6.1

MESSAGE FROM THE HEAD
OF THE HUMAN RESOURCES DEPARTMENT

The company continued to develop as a socially responsible business in 2017. Our cooperation with internal and external stakeholders and our administrative decision-making are now based on the corporate values that have been formulated and introduced into the corporate constitution.

Members of the Management Board defined the priorities for sustainable development in the OMK Corporate Social Responsibility Policy. The policy was an important step in creating a management system that has enabled us to set corporate social responsibility objectives for 2018 and to ensure that they are met. In our production safety policy, we systematized the company’s approaches in this area and confirmed that people’s health and safety are our top priority. Thus we achieved the objective we had set for the reporting year: to formalize the company’s approaches in the corporate documents and, relying on this experience, to proceed to developing social practices on a new level.

The primary task of our HR work over the past year has been to improve efficiency in company subdivisions. The company offered to transfer redundant employees to our new projects, making it possible to keep the team together and diversify the business with almost no increase in staff numbers.

The functional HR Management and Social Development strategy for 2018–2020 was approved in November. It defines the key tasks as continuing to identify staff reserves to supply a workforce for our new projects, introducing values into company management, establishing a corporate university, and providing a convenient HR service to employees and subdivisions.

We continued to support local communities in the cities where our production facilities are located. In 2017, we spent over RUB 200 million on social and charitable activities, projects and programmes aimed at implementing creative and educational initiatives, supporting children, young people and the elderly, and developing sport. Social projects previously launched with the company’s involvement demonstrated their sustainability by obtaining funding for further development from sources not associated with OMK. Our future plans are to begin setting medium-term (3–5-year) corporate social responsibility objectives, and to work on more detailed charts of social and environmental risks. In addition to improving our own company, we plan to promote the wider application of sustainable development practices in our business environment.

Svetlana Nikolashina
6.2

SUSTAINABLE DEVELOPMENT
PRACTICE

The Corporate Social Responsibility Committee, operating under the Chair of the Management Board, occupies a central place in the system for managing aspects of corporate social responsibility. It coordinates the efforts of all company departments and management bodies in implementing the provisions of the OMK Corporate Social Responsibility Policy.

The Corporate Social Responsibility Committee is headed by Chair of the Management Board Natalya Eremina.


Natalya Eremina: ”OMK takes a responsible approach to human rights, occupational safety, local community development, procurement and other aspects, and we have already developed applicable practices. The new policy underpins an effective system that makes it possible to consolidate information on all these aspects and to develop future plans that take all stakeholders’ wishes into account.”

ANNUAL CORPORATE SOCIAL RESPONSIBILITY MANAGEMENT CYCLE:

The committee includes heads of subdivisions that are responsible for achieving key performance indicators (KPIs) in the area of corporate social responsibility: the HR department, production safety office, quality control office, corporate communications office, efficiency management office, government liaison office and corporate social responsibility office. The committee is headed by the Chair of the Management Board. The committee’s makeup enables it to effectively monitor achievement of the relevant goals by OMK subdivisions and to respond rapidly to crises.

Two interrelated documents developed by the committee — the registers of corporate social responsibility goals and risks — form the core of the corporate social responsibility management system. After approval by the committee, these documents will be included in the general corporate strategic planning system and

become part of the integrated management system. Thus, aspects of corporate social responsibility are an integral part of the core operations of company subdivisions, in line with global best practice.



In addition to monitoring the implementation of policy, the committee provides clear and timely reporting of information on performance in the sphere of sustainable development to a broad range of stakeholders. The committee secretary maintains a database containing information on the achievement of goals, risks, and administrative and accounting indicators, and this is used to prepare the public annual report and to respond to requests from partners. If necessary, the committee may order an audit of individual corporate social responsibility KPIs from OMK’s internal auditing service or an external auditor.

6.3

HR MANAGEMENT

STAFF DEVELOPMENT STRATEGY

In 2017, staff were managed on the basis of the functional strategy for 2015–2017. The company efficiently managed working hours and payroll, staffing requirements, social facilities and staff retention.

The key task in 2017 was to identify reserves within the staffing structure and take measures to improve efficiency in the subdivisions. Redundant personnel were redeployed to jobs associated with the construction of Electric Pipe Welding Shop No. 1 at Vyksa Steel Works.

Since this demand could be covered by existing staff, the company did not conduct either mass layoffs or mass recruitment of staff during the reporting year. As a result of measures taken to redistribute resources and introduce additional training programmes, the planned annual gain from the increase in labour productivity — RUB 94 million — was exceeded by 51%, reaching RUB 142.2 million.

In November 2017, the Management Board approved the functional HR and Social Development Management strategy for 2018–2020.


The following priorities were set in the new strategic cycle:


  • Providing staff for the construction of new production facilities at Vyksa
  • Implementing a social investment plan at Vyksa due to the expansion of the production base
  • Making maximum use of internal reserves in staffing and workforce efficiency
  • Creating a consistent management culture at all of the group’s plants, based on an effective system for communicating corporate values
  • Developing employees professionally through an effective corporate training system and cross-functional interaction

RECRUITMENT


OMK plants work with several top-ranking higher education institutions, which gives them an advantage when it comes to recruiting the most promising young specialists. Some forms of cooperation have been in place for more than ten years.

ОMK PARTNER INSTITUTIONS


  1. National University of Science and Technology MISIS, Vyksa Branch of National University of Science and Technology MISIS
  2. Alexeyev State Technical University, Nizhny Novgorod
  3. Murom Institute of Stoletovs State University, Vladimir
  4. Lobachevsky State University, Nizhny Novgorod
  5. Kozeradsky Metallurgical College, Vyksa
  6. Bauman State Technical University, Moscow
  7. Navashino Polytechnical School
  8. Samara State Transport University
  9. Boris Yeltsin Ural Federal University
  10. Lysva Branch of Perm National Research Polytechnic Universit
  11. Perm State University
  12. Chusovoy Industrial School
  13. Lysva Polytechnical College
  14. Ufa State Aviation Technical University
  1. Ufa State Petroleum Technical University
  2. Almetyevsk State Petroleum Institute
  3. Kazan Aviation Institute
  4. Kazan State Energy University
  5. Kazan (Volga) Federal University
  6. TISBI University of Management, Kazan
26

Value of cooperation with educational
institutions*
(RUB million)

2017
26
2016
23
2015
25

*Expenditure includes targeted training programmes for OMK employees and support for higher education institutions, including scholarships for outstanding undergraduate and graduate students and young lecturers.

MAIN CAREER ADVICE PROGRAMMES

Number of participants
Event Target group Programme duration
(years)
2016 2017
Participation in the nationwide
‘No Turnstile Week’
Tenth grade students (15–16 years) since 2017 42
Award to student at Vyksa Branch of National University
of Science and Technology MISIS with the highest mark
in the Unified State Examination
students since 2016 1 1
Young Innovators and Inventors Festival primary and secondary school students 3 450 650
Trajectory Careers Academy Tenth grade students (15–16 years) 4 90 90
Talks by plant specialists in schools and higher education institutions upper secondary school pupils, students 4 50 250
Companies fair at Employment Centre upper secondary school pupils, students 4 over 1,000 over 1,000
Work experience (job training) Tenth grade students (15–16 years) 6 12 13
Industry and Proflandia games Ninth grade students (14–15 years) 7 100 100
Work placements students from Chusovoy Industrial School 10 30 40
Tours of spring production facility school and higher education students 10 85 105
Batashev Brothers Scholarship competition 9–11th grade students (14–17 years) 13 15 15
Tours of production facility upper secondary school pupils, students over 15 years 1,350 1,425

MAIN CAREER ADVICE PROGRAMMES


SUCCESSFACTORS COMPLETE RECRUITMENT SYSTEM

SuccessFactors, a complete recruitment system, was introduced at OMK in October 2017.

  • The system enables a centralized approach to recruitment using a single statistical database of vacancies and processes.
  • It makes it much simpler to organize employee rotation, both at the employee’s primary plant and within the company as a whole.
  • Managers can create requests for staff in any category and from any region.
  • The system facilitates career progression by in-house candidates by creating specific talent pool groups.
Ratio of in-house and external staff recruitment in categories B, C and D
90.7
In-house

2017
90.7%
2016
90.2%
2015
80.6%

9.3
External

2017
9.3%
2016
9.8%
2015
19.4%


In line with the strategic objective of making maximum use of employees’ potential in order to develop the talent pool, 17 line managers were promoted to senior management positions in 2017. Recruitment from external sources has fallen by 10 percentage points in the space of two years thanks to the emergence of big career opportunities for company employees and candidates from local communities.

