5.0
SUSTAINABLE
DEVELOPMENT
ACTIVITIES
5.1
APPROACH
TO SUSTAINABLE DEVELOPMENT

OMK is a major employer and an industrial group that is focused on extensive international collaboration. The group plays a significant role in the metal products market and in the regions where its production assets are located. This position requires that aspects of sustainable development be included in the strategic management system, with the meeting of key indicators being directly monitored by management at the highest level.

In 2016, the new OMK Corporate Social Responsibility Policy9 was developed, setting out the company’s priorities with respect to corporate social responsibility. Priority areas for the development of the corporate social responsibility system were selected on the basis of the mission and strategy approved by senior management, stakeholders’ views as documented, and the current versions of international sustainable development standards. The provisions of the Policy apply to all permanent and temporary employees of OMK (including subsidiaries, affiliates and controlled companies).

Furthermore, OMK will recommend that its contractors and suppliers comply with these standards, which over time should result in significant changes to the product quality control system and production safety throughout the entire supply chain.

9Enacted by a resolution of the OMK Management Board in February 2017.

OMK CORPORATE SOCIAL RESPONSIBILITY PRIORITIES

  • CREATING A MORE EFFECTIVE MANAGEMENT SYSTEM
  • DEVELOPING MECHANISMS FOR WORKING WITH STAKEHOLDERS
  • PREVENTING CORRUPTION
  • MONITORING RESPECT FOR HUMAN RIGHTS
  • DEVELOPING RESPONSIBLE PROCUREMENT PRINCIPLES
  • DEVELOPING RESPONSIBLE SUPPLIER PRINCIPLES
  • IMPLEMENTING CHILD PROTECTION PROJECTS
  • IMPROVING QUALITY OF LIFE IN OPERATING REGIONS
5.2
PERSONNEL

KEY INDICATORS

Headcount as of 31 December 2016

persons

24,274 -4%

Satisfied with employment
at OMK

 

55% +2 pp

Average age
of personnel

years

40.8 +1.2 years

Awards received
by employees in 2016

 

730

Percentage
of engaged employees

 

54% +4 pp

Social expenditure

RUB millions

 

598 +8%

OMK HR SERVICE DEVELOPMENT STRATEGY

OMK IS DEVELOPING ITS HR SERVICETO BE AN INTERNAL ‘STRATEGIC PARTNER’
Key processes monitored by the HR service
  • Management of HR indicators, integration of HR processes, HR analytics
  • Target groups (talent pool) and career planning
  • Translation of corporate KPI system into employee targets
  • Evaluation of staff performance and competencies
  • Improving the transparency of HR decisions
  • Proactive selection and development
  • Personnel management in unanimity with managers
  • Managing engagement
Significant organizational changes in 2016
  • Establishment of a personnel records service centre
  • Establishment of expert centres on management methodology; development of non-standard HR management decisions
  • Development of HR partners: fast resolution of HR management issues aimed at achieving primary KPIs as per business plan and long-term strategy
HR Service tasks – development of the following areas:
  • Effectiveness (cost/benefit)
  • Competence (I can do it)
  • Engagement (I try)
  • Service (HR partnership)
Key documents determining HR management strategy:
  • Labour Code of the Russian Federation
  • Industry agreement
  • Functional HR management strategy
  • Collective agreements at enterprises

IMPROVING HR SERVICES

Improving the HR services provided to the business remains a basic target indicator for OMK’s HR Department. The achievement of this objective involves developing basic processes which impact the sustainability of the company’s business model. Managing the organizational structure and workforce planning were priority areas for improvement in 2016.

In connection with the launch of the Pipe Shop No. 1 project at VSW, for example, the staff freed up were reassigned to Pipe Shop No. 2. In cases where production capacities have an uneven workload, time management technology is used instead of reducing personnel. The potential impact of implementing this approach was RUB 278 million over the year.

Attention is traditionally focused on projects that will increase labour productivity, develop employees’ skill sets, attract young employees, ensure optimum working conditions, create conditions for employees’ development and professional growth, and improve the incentives system.

MEMBERSHIP OF ASSOCIATIONS

Name

Association of Russian Metallurgists (national association of employers in the industry)

Industry Council on Professional Standards

Role and attitude towards participation

The company has seats in the management bodies

The company views its membership as strategic

HR SERVICES: AREAS FOR DEVELOPMENT

EFFECTIVENESS

Optimizing OMK’s organizational structure

Improving the payroll system

Improving the efficiency of social facilities

COMPETENCE

Improving professional skills and competencies

ENGAGEMENT

Increasing engagement

Social responsibility

Keeping staff better informed

SERVICE

Establishing the HR partnership structure

HR record keeping using advanced information systems

Social support system operating according to best practices

KEY HR MEASURES IMPLEMENTED IN 2016

  • Time management for primary production workforce when a production facility has a low workload
  • Implementation of strategy to reorganize/expand social facilities
  • Development of plan to introduce re-engineering measures in 2016–2017
  • Creation of HR records service for the Vyksa Production Site and centralization of accounting functions for other legal entities (2017 plan)

PERSONNEL STRUCTURE

Headcount Actual as of 31 December 2015

Headcount Actual as of 31 December 2016

OMK headcount
as of 31 December 2015

25,286

OMK headcount
as of 31 December 2016

24,274 4%

Factor analysis of change in headcount in 2016

Gender balance, %

Структура персонала по типу договора, чел.

Тип договора о найме Тип занятости Мужчины Женщины Всего
Постоянный трудовой договор Полная занятость 14 962 7 209 22171
Частичная занятость 39 31 70
Временный трудовой договор Полная занятость 302 668 970
Частичная занятость 5 4 9

Percentage of women in personnel categories (%)

Percentage of women in personnel age groups

WORKING WITH EDUCATIONAL INSTITUTIONS

OMK takes the creation of its manpower reserve seriously and begins reaching out to potential employees at the very earliest stage – while they are still in school. Careers advice was provided for students aged 16–18 during the reporting year to encourage them to choose careers in industry.

The company organized work experience placements for students at more than ten vocational and higher educational institutions to help students adapt better to the workplace and get to know the company’s production culture.

Cooperation with higher educational institutions is not limited to training for students. OMK runs corporate programmes aimed at improving the level of employees’ specialist education through bachelor’s, master’s and PhD-level study programmes and business education programmes.

MAIN CAREERS ADVICE PROGRAMMES

Measure Target group Programme duration Number of participants annually
Competition for Batashev Brothers scholarships for secondary school students Pupils aged 14–17 11 years 150
Industry and Proflandia games Pupils aged 14–15 5 years 500
Trajectory careers academy Pupils aged 15–16 2 years 180
Young Innovators and Inventors Festival Primary and secondary school pupils 1 year 450
Managing Director’s scholarship award Awarded to the student at the Vyksa branch of MISiS National University of Science and Technology who achieves the top score on the standardized state exams (239 marks) 1 year 1
Trips to an actual metal works Secondary school and college students >10 years Up to 1,400 (150 trips per year)
70%

of those taking part in careers guidance events enrol on technical programmes in vocational educational institutions

CAREERS GUIDANCE FOR SCHOOL PUPILS

As part of the programmes, schoolchildren visit the metal works, participate in workshops for VSW specialists, and build their own virtual metal works. Nearly 70% of those taking part in careers guidance events go on to enrol on technical programmes in vocational educational institutions.

The careers advice magazine Path to a Profession has been published especially for school and college students in Vyksa for two years (2015–2016). It gives students information about the operations of Vyksa Steel Works, the career paths of senior managers and top employees, professions in the metals industry, and the educational institutions which provide training for these professions.

