubles. We have joined the UN Global Compact in the reporting year and committed to supporting its principles in the protection of human Industrial safety is a key area of focus for Severstal. Over the past rights, labour rights and the environment, and anti-corruption. ten years, we have reduced the incidence of workplace injuries by We work on integrating these principles in Severstal operations a factor of three, and LTIFR almost by a factor of two.