WORKFORCE STABILITY

Thanks to the efforts made by management to provide steady employment, competitive pay and an expanded social programme, it has been possible to keep average employee turnover at key company plants to 4.1%. At the plants that are the main employers in their cities (VSW and CSW),

the turnover is steady at 3–5%. This is due to the absence of equivalent employers in the area and the insulation of the job market, which motivates qualified workers to stay at a plant. At the other sites, where a large number of job openings are available, the rate of turnover is 10–15%.


2016 2017
Plant Net turnover (%) Stability Net turnover (%) Stability
VSW 4,0 96,0 2,7 97,3
Trubodetal 4,8 95.2 3,0 97,0
BVP 18,1 81,9 5,8 94,2
CSW 4,8 95,2 4,8 95,2
APP 8,5 91,5 7,1 92,9
OMK managing
company
11,7 88,3 8,9 91,1
Group 6,0 94,0 4,1 95,9

ENGAGEMENT


The annual study of employee engagement using international methodology* was conducted for the fifth time in 2017, covering 74% of full-time employees. The results were analysed in a focus group format with individual staff categories and round tables in the subdivisions (shops). Plans to improve engagement in 2018 were developed during working sessions with subdivision managers.


Increasing engagement year-on-year helps the company to remain focused on conditions for staff. The engagement study is itself a form

of dialogue with employees as stakeholders. Over 400 corrective measures are taken annually according to the results of the study. The company believes that the fundamental factors promoting an increase in engagement are the deliberate development of people skills by managers at various levels, and compliance with the company’s rules of conduct, which is ensured by the OMK Ethics Committee and he ethics committees at the plants.


Following a review of the requests received, the rules were updated by a decision of the OMK

Ethics Commission by means of amendments to the OMK Corporate Constitution. This is the regulatory document that contains the code of corporate ethics. In particular, the special role of managers in complying with ethical standards was emphasized (Section 4.11), as was the responsibility of employees to provide constructive feedback on performance, including negative feedback (Section 4.12). The dispute resolution procedure was defined (Section 4.13).


The company established a set of corporate values in 2017. The level of communication

of the new values was measured as part of the engagement study and varied between 64% and 82%. The new values were approved by the Management Board together with the new version of the Corporate Constitution.



Employee engagement, %

2016
2017

54%
56%
51%
86%
34%
30%
70%
67%
73%
67%
92%
42%
48%
76%



* AON Hewitt international methodology.

EMPLOYEE QUALIFICATIONS


The employee qualification level is calculated according to mandatory qualifications from the following groups in the qualification catalogue:

  • professional qualifications of blue-collar workers
  • certification according to international standards
  • special processes
  • requirements of oversight bodies, managers, specialists, office staff and blue-collar workers

Employee qualification level (%)
2016
2017

78%
86%
89%
74%
83%
45%
86%
86%
86%
90%
92%
72%

STAFF DEVELOPMENT

OMK takes the creation of a talent pool within the company very seriously. The talent pool is formed so that employees can be promptly appointed to vacant positions within a group, administrative risks are reduced when making appointments to management positions, the time taken to adapt to a new role is shortened, optimum conditions are created for discovering and utilizing potential, and motivation for professional, personal and career development is increased.


TALENT POOL

In forming the talent pool, special attention is devoted to the evaluation of candidates. Applicants are primarily selected according to formal criteria (length of service and performance in their current position). Introductory interviews are conducted with candidates who meet the formal criteria to determine their loyalty to the company and their motivation for further development.

Corporate competencies are evaluated using a 360-degree appraisal, an assessment centre, testing and questionnaires. To develop the competencies of a candidate, a combination of standard training programmes and an individual development plan tailored to the specific candidate is offered.

Three basic development programmes for different categories of talent pool candidate were created in 2017 and are due to be introduced in 2018:

  • for the talent pool for senior management positions
  • for the talent pool for production and maintenance roles
  • for the talent pool for auxiliary and support functions

EMPLOYEE TRAINING

Total duration of training by category (man-courses)
Category 2017
VSW Trubodetal CSW APP BVP Total
Managers 14,259 305 968 1,753 1,430 18,715
Specialists 25,121 206 1,069 292 607 27,349
Office staff 186 1 8 0 30 225
Blue-collar workers 93,843 1,824 6,041 2,116 1,273 105,097
arget groups Talent Pool 12
Young specialists 130
Total 133,409 2,390 8,228 4,161 3,340 151,386
87158
Total duration of training in industrial safety, occupational safety, environmental protection and emergency preparedness,
(man-courses)

2017
87,158
2016
92,860
2015
75,640


The programme is cyclical due to the periodic nature of confirming qualifications and obtaining permits which are valid for 1–5 years.

EMPLOYEE TRAINING

PROACTIVE TRAINING IN CRITICAL PROFESSIONS

Proactive training for employees at OMK is based on programmes for professional training, retraining, mastery of a second (related) profession, and skills upgrading.

As a rule, the programmes are conducted in three areas:


  • prior to the commissioning of production facilities equipped with new and advanced technologies
  • prior to laying off employees due to production facilities being closed down or a reduction in production volumes
  • before the launch of a project to modernize (restructure) a production facility.

The proactive training system includes additional training at basic educational institutions, training at OMK plant training centres, and specific training by equipment suppliers during start-up and commissioning work.

The main outcome of proactive training is the proper redistribution of shop workers during a peak load period or during a reduction in production volumes.


Due to the opening of new production facilities as part of the project to expand the Oil and Gas Pipes Division, proactive training is being conducted at Vyksa for the following professions:


  • flaw detection specialist
  • process equipment engineer
  • control post operator
  • mechatronic engineer (electrician + fitter)
  • equipment maintenance and service electrician
  • metallurgical production facility crane operator
  • boilermaker

PROFESSIONAL RETRAINING PROGRAMME
IN INDUSTRIAL FACILITY MANAGEMENT

OMK employees received training in an MBA programme in 2016–2017. Twenty-six employees from four company plants participated in the programme.

The main objective was to train in-house professional managers for leadership positions to ensure continuity of management for production departments. The programme gives talented, high-potential employees opportunities to advance and realize their potential, and creates a team of like-minded managers who will implement the company’s objectives and principles in the long term.

The training modules were developed by the National University of Science and Technology MISIS in conjunction with OMK experts and senior managers.

The training programme format was mixed: 240 hours of classroom training, over 250 hours of distance learning through video conferencing, online training using the LMS, and internships at plants in the Vorsino industrial park in Kaluga Region. The participants worked on projects during the training programme, and the majority of these are already being implemented.

MANAGEMENT MINIMUM

This programme focuses on developing basic managerial competence and improving managers’ professional skills. It has been provided via online distance learning since 2013. During that time, 3,874 managers completed the training. More than 300 OMK employees completed the training in 2017.

THE SCHOOL OF EFFECTIVE MANAGEMENT

This programme aims to improve the managerial and professional competence of line managers in production, service and auxiliary subdivisions so that production problems can be solved quickly and skilfully. It combines all aspects of subdivision management, from staff management skills to knowledge of production processes and technology.

The programme has been running successfully since 2013 and over a hundred people have successfully completed it. Figures tracking participant development show that the programme is highly effective:

20% of participants followed a managerial career (from team leader to foreman, and from foreman to senior foreman); 37% followed an expert career (including a change in level); and 11% followed a horizontal career path.

In 2017, 142 plant foremen, team leaders and plant employees participated in the programme: some had been recommended by subdivision managers and others had put themselves forward for the school. Everyone who wanted to take part in the programme was given the opportunity to apply on their own initiative for the first time. Selection was carried out on the basis of a letter of motivation from the participant and meetings with each of the self-referring applicants.

PRODUCTION SYSTEM ACADEMY

The aim of this programme is to improve production process efficiency for all employees at Vyksa Steel Works. It has been ongoing since 2014, and during that time over 1,600 people have taken part. In 2017, 220 leaders were trained.

A corporate production system standard with more than 50 tools has been developed to improve the effectiveness of the training course.

INVESTMENT PROJECT MANAGERS’ ACADEMY

Running the investment programme at VSW requires continual upgrading of investment management skills. This programme was launched in May 2017. Forty-five participants were selected, and they spent five months studying planning, from the fundamentals of project management to running projects and integrating the results into operations. Following an evaluation of its effectiveness, the programme may be rolled out to other OMK sites.

TEAM-BUILDING WORKSHOPS FOR EMPLOYEES

These workshops are held to improve the supportive environment within teams, help people to work together more effectively, and solve practical problems regarding the restructuring and merging of subdivisions, and the redistribution of functions among employees or subdivisions.

In 2017, 1,500 people attended these workshops (29 workshops). The engagement study showed an improvement of 14 percentage points in the ‘Interaction’ factor, confirming the effectiveness of such measures.

DIGITAL CIO


In 2017, OMK launched a unique training programme for those who want to become a new type of manager — a CIO. Experienced business coaches hold workshops covering leadership, professional competencies, modern approaches to management, including flexible Agile methods, and personal development.

