Environmental & Social Information • Mar 22, 2022
Environmental & Social Information
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259400OI92UBLS9RJK55 Arctic Paper S.A. Capital Group disclosure on non-nancial information SUSTAINABILITY REPORT 2021 TABLE OF CONTENT This is Arctic Paper / 6 Company sustainability / 22 Sustainable supply chain for client satisfaction / 40 Environment and Climate / 50 1.1 Company Overview / 07 1.2 Governance and Business ethics / 16 1.3 Company’s structure and management on sustainability topics / 20 2.1 Materiality assessment / 23 2.2 Our contribution to the Sustainable Development Goals / 28 2.3 Responsible business / 30 2.4 Principal risk and their management / 31 2.5 Arctic Paper's Partnership / 34 2.6 Key business performance indicators / 37 3.1 Responsible supply chain / 41 3.2. Environmental assessment of suppliers and responsible sourcing / 43 3.3 Transportation / 46 3.4. Commitment to client satisfaction / 48 4.1 Management approach / 51 4.2 Energy and emissions / 54 4.3. Sustainable circular production and waste / 60 4.4 Water / 63 4.5 Biodiversity / 66 2 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 People / 68 About the Report / 88 5.1 Working at Arctic Paper – Management approach / 69 5.2 Our employee well-being and satisfaction / 72 5.3 Human rights / 78 5.4 Health and safety / 79 5.5 Diversity and Inclusion / 80 Taxonomy / 82 7.1 Reporting period: the Year 2021 / 89 7.2 Contact / 89 7.3 ESG factsheet / 90 GRI Index / 96 3 Michał Jarczyski CEO Arctic Paper S.A. What were the most important events in 2021? 2021 was a special year that was marked both by the pandemic, and by the increased focus on sustainability. For Arctic Paper, 2021 was a good year in which we strengthened our positions in the market, at the same time as we worked on developing our business model. In the autumn of 2021, we launched our new strategy – 4P – which means that we diversify and add two new pillars to our existing business: renewable packaging and green energy. We already have a founda- tion, expertise and expe- riences in these two areas and see great potential for the future. During the year, we also had time to take important steps towards realizing the new strategy in both energy and packaging. What does the new strategy mean for your sustainability work? Arctic Paper has its origins and heritage in renewable products and has long worked to reduce the environmental footprint of the Group's products. The new 4P strategy takes it a step further by broadening our business with a focus on the circular economy. We are good at affordable green energy; now we are gradually building up capacity that not only makes us self-suf- cient but with the aim of becoming a net seller of electricity from solar, wind and hydropower in the future. This will be done step by step in various projects as we gradually are learning from pilot investments such as the solar farm in Kostrzyn. We are gradually learning. The shift to packaging without petroleum-based plastics benets our growing packaging busi- ness and we are building a new ber tray factory in Kostrzyn together with our subsidiary Rottneros, based on renewable resources. 4 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 What is your most impor- tant sustainability goal? The ultimate goal is to become climate neutral by 2035, while our paper and packaging business aim to reach this goal already by 2030. But we are taking many small steps, day by day, towards a more sustainable company in both social and environmental terms with resilient govern- ance. It is ultimately the customers and the surrounding society that dene what is sustain- able. We are therefore humble because we need to change our work and adjust our goals as our view of sustainability changes. Arctic Paper's CSR report is our way of sharing about that work and how well we are performing. What does it mean for your employees all over Europe? Climate change, pandemics, protection of the biosphere and digi- talisation are the biggest challenges of our time. We continue our efforts in education and training, in increasing diversity and in creating equal and fair treatment within the Arctic Group. And to use this knowledge also to support local and international projects to achieve these global goals, while taking social needs into account. How does the EU's taxonomy affect the perception of sustainability? Firstly, the new taxonomy is not complete, it is a work in progress, but it illustrates well that the view of sustaina- bility may change over time. Currently there are different opinions about energy solutions or modern forest manage- ment just to mention two. But we are completely convinced that products based on a renewable and circular raw material that stem from sustain- ably managed forests