Message from the CEO

GRI 102–14
Alexander Frolov Alexander Frolov Chief Executive Offcer

Dear Stakeholders,

Despite the fact that 2020 was marked by various unprecedented and unexpected events, which in many ways changed the world, EVRAZ maintained its commitment to creating long-term value for all stakeholders. In this unstable environment EVRAZ once again confirmed its status as a responsible employer and business partner, and also continued to implement projects and initiatives to protect the environment and develop local communities.

COVID-19 has encouraged us even more to make positive change for all groups of people that influence and are impacted by our business. Although, EVRAZ has always adopted a responsible approach to doing business, in 2020 we made even greater efforts to attain UN Sustainable Development Goals, and we plan to continue on this course. Also, in August 2020 EVRAZ joined the UN Global Compact, one of the world’s foremost initiatives in the field of sustainable development.

The year 2020 was a major challenge for many companies and industries, including mining and metals. We made every effort to adapt to the changes brought about by the COVID-19 pandemic, and we are proud to report that we were able to respond rapidly to it. We tweaked business processes, fine-tuned our performance, and maintained high product quality. Despite the difficult situation across the world, a new working environment, and demand volatility, EVRAZ generated EBITDA of US$2,212 million.

Occupational health and safety

Ensuring comfortable and safe working conditions and monitoring and safeguarding employee health are our top priorities. The Group seeks to ensure that a safety culture exists at all stages of production and covers all employees and contractors. For this purpose, EVRAZ regularly implements measures and educational programmes aimed at making sure that everyone approaches their work with an understanding that safety comes first.

Our work in the area of occupational safety is geared towards achieving zero fatalities and reducing the lost time injury frequency rate (LTIFR). In 2020 the LTIFR among the Group’s employees stood at 1.58 per 1 million hours, which was a 22.5% drop on the figure for 2019. The Group achieved zero fatalities among contractors, however, I deeply regret to report that in 2020 there were five fatalities among our employees. The Group carried out thorough investigations and took measures to prevent such cases from reoccurring in the future.

In the reporting period the health and safety of employees became a particularly pertinent issue due to COVID-19. The Group promptly implemented all necessary measures and successfully adapted to new working conditions: foreign business trips were cancelled; business trips in Russia were restricted; transport, canteens, and work spaces were sanitised daily; thermal imagers and pyrometers were installed at checkpoints; all mass events were postponed; and most office employees began working remotely. The Group believes that these measures helped significantly in reducing the spread of the virus.

EVRAZ also endeavours to be one of the leading companies that actively use the latest technologies and innovations in the area of health and safety. In 2020, as part of the risk management system, the Group launched a new mobile app, Hunt for Risk, which allows employees to identify and eliminate safety related risks and to bolster the safety culture through gamification.

At Raspadskaya the Group introduced the pilot version of a digital network that uses artificial intelligence methods to prevent incidents: the 24/7 network ensures that employees use personal protective equipment. It is also planned to roll out the system for vehicles, with a view to monitoring that safe driving practices are being followed.

Human capital management

Our activity in the area of human resources management is aimed at ensuring that interaction with employees is based on respect of human rights. All employees have equal opportunities in terms of professional and personal skills, career growth, a decent salary, and an attractive social package.

Education and training are important aspects of staff management and key drivers of employee development within the Group. Each year EVRAZ implements new training programmes, which often become a regular feature within the Group, with the most effective initiatives being embraced. For example, in the reporting year the third Top-300 programme was held to train production managers. Due to the success of the programme it was decided to expand it, consequently in 2020 the Top-1000 programme was launched, covering specialists who practice effective goal-setting and feedback, delegation, and other aspects of management.

In 2020 EVRAZ completed work to enhance the target remuneration system. Now the system is even more transparent and balanced (in terms of fixed and variable parts) and reflects how well the employee, team, and department are performing. The social package includes voluntary medical insurance, a pension scheme, additional holiday days in case certain events arise, and financial assistance in difficult life circumstances. In addition, the Group organises cultural and sporting events for employees and their families.