Since 2017, the company has operated a game-type online platform for managing employees’ ideas and goals.

The platform is set up on the same principle as a social network. Everyone can post their ideas, discuss them with colleagues, assemble a team to make them happen, and receive a reward once the outcome is achieved. Thanks to the game elements embedded in the process, participants can think up a multitude of the most diverse ideas, research various routes, and find out what works and what does not.

SHADOWING

A shadowing programme was introduced in the reporting year to build up potential successors to VSW managers. The plant creates an environment for studying the specific nature of the work of an adjacent or higher manager, who functions as a mentor. The mentor has a meeting with the apprentice, and they create an individual apprenticeship plan, setting out development goals and methods and timelines for achieving them.

At the end of the apprenticeship/deputizing period, the mentor meets with the apprentice and evaluates how well the plan has been fulfilled. By temporarily getting involved in fulfilling the mentor’s key responsibilities, the apprentice gains unique experience and expands his or her competencies. The purpose of shadowing is to improve management efficiency when a manager is absent and a deputy is fulfilling his or her responsibilities, to speed up the process whereby professional experience is passed on, and to support a spirit of succession. The programme is open to employees from the Talent Pool programme and employees already doing the work of managers.

SALARIES

Company policy on pay is based on the historic and economic particulars of the regions
where the company’s key assets are located.

Average wage growth was more than twice the level of inflation in the Russian Federation.

Average salary in 2017 (RUB thousand per month)
Plant Average salary Ratio of average salary at plant
to average salary in region (%)
VSW 45.2 above market rate for the region
CSW 32.1 at market rate for the region*
BVP 37.8 at market rate for the region
APP 33.5 at market rate for the region
Trubodetal 47.8 above market rate for the region

* Due to the variability of the labour market and the impossibility of assessing it using just one value, a range of +/-15% of the average salary for the region was selected by experts as an acceptable range.

Social support
Type 2015 2016 2017 For 1
employee
in 2017,
(RUB
thousand)
Total social expenditure,
(RUB million)
553 598 558 22.8
Direct social payments to employees (grants, financial assistance, severance pay, pay for social leave, etc.) 201 197 164 6.7
Medical support (voluntary medical insurance + expenses for medical care) 155 171 179 7.3
Nongovernmental pension support 30 43 23 1.0
Sanatorium and resort treatment and wellbeing for employees and their family members 38 43 41 1.7
Meal provision 92 97 106 4.3
Other 37 46 45 1,8

RELATIONS WITH TRADE UNIONS

Relations are based on the social partnership objectives and principles at OMK agreed upon by the management and the trade unions in 2016.

The main relationship is built at plant level. At the OMK level, dialogue takes place through a social council that includes trade union leaders, the plants’ HR managers and representatives of the managing company. There were no collective labour disputes or strikes in 2017.

Questions about trade unions were included in the engagement survey questionnaire, with the consent of the trade unions. The results showed that the most important issues in a trade union’s relations with the employer are:

  • Wellbeing of employees and their children — 74%
  • Social benefits and guarantees — 68%
  • Indexing and raising of salaries — 67%

In order to develop, a trade union should be actively involved in the following issues:


  • Ensuring the social and labour rights and interests of employees — 62%
  • Keeping employees informed about the trade union’s activity — 61%
  • Legal advice for trade union members — 57%

The shop trade union leaders were also rated according to how well employees know them.


PENSION PROGRAMME

To ensure a decent standard of living after retirement, various nongovernmental pension programmes are in place at OMK via the Gefest Nongovernmental Pension Fund. The basic principle is that the company doubles the voluntary contributions made by its employees. Employees determine the amount of their contributions independently.

In 2017, over 5,800 employees participated in nongovernmental pension programmes, and 4,490 participated in voluntary pension programmes. Pension payments from the Gefest fund totalled RUB 21.9 million in 2017, 25% more than in 2016. This rise was due to an increase in the average time employees had been enrolled in the programme and the number of retirees.

The additional pension increased by 11% in 2017 compared with 2016 and amounted to between 2% and 11% of the government pension for regions in which OMK operates.

The reason for the low percentage is that corporate pension programmes have existed for a relatively short time. Future plans are to help company employees to increase their pension income to 40% of salary (the world standard).

OMK CODE FORUM

A corporate forum was held for the first time in 2017, at which company managers gave presentations on topical issues, division managing directors held meetings in a talk show format, and questions were asked of company management.

Forum participants exchanged ideas and thoughts on company successes and problems, what lies at the heart of corporate culture and leadership, and the company’s strategy and social responsibility. The event was streamed online to all employees.

CORPORATE GAME SERIES
‘WHAT? WHERE? WHEN?’

This game series is aimed at promoting the development of employees’ intellectual potential, team spirit and leadership principles. Five games were held last year, and more than 160 employees participated in each competition. The games were held simultaneously via video conferencing.

14TH IVAN AND ANDREY BATASHEV
AWARD CEREMONY

Prizes were awarded in 11 categories, five of which were only open to blue-collar workers. In all, 197 candidates and 10 primary production teams were nominated for awards. By tradition, the winners were presented with their awards by the guests of honour: government representatives and outstanding figures in science and culture.

AWARDS

PIGGY BANK OF ACHIEVEMENTS

VSW developed a new, non-financial incentive for employees, the ‘Piggy Bank of Achievements’ – an album of personal success stories in which employees receive stickers for various achievements. For subdivision managers, the album serves as a tool for positive feedback and for acknowledging the achievements of their teams.

There are 17 types of activity that employees can record in the album: performing management responsibilities, entering foreman competitions, acting as an instructor, taking part in social, cultural, charitable and creative activities

and competitions, using their initiative and supporting production system tools, and getting involved in sporting events and educational programmes. Employees can earn a separate ‘Thank You’ sticker from their supervisor as a sign of their appreciation for a job well done. This is an inspiring and motivating career-building tool that helps employees to gather together their personal achievements in all areas, and to maintain and develop an interest in new triumphs.

Due to the introduction of this programme, the level of satisfaction with the ‘Career Opportunities’ factor in the engagement survey at VSW immediately went up by 25% in 2017, from 27% to 62%.

Awards received by employees at key OMK plants in 2017

Total VSW Trubodetal APP BVP CSW
Government 2 2
Departmental 110 92 3 8 7
Regional 79 72 3 2 2
Municipal 113 82 9 8 13 1
Corporate 79
Plant 1,185 870 39 26 50 200
Total: 1,568

SOCIAL BENEFITS CAFETERIA

A ‘Social Benefits Cafeteria’ was set up for key company employees in 2017. Each employee can choose from more than ten benefits at his or her discretion within a specific budget. The programme was launched at the managing company and the group’s largest plant, VSW, in 2017, and is to be rolled out to other plants in 2018.

‘Key’ employees are employees who have unique knowledge, play a key role in business processes, and have important connections to outside organizations. The business could not exist in the long term without them.

PROFESSIONAL 2017
CORPORATE COMPETITION

One of the biggest and most significant events of the year was the Professional 2017 corporate competition for professional skills,

which was held at VSW production sites in 13 main categories and one additional category. The competition is held every three years and has two main goals: to increase the prestige of working specialisms in the company and to motivate employees to develop their professional skills.

More than 130 workers from seven United Metallurgical Company plants took part in 2017. On the first day, competition entrants answered test questions on professional skills, occupational safety, production system elements and company policies.

OPEN DAY FOR EMPLOYEES’
CHILDREN

Open days are held at all OMK plants to develop the corporate culture and encourage loyalty to the company among employees’ children. During guided tours, children aged 4–16 find out about where their parents work and learn about what the company does.

IMPROVING THE EFFICIENCY
OF THE HR SERVICE

To improve the efficiency of the HR service, a single centre for operational work with employees was set up in 2017. The centre’s specialists perform all stages of operational HR accounting — keeping the staff register, personal record keeping and time keeping — and are responsible for the end result. Bringing specialists at this level together in a single centre makes it possible to quickly divide up large workloads, discuss complex and non-standard situations, and share experience.

The establishment of the centre has freed HR partners from standard routine operations and given them more time to spend on developing competencies and creating elements of corporate culture. Employees are automating processes in order to reduce the workload and the number of errors in manual input. Areas of expertise are to be allocated in the centre so that uniform HR accounting processes can be established for the entire group.

6.4

SOCIAL
PROJECTS

The aim of OMK’s external social activity is to support the company’s strategy by creating a positive atmosphere and making long-term investments in the development of local communities.

Cooperation with a wide range of sustainable development stakeholders in the areas where OMK operates is enabling us to bring about qualitative changes in the social sphere. Thanks to its serious approach to social planning, OMK is addressing specific social problems in the regions and improving their social and business potential.