and produced with green energy will be in demand and seen as sustainable also in the future. And we are committed to always buy raw materials from sustainably managed and certied forests. How has the pandemic affected Arctic Paper? Arctic Paper has during 2021 been successful in protecting the busi- ness from impact of the pandemic. The local policies implemented and adjusted out from the changes of pandemic outbreaks, govern- ments guidelines and restrictions had a limited impact on our business. How do you see the outlook for 2022? Working today means agile commitment to new conditions due to digitalization, covid related measures or new demands from society and clients. We are proud of the exibility and the adaptation of our employees in these fast changing and chal- lenging times. In 2022, we will take further steps, in line with our strategy, to build our business in renewable packaging and green energy, while maintaining our strength in paper and pulp. 5 THIS IS ARCTIC PAPER 6 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 1.1 Company Overview Arctic Paper S.A. is a leading European producer of high-quality graphic paper listed on the stock exchanges in Warsaw (Giełda Papierów Wartościo- wych – GPW) and Stockholm (NASDAQ). We produce numerous types of uncoated and coated wood-free paper, as well as wood-containing uncoated paper for printing houses, paper distributors, book and magazine publishing houses, the advertising industry and packaging producers. POLAND THE PAPER MILL IN KOSTRZYN NAD ODRĄ The mill has a production capacity of about 315,000 tonnes of paper per year and mainly produces uncoated wood-free paper for printing books, brochures and forms, and for producing envelopes and other paper products. SWEDEN THE PAPER MILL IN MUNKEDAL The mill has a produc- tion capacity of about 160,000 tonnes per year and mainly produces ne uncoated wood-free paper, used primarily for printing books and high- quality brochures. SWEDEN THE PAPER MILL IN GRYCKSBO The mill has a produc- tion capacity of about 220,000 tonnes per year and produces coated wood-free paper used for printing maps, books, magazines, posters and advertising materials. ONE TWO THREE As of 31 December 2021, Arctic Paper employs about 1,200 people in paper production sector. Our business activities are based on the operations of three mills: 7 1. THIS IS ARCTIC PAPER SALES OFFICES Arctic Paper Papierhandels GmbH, Austria Arctic Paper Benelux N.V., Belgium Arctic Paper Danmark A/S, Denmark Arctic Paper France SAS, France Arctic Paper Deutschland GmbH, Germany Arctic Paper Italia Srl, Italy Arctic Paper Baltic States, Latvia Arctic Paper Norge AS, Norway Arctic Paper Polska Sp.zo.o., Poland Arctic Paper Espana S.L., Spain Arctic Paper Sverige AB, Sweden Arctic Paper Schweiz AG, Switzerland Arctic Paper UK Ltd., United Kingdom MILLS Arctic Paper Kostrzyn S.A., Poland Arctic Paper Munkedals AB, Sweden Arctic Paper Grycksbo AB, Sweden We manage sales organisations across Europe, which support our activities and contacts with customers. The company is registered in Kostrzyn nad Odra (Poland). Arctic Paper S.A is also a majority owner (in possession of 51.0 % of the shares by the 31 December 2021) of the Rottneros group. Rottneros is a pulp producing company, registered on the Nasdaq stock exchange in Stockholm. The Pulp mills owned and operated by Rottneros are located in Sweden and have aggregate production capacities of about 440,000 tonnes of pulp annually. Arctic Paper S.A. has nancial control over Rottneros, as it holds the majority of shares, yet opera- tional control belongs to Rottneros including responsi- bility for the company’s performance and sustainability matters. For 2021, the data for Rottneros is not available in the format reported by Arctic Paper S.A., but sustain- ability impact and performance will be reported the subsidiary’s separate report. Rottneros AB report is available on web page: https://www.rottneros.com/sustainability/ 8 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 Our Heritage and Values Arctic Paper is a company based upon Swedish roots. We have been manufacturing paper with craft and dedication since 1740. Today we run some of the most eco-friendly mills worldwide and are constantly improving our sourcing, production, sale processes and energy management. We try to optimise our daily business processes to be part of circular bioeconomy. Our reputation in the high-quality graphic paper market is built on a long tradition of exceptional work with the help of our brands executed by the most demanding customers who value the proven quality of our products. We are clear, open-minded and follow a long-term plan in the way we act, think and appear. We are sensi- tive towards nature and positive towards the future. We protect