Sustainability risk management
Approach to managing sustainability risks
Risk management forms an essential element of the Group’s activities and is aimed at attaining its strategic objectives, including those related to sustainability. The risk management approach was elaborated in EVRAZ to cover all the Group’s business processes and is adopted in all its operations.
There is a unified framework in place in the Group that is used to identify, assess, and manage risks at both corporate and operational level. Risk management consists of the timely identification, analysis, and assessment of risks and implementing appropriate measures when necessary.
At EVRAZ, we apply the same approach to managing financial and non-financial risks. Hence the Group takes actions to manage risks related to sustainable development: environmental, social, and economic, as well as the other risks that it is exposed to (strategic and financial).
The table below describes the Group’s sustainability related risks and gives an overview of the Group’s measures to manage them.
|Risk||Description||Risk management actions|
|HSE: environment|| |
Steel and mining production carry an inherent risk of environmental impact and incidents relating to issues as diverse as water usage, quality of water discharged, waste recycling, tailing management, air emissions (including greenhouse gases), and community satisfaction.
Consequently, EVRAZ faces risks including regulatory fines, penalties, adverse reputational impact and, in the extreme, the withdrawal of plant environmental licences, which would curtail operations indefinitely.
Globally, there is an increase in regulatory scrutiny and pressure, as well as investor and customer expectations.
|HSE: health, safety|| |
Inherent HSE risks include the potential danger of fire, explosions and electrocution, as well as risks specific to individual mines, where elevated methane levels, rock falls and other accidents could lead to loss of personnel, outage or production delays, loss of material, equipment or product, or extensive damage compensation.
In addition, the breach of any HSE laws, regulations and standards may result in fines, penalties and adverse reputational impacts and, in the extreme, the withdrawal of mining operational licences, thereby curtailing operations for an indefinite period.
There is also the risk of infection with COVID-19, which may be associated with the need for a mass quarantine of workers.
|Business interruption|| |
Prolonged outages or production delays, especially in coal mining, could have a material adverse effect on the Group’s operating performance, production, financial condition and future prospects.
In addition, any long-term business interruption may result in a loss of customers and competitive advantage, as well as damage to the Group’s reputation.
|Potential regulatory actions by governments, including trade, antimonopoly, antidumping regulation, sanctions regimes, and other laws and regulations|| |
New laws, regulations or other requirements and regimes could limit the Group’s ability to obtain financing on international markets, sell its products and purchase equipment. EVRAZ may also be adversely affected by government sanctions against Russian businesses or otherwise reducing its ability to conduct business with counterparties.
There is a risk of adverse geopolitical situations in the countries where the Group operates.
Other risks include the possibility that EVRAZ could fail to adapt to new market conditions or could incur losses connected with existing contracts in case of additional sanctions implementation.
|Product competition|| |
Excessive supply on the global market and greater competition, mostly in the steel products market, primarily due to competitors’ activity and introduction of new facilities. Low demand for construction products and increasing competition in this segment. Increasing competition in the rail product segment.
Excessive supply of slabs on the global market and intensified competition.
|HR and employee risks||Risks related to a lack of skills, a lack of succession planning, and reduced productivity due to labour unrest or low job satisfaction levels.|| |
|Social and community risks||Risks related to socio-economic instability in the regions where the Group operates, deteriorations in relations with local communities and authorities, and loss of the Group’s “social licence” to operate.|| |
|Climate change risks||Risks related to climate change and extreme weather events that could lead to business disruptions, resource shortages, and damage to the supply chain, equipment, and reputation.|| |
|Human rights risks||Risks related to violations of human rights.|| |
|Quality||Risks related to product quality.|| |
|Digital effectiveness, as well as effective, efficient and continuous IT service|| |
A failure to proactively use IT opportunities to increase the efficiency of business operations could result in a loss of competitive advantage and margins.
Information technology and information security risks have the potential to cause prolonged production delays or shutdowns.
At the same time, increased digital transformation and the convergence of IT and operational technology make companies more vulnerable.