CORPORATE PROGRAMMES

OMK CAMPUS

The OMK Campus programme has been running since 2009 and is aimed at training highly qualified metals industry specialists for OMK enterprises at Russia’s top educational institutions (MISiS National University of Science and Technology, and Peter the Great St. Petersburg Polytechnic University).

As part of the programme, more than 60 employees at the Vyksa Production Site have completed master’s degrees in mill production, welding production, and steelmaking. Over 50% of them are employees of the Technical Engineering Centre and the division technology and quality departments.

In 2017, the OMK Campus programme will focus on training employees in maintenance and repair.

MBA: INDUSTRIAL ENTERPRISE MANAGEMENT

OMK and MISiS National University of Science and Technology have jointly developed an MBA programme in Industrial Enterprise Management. The programme is designed for OMK line managers who are capable of initiating improvements in the area of efficient production management.

The course lasts one year. Managers with a higher technical education can learn about state-of-the-art techniques in production management for subsequent use in practice. The course involves 240 hours of study. A work placement at a leading Russian enterprise is also planned for programme participants.

MAIN PERSONNEL DEVELOPMENT PROJECTS IMPLEMENTED IN 2016

Project Measure
Introduction of career choice and management based on the SuccessFactors system A competency assessment has been automated and conducted using the 360 degree method; 600 employees have been evaluated
Updating of corporate competency model A questionnaire was drawn up to evaluate competencies in accordance with the corporate values and Corporate Constitution
Production Management MBA programme A six-module development programme for production and maintenance personnel has been developed on the basis of the MISiS National University of Science and Technology system
Launch of Open Dialogues project Managers, including members of the Management Board, gave reports to employees and answered questions about the company’s plans
Effective Management Team development programme Development sessions were held for front-line managers at the Vyksa Production Site, Trubodetal Plant, CMW and BVP, and for members of the Management Board
Effective Feedback development programme HR partners were trained in corrective feedback so that they could pass on their knowledge to managers for work with their staff. A development programme on giving feedback was run for senior executives
Ethics Commission An ethics commission for OMK has been set up and is functioning
OMK Corporate Social Responsibility Policy A new OMK Corporate Social Responsibility Policy has been developed and forms the basis for the corporate social responsibility management system
600 employees

underwent the 360 degree competency assessment

SALARY

Average salary for 2016

Region Enterprise Average salary (RUB) Ratio of average salary at enterprise to average salary in region (%)
Nizhny Novgorod Region VSW 40,947.00 above market rate
Chelyabinsk Region Trubodetal Plant 44,573.00 above market rate
Perm Territory CMW 30,057.00 market rate10
Republic of Bashkortostan BVP 35,417.00 market rate
Republic of Tatarstan APP 32,686.00 market rate

10 Average salary at the enterprise does not deviate from the average salary in the region by more than +/-15%.

NON-FINANCIAL INCENTIVES

To increase engagement and build up the company’s profile, employees took part in the most prestigious professional skill competition, the National Championship for Cross-Industry Professions in High-Tech Industries (using the WorldSkills Hi-Tech procedure). OMK employee Ilya Filippov took third place in the Reverse Engineering category in 2016.

Every year for the last nine years, OMK has organized an Applied Science Conference for Young Specialists, which develops young specialists professionally and gives them an opportunity to solve non-standard production tasks in a new way.

The conferences were attended by over 1,000 participants from all of the company’s enterprises, as well as students from Bauman Moscow State Technical University, the Vyksa branch of MISiS National University of Science and Technology, Alekseev Nizhny Novgorod State Technical University, Vyksa Metallurgical College, and other institutions. An expert commission made up of highly qualified specialists and managers determines the best level 1 and 2 competition reports in each subject area, the work with the best innovative idea, and the best work in terms of economic impact.

Since 2015, OMK’s annual Applied Science Conference for Young Specialists has been named after Serafim Afonin, honoured metallurgist of the Russian Soviet Federative Socialist Republic and the Russian Federation and three-time winner of awards from the Soviet and Russian governments.

First place in the Most Effective Work category went to ‘Improving the Technology for Production of Strength Class K50-K60 Cold-Resistant Rolled Stock under Casting and Rolling Mill Conditions’. The authors of the project – Yevgeny Soldatov, Alexander Muntin, Vitaly Naumenko and Dmitry Yermakov (VSW) — developed a uniform technology for each modification of steel that provides for optimum alloying and thermal deformation rolling. It means that fewer readjustments of equipment are required to produce various grades of steel in a single series. The implementation of this project will save more than RUB 120 million.

The winner in the Best Innovative Idea category was a project by VSW’s Chief Refractories Specialist Alexander Kosonogov, which makes it possible to reduce the contamination of metal by non-metallic inclusions by 50%. Experts believe that, due to its universal nature, this idea could be applied in every metallurgical plant worldwide.

In 2016, OMK began a collaboration with the Talent and Success educational foundation on the Sirius Education Centre project in Sochi, based on the Olympic infrastructure. The initiative for the project came from President Vladimir Putin.

13TH IVAN & ANDREY BATASHEV FOUNDATION AWARDS CEREMONY

In April 2016, OMK celebrated the top employees of the year from each of its enterprises at the annual awards ceremony of the Ivan and Andrey Batashev Foundation held in Vyksa.

Prizes were awarded in 11 categories, five of which were only open to blue-collar workers. In all, 206 candidates and 12 primary production teams were nominated for awards.

By tradition, the Ivan and Andrey Batashev Foundation prizes were awarded by the honoured guests at the ceremony: Yevgeny Lyulin, Deputy Governor and Deputy Chairman of the Nizhny Novgorod Regional Government; Alexander Tabachnikov, Deputy Chairman of the Nizhny Novgorod Region Legislature; Alevtina Chernikova, Rector of MISiS National University of Science and Technology; Albert Demchenko, head coach of the Russian national luge team and honoured sportsman; Alexey Levykin, Director of the State Historical Museum and member of the Federation Council Committee on Culture; stars of stage and screen, and so on. Russian Deputy Minister of Industry and Trade Sergey Tsyb gave the opening remarks at the ceremony.

The Batashev Foundation prize has been awarded since 2004. It is awarded to the most worthy OMK employees who demonstrate outstanding successes in their work, are the very best at their job, and make a significant contribution to the company’s development. Since its inception, the prize has been awarded to around 200 people and there have been over 600 nominees.

INCREASING EMPLOYEE ENGAGEMENT

Since 2013, the company has conducted annual employee engagement studies, which are one of the primary channels for gauging the opinion of staff as primary stakeholders. Roughly 20,000 people took part in the engagement study in 2016.

Indicator Percentage of staff (%) Change
Percentage of engaged employees 54 +4
Satisfied with employment at OMK 55 +3
Employer brand 51 +4

AWARDS RECEIVED BY COMPANY EMPLOYEES

Total VSW Trubodetal APP BVP CMW
National government 2 - - - 2 -
Departmental 43 24 6 3 4 6
Regional 38 31 3 - 4 -
Municipal 72 34 8 18 2 10
Corporate 36 4 1 5 17 9
Plant 539 164 42 36 87 210
Total: 730

took part in the engagement study in 2016

20,000people

The introduction of the Enterprise Social Chart, a joint project with the Mining and Metallurgical Trade Union of Russia, continued in 2016. The trade union gathers information from workplaces on existing problems, structures it by sections into a single chart, discusses possible solutions with managers, beginning at the shop foreman level, records what is agreed, and notes how the problem was solved when the deadline for action falls due. The chart is published on the internal corporate portal and regularly updated.

At the end of the reporting period, the project was working successfully at Chusovoy Metallurgical Works and in individual shops at VSW.