natural resources and constantly create a sound balance between people, production and regions. We run our business in a stable, long-term and trustworthy manner. We are a forerunner in the protec- tion of nature and the development of new products for core markets as well as for new markets and segments. We offer distinctive products and services built on inventiveness and reliable quality, crafted for the most demanding creative ideas and new technologies. Our business operations are based on well-established and trusted relationships with different stakeholders. Thus, we need to ensure that all of our business oper- ations are transparent – from sustainable sourcing, the production and delivery of our products, to the commu- nication of our results to external stakeholders. We are transparent and ethical in everything we do. In 2018 we established a Code of Conduct for Suppliers of Arctic Paper. In 2021 we have elaborated a new Sustainability Policy for the entire Arctic Paper Group. 9 1. THIS IS ARCTIC PAPER Our brands For decades we have been one of the leading European producers of premium graphic paper products, superior packaging grades and services for the most demanding creatives and technologies valuing the superior, reliable and eco-friendly quality of our paper brands. We are known for new solutions and products and the continuous extension of our product ranges in step with the latest developments in printing tech- nology for both the graphical and the packaging segments. The graphical paper market consists of two segments: wood-free ne paper and wood-based paper, both divided into the sub-segments of uncoated and coated paper, while the packaging segment is served by wood-free grades. Our mills in Munkedal and Kostrzyn produce uncoated wood-free and wood- based paper, while the mill in Grycksbo produces coated wood-free paper. 10 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 Key Brands UNCOATED WOOD-FREE PAPER, IN PARTICULAR – MUNKEN DESIGN, MUNKEN BOOK, AMBER • High-quality graphic paper with a very smooth surface, used for various kinds of advertising and marketing materials. It is produced under the Munken brand • Bulky book paper, produced under the Munken brand, used primarily for printing books • White offset paper, produced and distributed primarily under the Amber brand. It’s one of the most versatile types of paper. UNCOATED WOOD-BASED PAPER, IN PARTICULAR – MUNKEN PRINT • Premium bulky book paper, produced and distributed under the Munken brand, specially developed for colour- and monochrome-printing of books. COATED WOOD-FREE PAPER, IN PARTICULAR – ARCTIC VOLUME, G, ARCTIC • Manufactured under the brand names Arctic Volume, G and Arctic. Used primarily for printing books, magazines, catalogues, maps and personal- ised direct mail correspondence. PACKAGING PAPER – MUNKEN KRAFT, G-FLEXMATT The packaging paper portfolio manufactured in Munkedal, Kostrzyn and Grycksbo has been established since 2020 in chosen markets and segments. The combined offer from the two uncoated mills covers a grammage range from 38 g/m 2 to 150 g/m 2 in two shades and is called Munken Kraft. Since 2021 the coated packaging paper is a 1 side coated matt grade, called G-Flexmatt. 11 1. THIS IS ARCTIC PAPER Our brands and the circular economy The full product range of Munken papers produced by Arctic Paper Munkedals and papers produced by Arctic Paper Grycksbo as well Amber Graphic and Munken Kraft produced by Arctic Paper Kostrzyn were awarded a Silver Material Health Certicate by the Cradle to Cradle Products Innovation Institute. The Cradle to Cradle Certied™ Mate- rial Health Assessment Methodology is a contextual assessment based on chem- ical hazard identication and qualitative exposure considerations during a prod- uct’s manufacture, use, and end-of-use. It means that products are made using chemicals that are as safe as possible for humans and the environment by leading designers and product developers. Our brands and the design industry At Arctic Paper, we learn from students and students learn from working with us. The Munken Agenda is a unique annual design project, that started in 1996 For over a decade, Arctic Paper has collaborated with different Euro- pean Design Universities in creating an artistic platform for exchanging our passion for providing high-quality prod- ucts with an eco-friendly and sustainable footprint with creativity and conceptual ideas by artists and designers. For 2019, the creative idea and concept for the Agenda were created by ve graphic design students from NABA (Nuova Accademia Belle Arti) in Milan, Italy. The Munken Agenda is perceived as an inter- esting design reference by art directors, designers and agencies around Europe and the world. For 2020, the concept was created by graphic design students from École Estienne in Paris, France followed by Universities in London, England for 2021 and by the Academy of Fine Arts in Warsaw in 2021 for the year 2022. 