Supply chain Due Diligence Management System

Responsible sourcing policy

In 2021, the Company adopted the corporate documents describing the key responsible supply chain principles:

The Policy seeks to ensure that suppliers of raw materials, goods, works and services meet the Company’s sustainability criteria. It sets out Nornickel’s responsible supply chain management principles applicable to both the Group itself and its counterparties. In case of suppliers’ failure to meet the Policy requirements in full, the Company identifies supply chain risksThe risks are further detailed in Identification and assessment of supply chain risks. and may reconsider its relationship with such suppliers if, following corrective actions, risks remain unaddressed.

The Policy was approved by the Board of Directors which oversees its implementation by the Company’s Head Office and divisions.

The Policy was communicated to all stakeholders (suppliers, customers, employees, etc.) and published in Russian and English on the Company’s website.

The Company also adopted the Code which describes the list of requirements for counterparties to align their activities with the sustainability principles. As part of supplier due diligence, the Company assesses the maturity of its mineral suppliers’ practices for compliance with the Code.

Nornickel developed a Code implementation roadmap in 2021. By the end of 2022, the Group completed all the main roadmap activities planned for this reporting period.

Management framework and responsible parties

In line with the OECD Guidance, the Company established a mineral supply chain due diligence management framework.

The Head Office has its Sustainable Development Department to take charge, including to develop and approve documentsThe documents governing interaction with mineral suppliers as part of supplier due diligence. governing interaction with suppliers. This Department also provides necessary guidance on DDMS implementation to divisions.

Divisions have their respective sustainability units to take charge. Also involved in the DDMS implementation at different stages are the Head Office’s and divisions’ departments responsible for production and safety, the risk management function, as well as legal, corporate relations, marketing and public relations departments.

The DDMS underlies the internal responsible sourcing standards (“standards”) developed for Polar Division, Kola MMC, and GRK Bystrinskoye. Each standard factors in divisional specifics, governs interaction between business units, and defines the responsible parties and their responsibilities.

The key responsibilities of DDMS teams include:

  • developing, endorsing and submitting for approval amendments to the Policy, the Code and other regulations and guidelines as part of the DDMS, including its tools;
  • organising and coordinating, as well as monitoring and assessing the DDMS performance;
  • making the employees involved in the mineral supply chain aware of the requirements of corporate documents and internal standards for responsible supply chains;
  • updating mineral suppliers on the Code requirements and holding consultations (where necessary);
  • identifying and assessing supply chain risks, conducting due diligence on mineral suppliers in line with the divisional DDMS standards;
  • developing risk management plans in cooperation with suppliers and overseeing their implementation;
  • producing reports: internal reports on mineral supply chain due diligence for the management, including performance assessment and risk management results, as well as preparing public annual responsible supply chain reports;
  • developing and providing employee training for those involved in the DDMS operation.

If necessary, the respective business units of Polar Division and Kola MMC may also be involved in supplier due diligence.

Training for managers and employees

The key distinctive feature of the Company’s production process is that virtually all mineral suppliers are part of Nornickel Group, i.e. internal suppliers, except for one external supplier that shipped minerals to Polar Division in the reporting period.

Thus, the Group’s trainings in 2021–2022 conducted at Kola MMC, Polar Division, Medvezhy Ruchey LLC and GRK Bystrinskoye actually covered employees of these entities as mineral suppliers.

All Nornickel’s employees, including managers, must adhere to the Policy and the Code. The Company provides training to managers and employees on internal policies and processes and updates on both internal and international standards for responsible supply chains. Also, the employees responsible for the DDMS operation and monitoring undergo in-depth training modules within their competence.

The principles underlying responsible supply chains and the use of DDMS tools are also covered by internal workshops and training sessions on other matters, such as human rights or environmental, social and corporate governance (ESG) practices. On top of that, Nornickel pays special attention to preparation for industry and ESG audits.

The training activities on supply chain management may be conveniently divided into:

  1. in-depth training sessions on responsible supply chain principles and the DDMS, including on the applicable standards and the requirements imposed by the regulators and initiatives (LME, RMI, etc.);
  2. general ESG training sessions also covering responsible supply chain principles and the DDMS;
  3. workshops to prepare for audits and introduce standards and initiatives also covering responsible supply chain principles and the DDMS.

In 2021–2022, the Group conducted a total of 10 training sessions on the DDMS and responsible supply chains for managers and employees of the Head Office, Polar Division, Medvezhy Ruchey LLC, Kola MMC, and GRK BystrinskoyeThe trainings also covered internal mineral suppliers being part of the Group..

As part of general staff training, the Group also held specific workshops to prepare for audits and introduce industry standards and initiatives. These trainings took 438 hours and covered more than 400 employees.

Participants by training domain in 2021–2022

Supply controls and transparency

Nornickel consistently monitors the material flows throughout its supply chain and continuously improves the mechanisms to ensure transparency and quality of on-site material acceptance. The DDMS complements the existing supply chain controls by ensuring compliance with the OECD Guidance.