SOCIAL PARTNERSHIP

The previous collective bargaining agreements remained in effect at OMK enterprises in 2016. There were no collective labour disputes.

A new model employment contract was introduced in 2016 that includes specific examples of extra pay for work in hazardous conditions, types and duration of additional leave, and describes other employee rights granted by employment law in greater detail. Employees no longer need to look elsewhere for the information they need; all the important terms and conditions from local regulations and employment law have been incorporated into the text of the contract. More than 5,000 people were already working under the new contract by the end of the year.

There are three major trade unions at OMK: the Mining and Metallurgical Trade Union of Russia (at VSW, Trubodetal and CMW), the Russian Trade Union of Nuclear Energy and Industry Employees (at BVP), and the Trade Union of Russian Agribusiness Employees (at APP). When the Casting and Rolling Mill at Vyksa was absorbed into VSW, a local branch of the Mining and Metallurgical Trade Union of Russia was established to replace the previous labour collective council. All mandated legal conditions for the operation of trade unions have been provided at the company’s enterprises. The reasoned opinion of trade unions is considered in all cases stipulated by the Labour Code of the Russian Federation. Joint commissions on labour disputes are in operation and employee appeals on labour relations issues are granted review.

Trade unions participate in the distribution of benefits, as well as in a number of the company’s social projects: they participate in the expert commissions for the OMK Partnership social and charitable projects competition; they work with enterprise management to develop plant action plans according to the findings of engagement studies; and they participate in arranging sporting and cultural events.

Most interaction with trade unions occurs at the enterprise level. At the OMK level, the social partnership is coordinated by the Social Council set up in 2015. The Council includes the chairs of the enterprise trade unions and the HR Director, as well as representatives of the management company.

The Council’s main achievement in 2016 was to agree on the uniform tasks and principles of social partnership at OMK, on which the parties plan to base cooperation going forward.

Social partnership tasks
1. Concern for people
  • Ensuring production safety
  • Material wellbeing of employees
  • Creation of an environment where employees can show initiative and realize their potential
  • Organization of sporting, cultural and volunteer events
2. Effective labour
  • Achievement of production, economic and social goals and objectives
  • Employee engagement
  • Workplace discipline and procedure
3. Modernization and development
  • Sustainable development of the company
  • Keeping the business competitive
  • Jointly seeking out and introducing best practices in social partnership
  • Advanced training and retraining for employees
4. Social stability
  • A supportive environment within teams
  • Employment stability
  • Timely and accepted preparation for changes
Principles of social partnership
1. Common objectives
  • Drive towards overall result
  • Agreement on actions
  • Joint resolution of business challenges
2. Constructive dialogue
  • Openness and trust
  • Seeking solutions through discussion, questioning, and consideration of views
  • Conflict prevention
  • Equal rights
3. Responsibility
  • Legal compliance
  • Compliance with agreed obligations
4. Good communication
  • Exchange of objective information between employer and employees on the situation within the organization
  • Responsible attitude towards the information obtained, and agreement with social partner on ways to use it going forward

SOCIAL POLICY

Name 2013 2014 2015 2016
Total social expenditure: 426 599 553 598
Direct social payments 207 248 201 197
Medical assistance 9 156 155 171
Nongovernmental pension provision 25 22 30 43
Sanatorium and resort treatment and wellbeing for employees and their family members 87 53 38 43
Meal provision 57 85 92 97
Other 41 35 37 46

PENSION CONTRIBUTIONS

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. As of the end of 2016, more than 6,100 employees participated in nongovernmental pension programmes, and 3,788 people participated in voluntary pension support programmes (three parties in equal shares: the employee, the employer, and the state).

Pension payments from the Gefest Nongovernmental Pension Fund were RUB 16.4 million in 2016, 9% higher than in 2015. This rise was due to the increase in the average time employees had been enrolled in the programme. The amount of the additional pension in 2015 ranged from 2% to 11% of the government pension across the regions where OMK operates. The low percentage is explained by the fact that corporate pension programmes have existed for a relatively short time, but in the future they are intended to assist OMK employees to reach a pension income level of up to 40% of lost earnings (the world standard).

16.4million roubles   +9%

in pension payments from the Gefest Nongovernmental Pension Fund in 2016

6,100people

participate in nongovernmental pension programmes

3,788people

participate in voluntary pension programmes

5.3
OCCUPATIONAL
SAFETY

THE PRIMARY OBJECTIVES FOR OMK, BOTH IN 2016 AND IN THE LONG TERM, ARE TO PREVENT FATAL INJURIES AND SYSTEMATICALLY REDUCE WORK-RELATED INJURIES

There were no fatal injuries in production at OMK enterprises in 2016.

Priority areas for efforts to improve production safety in 2016:

  • improving the production safety culture
  • monitoring and development of contractor safety
  • development of the production process safety system
  • development and introduction of transport safety system
  • introduction of a staff occupational health system

The company plans to continue work in these areas in 2017–2018.

KEY PRODUCTION SAFETY RISKS

Corporate standards for production process safety were developed and introduced at OMK in 2016 to eliminate and minimize these risks:

  • STK.12-56.17 Mechanical Integrity of Equipment
  • STK.12-56.15 Pre-Startup Safety Inspections
  • STK.12-56.16 Managing Technical Changes

A pilot project for production process safety was successfully launched at the Trubodetal Plant. Enterprise managers were trained in the new standards and benefit from regular mentoring. Equipment safety status is assessed according to approved schedules. Plans are drawn up for rendering equipment safe. New equipment and equipment received after major overhaul undergoes a pre-startup safety inspection. Technical changes are subject to a risk assessment procedure.

All OMK enterprises have achieved certification in accordance with the OHSAS 18001 international standard.

Reduction in workplace injuries (number of workplace injuries in 2016)

80 -13%

KEY PERFORMANCE INDICATORS

KEY PERFORMANCE INDICATORS FOR EVALUATING OMK MANAGEMENT ACTIONS ON PRODUCTION SAFETY:

1. Reduce the LTIFR11across OMK by 10% in comparison with 2015.

Actual 2015

LTIFR

2.37

Actual 2016

LTIFR

2.22

2. Increase the level of development of the production safety management system across the OMK group.

Actual 2015

2.212

Target 2016

2.5

Actual 2016

2.51

The LTIFR reduction target was not achieved in 2016, but the LTIFR was reduced by

6.3%

11 Lost time injury frequency rate
12Target indicators for the level of development of the OMK group’s production safety management system, which are calculated on the basis of an assessment of all areas of production safety. Assessment of production safety management system = (occupational safety management system assessment + fire safety assessment + environmental safety assessment + industrial safety assessment + production process safety assessment + transport safety assessment) / 6. Each area has specific assessment criteria and special checklists on the basis of which the assessments are carried out during annual comprehensive audits.

Target indicators for reduction of workplace injuries (LTIFR)

There are also plans to increase the level of development of the production safety management system and, with an annual 0.3-point increase in the indicator, to achieve a production safety management system level of 3.5 points by 2020 and over four points by 2025.

With this level of production safety, we believe that by 2025 the injury rate will fall to 0.9, the level of the world leaders in LTIFR.

OMK PRODUCTION SAFETY COMMITTEE

The effective organization of the production safety management system at OMK enterprises is based on sharing experience and best practice among plants, and 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 enterprises’ occupational safety coordinating committees and shop working groups to form a unified managerial hierarchy.

The OMK Production Safety Committee is responsible for the practical implementation of the company’s objectives, development strategy, and policy as regards environmental protection, occupational safety, and industrial safety, and manages ongoing production safety efforts at all OMK enterprises.