12 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 Markets served and our scale of operations 95% of Arctic Paper products are delivered to European markets. Which in times of global transportation problems and supply chain crisis helps us to create a relative secure distribution and deliveries reliability. Since years our biggest markets are Germany, Poland, Nordic countries, the Baltics, followed by France, BeNeLux, UK and Central and Eastern European countries. Germany 21% Poland 16% UK & IE 12% Austria and Central Europe 11% The Nordics 10% France 9% The Baltics 5% Benelux 4% Outside Europe 3% Rest of Europe 9% 13 1. THIS IS ARCTIC PAPER Our main achievements and projects in 2021 Arctic Paper works towards business expansion and revenue diversica- tion creating a solid future for our stakeholders and using natural renewable resources. We are focused on developing our products while making a positive contribution toward environment protection in our day-to-day operations. EACH YEAR WE PLAN AND IMPLEMENT INNOVATIVE AND EFFICIENT SOLUTIONS AMONG ALL OUR AREAS OF OPERATION. 4P Strategy – Future strategy for growth and a diverse, carbon-neutral and renewable group – built on the ambi- tion to grow using the synergies between the two existing pillars paper and pulp and new investments in packaging and energy to reach a sustainably higher protability and resilience of the group with the aim of CO 2 neutral opera- tions for Arctic Paper Group over all 4 pillars by 2035 Development of packing grades – Munken Kraft – for sustainable replacement of plastic packages Launch of a hydropower plant in Munkedals with an installed power of 6 MW Start of a solar panel farm in Kostrzyn with a capacity up to 1MW – to increase the share of renewable energy in total energy consumption All grades from the Grycksbo mill including G-Print, G-Smooth, G-Snow, Arctic Silk, Arctic Matt, Arctic Volume White and Arctic Volume Ice are Cradle to Cradle Certied™ 14 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 Business model BELOW WE PRESENT INFORMATION ABOUT OUR BUSINESS MODEL – KEY INPUTS AND OUTPUTS, AS WELL AS BUSINESS ACTIVITIES AND RESULTS. INPUTS BUSINESS ACTIVITIES OUTPUTS RESULTS Human capital: • 1,200 employees around Europe Manufacturing capital: • One mill in Poland and two mills in Sweden • Total production capacity of over 700,000 tonnes of paper per year Natural capital: • Pulp • Pigments • Chemical additives • Water • Energy Financial capital: • Cash Purchasing: • Sustainable and ethical sourcing • Compliance with the Code of Conduct for Suppliers Innovation: • Eco-friendly products,in- novative and efcient production processes Production: • Responsibility for the health and safety of employees, the environ- ment and product quality Sales: • Compliance with the Code of Conduct Transportation and logistics: • Sustainability and lower CO 2 footprint in deliveries Recyclable and degradable products: • Sheets and reels • Coated and uncoated, wood-free and wood- based paper Service offer: • Availability of standard products • Production on demand (adjustable time frame, quality, quantity) • Delivery • Product-specic training for customers and suppliers Emissions and waste: • Affecting air, water and land Energy: • The mill in Kostrzyn sells heat and electricity • Solar power plant in Kostrzyn • Increased capex for power pillar • Hydropower plant in Munkedals Customer: • Customer satisfaction • Brand loyalty • Few customer complaints Employees: • Stable employment and safe working conditions • Equal opportunities to grow within the organisation • Few accidents • Good relationship with trade unions • Low employee turnover Society: • Taxes from employees and company • Provision of local employment • Participation in and support for local initiatives • Commitment into health programmes and initiatives to support employees, their families and local communities Financers and shareholders: • Interest and dividends 15 1. THIS IS ARCTIC PAPER 1.2 Governance and Business ethics Business ethics We value transparency in internal and external relations, as any unethical behaviour may expose us to risks of reputational damage and nancial loss. Our Code of Conduct contains clear guidelines regarding the business behaviour of our employees, including zero-tolerance for bribes, corruption and other unethical acts. We are aware of the fact that our sales ofces and purchasing and logistics departments are those where the risks of corruption and bribery exposure are most signicant. Our approach to anti-corrup- tion measures in these areas is structurally embedded in our processes. 