In 2017, RUB 203 million was spent on social and charitable campaigns, projects and programmes aimed at implementing creative and educational initiatives, supporting children, young people and the elderly, and expanding sport in regions where the company operates (not counting social partnership agreements with municipal authorities).

2nd place


in the category for Best Programme for Determining Policies and Principles for Corporate Social Investments in the Leaders in Corporate Charity competition

3rd place


in the Transparency of Charitable Activity category in the Leaders in Corporate Charity competition

Winner of Champions
of Good Deeds
competition


in the Pro Bono category (3rd place) and Social Volunteering category (2nd place)

Medal


for contributing to the development of civil society in Chelyabinsk Region

Winner


of Changing the World, a regional competition for social achievements, in the Charitable Activity by Commercial Organizations and Individual Entrepreneurs category (Chelyabinsk Region Legislature)

3rd place


in the Leaders of Russian Business: Dynamics and Responsibility competition in the Support and Development of Social Entrepreneurship category

Impulse for Good Prize


in the Best Corporate Programme for the Development of Social Entrepreneurship category. (Our Future Fund for Regional Social Programmes)

KEY PRIORITIES
FOR SOCIAL INITIATIVES

OMK PARTNERSHIP

OMK Partnership, the grant competition for social and charitable projects, aims to combine the efforts of business, government and local communities to address acute social problems in the regions. It is by following such an approach that we will be able to find genuine solutions to important problems affecting the cities where OMK operates, to spend funds effectively, and to create sustainable long-term projects.

In 2017, 233 applications for the competition were received: 64 projects from OMK employees and 169 from nonprofit organizations across all of the regions where the company’s plants operate. A panel of experts chose 78 projects to receive financial support from OMK: 46 from organizations and 32 from volunteers. OMK spent RUB 9.3 million on these projects in 2017. The best ideas were able to obtain additional funding from sponsors of the Planeta.ru crowdfunding platform, with which the company has been cooperating since the third OMK Partnership competition.

The applications that were singled out among the winners for their professional approach focused on the social adaptation of orphaned

children, and providing support for people with disabilities and learning difficulties, involving them in an active life. A large number of projects were about promoting a healthy lifestyle and cultural and sporting events.

The competition’s expert panels included plant managers, heads of local administrations, and representatives of various regional ministries and departments.

In 2017, OMK invited experts from the Charities Aid Foundation to evaluate the socioeconomic impact of projects implemented in the course of the OMK Partnership competition over the past three years. The evaluation was performed using the Social Return on Investment (SROI) approach. During 2015–2017, 216 projects were implemented in the cities where the company operates, and the total grant pool for the three years was approximately RUB 31.9 million. Furthermore, over the three years of the competition, RUB 29.9 million in social project funding was raised in the cities, which is roughly equal to the amount the company invested in the competition. The funds were raised from federal and regional grants (eight presidential grants and grants from

private funds), and more than RUB 800,000 was collected on the Planeta.ru platform. According to the evaluation by the Charities Aid Foundation, the SROI of the OMK Partnership competition for the entire company was 3.4:1. This means that for each rouble invested by OMK, the value of the social impact is more than three roubles.

The SROI was 3.6:1 in Vyksa, 3.6:1 in Novosineglazovo, 2.5:1 in Blagoveshchensk and 3.9:1 in Chusovoy. The competition has had a positive impact on the relationship between the plants and regional and local governments, and has improved relations with local residents and representatives of the social sector and the media.

The OMK Partnership competition has to a great extent promoted the development of personal leadership and city residents’ personal responsibility for improving the urban environment. Many more people were involved in the projects than was officially recorded, the potential of the community has been revealed, and a new mindset has been shaped with regard to social good and people’s role in achieving it.

BUDGET OF GRANT POOL
FOR SOCIAL INITIATIVES

9.3RUB million


TOTAL GRANT POOL
OVER THREE YEARS

31.9RUB million


SOCIAL RETURN
ON INVESTMENT (SPOI)

3.4:1


CORPORATE VOLUNTEERING

For OMK, corporate volunteering is a tool for attracting and retaining employees, for promoting their creative and professional development, and for increasing their motivation. The readiness of staff to participate in volunteer projects and the projects themselves have a positive impact on employee engagement. A total of 7,694 OMK employees are volunteers — more than 30% of the company’s workforce.

7694

OMK employees
are volunteers

The corporate volunteering programme has been expanding since 2015. Four areas for volunteer initiatives were successfully implemented in 2017:

  • Event volunteering: participation in company-wide volunteer campaigns jointly with the OMK Participation fund (Every Little Christmas Tree Helps, Heart to Heart, Let’s Take a Child to School, and the ‘Who’s Running? Everybody!’ marathon).
  • Conscious volunteering: OMK employees have the opportunity to run social projects independently, receiving mini-grants from the company and involving other volunteers in their initiatives
  • Individual volunteer projects as part of the OMK Partnership grant competition
  • Volunteer projects run by the young metallurgists’ councils at the plants include planting trees, clearing rivers, blood drives, helping company veterans and residents of senior citizens’ homes, and cleaning up plant sites (‘environmental paratroopers’)

In November 2017, OMK featured as a partner in the section entitled ‘Corporate volunteering as an HR strategy: a tool for increasing engagement or an additional HR burden?’ at the Sixth Moscow International Forum on Corporate Volunteering: Business and Society.

As part of the forum, awards were given to entrants in the Champions of Good Deeds competition for corporate volunteering projects. The winners included projects run by OMK volunteers in Vyksa (Nizhny Novgorod Region):

the Big Brother project to help orphaned children and the Respect internet project for veterans.

OMK actively supports the blood donor movement. Four blood donation drives were held at OMK’s Moscow office in 2017, in which 201 people participated. Company employees gave a total of over 90 litres of blood during the year. Partners join in with OMK events, including employees of Metalloinvestbank, the Russian Martial Arts Union, the National University of Science and Technology MISIS, etc.

2017
30,776
7,694
1,282

2016
25,600
6,400
1,006

2015
21,988
5,497
916


Number of volunteers
Number of volunteer hours
Number of days
(in terms of volunteer hours)

PARTNER PROJECTS

START YOUR BUSINESS SOCIAL
ENTREPRENEURSHIP
DEVELOPMENT PROGRAMME

This social entrepreneurship development programme was launched in Chusovoy in 2016. The project was extended to Blagoveshchensk in 2017. The programme’s total budget in 2016–2017 was RUB 9 million.

BUDGET FOR SOCIAL
ENTREPRENEURSHIP
DEVELOPMENT PROGRAMME
IN 2016–2017

9RUB million

The programme was implemented using social partnership mechanisms. This builds additional sustainability into the project itself and means the results achieved can be published on social media.

The following participated in the project in 2017: in Chusovoy: the Perm Entrepreneurship Development Fund, the Perm Territory Ministry of Industry and Trade, the Chusovoy Municipal District Administration; in Blagoveshchensk:

Our Future Regional Social Programmes Fund, the State Committee for Entrepreneurship and Tourism and the Centre for Social Innovation of the Republic of Bashkortostan, and the Blagoveshchensk Municipal District Administration.

TRAINING FOR RESIDENTS WITH INITIATIVE

Various examples of social entrepreneurship were examined at the introductory seminar ‘Business Models in Social Entrepreneurship: Russian and Foreign Experience’ to give participants an understanding of the subject of social entrepreneurship and present possible templates for implementing a business model. A practical seminar on Social Planning was conducted for those who had decided to try to incorporate their own idea into the working business model.

START YOUR BUSINESS COMPETITION

Residents of Chusovoy and Blagoveshchensk who were interested in the examples considered at the seminars could obtain startup capital to develop their ideas. The grant competition was open to individuals and private

PROJECTS IN CHUSOVOY


Supported Launched Certified in social
entrepreneurship
Joined Perm
Entrepreneurship
Development
Fund Federal
acceleration
programme
Jobs created
35 projects
(20 in 2016,
15 in 2017)
34 projects 2 projects 24 projects 37

entrepreneurs permanently resident in Chusovoy and Blagoveshchensk and the corresponding municipal districts.

Grant support was also provided to organizations working to address social problems in the city and improve the quality of life of residents of the region as a whole and representatives of socially vulnerable groups. The main criterion for awarding a grant is that the socially-oriented activity be self-supporting after the implementation of the stated business plan. The budget for the grant competition in 2017 was RUB 4 million.

The Cross Country Skiing Federation project reached the final of the All-Russian Social Entrepreneurship Projects competition.

The Recycle Plastic project received a regional subsidy of RUB 850,000.

New leisure sites appeared in Chusovoy: a pay-per-minute café, a cycling club, the Awesome Rabbit trampolining centre, a Montessori children’s club, a pastry shop, the Alph@ mental arithmetic club, the Free Sandbox (a space for young mothers and children to relax in), and a gym for senior citizens. An eco-village, petting zoo and laundry have been opened.