The production safety committee is chaired by the President of OMK. Members include the Director for Production Safety, the Deputy Chair of the Management Board, the Head of the Commercial Department, the Head of the HR Department, the Director for Business Systems Development, and the managing directors of the enterprises.

Committee responsibility
Members of the Production Safety Committee are responsible for:

  • ensuring that the production safety management system works effectively at the enterprises, to the extent of their authority
  • ensuring that decisions comply with Russian law, company policy on environmental protection, health and industrial safety, and the decisions of company management
  • supporting decisions made by the OMK Production Safety Committee by providing the necessary resources
  • carrying out the decisions made by the committee
  • ensuring that the production safety coordinating committees work effectively at the enterprises controlled by OMK

In 2016, the two departments responsible for occupational safety and production process safety at OMK were merged into the Production Safety Department. OMK’s Production Safety Department covers the primary areas for development in the field of occupational, industrial, fire, transport and environmental safety, employee health management, and production process safety. There were no significant changes in the system of internal regulations determining occupational safety policy in 2016.

PRODUCTION SAFETY MANAGEMENT PROGRAMMES

TRAINING ON THE DEVELOPMENT OF AN OCCUPATIONAL AND INDUSTRIAL SAFETY MANAGEMENT SYSTEM

  1. Seminar for senior managers: ‘Safety Management: Systems Used by Facility Managers’
  2. Seminar for line managers: ‘Effective Safety Management Techniques with Training on Conducting Behaviour-Based Safety Audits’
  3. Seminar for employees: ‘Developing a Conscientious Attitude Towards Safety’
  4. Seminar on internal investigation of incidents: ‘Investigation of Incidents and Analysis of Key Causes’
  5. Seminar: ‘Organization of a Transport Safety System’
  6. Seminar: ‘Defensive Driving’
  7. Seminar: ‘Production Process Safety’

Over the last five years, corporate training programmes have been attended by

28,606

OMK employees

MENTORING PROGRAMMES

This is direct assistance provided by Production Safety Department experts to line managers to help them introduce new production safety processes. This assistance is provided during training in new safety requirements directly at the workplace. The main purpose of mentoring is to involve managers in the performance of job functions relating to production safety. As mentoring is provided on an individual basis, it is essentially of a practical nature

The mentoring programme comprises the following steps:

  1. Meeting with manager, evaluation of assignment from previous session.
  2. Progress made by manager in fulfilling his or her personal action plan to improve occupational safety (planned/actual performance and adequacy of actions taken to successfully implement key areas, difficulties encountered and ways of overcoming them).
  3. Actual status and problems in providing mandatory information on all incidents at the production facility, and methods for overcoming these problems in departments subordinate to session participant.
  4. Schedule and practical results of occupational safety inspections and audits (behavioural) conducted personally by the manager in subordinate departments
  1. Foundations for methodology and internal investigations of incidents: purpose, membership and formation of investigation commissions; concept of ‘indirect’, ‘associated’ and ‘systemic’ causes of incidents; assessment of sufficiency of measures; development and application of ‘lessons learned’.
  2. Personal role of the manager in organizing and supporting the internal investigation process (including personal efforts to ensure swift internal organization of an investigation and assess its quality in the case of incidents that had or could easily have had serious consequences).
  3. Planning of session participant’s personal actions to introduce and support the internal investigation process.
  4. Visit to production section: honing skills for behavioural occupational safety audits and direct motivating interaction with subordinates and contractors.
  5. Summary:
    • reach a shared understanding and agreement with session participants on the actions they need to take to further improve occupational safety (internal investigation and behavioural safety audits).
    • plan the actions specified by the session participant (adjust/ add to personal plan): specific actions, deadlines, and persons responsible.

CONDUCTING COMPREHENSIVE AUDITS

  1. Occupational safety
  2. Industrial safety
  3. Environmental safety
  4. Transport safety
  5. Transport safety
  6. Fire safety

Six planned audits were conducted at OMK enterprises in 2016.

Number of people trained in safety programmes
2015 2016
4,293 3,096
Mentoring by managers (sessions/persons)
2015 2016
33/231 38/266

STANDARD FOR PERSONAL PROTECTIVE EQUIPMENT FOR EMPLOYEES OF OMK AND CONTROLLED COMPANIES

In September 2016, OMK introduced a new (second) edition of its corporate standard, ‘Personal Protective Equipment for Employees of OMK and Controlled Companies’. This standard was used to identify a single supplier of personal protective equipment for enterprises in the OMK group. An expert committee on personal protective equipment was organized. Eleven technical specifications were developed for the manufacture of men’s and women’s summer clothing, as well as for winter clothing to protect against low temperatures and general contamination.

All personal protective equipment is selected according to the employee’s gender, height, clothing size and shoe size, as well as the specifics of the work they do.

A great deal of work was also done in 2016 to review internal standards on the issuance of free personal protective equipment to company employees and ensure that they comply with the model industry standards specified by Russian law.

WORKPLACE INSPECTION

A special assessment of working conditions at OMK was conducted in 2015 in accordance with Federal Law No. 426-FZ ’Special Assessment of Working Conditions’. An unscheduled special assessment was conducted in 2016.

Unscheduled assessment of workplaces
at OMK enterprises in 2016:

OCCUPATIONAL HEALTH

OMK spent more than RUB 250 million on occupational health in 2016. The comprehensive action plan included: preventive medical examinations (for all employees whose work requires that they undergo such examinations), vaccinations (against flu, hepatitis B, diphtheria and tetanus), rest and treatment at the company’s health resorts for employees and their children; preventive action on cancer and diabetes.

Health expenditure

250 million roubles

Employees receiving preventive medical examinations13

100%

13All company employees whose work requires that they undergo medical examinations.

WORK WITH CONTRACTORS

The corporate standard ‘Contractor Management in the Field of Occupational Safety, Environmental Protection and Fire Safety’ was introduced to ensure compliance with industrial and occupational safety requirements by OMK group contractors. 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 in the company’s interest.

Evaluation of a contractor on the basis of the requirements of the standard begins at the selection stage. The documented evaluation of the contractor is carried out according to established criteria:

  • There is a local standard regulating the production safety management system (copy of the provision on the production safety management system, or production safety standards for the enterprise or organization
  • The work of the production safety management bodies is organized (copy of the order establishing a production safety service or appointing a production safety specialist, or a service contract)
  • The organization’s employees have mandatory insurance against workplace accidents (copy of the document confirming mandatory insurance of employees against workplace accidents)
  • The organization has production safety instructions drawn up for each job or type of work (copies of the current approved list of occupational safety instructions and approved title pages)
  • of the regular employee medical examination, or the initial report for those who have been working less than one year)
  • There are documents confirming the qualifications and certification of personnel (list of personnel scheduled to work under the contract and copies of documents confirming the qualifications of personnel)
  • Frequency of workplace accidents

Contractor employees undergo new-hire training, and records are kept, prior to starting work. During the training, contractor employees are informed of the occupational safety and environmental protection requirements; environmental protection, health and industrial safety policy; and procedures for access to and movement around the enterprise site, including in vehicles.

During contract work, OMK specialists regularly inspect contractors. In the future, a database of suppliers, contractors, and workers will be created and placed on the corporate portal.

5.4
ENVIRONMENTAL
PROTECTION

OMK’S ENVIRONMENTAL PROTECTION SYSTEM IS BASED ON COMPLIANCE WITH COMMON PRINCIPLES:

  • fulfilling legal requirements
  • preventing industrial accidents and continuously reducing the adverse environmental impact of production facilities
  • reducing the consumption of natural resources and energy
  • improving the knowledge and accountability of personnel with regard to environmental issues
  • developing an integrated management system which complies with international standard ISO 14001

Environmental protection efforts are coordinated by the OMK Production Safety Department. The department ensures that all enterprises comply with the programme for minimizing environmental risks, which includes oversight and internal audits of current and planned projects.