16 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 KEY PERFORMANCE INDICATOR 2021 Number of employees who participated in the Business ethics training programme (per year) 381 We have a 7-step approach to procure- ment, which limits the scope for unethical behaviour. First, we divide item purchases into sourcing groups. Then, we gather information about the sourcing groups and the market. Subse- quently, we create a portfolio of poten- tial suppliers and choose a strategy for each sourcing group. We then negotiate with a selection of suppliers, and inte- grate further with our chosen suppliers. Lastly, we continuously monitor the procurement market to make sure our contracts remain competitive. As all decisions made during this process are never dependent on one person, the risk of bribery or corruption is reduced. For large investment projects, decisions regarding investment purchases are made by a dedicated committee, and we are considering extending this prac- tice to other large purchases. The logis- tics department has a similar purchasing system in place. When it comes to sales, we have set price lists approved by our management which are communicated to members of our sales teams. Bonuses to members of the sales team are not tied exclusively to their individual sales performance, but also to the overall nancial performance of the company. We offer bonuses to our clients on a semi-annual and annual basis; however, these are linked to sales volumes, e.g., through sales volume brackets, which are strictly monitored. Arctic Paper does not offer other bonuses (for example in-kind) to clients. To us, business ethics is very much a question of awareness. A part of the induction programme for new employees includes topics such as laws and regulations, anti-bribery and anti-corruption measures, human rights and environmental responsibility. Since 2018, the programme covers all units within the group. Thus, our key perfor- mance indicator in this respect is the number of our employees who have attended such training. The high target for 2022 will be reached by implementing a training programme for business ethics in all operations within Arctic Paper. In order to speed up the process, the intention is to have a training programme in place not only for new employees, but also for co-workers who have been with the company for a long time. We also aim for our employees to sign declarations that they have familiarised themselves with our Code of Conduct. In 2021 our employees participated in nano-learning in the area of business ethics, which mainly covered corruption and bribery topics. 17 1. THIS IS ARCTIC PAPER Due to the fact that Arctic Paper S.A. is a stock listed company, we are obliged to follow the principles outlined in the “Best Practice of GPW Listed Companies 2021”. A statement on current compli- ance with the corporate governance prin- ciples of GPW is published on the Arctic Paper corporate webpage. We comply with and adhere to all applicable laws and regulations in the European Union countries where we operate. A large part of those laws and regulations are uniform across the Union, although we are vigilant about any differences. Legal and regu- latory compliance is a business neces- sity, but also a way for us to ensure the sustainability of our operations. We monitor the number of open legal cases where Arctic Paper was found guilty of abreach of law or regulation. We separate them into business and non-business related, as well as into nes bigger and smaller than 2 million PLN. With regards to legal and regula- tory compliance, our target is to mini- mise our risk of being sued. KEY PERFORMANCE INDICATOR BUSINESS RELATED NON-BUSINESS RELATED 2021 Fine bigger than 2 m PLN 0 0 Fine smaller than 2 m PLN 0 0 Business related legal cases are from customers. All others are dened as non-business. Legal and regulatory compliance 18 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 Transparency Arctic Paper Group is open and trans- parent in decisions and activities that have an impact on society and the environment. • We are accountable for our actions. • We always comply with applicable laws and regulations, and we respect, consider and respond to the interests of our stakeholders. • We behave ethically and actively promote ethical behaviour based in the values of honesty, equity and integrity. • We believe in fair and free trade. We shall refrain from any kind of bribes and corrupt business Apart from transparency in internal and external relations, we value constant and transparent communication with our stakeholders, as explained in our Sustain- ability policy. Our communication matrix shows that we use different communica- tion channels which help us to communi- cate issues regarding our material themes to different stakeholders. We