PROJECTS IN BLAGOVESHCHENSK

Supported Launched Joined
the Social Projects
Accelerator
(Centre for Social
Innovation)
Created by
visually impaired
people
Создано рабочих мест
11 projects 11 projects 11 projects 2 projects over 70

Facilities that have opened in Blagoveshchensk include new developmental centres for children and teenagers (an interactive foreign language learning club for children, including children with disabilities, and the Today careers advice and personal development centre); recreational facilities (Grab and Go, a bike and roller-skate hire shop, and Spin the Pedals, an indoor cycling studio); social services (a social assistance service called Your Caregiver, the Pro Bono wellness centre (a salt therapy room), and the Joy massage centre, which offers jobs to visually impaired people); and new services (mobile repairs of agricultural equipment, and Button, a children’s clothing production facility).

.

ACCELERATION PROGAMME
TO SUPPORT COMPETITION WINNERS

The programme supporting young entrepreneurs is perhaps even more important than financial support for social initiatives. As part of the programme, arrangements were made for the competition winners to take part in the federal School of Social Entrepreneurship programme in Chusovoy and the acceleration programme of the Republic of Bashkortostan’s Centre for Social Innovation. A positive outcome was gained from sharing best practices at district conferences on social entrepreneurship in Chusovoy and Perm and at regional entrepreneurship forums in Ufa.

INFORMATION SUPPORT

This programme provoked great interest among journalists and social media users. During the programme, over 600 articles on social entrepreneurship projects and the programme itself appeared in local, regional, corporate, national and social media.

RUSSIA-WIDE BOOK FESTIVAL

In 2017, OMK organized Book City: Architecture of the Intellect, a large-scale festival for book lovers, in the areas where it operates.

There were cultural events and presentations of the latest books, libraries and publishers for both children and adults. Great emphasis was placed on involving local creative groups in preparing for and organizing the festival. Visitors to Book City were able to meet contemporary Russian authors: Anna Goncharova, Zakhar Prilepin, Rinat Valiullin, Sergey Litvinov, Ekaterina Vilmont, Dmitri Yemets, Oleg Zhdanov and Tatyana Bulatova. The guest writers gave readings which were open to all.

The event was held in August and September 2017 in all of the cities where OMK operates. The festival opened in Chusovoy, and later transferred to Blagoveshchensk, Novosineglazovo and Almetyevsk. It closed in Vyksa. Regional and local government representatives, creative groups, libraries and local business communities were involved

VICTORS’ BALL

The 12th Victors’ Ball was held in Moscow in December 2017. More than 400 veterans attended from 15 countries, including Russia, the CIS and the Baltic states. Those invited included veterans of the battles for Moscow and Stalingrad, as well as Leningrad and Kursk, children of the war and concentration camp prisoners. They included artillerymen, gunners, paratroopers, tankers, radio operators and nurses. All have been awarded medals and decorations. The ball has been held since 2006.

THE ENERGY OF A DREAM

OMK sponsored The Energy of a Dream, an exhibition held at the State Historical Museum in Moscow to mark the centenary of the October Revolution. The company’s support for the exhibition was its contribution to preserving historical heritage.

6.5

CHARITY

OMK PARTICIPATION CHARITABLE FOUNDATION

Founded in 2008, OMK Participation is funded by contributions from company managers and employees. The foundation’s board of trustees is chaired by Irina Sedykh. In 2017 it held several events aimed at supporting disadvantaged and seriously ill children, and supporting the development of educational and medical techniques, culture and art.

ART OVRAG FESTIVAL

The seventh Art Ovrag festival of urban culture was held in Vyksa from 16 to 18 June 2017. United Metallurgical Company and the OMK Participation foundation have held this event every year since 2011.

During the festival, the city was transformed into a single art gallery with outdoor exhibits of works by famous artists.

The festival is a catalyst for creativity among the city’s residents, who gain the freedom to transform their environment and create a new public space.

The three-day programme in 2017 was packed full of cultural, educational and sporting events, workshops, and other happenings. The theme of the festival was ‘Water’, so the 300-hectare Upper Vyksa Pond became the main festival site for the first time. Famous architects and artists from Russia and France developed their own art float projects, one of which was created from a sketch by a woman from Vyksa who had won the competition for the best project.

The programme also included theatre productions, workshops and lectures on urban entrepreneurship, modern art, photography and other subjects, concerts, creative activities for children, and sports

demonstrations.The Vyksa Air art residence opened in Vyksa. This is a new development in global modern art. The art residence in Vyksa is the only one in Russia that is hosted in a provincial city. Artists now live and work in the residence, and their work will later remain in Vyksa. The festival also featured the unveiling of the largest mural in the world on the wall of Mill-5000 at the Vyksa Steel Works.

More than 10,000 residents of Vyksa and visitors to the city participated in the Art Ovrag festival over the three days.

SHOW AT NIKULIN CIRCUS

This New Year event was held for the fifteenth time and was attended by about 2,000 guests. The special guests were children from large and low-income families, beneficiaries of the foundation from Vyksa, foster children from the Pelican social rehabilitation centre, children with health problems, disadvantaged children, patients from the Paediatric Oncology and Haematology Research Institute at the Nikolai Blokhin Russian Cancer Research Centre, children from Syria who are receiving medical treatment in Moscow, families from regions where OMK operates, and children of employees.

EVERY LITTLE CHRISTMAS TREE HELPS

Since 2012, the OMK Participation charitable foundation has run the annual Every Little Christmas Tree Helps project for children undergoing treatment at the Nikolai Blokhin Russian Cancer Research Centre of the Russian Academy of Medical Sciences. In 2017, volunteers painted the ward and inner courtyard of the Russian Cancer Research Centre, presented gifts to young patients, and held a theatre festival for them featuring the Meyerhold Centre,

SNARK Theatre, the Smart Bear folk puppet theatre the Russian Marionette Theatre, the Figaro Marionette Theatre, the Cedar animation studio and the July Ensemble Theatre.

ASSISTANCE FOR CHILDREN’S
CANCER RESEARCH INSTITUTE

For the first time in its history, the foundation received a presidential grant of RUB 1 million for a socially significant project — the development of the website pediatriconcology.ru, which was set up in 2011 as a foundation initiative. The foundation supports the publication of the journal Paediatric Oncology and in 2017 provided the Russian Cancer Research Centre with medical equipment for young patients: a BF-XP60 bronchofibrescope for thoracic surgery, 15 infusion pumps and five perfusors for chemotherapy.

GIVING TUESDAY

The OMK Participation foundation supported the international #GivingTuesday initiative for the second year in a row. Charitable, educational and patriotic events and blood drives were held on 28 November in the regions where the company operates.

TOGETHER TO SCHOOL!

OMK Participation held this traditional charity event, during which more than 2,000 employees helped 164 children from cities where the company operates get to school.

WITH A LOVING HEART

The foundation raised more than RUB 595,000 to buy a horse-riding simulator for disabled children at the Constellation developmental centre in Vyksa and a stationary bicycle for Matvey Antropov from Blagoveshchensk, as well as medical treatment for foundation beneficiaries in Almetyevsk and Chelyabinsk.

TARGETED ASSISTANCE

In 2017, 41 families from regions where OMK operates received targeted assistance from the OMK Participation foundation, amounting to RUB 4.7 million.

6.6

PRODUCTION
SAFETY

The OMK Management Board approved a new policy on production safety in July 2017. The policy was developed according to Russian laws and the international standards ISO 14001:2004 and OHSAS 18001:2007. There were no significant changes to the system of internal regulations determining production safety policy in 2017.

The company operates in accordance with the laws of the Russian Federation. It is guided by international standards and best practices in production safety and strives to integrate them into all business processes.