Each enterprise has its own occupational and environmental safety management programme that complies fully with the enterprise’s specifications. Implementation of the programme is monitored by the managing director. A special representative responsible for integrated systems management is appointed by order of the enterprise’s managing director. The representative monitors compliance with the requirements of ISO 14001:2004, and also reports to management on the results of the environmental management system, including making recommendations on improving it.

There are plans to develop standards for specific indicators per unit of product for all three waste categories.

CHANGES IN KEY ENVIRONMENTAL INDICATORS

5.76

Gross atmospheric pollutant emissions

(thousand tonnes)

1,037.90

Total waste generation

(thousand tonnes)

3.17

Gross discharge of pollutants into water bodies

(thousand tonnes)

ENVIRONMENTAL PROTECTION EXPENDITURE (RUB MILLION)

222.11

Capital expenditure

RUB millions

1,115.03

Operating expenses for environmental protection

RUB millions

79.68

Payments for adverse environmental impact

RUB millions

0.29

Fines for breaches of environmental protection laws

RUB millions

ATMOSPHERIC EMISSIONS BY OMK ENTERPRISES (TONNES)

2014 2015 2016
Mass of atmospheric pollutant emissions 6,830.27 4,901.75 5,758.28
nitrogen oxides (NOx) 3,347.32 1,671.848 2,182.13
sulphur dioxide (SOx) 90.32 136.494 112.72
carbon monoxide (CO) 1,760.48 1,825.154 2,001.93
benzo(a)pyrene 0.01 0.0004287 0.00
volatile organic compounds (VOCs) 152.02 246.663 257.54
hydrocarbons (not including VOCs) 16.81 17.603 27.05
solids 1,415.42 939.971 1,126.14
miscellaneous 47.88 64.018 50.77

Breakdown of emissions by enterprise (tonnes) (2016)

GREENHOUSE GAS EMISSIONS

The increase in greenhouse gas emissions was due to the inclusion of an unconsidered source: straight-flow water boilers.

In 2016, only Chusovoy Metallurgical Works calculated greenhouse gases using the method approved by Order No. 300 of the Russian Ministry of Natural Resources dated 30 June 2015. Having identified the sources of greenhouse gas emissions and measured the volumes of these emissions, it was established that steam boilers make the biggest contribution. To reduce greenhouse gas emissions at the enterprise, there are plans to install modular boilers to replace the existing steam and water boilers.

Startup and commissioning of the modular boilers and dismantling of the water boilers that are emitting greenhouse gases are planned for May 2018. This will reduce СO₂ emissions by 9,300 tonnes.

POLLUTANT DISCHARGES INTO WATER BODIES

To reduce vanadium and manganese discharges, a second ozone generation line was launched in December 2016. This has made it possible to increase the percentage of acidic wastewater that is treated with ozone from 30% to 60%.

The following measures are planned in 2017 to reduce vanadium and manganese discharges:

  • Use ozone generation line No. 2 for ozone treatment of acidic wastewater (generator B was launched in December 2016)
  • Sign a contract for research into the development of new technology or adaptation of existing technology for final treatment of wastewater (with the company Ecoservice
  • Consider the possibility of using groundwater instead of fresh water for the needs of the ferroalloy smelting shop
  • Purchase lime with active calcium oxide to neutralize acidic wastewater and improve the efficiency of joint precipitation of manganese and vanadium
  • Look into the possibility of using the plant’s chemical dispenser at the wastewater neutralization stage
89.19

Greenhouse gas emissions from CMW14

(thousand tonnes) (in СO₂ equivalent)

14Greenhouse gas emissions were measured at VSW in 2016. The company plans to introduce greenhouse gas measurement at all of its assets in sequence.

TOTAL MASS OF WASTE BY TYPE AND DISPOSAL METHOD (THOUSAND TONNES)

Waste on hand at beginning of year 19,615.3
Identified and itemized in current period 873.6
Waste generated during year 1,156.6
Received due to reorganization of another legal entity 0.00
Waste received from third parties (with and without transfer of ownership) 109.3
   received from Company third parties 109.3
Waste utilized during year 1,111.5
   used by third parties 869.6
Waste neutralization and processing 356.7
   by third parties 26.9
Total waste sent to landfill 253.3
   by third parties 80.3
Ownership transferred 855.9
Waste on hand at end of year 19,231.8
Waste transferred to third parties 937.0
total transferred to Company third parties 413.1

One of the Company’s key objectives in the area of waste management is to increase the percentage of waste that is recycled and processed. The set of measures implemented made it possible to increase the percentage of recycled and processed waste from 35% to 40% in 2016 (minus scrap metal generated).

Waste on hand

Beginning of year

(thousand tonnes)

19,615.3

End of year

(thousand tonnes)

19,231.8 2%

Total disturbed land

(hectares)

The area of disturbed land was reduced in 2016 as a result of the transfer of the rock (limestone) excavation and processing section of the limestone extraction and processing quarry to a new legal entity, Bely Kamen.

51.4%

CERTIFICATION OF ENTERPRISES ACCORDING TO INTERNATIONAL ENVIRONMENTAL MANAGEMENT STANDARDS

Enterprise Certificate 2016 audit
VSW ISO 14001:2004 and OHSAS 18001:2007 Compliance audit of integrated management system
BVP ISO 14001:2004 Certification audit
CMW ISO 14001:2004 Compliance audit
Trubodetal Plant ISO 14001:2004 Introduction and certification audit
APP ISO 14001:2004 Introduction and certification audit

Internal audits of departments are conducted according to a set schedule. The results of the internal audits are registered with SAP, announced at a video conference, and posted on the information portal.

Work to mitigate the environmental impact from the operation of company facilities will continue in 2017–2018. For example, for 2017 the company has set a goal of reducing the total human impact on the environment by at least 3%.

This parameter will be measured using an integrated indicator that takes account of the changes in atmospheric pollutant emissions, discharges of pollutants into water bodies, and waste disposal in comparison with 2016.

For 2017, the company has set a goal of reducing the total human impact on the environment by

3%

COMPENSATION FOR ADVERSE IMPACT OF DISCHARGES FROM CMW

The discharge of process wastewater from CMW into the Chusovaya River, Usva River and Belokamenka Creek has an adverse impact on the water bodies, bioresources, and their habitat. The enterprise makes regular payments to the Russian Federation government for the adverse environmental impact associated with pollutant discharges into water bodies.

In addition, beginning in 2014, the enterprise has made annual compensation for the damage caused to aquatic bioresources by releasing 18,555 pike fry weighing up to eight grams or releasing 97,968 grayling fry weighing up to three grams into the Chusovaya River. The fry are raised by Topol, a local fishery in Gorshki.

In 2014 the fish were released into the Chusovaya River near the villages of Vetlyany and Shalashnaya; in 2015, they were released into the Sylva River near the villages of Gari and Shatovo. No compensation measures were undertaken in 2016 due to work on a new assessment of the damage caused to aquatic bioresources.