understand that different topics have varying degrees of importance to our stakeholders. A commonly used communication channel is our Investors Relations mailbox. Upon receiving a query, the message is forwarded to the person most competent to answer it. CUSTOMERS EMPLOYEES SUPPLIERS SHAREHOLDERS Environment and Climate • EMAS report • “Paper Proles” • Sustainability Policy • EMAS report • Sustainability policy • EMAS report • Code of Conduct and Sustainability Policy • “Paper Proles” • EMAS report • “Paper Proles” • Sustainability Policy People • Direct communica- tion through sales ofces • Code of Conduct and Sustainability olicy • Intranet, widely accessible to all employees • Meetings, both one-on-one and in groups • Training and education • Whistleblowing reporting system • Direct commu- nication through purchasing departments • Code of Conduct and Sustainability • Whistleblowing reporting system • Our Code of Conduct and Sustainability Policy Business operations • Direct communica- tion through sales ofces • Press releases • Meetings • Periodic and annual reports • Annual meetings and investors meetings • Press releases • Code of Conduct and Sustainability policy 19 1. THIS IS ARCTIC PAPER 1. 3 Company’s structure and management on sustainability topics Management Board Sustainability Team Group Executive Team Managing Director Arctic Paper Munkedals AB. Managing Director Arctic Paper Grycksbo AB. Managing Director Arctic Paper Kostrzyn S.A. Managing Director Sales Ofces Managers Managers Managers Managers 20 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 • Arctic Paper Group strives in its operations to promote environ- mental protection, an efcient utili- sation of resources and energy, and sustainable development. • The Arctic Paper Management Board is responsible for overseeing the process of identifying and managing risks in each country where Arctic Paper operates. The Management Board is supported and advised by the Managing Directors of the mills and Managing Directors of sales units. • The CSR Team, consisting of employees representing various func- tions and positions within Arctic Paper, holds an advisory role in the process. • At least every two years Arctic Paper conducts a materiality assessment which denes the most important topics it should contribute to. • The demands we place on ourselves, we pass on to our suppliers. Our environmental thinking shall as far as possible be the rule outside our company. Every step in the chain, from sourcing of raw materials to suppliers, must live up to our high demands. • Each company in the Arctic Paper Group must act to maintain a good external environment and a good working environment. The companies must act continuously to improve the internal and external environment within the framework of what is techni- cally and economically reasonable. • At each stage of the process, from the purchase of raw materials for manu- facturing through quality develop- ment, marketing and distribution to end customers we try to minimise our environmental impact on water, air, climate, ground and noise levels. • Before a decision is made as to new investments, new modified processes, or major changes in the manufacturing process, issues relating to the working environment and the external environment must be assessed in the form of an envi- ronmental impact analysis, including energy consumption and evaluated in collaboration with management, authorities and employees. Envi- ronmental factors are taken into consideration when marketing the Group’s products. • Arctic Paper Group undertakes long-term environmental planning and monitors development in these matters, both in Sweden and Poland and on an international scale, as well as monitoring and participating in research projects in this area. Arctic Paper Group must have an open, objective approach to internal and external environment information. ENGAGEMENT OF THE MANAGEMENT BOARD IN THE ECONOMIC, ENVIRONMENTAL, AND SOCIAL TOPICS 21 1. THIS IS ARCTIC PAPER COMPANY SUSTAINA- BILITY 22 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 2.1 Materiality assessment Arctic Paper’s key focus is sustainable development in all areas where our busi- ness activities have a signicant impact. This means that we aim to create value for shareholders, but not at the expense of opportunities for future generations. In sustainability reporting, materiality is the principle that determines which relevant topics are so important that it is essential to report on them. Not all material topics are of equal importance, and the emphasis within a report is expected to reect their relative priority. Thus, the reporting organisation should conduct a materiality assessment. Our three key sustainability aspects – the Environment, People and Business Operations – have