EVRAZ strives to adhere to high standards in the area of employee engagement. In order to be more productive in this area, in 2020 the Group began planning its employer brand development strategy. This initiative confirms the Group’s commitment to being the best employer in the regions where we operate and to earn the trust and support of our employees.

Managing environmental impacts

The protection of the environment and combating climate change are gradually coming to the forefront of the strategies of global companies, organisations, and governments. EVRAZ has also committed to these initiatives and adheres to a responsible approach in its operations. In 2020 the Group elaborated its Environmental strategy, which sets ambitious climate targets for 2030 and is aligned with sustainable development principles. EVRAZ is also seeking to expand the scope of its commitments to include United Nations Sustainable Development Goals, the Paris Agreement, and the requirements of the Intergovernmental Panel on Climate Change (IPCC).

The Group has an Environmental Management System (EMS) in place, which manages environmental risks and monitors that production processes at all enterprises comply with applicable requirements. The system is embraced at all enterprises and is based on the plan-do-check-act (PDCA) model. In 2020 EVRAZ made major improvements in the area of managing its environment impacts. The Group reduced its total atmospheric emissions from steel production by 3.7% compared to the 2019 level, and recycled 102.7% of non-mining waste and by-products (target: 95%). Fresh water consumption in 2020 stood at 206.2 million m3.

In the reporting period EVRAZ published its first Climate Change Report, based on recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD). The report contains detailed information on the Group’s approach to climate change, climate risk management, and quantitative indicators compared to previous periods. In 2020 the GHG emission intensity level was 1.97 tCO2e/tcs (tonnes of carbon dioxide equivalent per tonne of crude steel) and the Group achieved its goal of a GHG emission indicator of below 2 tCO2e/tcs. The Group’s total energy consumption fell 5.7% year-on-year.

I am particularly proud to mention that EVRAZ’s environmental protection activity has been recognised at international level. The Group took second place in the Wall Street Journal ranking of the world’s 100 most sustainably managed companies; over 5,500 global public companies were evaluated, across 26 categories, and EVRAZ gained recognition for its projects related to reducing emissions and boosting energy efficiency.

Community relations

Community relations

Maintaining and fostering well-being and social stability in the regions where we operate are essential aspects of the EVRAZ sustainability practice. Each year the Group earmarks significant funds for organising large-scale cultural and sporting events, implementing educational projects, and improving healthcare and infrastructure.

Most EVRAZ initiatives are encompassed within three main areas of social investment: EVRAZ for Kids, EVRAZ for Cities, and EVRAZ for Sports. As part of its commitment to local communities, during the reporting period the Group invested in setting up two R&D centres at the Siberian State Industrial University in Novokuznetsk, one of which – the Digital Competence Centre – allows students to acquire highly in-demand IT skills. EVRAZ also held workshops and educational programmes for children, and provided financial support for orphanages, schools, and family centres. Investing in holding sporting events and development activities for children and adults, as well as building sports facilities, are great ways to promote a healthy lifestyle.

The Group is especially proud that our employees are actively engaged in social initiatives implemented in the regions of operations, acting as volunteers and helping vulnerable groups and people in challenging life circumstances.

In the reporting period EVRAZ held its traditional annual grant contest: City of Friends – City of Ideas, which allows representatives from local communities and other stakeholders to present projects to enhance urban spaces and protect the environment. This year 44 projects received grants from the Group.

In 2020 EVRAZ placed a particular emphasis on healthcare support, on account of the pandemic. The Group provided financial support to purchase medical equipment and personal protective equipment for hospitals in the regions where we operate and opened new medical centres and COVID-19 diagnostic laboratories.

2020 negatively impacted many businesses, people, and their families. It affirmed the importance of being ready for unexpected events and being able to react quickly to change. We are proud that in such a challenging year we showed flexibility, improved our performance in many areas, and demonstrated not only the stability of the Group, but also an ability to achieve sustainable growth. I would like to thank all our stakeholders for their support and contribution to the Group’s development. Under all circumstances EVRAZ in turn will strive to do even more for the overall prosperity of businesses, employees, and communities in the regions where we operate, thereby facilitating sustainable development for a better future.