ENVIRONMENTAL SAFETY MEASURES AT OMK ENTERPRISES

VSW

  • Completion of renovation and commissioning of second part of solid industrial and domestic waste disposal site
  • Installation of a ladle drying system with removal of harmful products of combustion

BVP

  • Landscaping of plant sanitary protection zone

CMW

  • Introduction of separate collection of waste and purchase of necessary equipment
  • Commissioning of second ozone generation line to process waste containing manganese and vanadium

TRUBODETAL

  • Introduction of separate collection and recycling of waste paper, cardboard, and used batteries: 150 kg of batteries and 9.6 tonnes of paper and cardboard were collected and recycled

APP

  • Introduction of separate collection of waste

TARGET INDICATORS FOR 2017

Enterprise Indicator
VSW
  • Reduce total mass of waste generated, excluding nonferrous and ferrous metals, by 10% or more than 40,000 tonnes/year
  • Reduce gross pollutant discharges with wastewater into reservoirs by 5% – more than 45 tonnes/year
  • Renovate filter and ventilation equipment at five fixed emission sources to comply with standards
BVP
  • Reduce unit value of disposal (transfer for disposal) by at least 5%
  • Reduce gross atmospheric pollutant emissions from arc steelmaking furnaces by at least 5%
CMW
  • Achieve specific discharge of pollutants with wastewater from outlet No. 3 into the Usva River within the set standards: vanadium: 0.13 kg/tonne; manganese: 0.14 kg/tonne of the vanadium pentoxide produced
  • Arrange for commercial metering of wastewater discharges into the Usva River
  • Achieve specific value of vanadium pentoxide production waste (dewatered sludge from neutralization of wastewater by slaked lime) of no more than 2.4
Trubodetal
  • Reduce waste disposal volume by introducing a system for separate collection of plastic waste, as well as sanding and grinding wheels with subsequent transfer of such waste for processing
5.5
ENERGY
CONSUMPTION

ENERGY CONSUMPTION BY BUSINESS UNIT

Indicator Unit of measurement 2014 2015 2016
Electricity consumption (VSW) MWh 626,359.25 637,218.90 527,390.66
Natural gas consumption (VSW) thousand m3 203,547.00 202,263.70 187,430.64
Electricity consumption (Trubodetal Plant) MWh 20,265.01 15,921.40 15,627.98
Natural gas consumption (Trubodetal Plant) thousand m3 16,853.00 9,647.00 8,728.56
Electricity consumption (BVP) MWh 42,455.93 43,804.60 37,610.05
Natural gas consumption (BVP) thousand m3 7,178.23 6,591.20 6,779.95
Electricity consumption (APP) MWh 29,564.33 26,582.91 21,433.33
Natural gas consumption (APP) thousand m3 4,741.80 3,998.60 4,108.15
Electricity consumption (CMW) MWh 87,178.44 62,261.10 58,188.52
Natural gas consumption (CMW) thousand m3 82,649.08 51,234.86 48,487.64

WATER CONSUMPTION (THOUSAND M3)

Parameter Unit of measurement 2014 2015 2016
Water intake from all sources, including: million m3 14.5 10.1 9.4
   water intake from underground sources million m3 4.5 4.1 3.7
   water intake from surface sources million m3 9.6 5.5 5.1
   water supply from water supply networks of other entities million m3 0.4 0.5 0.57
Volume of recycled and reused water million m3 352.8 368.5 352.7
Total volume of water used million m3 367.3 378.6 362.1
Percentage of recycled water supply % 96.04% 97.33% 97.41%

Actions to improve energy efficiency are taken in compliance with the regulation ‘Procedure for the Development, Endorsement, and Oversight of Energy Saving Programmes’.

TOTAL ENERGY SAVINGS YEAR ON YEAR

Business unit Investment report
Actual expenditure (RUB million)
Cost effectiveness report
Impact (RUB million)
Summary energy
efficiency indicators
for 2014
Summary energy
efficiency indicators
for 2015
Summary energy
efficiency indicators
for 2016
Summary energy
efficiency indicators
for 2014
Summary energy
efficiency indicators
for 2015
Summary energy
efficiency indicators
for 2016
VSW 347.94 11.69 27.63 37.16 7.62 43.67
CMW 7.45 16.55 18.00 408.22 27.33 51.29
APP 10.36 0.54 0.00 11.42 3.15 1.16
Trubodetal Plant 3.23 0.70 0.29 15.49 1.71 2.62
BVP 6.10 1.27 12.59 2.90 3.43 15.51
Other 10.31 2.2 2.47 1.70 1.82 8.12
Total over the year 385.38 32.96 60.98 476.89 45.05 122.37
             
Total for 2014–2016 479.31 644.31
5.6
DEVELOPING THE REGIONS
IN WHICH WE OPERATE

OMK REGIONAL DEVELOPMENT PRIORITIES

An active social policy is an integral part of OMK’s strategy. The company views social programmes as long-term investments in the stability of the local communities in the regions where it operates. OMK strives to ensure a decent standard of living for all OMK employees, build relationships with state authorities and partners from businesses large and small, and forge long-term relationships with NGOs.

Measures implemented
Tournaments and competitions; infrastructure development
  • Battle of the Champions (Russian Martial Arts Association)
  • Plant Olympics
  • Construction of sports venues in cities where the company operates
Support for athletic organizations, associations, and initiatives
  • Metallurg, Volga, and CMW football clubs
  • Sport Against Narcotics programme (VSW)
  • Prizes for remarkable sporting achievements (VSW)
  • Charitable assistance to fitness and popular sports institutions in regions where OMK operates
Assistance to children’s institutions and vulnerable segments of the population Charitable support for disadvantaged children, young people, and senior citizens in regions where OMK operates
Assistance to religious and spiritual organizations Assistance to the Vyksa bishopric of the Russian Orthodox Church and support for the construction of St. Mary’s Church in Chusovoy (Perm Territory)
Support for educational programmes and institutions Careers guidance, awareness raising, promotion and use of new technologies, tools and techniques in education and training.
Support for culture Support of projects aimed at restoring cultural heritage sites and popularizing current trends in contemporary culture and modern art
Social entrepreneurship Innovative activity aimed from the outset at solving or mitigating social problems on the basis of self-sufficiency and sustainability.
Social entrepreneurs are people whose aim is to transform society by filling in the gaps that are overlooked by the government and traditional business. They are representatives of micro, small or medium-sized businesses who see a social problem, realize how it can be solved, and do just that, using their business skills and potential within the legal framework.

‘START YOUR OWN BUSINESS’ COMPETITION

Expanding social entrepreneurship is a new direction for OMK social investment. OMK ran the first ‘Start Your Own Business’ programme in 2016 in Chusovoy (Perm Territory). The aim of this OMK initiative is to seek out business ideas that promote job creation and improve the quality of life in Chusovoy.

The ‘Our Future’ Regional Social Programmes Fund and the Perm Territory Ministry of Energy and Trade are partners in this initiative. A programme designed to support potential social entrepreneurs was developed, consisting of an educational unit (training courses on social entrepreneurship), the ‘Start Your Own Business’ grant competition, fairs featuring social ideas, an accelerator programme to support competition winners, and an inter-regional conference on social entrepreneurship.

Thirty-six applications were submitted for the competition, and 20 projects were chosen as winners. Nine of the winning projects entered the Perm Entrepreneurship Development Fund accelerator programme.

The social entrepreneurship development programme is due to be rolled out to Blagoveshchensk in the Republic of Bashkortostan in 2017.

An equally important aim of the ‘Start Your Own Business’ competition was to create a discussion and networking platform for residents of Chusovoy, who are united by their desire to improve the quality of life in the region. Thanks to the social entrepreneurship programme in Chusovoy, new leisure facilities have appeared: a pay-per-minute café, cycling club, Montessori children’s club, the ‘Free Sandbox’ (a space for young mothers and children to relax in), a gym for senior citizens in the village of Sely, and ‘smart trainers’ for senior citizens.

Another success story is the social entrepreneurs’ ‘Recycle Plastic’ projects to set up a system for collecting and recycling polymers.