been chosen based on a materiality assessment that was carried out in 2017. We constantly review and internally validate the list of mate- rial aspects, from which we arrived at our materiality mix. The materiality mix continues to be the basis of Arctic Paper's sustainability work and reporting structure. At the end of 2020 we invited our 3 main groups of stakeholders to participate in our CSR Survey and to share their opinions and recommendations regarding our future CSR activities and areas of engagement: employees (491 respondents), clients (24 respondents) and other stakeholders (20 respondents), among whom were: • suppliers, • NGO representatives, • authorities, • local communities, • universities, • schools and representatives of creative industries, All topics were assessed against the following criteria: importance to the company and importance to the stake- holders, using a scale from 1 (low impor- tance) to 20 (high importance). Their opinions help us to decide which aspects of our responsibilities should be our priority for the future. We have analysed the results and prepared new Arctic Paper Materiality Matrix based on environmental, social and governance (ESG) criteria. 23 2. COMPANY SUSTAINABILITY Arctic Paper Materiality Matrix The results of the stakeholder survey and management valuation of sustainability factors is shown in condensed form in the materiality matrix below. 5 10 11 12 13 14 15 16 17 18 19 20 10 15 16 17 18 19 20 7 TOP MATERIAL ESG TOPICS S1 Health and safety of the employees 40 S2 Customer satisfaction 39 E1 Climate change 38 E2 Water consumption manage- ment and minimising water pollution 36 E3 Sustainable circular production system and waste management 36 S3 Working conditions and employee satisfaction 35 G1 Business ethics: legal & regulatory compliance, anti-corruption measures, transparency 35 OTHER ESG TOPICS S4 Training and development possibilities 34 S5 Human rights protection in the workplace and in the supply chain 34 G2 Inuence of COVID-19 pandemic on business – company resilience 34 E4 Offering more eco- friendly, certied products 31 S6 Diversity and inclusion 30 S1S2 S5 S4 S2 S3 G1 E3 E2 E4 G2 E1 IMPORTANCE TO EXTERNAL STAKEHOLDERS IMPORTANCE TO ARCTIC PAPER – TOP MANAGEMENT PERSPECTIVE 24 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 KEY FINDINGS: The fact, that Arctic Paper engages in sustainable devel- opment activities is important or very important for stakeholders All groups stated that Arctic Paper has made progress regarding sustainable development According to more than half of Arctic Paper clients, the company is one of the leaders in sustainable development Almost 80% of clients state that Arctic Paper's cares about customer satisfaction, and as research shows, this topic should be one of the most crucial for Arctic Paper Reducing the impact on climate change should be a priority for the next 3 years according to stakeholders 85% of representatives of the group of other stakeholders declared that it is important to them and their organisation to understand the goals and plans of Arctic Paper 25 2. COMPANY SUSTAINABILITY BASIS FOR SELECTION IMPORTANT SUBJECTS ARCTIC PAPER ACTIONS Customers Main source of value creation • Environmental impact of production and ways of improving its efciency • Preventing deforesta- tion: pulp sourced from sustainably managed forests • Compliance with laws and regulations • Meeting sustainability goals while offering competitive prices • Offering more ecofriend- ly,certied products and packaging solutions • Customer satisfaction and managing consumer complaints • Effective transport and logistics • Workplace ethics and principles • Communication with customers regarding sustainable development activities • Support and education of clients and end-users • Transparent presentation of environmental perfor- mance, such as in the EMAS-report • Using pulp manufactured from suppliers certied by FSC ® or PEFC™ • Development of new sustainable and renew- able products and services • Effective claim handling system • Reduction of the share of transport with the use of engines with standards lower than EURO 5 • Business ethics trainings for employees • Meetings with customers trial printing of new products Employees Key capital for our ability to produce and sell our products • Environmental impact of production and ways of improving its efciency • Initiatives to improve the wellbeing of employees • Health and safety • Training and develop- ment possibilities within organization • Communication with the employees • Human rights protection in the workplace • Company involvement in local communities • Mill-specic action plans for health and safety • Training programmes • Remuneration routines • Financial participation in health and well-being initiatives