The policy includes the following principles:

  • Priority of human life and health over production indicators
  • Integration of the production safety management system into production and managerial operations
  • Compliance with the requirements of law, a mandatory condition for company operations
  • Support and encouragement of safe employee behaviour
  • Risk management to prevent accidents
  • Employee competence and responsibility, a basic condition for safe work
  • Monitoring of production safety indicators
  • Mutually profitable relationships
    with suppliers and contractors

Work to ensure production safety involves:


  1. Identification and ranking of aspects and hazards of company operations in terms of environmental protection, health and industrial safety
  1. Effective management of these aspects and hazards to prevent and/or minimize the potential adverse impacts associated with them
  2. Integration of this activity into the general management system
  3. A corresponding organizational structure with clearly defined functions and allocation of authorities and responsibility
  4. Specific training and distribution of information to improve company employees’ general awareness and to support the effective functioning of the management system
  5. Monitoring of key safety, health and environmental impact indicators
  6. Continuous evaluation of performance and improvement of the integrated management system


INTERNATIONAL STANDARDS


ISO 9001:2008
ISO 14001:2004
ISO 39001:2012
OHSAS 18001:2007
OSHA 3132 2000
OSHA 3133 1994
RR363/2001
ISBN 978-0-470-04309-7

IOGP International Association of Oil and Gas Producers, 2011 Customs Union Technical Regulation Safety of Wheeled Transport Vehicles,
TR TS 018/2011, approved on 9 December 2011 (No. 877) by a decision of the Customs Union Commission

6.6.1

OCCUPATIONAL
SAFETY



OMK has created conditions in which staff and contractors can work safely, and efforts
are continually being made to improve the environmental safety of the company’s operations


Stakeholders Requirements Measures
Consumers Employee safety/safety in production,
shipping and transportation of products
Joint production safety audits, development of safe working methods, staff training and demonstration of processes to consumers
Consumers Information on safety/providing information on incidents Providing information on incidents (causes, measures).
Preparing and providing monthly reports on production safety
Consumers Safety conferences/participation of production safety
representatives in joint conferences
Representatives of OMK safety offices and plant administrations
participate in joint conferences
Suppliers of goods and services
at the federal and local levels
Employee safety/safety in production,
shipping and transportation of products
Joint production safety audits, development of safe working methods, staff training and demonstration of processes to consumers
Government authorities
in regions where company operates
Reporting/quarterly and annual Timely submission of reports
Government authorities
in regions where company operates
Compliance with occupational safety and production
safety requirements/scheduled inspections by
oversight and regulatory bodies
Compliance with production safety requirements

The effective organization of the production safety management system at OMK plants is based on sharing experience and best practices, and also on management decisions that aim to reduce the risk of injuries and incidents through the work of the production safety committees.

The OMK Production Safety Committee is joined by the plants’ occupational safety coordinating committees and shop working groups to form a unified managerial hierarchy. The aim of the committee’s work is to implement the company’s ideas, development strategy and policy in the area of production safety. The managing company includes the OMK production safety office, which monitors the main areas of occupational, industrial, fire, transportation and environmental safety, and the management of staff health and production process safety.

649
Number of industrial safety audits in contractor companies


2017
649
2016
60
2015
45


OMK’s main goals in both 2017 and the long term are to prevent fatal injuries and achieve a systematic reduction in work-related injuries and zero fires and accidents.


Indicator Unit of
measurement
2015 2016 2017 Target
2018
Expenditure
on occupational
safety
and industrial
safety
RUB million 312.90 384.02 559.77 653.76
Expenditure on fire
and radiation
safety
RUB million 86.70 54.63 23.43 22.69

PROGRAMMES TO IMPROVE PRODUCTION SAFETY IN 2017:

improving
the production safety
culture

monitoring
and development
of contractor safety

development
of the production process
safety system

introduction
of a transport safety
system

introduction
of a staff occupational
health system

INJURIES

No fatal incidents were recorded at OMK plants in 2016–2017.

The number of lost-time injuries recorded at OMK plants in 2017 was down 25% compared with 2016.

Number of recorded lost-time injuries
(on graph):


* Lost Time Injury Frequency Rate. ** Target indicator

1.73
Lost time injury frequency rate, (LTIFR*)

2020
1.4**
2018
1.56
2017
1.73
2016
2.22
2015
2.37


For the safe performance of work, operation process charts are placed directly at workstations at OMK plants. These describe in detail which steps must be taken to perform a given operation.

TRAINING

Training on the development of the occupational safety and industrial safety management system:

  • Seminar for senior managers on ‘Safety Management: Systems Used by Facility Managers’
  • Seminar for line managers on ‘Effective Safety Management Techniques with Training on Conducting Behaviour-Based Safety Audits’
  • Seminar for workers on ‘Developing a Conscientious Attitude to Safety’
  • ‘Investigation of Incidents and Analysis of Key Causes’ seminar on internal incident investigations
  • ‘Organization of a Transport Safety System’ seminar
  • ‘Safe Driving’ seminar
  • ‘Production Process Safety’ seminar
1895

Number of people trained in safety programmes

2017
1,895
2016
3,096
2015
4,293

Over 30,000 OMK employees have attended corporate training programmes on production safety over the last six years.

Mentoring
for line managers

The mentoring programme makes it possible to reach a joint understanding of topical problems with the session participant and to determine what action he or she will take to further improve occupational safety (internal investigations, safety audits).


226/38

Number of mentoring sessions
held with managers

2017
226
38
2016
226
38
2015
231
33


Managers
Sessions

COMPREHENSIVE
AUDITS

In the reporting year, comprehensive audits were conducted in all six areas of production safety work:

  1. Occupational safety — basic criteria
  2. Industrial safety — basic criteria
  3. Environmental safety — basic criteria
  4. Transport safety — basic criteria
  5. Production process safety — basic criteria
  6. Fire safety — basic criteria

The report on the audits contains strengths (best practices and well developed processes), areas for improvement, and recommendations for preparing measures to improve the operation of the production safety management system.

On the basis of this report, each plant prepares corrective actions and draws up an individual implementation plan. Performance is monitored quarterly and during the annual audit of the production safety management system.

PERSONAL
PROTECTIVE EQUIPMENT

Work was done in 2017 to introduce the automated SAP EHSM system for demand creation, which radically changed the procedure for supplying employees with protective clothing and other personal protective equipment. Production safety specialists regularly attend exhibitions and seminars organized by suppliers of personal protective equipment to keep up with trends and seek out areas for improvement with regard to the provision of modern protective equipment for employees.

WORKPLACE
CERTIFICATION

Pursuant to Federal Law No. 426-FZ ‘Special Evaluation of Working Conditions’, an unscheduled special evaluation of workplaces was performed in 2017.




Special evaluation of workplaces
(number of workplaces)
Plant 2016 2017
APP 39 42
VSW 978 1,208
CSW 225 120
Trubodetal 132 119
BVP 291 46
Total 1,665 1,535

The unscheduled evaluation of working conditions did not result in any substantive changes at OMK plants.

PREVENTING WORK-RELATED
ILLNESSES

MINIMIZATION OF PRODUCTION SAFETY RISKS

To minimize the risks associated with the operation of hazardous production facilities, a number of mandatory measures are taken at all OMK plants:


  • Before being allowed to work independently, staff attend training courses in their working professions and designated role.
  • Each new employee undergoes an introductory briefing on occupational safety, an initial briefing at the workplace and an apprenticeship under the supervision of an experienced mentor and is only allowed to work independently after his or her knowledge of production safety has been tested.
  • All facilities have developed instructions on the rules for safe operation of equipment and units, on production safety when performing various jobs, on occupational safety for individual categories of specialists and on the actions to be taken by maintenance staff in the event of an accident. The instructions are approved by the appropriate facility managers.
  • To ensure their readiness to respond to accidents, the plants have: an accident response action plan; their own fire and gas rescue service (VSW); medical stations; a warning, communications and observation system; and the necessary stock of firefighting equipment, personal protective equipment and emergency tools. Contracts are signed with professional emergency rescue units.
  • Emergency drills, scheduled firefighting training sessions, and first aid drills are held to reinforce employees’ knowledge and practise the correct actions to take in emergencies.


All of the measures listed above help to reduce all risks associated with the operation of hazardous production facilities to an acceptable level and reduce the probability of accidents occurring and escalating at OMK plants.

REQUIREMENTS FOR CONTRACTORS

To ensure compliance with industrial safety and occupational safety requirements by OMK’s contractors, the company introduced a corporate standard, ‘Contractor management in the field of occupational, environmental and fire safety’. This standard establishes the requirements for interaction with contractors to ensure safe working conditions and compliance with environmental requirements when organizing work to be done by contractors at company facilities or at other facilities on the company’s behalf.

When contracts are entered into, the contractor signs a mandatory addendum to the contract, ‘Requirement for compliance with laws in the field of occupational safety, industrial safety, fire safety and environmental protection’. Production safety specialists evaluate suppliers/contractors according to criteria for compliance with occupational safety and environmental protection requirements.

All contractor employees undergo an introductory briefing prior to starting work, and records are kept accordingly. During the briefing, contractor employees are informed of the occupational safety and environmental protection requirements, the policy on environmental protection, health and industrial safety, and the procedure for gaining access to and moving around plant premises, including by vehicle. During contract work, regular inspections of contractors are conducted by OMK specialists. A database of suppliers and contractors is being created.

6.6.2

ENVIRONMENTAL
SAFETY

ENVIRONMENTAL MANAGEMENT SYSTEM

In accordance with the production safety policy adopted in 2017, the company is constantly improving its environmental protection, health and industrial safety management system, integrating it into the existing management system.