The Nadezhda roller skating rink is open for children and adults, the ‘Ecotourism Without Borders’ project (floats in the Chusovaya River) has been launched, and young people in Chusovoy can practice mental arithmetic at the Alph@ educational club. A cleaning company’s first clients received help cleaning their apartments. The clients were pensioners, veterans, low-income and large families on the lists of social services and the CMW Veterans’ Council.

‘Second Home’, the first animal hospital in Chusovoy, was opened.

The Perm Territory Ministry of Industry, Business and Trade provided a RUB 850,000 subsidy to social entrepreneur Anton Gorokhov, who started an initiative for separate refuse collection in Chusovoy. His ‘Recycle Plastic’ project was one of the winners of the competition organized by the Ministry.

Grant pool for ‘Start Your Own Business’ competition in 2016

1.85million roubles

Total programme budget

3.0million roubles

RESULTS OF CHARITY WORK AND SPONSORSHIP IN 2016

Allocated to charitable and sponsorship projects

431million roubles

PARTNER PROJECTS

1
Organization of a venue for workshops at the ‘Spiritual Bazar’ charity fair in Moscow in partnership with the non-profit Development Group
2
Participation in organization of the 10th National Forum ‘Health of the Nation – The Foundation of Russia’s Prosperity’ in partnership with the National Health League charitable foundation
3
Victors’ Ball in partnership with the Maris Liepa Foundation and the Central Museum of the Great Patriotic War 1941–1945
4
The ‘Start Your Own Business’ social entrepreneurship support programme in Chusovoy in partnership with the ‘Our Future’ fund for regional social programmes and the Perm Entrepreneurship Development Fund
5
Partnership with the Prospect Foundation to expand non-profit organizations in regions where the company operates
6
The OMK Partnership grant competition in partnership with local administrations, regional ministries and resource centres for non-profit organizations: 35 projects (23 non-profits and 12 municipal and national government institutions)

VOLUNTEERING

More than 9,000 OMK employees are volunteers. They represent more than 35% of the total company workforce.

6,400employees
volunteered
in 2016
OMK employee volunteers (total)9,00015

employees volunteered in 2016

6,400

OMK employee volunteers (total)

9,000 15

Volunteers in the OMK Partnership competition

2,450

Volunteer events in 2016

70

15More than 35% of the total company workforce

BLOOD DONATION

The corporate blood donor movement continued to expand in 2016.

OMK employees gave more than 390 litres of blood in 2016, including 140 litres from employees in the Moscow office. There were 21 blood drives in 2009–2016 in the Moscow office alone. The company got its partners involved too, including Metallinvestbank employees and representatives of the Russian Martial Arts Association.

Two hundred and twenty company employees are regular donors.

220OMK employees

are regular donors

OMK PARTNERSHIP COMPETITION

We continued our long-term programme to support social initiatives, the OMK Partnership social and charitable projects competition, in 2016. Employees of OMK enterprises, non-profit organizations, and government and municipal institutions from the regions in which the company operates were invited to participate. Four workshops on social project management, fundraising, and project promotion for potential grant recipients were held during preparations for the competition.

The purpose of the competition is to create opportunities for introducing innovative technologies to develop the regions where the company operates and to involve employees in social projects at their own initiative and on a voluntary basis.

The objectives are to improve the quality of life in cities where OMK operates, to develop a systematic approach to solving social problems in the regions, to improve the effectiveness of social investment, to ensure maximum transparency in the selection of priority projects, and to submit the projects’ outcomes to a qualitative evaluation.

APPLICATIONS FOR OMK PARTNERSHIP COMPETITION

Region Applications received Support provided Grant fund (RUB million) Grant fund distribution by region (RUB million) Competition project beneficiaries
Almetyevsk
Blagoveshchensk
Vyksa
Chelyabinsk
Chusovoy
Moscow
256 59 projects:
35 from organizations
24 from employees
9.3 Almetyevsk — 0.7
Blagoveshchensk — 1.6
Vyksa — 3.2
Chelyabinsk — 1.7
Chusovoy — 1.95
Moscow — 0.15
30,000 people

Co-financing by OMK business partners

roubles>900,000roubles

In 2016, an agreement was signed with the Prospect Foundation which supports civic engagement in small towns and rural areas and is the operator of the presidential grants competition. Four winning projects from the OMK Partnership competition received a total of RUB 5.5 million in presidential grants.

Total co-financing for beneficiaries

million roubles≈6million roubles

Total presidential grants received by OMK Partnership winning projects

million roubles5.5million roubles

ACTIVITIES OF THE OMK PARTICIPATION CHARITABLE FOUNDATION IN 2016

Founded in 2008 at the initiative of OMK shareholders and employees, OMK Participation is funded by contributions from company managers and employees. The foundation’s board of trustees is chaired by Irina Sedykh. In 2016, the OMK Participation Foundation organized several events to support disadvantaged and seriously ill children and to develop educational and medical procedures, culture, and art.

SAY “YES” TO A NEST BOX!

As part of the traditional spring Saturday clean-up at Patriarch’s Ponds in Moscow, OMK Participation, assisted by volunteers, hung unusual nest boxes in Bulgakov Square, which were painted by patients of the Nikolai Blokhin Children’s Cancer and Haematology Research Institute.

“WHO’S RUNNING? EVERYBODY!”

United Metallurgical Company and OMK Participation held a series of charity runs called “Who’s Running? Everybody!” to support the foundation’s patients. About 100 people ran 2,300 metres in Moscow; they included employees, partners and friends of OMK, representatives of Metalloinvest and KPMG, students from MISiS, and ordinary Muscovites who just love sport. More than 700 volunteers, including employees of the Vyksa Steel Works, turned up at the starting line in Vyksa. Local races were also held in other regions where the company operates.

SHOW AT NIKULIN CIRCUS ON TSVETNOY BOULEVARD

This event, traditionally organized by OMK Participation at Moscow’s oldest circus and now in its fourteenth year, brought about 2,000 people together. These included more than 900 children from large and low-income families, patients of the Nikolai Blokhin Children’s Cancer and Haematology Research Centre, students from the Inclusive Molecule special school and the Revival social rehabilitation centre, members of Support, an organization for disabled people, and children of OMK employees.

ART RAVINE FESTIVAL

The sixth Art Ravine urban culture festival was held in Vyksa in Nizhny Novgorod Region. The festival was organized by United Metallurgical Company and the OMK Participation charitable foundation and sponsored by the Russian Ministry of Culture.

It hosted more than 10,000 visitors over three days. Dozens of workshops on dance, parkour, cooking and various styles of art were held at special venues all over Vyksa. There were also tricking demonstrations by Russia’s top practitioners and fitness, BMX and other contests. World kickboxing champion Jaber Rami, four-time world taekwondo champion Ri Yong Il, chef Francesco Castorina, graphic and fusion artist and sculptor Andrey Bartenev and others shared their skills. The Trickster and Praktika Theatres staged performances, and the music programme included rock group Jonny Online and folk singer Inna Zhelannaya.

The festival opened with a social event entitled ‘A Journey Back into the Ages’, which had children drawing illustrations for a book on the history of Vyksa. Chapters of the book were read aloud by famous residents of the city and visitors to Art Ravine. Two new street art paintings were also created: artists adorned 350 square metres of surface on the sides of buildings 20 and 3 in the Central neighbourhood with their designs. The Art Yard project opened renovated playgrounds and swings on the shores of Lebedinka Lake.