Nornickel’s production sites rely on their internal controls to monitor minerals received from suppliers. Each of the Group’s mining assets has its own system for accounting and monitoring the acceptance of materials in terms of their quality and quantity. Mineral supply controls are exercised by production units and internal business units involved in material acceptance and processing. Material acceptance and verification in terms of quality and quantity seek to confirm that no conflicts exist under supply agreements and the applicable regulations for acceptance of consumer and non-consumer goods in terms of quality and quantity.

Such verification covers suppliers’ primary accounting documents, as well as shipping documents.

All relevant documents and data should be kept for at least five years. Mineral supplier due diligence records are also stored in electronic files on the Company’s servers.

Procurement automation

The Company uses a single automated SAP SRMSAP SRM means System Analysis Programme for Supplier Relationship Management. electronic platform for supplier relationship management.

Procurement information is posted on the Company’s corporate website. For potential suppliers and partners, the SRM platform provides the possibility of online procurement informing for all product categories. The system also enables users to generate and download procurement reports and other necessary documents, which greatly facilitates the document flow with suppliers.

SRM access is free and requires no electronic signature to sign up and use the system. The Group relies on electronic workflow to streamline mutual settlements. Nornickel regularly updates the existing document management system to enhance procurement efficiency and transparency for all parties involved.

Interaction with suppliers

Supply agreements to include the responsible supply chain requirements

Nornickel expects its counterparties to comply with the ESG requirements which the Company itself adheres to. In 2021–2022, the Company amended its mineral supply agreements as well as standard agreements and the General Contracting Terms and Conditions for other suppliersSuppliers of goods, works and services. to include a requirement to comply with the Company’s ESG standardsESG requirements of the Policy and the Code.. Suppliers were also informed of the opportunity to report to Nornickel’s Corporate Trust Line which is the Company’s principal grievance mechanismThe Corporate Trust Line is described in more detail in the Corporate Trust Line sub-section..

Nornickel’s ESG requirements set out in the Policy and the Code focus on:

  • human rights and labour relations;
  • environmental protection;
  • anti-corruption;
  • implementing recommendations of the UN Global Compact.

To prevent corruption, supply agreements also include an anti-corruption clause to ensure that contracting parties are on the same page as regards zero tolerance to corruption. Such clause obliges contracting parties to inform the other party in a timely manner about possible corruption risks identified and relevant checks carried out, as well as provides grounds for termination or other liability if the contractor violates the anti-corruption clause or is involved in unlawful activities.

Training for suppliers

The Group focuses on building suppliers’ awareness and holding training sessions to increase the maturity of their sustainability and responsible supply chain practices. Since virtually all mineral suppliers are part of the Group, their training activities are described in the sub-section Training for Managers and Employees. In the reporting period, the Company conducted a training session for an external mineral supplier (not part of the Group) with a focus on responsible supply chain principles and the DDMS, and the applicable standards and initiatives (RMI, etc.).

In addition to training, the Company also advises its mineral suppliers on international sustainability standards and provides educational materials. Such materials contain information on the sustainability priorities, as well as the key requirements and approaches to building a responsible mineral supply chain.

As part of supplier relationship management, the Company pays special attention to working meetings with suppliers’ managers and employees to build awareness of Nornickel’s sustainability standards and to provide more details on its mineral supply chain due diligence procedure.

Corporate Trust Line

In 2010, Nornickel set up its Corporate Trust Line (the “CTL”) to provide the Group’s managers with objective and reliable information about the identified cases of abuse, theft, corruption, fraud and other violations in a timely manner to ensure effective decision-making.

Stakeholders may also report any violations of law and corporate policies to the CTL. The CTL enables Nornickel’s management to obtain timely information about possible violations and make managerial decisions resolving issues and preventing similar incidents going forward.

Issues may be reported anonymously and must be treated in a way to assure confidentiality, objectivity and impartiality, and to prevent retaliation against whistle-blowers.

Issues may be reported via multiple channels: by emailing to skd@nornik.ru, by calling +7(800)700-19-41 and +7(800)700-19-45 or by filling out a contact form on the CTL page on the Company’s corporate website, or by sending a letter to: 15, 1st Krasnogvardeysky Drive, Moscow, 123100, Russia, Corporate Trust Line, PJSC MMC Norilsk Nickel.

The reports are handled and resolved in accordance with the Company’s approved Procedure on the Corporate Trust Line. Report statistics are reviewed by the Board’s Audit Committee and published as part of sustainability reports. Quarterly reports are sent to the Group’s entities. The CTL performance is assessed by the Vice President for Internal Control and Risk Management, the Board’s Audit Committee and employees taking part in an engagement survey.

In 2022, the Company updated its Procedure on the Corporate Trust Line to include a new reporting subject related to responsible mineral sourcing. This subject includes reports on the Policy or Code violations made by mineral suppliers and risks identified under the OECD GuidanceThe risks under the OECD Guidance are further detailed in Identification and assessment of supply chain risks.. In 2022, the CTL received no reports on responsible sourcing violations.

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