Management of sustainable development and ESG risks - Integrated Report of KGHM Polska Miedź S.A. and the KGHM Polska Miedź S.A. Group for 2022

GRI

3-3
2-22
2-23

In the Strategy of the KGHM Polska Miedź S.A. Group until 2030 with an outlook to 2040, an additional, fifth element – “Energy” – was added, ultimately creating the Strategy based on “5Es”, including five pillars based on five updated development directions:

Pillar I

Core business

Pillar II

New activities

Pillar IV

Health

Pillar V

Prosociality

Pillar III

Supporting activities

The current Strategy has not changed the Company’s existing approach to its business activity. KGHM Polska Miedź S.A. continues to maintain its responsible attitude and forward-looking approach to the future of an enterprise operating in compliance with the principles of sustainable development, which are taken into account at the level of the Company’s business strategy and in the ESG analysis of individual strategic initiatives.

Sustainable Development Areas of KGHM Polska Miedź S.A.

Best practice

Sustainable Development Council

The Sustainable Development Council (hereinafter: the Council) was appointed pursuant to the resolution of the Management Board of KGHM to implement the Strategy of KGHM Polska Miedź S.A., given the dynamic changes in the mining and processing industry caused by macroeconomic, technological and legislative challenges, the evolution of global economic development directions and growth based on sustainable development and safety ideas.

The Council is comprised of individuals representing the areas that are critically important for the idea of sustainable development, i.e., among others, ecology, environment, community, security, investor relations, finance, resource management, regulatory analysis and broadly defined supply chain management. The key premise for the activities of the Council is our business development vision of operating according to the accepted standards and canons shaping the future functioning of raw material companies across the world as well as the need for internal information integrity and coherence in the Company’s operations.

The main goal of the Council is to identify needs, set directions, issue opinions and coordinate activities associated with the implementation of the rules and regulations guiding the sustainable development concept in the entire KGHM Group. Furthermore, the Council serves as a kind of open forum for sharing knowledge and promoting activities furthering the idea of sustainable development and a forum for aggregating and promoting mineral resource industry standards and solutions accepted in Poland and globally in this field.

The Council’s other activities include:

issuing opinions on information materials in the field of sustainable development, in particular in areas with impact on the environment (including climate change) and society, included in documents published outside the Company;
consulting on and supervising the preparation of documents that are important for pursuing sustainable development goals;
analysing legislative changes related to sustainable development and their impact on the KGHM Group;
identifying potential elements of improvements in the entire value chain of KGHM Polska Miedź S.A. based on the sustainable development concept.

During the Council’s meetings, the following topics were discussed in 2022:

the requirements imposed on listed companies in the context of respecting human rights, including the guidelines of the Copper Mark program which KGHM Polska Miedź S.A. joined in 2020. The Copper Mark initiative demonstrates the contribution of the copper industry to the implementation of the Global Sustainable Development Goals;
the Management Board issued its positive opinion and adopted, within the scope of its competence, the “Human Rights Policy in KGHM Polska Miedź S.A.” The document was finally adopted by Resolution No. 150/XI/2022 of the Management Board of KGHM Polska Miedź S.A. of 27 April 2022 and introduced for application in the Company.

Contribution to the Sustainable Development Goals (SDGs)

KGHM pursues far more of the sustainable development goals (SDGs) presented in the 2030 Agenda for Sustainable Development adopted by the UN in 2015 than just those considered typical for companies in the sector of its operations. The goals pursued by KGHM Polska Miedź S.A. are presented in the following diagram:

UN sustainable development goals for the years 2015-2030 pursued by KGHM Polska Miedź S.A.

Since December 2017, KGHM Polska Miedź S.A. is a signatory of the charter called “the Partnership for the realisation of Sustainable Development Goals”. In its declaration, the Company indicated selected goals of the Agenda 2030, which it aimed to support. In the following years, actions were taken in KGHM Polska Miedź S.A. consequently that resulted in an evolution and extension of the portfolio of supported goals. Today, after over five years since joining the Partnership, the Company has almost doubled the number of supported goals.

The positive aspects of KGHM’s operations drive economic growth across the region, through ensuring attractive and stable jobs and development of cooperating companies, increasing the well-being of its communities (SDG 8), efforts to broaden access to health care (SDG 3), decent work and education (SDG4), development of employees, benefits and training. KGHM addresses its activities to employees and their families, but it also cares for all residents of the region, contributing to the equality of opportunities in many aspects of life (SDG 10, 11).