'EVERY LITTLE CHRISTMAS TREE HELPS'

This event has been held since 2012 for children undergoing treatment at the Nikolai Blokhin Children’s Cancer Research Centre. In 2016, it lasted for two weeks, with OMK employees and partners getting involved. All funds raised went towards the purchase of a BF-XP60 OES bronchofibrescope, 15 infusion pumps and five perfusion pumps to treat patients at the centre.

#GIVINGTUESDAY

OMK employees held more than 40 charity events in Moscow, Chusovoy, Chelyabinsk, Almetyevsk, Vyksa and Blagoveshchensk with the active support of the OMK Participation charitable foundation, which has become a partner in the #GivingTuesday movement.

Charity fairs were key to the #GivingTuesday drive. A Red Fair was held in Moscow at MISiS National University of Science and Technology and OMK’s Moscow office. The fair was enthusiastically supported by students and lecturers from the university, OMK employees, and partners Techsnabexport and Metallinvestbank. All the money raised will be used to purchase medical equipment for the children’s ward at the Nikolai Blokhin Children’s Cancer Research Centre in Moscow, of which OMK Participation is a partner. At the fair, anyone who wished could paint Christmas tree ornaments which volunteers then used to decorate the cancer centre during the annual charity event ‘Every Little Christmas Tree Helps’.

In Chelyabinsk, the foundation and volunteers from the Trubodetal Plant organized ‘Cubic Warmth’, a fair selling homemade baked goods and handicrafts. All the money raised was put towards decorating the children’s ward at the Chelyabinsk Cancer Centre for New Year.

Urban festivals and workshops were held in Vyksa and Almetyevsk for children with special needs and children from large, low-income, and disadvantaged families. In Blagoveshchensk, OMK Participation and volunteers from the Blagoveshchensk Valves Plant decorated the city library with New Year handicrafts ready for ‘Every Little Christmas Tree Helps’, an event for young people run by the Blagoveshchensk society for disabled children.

40events

for #GivingTuesday

Also as part of the #GivingTuesday movement, more than 70 employees from OMK’s Moscow office and company partners participated in the blood drive at the Federal Biomedical Agency’s Blood Centre. OMK employees and representatives of Metallinvestbank and Techsnabexport gave blood alongside sporting heroes from the Russian Kyokushin Federation (a martial arts organization): Russian Cup winner Beka Kurtsikidze, undisputed world champion Ashot Zarinyan, reigning world champion Tariel Nikoleishvili, and other famous athletes.

Inspired by another OMK Participation initiative, during the #GivingTuesday ‘Going Public Week’ from 22 to 29 November, more than 150 OMK employees and friends of the foundation took photos and posted them on the initiative’s website and social media with their stories about what they had done to make a difference. OMK’s Moscow office took an unconventional approach to the idea of going public: an artist created a scribing wall filled with sketches of the employees and their good deeds.

Prizes
ОМК

Third place in the category ‘For supporting and developing social entrepreneurship’ in a competition held by the Russian Union of Industrialists and Entrepreneurs (RSPP), Russian Business Leaders: Dynamics and Responsibility 2016

‘I Am A Citizen’ Prize from the Civic Chamber of the Russian Federation

First place in the category ‘Best Programme Promoting the Development of Non-profits, Volunteerism and Philanthropy in Regions where the Company Operates’ (for the OMK Partnership competition) in the Corporate Charity Leaders competition 2016

Second place in the category ‘Best Programme Conducted in Partnership with Another Business’ in the Corporate Charity Leaders competition 2016

Second place in the ‘Champions of Good Deeds’ competition for the programme to develop corporate volunteerism in the company

Listed by the RSPP as one of the best companies for ‘Responsibility and Openness’ and ‘Sustainable Development’

VSW

Winner of the Nizhny Novgorod Phoenix prize for corporate volunteerism

Third place in the category ‘For Participation in Solving Social Problems in the Regions and Expanding Corporate Charity’

‘Philanthropist’ certificate for active charity work in Nizhny Novgorod Region

BVP

Prime Minister of the Government of Bashkortostan Rustem Mardanov declared the OMK Partnership competition a “model of systemic charity” and recommended that this best practice be rolled out across the region

Trubodetal

Winner of a ’Ten Good Deeds’ prize in the ‘Company of Good Deeds’ category

Winner of the ‘Changing World’ competition for social achievements organized by the Chelyabinsk Regional Legislative Assembly

CMW

‘Volunteer of Russia 2016’ badge of public recognition in the category ‘Socially Responsible Business Partner for Volunteer Initiatives’

5.7
RESPONSIBLE
PROCUREMENT

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 of 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 by its production enterprises. In 2016, OMK continued its policy of developing its strategic partnership with domestic suppliers of primary materials: slabs, sheets, steel billets, and anti-corrosion coatings.

In addition to the long-term cooperation between OMK and NLMK with regard to the supply of steel slabs for the Thick-Plate Mill 5000 at VSW, work with Metalloinvest on the supply of steel billets with particular specifications for the production of solid railway wheels continued in 2016.

Close cooperation with a Russian partner has made it possible to substitute imports of a large percentage of insulation coatings; now, up to 70% of coated pipes are manufactured by OMK using polyethylene produced by a Russian company, Metakley.

The switch to strategic sourcing and category management in procurement was made in 2016. The demand for physical resources, labour and services is divided into categories, for which cost management strategies are developed for the entire life cycle. This is a new tool for OMK which is already making it possible to identify previously hidden reserves where savings can be made and systematically improve production efficiency.

After doing a thorough analysis of the market, the costs for each category and the challenges of production, it is possible to switch to a multi-year strategic partnership with suppliers. It is important to note that the trust at the heart of the partnership is based on economic indicators that are mutually profitable, transparent and understood by all parties, a past history of working together successfully, and common strategic objectives.

Total procurement of feedstock, materials and equipment in 2016

74.3 -21%

billion roubles

Share of procurement from Russia exceeds

93%

For suppliers, a strategic partnership with OMK means a stable, long-term relationship, an opportunity to develop their products and services together with OMK, and increased brand recognition by supplying products for such important projects as Nord Stream 2, Power of Siberia, and so on.

For OMK, increasing the number of strategic partners ensures a reliable and efficient supply chain, and that gives us confidence that we can fulfil our obligations to our customers.

The objective of the new system for assessing suppliers and contractors is to improve procurement efficiency by applying advanced, systemic tools for qualification and certification and for managing suppliers’ development.

The main advantages are:

1
A uniform supplier qualification and certification assessment system for all OMK enterprises. Suppliers are assigned a rating.
2
Working only with qualified and certified suppliers makes it possible to use risk, knowledge and change management tools.
3
Supplier development within the framework of special programmes aimed at lowering costs in the supplier value chain while guaranteeing the required specifications and qualities, reducing turnaround time, and improving reliability.

The project is currently at the stage where a pilot qualification and certification assessment is being introduced as part of the development of strategies for several categories. The system automation requirements are also being formalized.

In addition to the systemic advantages, the savings over several years will amount to tens of millions of roubles.

EXAMPLES OF LONG-TERM COOPERATION WITH RUSSIAN SUPPLIERS

3M Russia
Supplier of anti-corrosion materials for coated pipes. A long-term partnership with development of new materials in response to OMK customer demand. Formula pricing for materials enables both parties to plan costs.


RKhI Vostok-Service + Metall Project
Strategic cooperation in carrying out refractory work on steelmaking units. Over a three-year period of joint work, the resistance of steel pouring ladles was increased by half as much again, reducing refractory consumption and thus cutting costs.


Tulachermet
A strategic agreement for the supply of steelmaking pig iron. Tulachermet is a major independent producer of pig iron, while OMK is the largest consumer of pig iron on the domestic market. A five-year contract reduces the risk of failure to deliver supplies.