OMK has a multilevel environmental management system. At the managing company level, all environmental protection issues are monitored by OMK’s occupational safety, environmental protection and quality office. Specialists from the environmental protection services are responsible for environmental oversight at the plants. Subdivision managers ensure compliance with the requirements of environmental protection legislation and targeted environmental protection measures.

All plant line managers are kept informed of topical environmental protection issues on a monthly basis, which facilitates the rapid introduction of comprehensive projects.

Adhering to the precautionary principle, OMK creates safe working conditions for staff and contractors and guarantees the environmental safety of the company’s products. To minimize the environmental impact at OMK plants, work is under way to introduce new, safer management methods, technologies and equipment.

OMK invests in environmental protection measures, prevents accidents and improves its readiness to deal with them, develops responsible resource management, and takes action to mitigate and adapt to climate change.

MAIN ENVIRONMENTAL INDICATORS

5.7
Total atmospheric emissions
of pollutants

(thousand tonnes)

2017
5.7
2016
6.30
2015
5.43
2014
6.66

2.85
Total discharge into water bodies
(thousand tonnes)

2017
2.85
2016
3.17
2015
3.20
2014
4.92

909.6
Production waste generation
(thousand tonnes)

2017
909.6
2016
1,037.9
2015
1,075.2
2014
1,195.6

A reduction in the volume of waste generation in 2017 was achieved thanks to an expansion of the range of by-products which enter the waste cycle at an earlier stage, and to the sale of limestone processing capacity. The latter, in combination with the development of waste processing capacity, has made a significant impact on the reduction of accumulated waste residues.

Total pollutant emissions were reduced in 2017 by closing the water discharge outlet at VSW and redirecting the wastewater to the municipal sewage network. As a result of the actions taken in 2017 to prevent certain sections of the VSW Casting and Rolling Mill flooding during seasonal rains and snow melt, there was an increase in the volumes of rainwater and drainage water discharged into open water bodies.

A new section for application of polyurethane foam coatings was launched at VSW in 2017. The waste generation volumes were recalculated as a result. The limits for VSW in 2017 included this section.

91.4
Total disturbed land (ha)

2017
91.4
2016
91.4
2015
187.9
2014
194.1

41.7
Payments for adverse
environmental impact,

(RUB million)

2017
41.7
2016
71.7
2015
41.0
2014
79.7

563.91.3
Greenhouse gas emissions
(thousand tonnes) (in CO2 equivalent)

2017
563.1
2016
555.9

Greenhouse gas emissions
determined for VSW and CSW

The calculation was performed according to the procedural instructions and manual on the quantitative determination of greenhouse gas emissions by organizations conducting business or other operations in the Russian Federation. Emissions were calculated for the following categories of greenhouse gas emission source: stationary combustion of fuel, ferrous metallurgy and rail transport.

Greenhouse gas emissions will be reduced in the future by closing the VSW open-hearth plant.

Total mass of waste by type and disposal method (thousand tonnes)

Plant 2016 2017
Waste on hand at beginning of year 19,615.3 10,834.33
Identified and itemized in current period 873.6 0.00
Waste generated during year 1,156.6 913.85
Received due to reorganization of another legal entity 0.00 0.00
Waste received from third parties (with and without transfer of ownership) 109.3 62.37
 received from Company third parties 109.3 62.37
Waste utilized during year 1,111.5 1,010.44
  used by third parties 869.6 523.83
Waste neutralization and processing 356.7 347.35
by third parties 27.0 21.41
Total waste sent to landfill 253.3 82.92
 by third parties 80.3 82.70
Ownership transferred 855.9 525.00
Waste on hand at end of year 19,231.9 10,362.97
Waste transferred to third parties 937.0 634.48
 total transferred to Company third parties 413.1 158.40

Volume of atmospheric emissions from OMK plants (tonnes)

2015 2016 2017
Mass of total atmospheric pollutant emissions 4,901.75 5,758.28
 nitrogen oxides (NOx) 1,671.848 2,182.13 3,084.721
 sulphur dioxide (SOx) 136.494 112.72 33.65
 carbon monoxide (CO) 1,825.154 2,001.93 1,576.62
 benz(a)pyrene 0.0004287 0.00 0.00
  volatile organic compounds (VOCs) 246.663 257.54 115.04
 hydrocarbons (not including VOCs) 17.603 27.05 6.80
 solids 939.971 1,126.14 898.67
Other 64.018 50.77 10.51


1 Growth resulted from a doubling of the production volume of billets for manufacturing railway wheels by VSW’s Open-Hearth Facility in 2017. In March 2018, the Open-Hearth Facility was shut down due to a transition to outsourced billets, which significantly reduced the volume of pollutant emissions into the atmosphere.

Water consumption (thousand m3)

Вопрос 2016 2017
Water use from all sources 373,996.06 376,200.687
Water intake, including: 10,109.12 10,053.757
  water intake from underground sources 4,134.33 3,953.540
  water intake from surface sources 5,479.26 5,797.860
 water supply from water supply networks of other entities 495.53 159.577
Percentage of water volume recycled by company 97.33% 97.47%

Energy consumption

Indicator Unit of measurement 2015 2016 2017 Target 2018
Electricity purchased (net of power transferred to third parties) MWh 1,503,823 1,521,895 1,640,540 1,659,204
Thermal energy generated for own needs (total) (Gcal) 627,181 570,359 561,947 574,526
Thermal energy purchased (net of thermal energy transferred to third parties) (Gcal) 7,395 6,975 5,310 5,093
Electricity (GJ) 5,413,761 5,478,821 5,905,945 5,973,134
Thermal energy (GJ) 2,656,843 2,417,180 2,374,990 2,426,748
Energy (fuel) consumption for product manufacturing (GJ) 8,101,956 7,981,376 8,366,730 7,803,359
Total energy consumption (GJ) 16,172,560 15,877,378 16,647,665 16,203,241

Savings on purchased energy resources due to energy conservation programmes by core asset*

Year
Plant Type Unit of measurement 2015 2016 2017
VSW Electricity (thousand kWh) 4,606 13,196 23,897
Natural gas (thousand m3) 608 1,541 5,918
CSW Electricity (thousand kWh) 17,811 6,318 2,124
Natural gas (thousand m3) 28,945 1,191 488
BVP Electricity (thousand kWh) 224 3,245 7,555
Natural gas (thousand m3) 139 413 73
Trubodetal Electricity (thousand kWh) 368 394 273
Natural gas (thousand m3) 203 44 21
Total for OMK Electricity (thousand kWh) 23,009 23,153 33,849
Total for OMK Natural gas (thousand m3) 29,895 3,189 6,500


Total energy savings resulting from implementation of energy efficiency programme (GJ)

Indicator 2015 2016 2017 Target 2018
Electricity 84,443 84,972 124,226 124,226
Thermal energy 1,016,071 108,388 220,922 220,922
Total energy 1,100 514 193,360 345,148 345,148

REDUCING ENVIRONMENTAL IMPACT

Constant efforts are being made at the plants to detect any non-compliance with the requirements of environmental law, and to identify and assess risks associated with environmental aspects of production operations. Corrective or preventive measures are developed for all non-compliance and risks identified.

PROJECTS AT INDUSTRIAL SITES

Measures to manage key sources of adverse environmental impact were developed in 2017. A plan for water conservation measures for the period 2017–2021 was developed at VSW with the aim of reducing discharges of pollutants with rainwater and drainage water into the Ivailovka brook.

Materials were prepared based on the results of air quality monitoring in the sanitary protection zone of the VSW production and domestic waste disposal site. The estimated sanitary protection zone of the main plant area was revised.

The project took account of sources of adverse environmental impact from planned investment projects. The equipment for collecting dust

from the pipe plasma cutting units at VSW was modernized; this made it possible to reduce the number of emission sources exceeding the maximum allowable emissions.

The most significant results include the reduction of per-unit waste generation from the vanadium pentaoxide production facility at CSW (dehydrated residue from neutralization of wastewater using quick lime) from 2.4 kg/tonne to 2.1 kg/tonne. Modernization of the equipment at BVP made it possible to reduce total atmospheric pollutant emissions from steel smelting arc furnaces from 2.5 to 0.7 tonnes/year.

For 2018, the company has set a goal of reducing the total anthropogenic environmental impact caused by company operations. To calculate the anthropogenic impact, an integrated indicator is used that considers the change in the impact of atmospheric pollutant emissions, pollutant discharges with wastewater into surface water bodies, and waste generation in the reporting year in comparison with the previous year. Changes in company production volumes are taken into account when the indicator is calculated. A reduction

in the anthropogenic environmental impact of at least 3% in comparison with 2017 was set as the target for 2018.

CSW, which discharges process wastewater after treatment at local treatment facilities into the Chusovaya and Usva Rivers, has an adverse impact on the water bodies, bioresources and their habitat. The plant makes payments to the Russian government for the adverse environmental impact associated with pollutant discharges into water bodies.