The draft Directive on due diligence in the area of sustainable development, currently in the pipeline of the European Union, imposes an obligation on companies to identify risks in the area of human rights. In order to meet the measures in this area, in April 2022 the Company adopted the KGHM Human Rights Policy. The adoption of the document is an expression of care and the confirmation that human rights represent an area of particular importance for KGHM. The document defines the potential risks in this area while identifying persons responsible as well as possible forms of prevention and mitigation of effects of such measures. The KGHM Human Rights Policy was also audited in 2022 in terms of maintaining the Copper Mark certification by the Company, with a positive result. The KGHM Human Rights Policy covers issues such as labour rights, social dialogue or occupational health and safety standards – both at KGHM and throughout the value chain (SDGs 5, 10).

Because of the broad international scope of its operations, cultural differences and the specific nature of the industries in which it operates, the Group has long conducted a variety of human rights protection activities, such as: counteracting discrimination, not using forced labour (including child labour and slavery), respecting women’s rights and equal pay principles, caring for the natural environment and conducting its activities with respect for the rights of the First Nations – in accordance with the applicable normative acts. Work is currently pending to ensure consistency and comprehensiveness of these activities.

Other objectives pursued by the Company include responsible consumption and innovative production (SDG 12). KGHM is striving to ensure that the entire core production line is optimized, safe, innovative and sustainable, constantly seeking methods for its continuous improvement, also through innovation, research and development activities (SDG 9). The Company is trying to focus its activities also on: efficient resource management (while striving to eliminate waste in accordance with the Circular Economy (CE) idea), reclamation of land and maintenance of biodiversity in post-mining areas (SDG 15).

The activities undertaken by KGHM Polska Miedź S.A. reflect the sustainable value chain, as presented in the chart below:

On 16 November 2021, the Management Board of KGHM Polska Miedź S.A. adopted a resolution approving for application the “Climate Policy of KGHM Polska Miedź S.A.” It directly supports the implementation of UN Sustainable Development Goals in the following areas:

SDG 7 – to ensure access to stable, sustainable and modern energy for everyone at an affordable price;
SDG 12 – to provide sustainable patterns of consumption and production;
SDG 13 – to take urgent action to combat climate change and its impacts.

Every year KGHM implements solutions to manifest its efforts to operate in line with the idea of a circular economy. One of the ways of using raw material constituting waste within the circular economy activities is the production of road building aggregates from copper slag.

The Strategy of the KGHM Polska Miedź S.A. Group assumes that a stable level of copper production will be maintained in Poland and internationally, also based on increased processing of third party materials and recycled copper. Given the limited sources of copper ore, the acquisition of raw material by recycling copper scrap has become an important element of the Group’s activities. It is the ambition of KGHM to increase the recycling of scrap metal to reuse it in accordance with the Circular Economy concept.

One of the new development directions within 5E is the “Energy” area. The priority in this area is to acquire energy from its own sources and renewable sources.

The Company carries out a range of projects in the scope of preparation for the construction of its own photovoltaic farms as well as the acquisition of companies with photovoltaic farm projects or with operating installations. Moreover, the opportunities of acquiring new RES projects from the market in the scope of offshore wind energy and onshore wind farm development are identified.

KGHM’s flagship project should not be omitted related to nuclear power development, i.e. the construction of small modular nuclear reactors (SMRs). In addition, at the end of February 2022, KGHM became one of the initiators of the newly founded Lower Silesian Hydrogen Valley Association.

The Company is also involved in a number of research and development projects aimed at developing the design of battery-powered mining vehicles and machines adapted to operate in the extremely difficult environmental conditions of KGHM Polska Miedź S.A.’s underground mines. In KGHM’s mines, the first tests of underground electric machines and a vehicle for transporting people and materials have been launched.

In order to minimize the negative environmental impact of metallurgical technologies and maintain fully operational equipment protecting the environment, the Company has successfully adapted the units to the BAT Conclusions for the non-ferrous metals industry, including limitation of arsenic emissions. The metallurgical emission reduction parameters achieved as a result of investment projects are much better than the levels required by the law.