To compensate, in addition to the payments, CSW has released pike fry, raised under contract for the plant by the Topol Fishery in Gorshki village, into the rivers of the Kama reservoir since 2014. In 2017, 17,500 pike fry weighing 9.6–10.6 grams were released into the Chusovaya River.

An examination by state ecologists of a project to reclaim an area of land historically polluted by production waste in the Blagoveshchensk Valves Plant sanitary protection zone has been successfully concluded. Project implementation is scheduled for 2018–2021. The technical phase of the reclamation is set to take place in 2018.

COMPREHENSIVE PROGRAMME
TO INTRODUCE A SEPARATE
WASTE COLLECTION SYSTEM

This programme has made a significant contribution to reducing adverse environmental impact. The volume of solid domestic waste was reduced by 14.5% in 2017 in comparison with the same period in the previous year.

The majority of waste generated at OMK plants is low-hazard and non-hazardous waste. The volume of hazardous waste at OMK plants is very insignificant, amounting to 0.01% of the total volume of waste generated.

The introduction of separate waste collection has enabled Vyksa Steel Works (which generates 80% of the company’s waste) to stay within the limits for disposal of solid domestic waste since 2015, and has also helped to reduce waste transportation and disposal costs and payments for adverse environmental impact.

BATTERY DISPOSAL

Several collection points for spent batteries have been established at VSW; the batteries are sent to specialist organizations for processing.

INDUSTRIAL WASTE
RECYCLING

As well as working to reduce the volumes of solid domestic waste sent to landfill, OMK is constantly seeking ways to recycle industrial waste. Of the more than 60 types of waste generated at VSW, over 50 are used either directly at the plant or by partners.

Cardboard, paper, rubber, polyethylene waste, wood waste and containers are separated from the general mass of solid domestic waste and accumulated separately. This means they can be sold to companies that use them as raw materials in production instead of being sent to landfill. In particular, dust from ferrous metal grinding is sent for recycling.

DEVELOPING THE DOMESTIC
WASTE DISPOSAL SITE
IN VYKSA

The VSW production and domestic waste disposal site is the only waste disposal site in Vyksa municipal district. The company is working to improve environmental safety at the site. An investment project for reconstruction of the site was developed in order to build a second waste disposal pit.

Geoengineering, geodesic and environmental surveys were carried out as part of the project; an environmental impact assessment was conducted, and there was dialogue with the local community in the form of public hearings.

An anti-filtration screen was laid at the bottom of the pit to protect the soil and groundwater in accordance with modern landfill construction requirements. The principal function of the anti-filtration screen made of 600 g/m2 geotextile — HDPE 2 mm geomembranes — is to prevent water from filtering into the soil and adjacent sections.

A system is also due to be installed to collect and treat rain, melt and wash water from the office and amenities area, including gravity-flow networks that collect the wastewater, accumulation tanks, sewer pump station 1, rainwater treatment facilities, sewer pump station 2 and a UV disinfection unit.

IMPLEMENTING THE
PRECAUTIONARY PRINCIPLE

The company takes a risk-oriented approach in its operations.

Processes for detecting potential emergencies and accidents that may impact the environment have been established and introduced and are maintained in working order at company plants. Responses to potential emergencies and accidents have also been determined. The purpose of these processes is to prevent or mitigate the adverse environmental impact of likely emergencies and accidents. Emergency prevention and response and fire safety commissions have been established

at the plants to organize and take measures to prevent, respond to and control damage from emergencies, catastrophes and disasters, and to manage emergency response manpower and equipment.

The responsibility, authorities and interaction of the staff and manager carrying out and checking the work of the emergency and fire safety commissions are defined by orders.

The procedure for identifying, preparing for and responding to environmental incidents and accidents, and developing accident response action plans in production departments, is described in internal regulations.

Third parties may be involved in accident response and environmental monitoring.

AUDIT

Environmental management systems have been introduced and certified for compliance with the requirements of ISO 14001 at all main company plants.

A second compliance audit of the integrated management system for conformity to the requirements of ISO 14001:2015 and OHSAS 18001: 2007 was conducted at VSW in 2017. Certificationcovered the steel smelting facility, railway wheels production facility, pipe production facility and facility for production of hot-rolled steel in rolls, sheets and strips. The results of the audit showed that these areas correspond to operations.

Internal audits of the subdivisions are conducted according to a set schedule. The results of the internal audits are recorded upon completion of the audits.

The CSW environmental management system was certified for compliance with the requirements of ISO 14001:2004 in 2015, and compliance audits were conducted by the certifying body in 2016–2017. A new certification audit of the occupational safety, health, environmental and fire safety management system is planned for May 2018.

Environmental protection specialists were trained in ISO 14001:2015 in 2017. The documentation is currently being developed and updated.

An audit of the environmental management system and occupational health and safety management system was conducted at the Blagoveshchensk Valves Plant in July 2017 in accordance with the requirements of ISO 14001 and OHSAS 18001.

The following local regulations
were updated in 2017:


VSW

  • Production Safety Policy
  • STO.20-30.1 Occupational and Environmental Safety. General Requirements for Management Systems
  • STO.20-35.12 Requirements for Waste Management
  • STO.20-35.1 Identification and Ranking of Environmental Aspects
  • P.20-541.1 Procedure for Organizing Investigations and Recording Incidents

CSW

  • Environmental Management System Manual (R SEM.43-39.4)
  • Regulation Determination of Environmental Aspects, Impacts, Risks and Opportunities (R.43-540.1)
  • Organizational Standard Waste Management STO.43-540.3

BVP

  • STO.53-35.1.1 Identification and Evaluation of the Environmental Aspects of Operations, Products and Services
  • STO.53-20.1 Identification of Legal and Regulatory Requirements in the Field of Integrated Management Systems and Evaluation of their Fulfilment
  • I.53-22.2 Environmental Safety
6.7

SUPPLY CHAIN
MANAGEMENT

A key element of the company’s management and corporate social responsibility system is its approach to supply chain management, which has proven its effectiveness at OMK for over ten years. It is based on the idea of determining the company’s success by developing competitive advantages — the reasons why customers choose this company over many others. The operational processes for sales, production, procurement and logistics are organized and function in the company in such a way as to achieve the level required, a specific indicator for each supply chain: reliability and speed in filling customer orders, quality of the product, price, and level of innovation.

The planning system is closely linked to a two-level supply chain management system that the company has been developing since 2007:


  • centralized level: uniform standards, methods and overall planning
  • division level: planning and management of customer requests and orders; ensuring coordination of all processes from the supply of raw materials to the shipping of finished products

In addition, to improve the occupational, industrial and environmental safety system, the company works actively with contractors on issues of occupational and industrial safety at its plants. OMK has developed a special form which is appended to the agreement with contractors: ‘Requirements for compliance with laws on occupational, industrial and fire safety and environmental protection’. By signing it, contractors undertake to follow OMK’s procedures, rules and instructions on occupational, industrial, environmental and economic safety in order to prevent or minimize possible harm to the environment and the health of OMK employees, visitors and third parties.

The company creates safe and reliable products and guarantees their quality according to Russian and international standards. In its consumer relations, OMK abides by the principles of product safety and open access for consumers to objective information that enables them to make informed management decisions, and protects against dishonest or deceptive advertising or labelling. Compliance with these principles leads to positive systemic changes throughout the entire supply chain.

6.8

RESPONSIBLE
PROCUREMENT

Corporate procurement management consists of two levels:

OMK is a private company, and therefore its procurement operations are not subject to regulation by Russian Law 223-FZ. Procurement is governed by internal regulations.

OMK’s supply policy is determined by fundamental procurement principles: transparency; collegiality; competence; competitiveness; responsibility; and support for its own producers.

OMK’s objective is to ensure timely fulfilment of orders required for production with the optimum combination of quality of the physical resources, labour and services procured, reliability of supply, and economically justified costs.

Foreign purchases are made in Austria, the Netherlands, Japan, Germany, and other countries.

The company is actively expanding import substitution in procurement. In 2017, OMK continued its policy of developing strategic partnerships with domestic suppliers of primary materials: slabs, sheets, steel billets, and anti-corrosion coatings.

105
billion roubles — procurement in 2017

85
Procurement within Russia


In addition to the long-term cooperation between OMK and NLMK for the supply of steel slabs for Thick Plate Mill-5000 at VSW, in 2017 OMK and Metalloinvest signed a long-term contract for the supply of steel blanks for railway wheel production at VSW. A roadmap has also been agreed for projects with Rosatom.

The policy of expanding strategic partnerships with key suppliers on mutually profitable terms was continued in 2017. The key tool for the implementation of this policy is the company’s introduction of category management, which involves comprehensive, universal and long-term management of categories of resources purchased.