and activities, supporting employees and their families • Partnerships and sponsor- ships with local cultural and sprts associations 26 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 BASIS FOR SELECTION IMPORTANT SUBJECTS ARCTIC PAPER ACTIONS Suppliers Signicant impact on our production capabilities • Responsible approach towards our supply chain • Business ethics • Human rights protection in the supply chain • Audit of a major pulp supplier using a detailed form • Following the Arctic Paper Code of Conduct for suppliers • Looking for more efcient and sustainable ways of transportation Authorities/NGO’s/Local communities Compliance with legal obligations • Compliance with legal requirements • Minimising the nega- tive impact of business operations • Human rights protection in the supply chain • Human rights protection in thework place • Transparent reporting and communication both for nancial and non-nancial performance • Active participation in sectoral initiatives • Following Arctic Paper’s Code of Conduct and Diversity Policy Shareholders Expectations of return on investments • Support for Arctic Paper’s sustainability work • Potential business risks related to sustainability issues • Sustainable circular production system and waste management • Providing information regarding regarding its approach to environ- mental issues • Transparent reporting and communication, both for nancial and non-nancial performance • Strategy publication • Meetings and dialogue with investors 27 2. COMPANY SUSTAINABILITY 2.2 Our contribution to the Sustainable Development Goals In 2015, the United Nations published a comprehensive list of 17 Sustainable Development Goals (SDGs). As sustainability is deeply integrated into the daily operations of Arctic Paper, we decided to match the material themes described above with the SDGs. We have identied eleven SDGs that we nd are the most relevant to our operations and to which Arctic Paper can best contribute. People Impact on Arctic Paper core operations Impact on Arctic Paper value chain • Systematic approach to health and safety in each mill • Annually approved action plans for health and safety • Occupational healthcare service on all sites • Rehabilitation services on offer • Keeping a register for analysis and prevention of accidents • Implementation of whistlebowing system and interactive trainings for employees across the entire organisation • Implementation of Diversity Policy • Regular performance audits for employees (salary mapping) • Cooperations with local and interna- tional schools and universities in Europe Impact on Arctic Paper value chain WHAT ARCTIC PAPER IS DOING 28 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 Environment • State of the art water treatment facilities at all sites • Plans in place to improve water efciency • Measurement and monitoring of indicators of water inow and outow • Employee education with regards to environmental behaviours • Improvements in energy efciency • Measurement and monitoring of emission indicators • All mills are ISO14001 certied and full EU EMAS regulations • Measurement and monitoring of waste management indicators • Restoring sh breeding habitat in the Munekdal river – (see 4.5 Biodiversity) Business operations • Responsible supply chain practices • 4P Strategy – Power, Paper, Pulp, Packaging – implementation of business operations diversitcation towards carbon footprint neutral company and invest- ment plans for eco-friendly energy sources including solar panel, wind farm • Strong focus on measuring and minimising the environmental impact of our business operations • Cooperation with local communities, industry associations • Sharing knowledge and experience with institutional partners WHAT ARCTIC PAPER IS DOING WHAT ARCTIC PAPER IS DOING Impact on Arctic Paper core operations Impact on Arctic Paper value chain Impact on Arctic Paper core operations Impact on Arctic Paper value chain 29 2. COMPANY SUSTAINABILITY 2.3 Responsible business For Arctic Paper Group, sustainability is the foundation of our business: we believe that you can't run a business without considering the organisation’s impact on the environment and society. We want to leave the smallest possible footprint, while having the greatest possible positive impact on our stake- holders. This is our responsibility as a company which employs more than thousand employees around Europe, supplies its products to customers around the world, and whose production process is based on the use of renew- able raw materials. This is manifested in our new Sustainability Policy which we implemented at the end of 2021. The Sustainability Policy presents our approach to sustainable development. It is based on the ESG approach and centred around the three pillars: Environ- ment, Social and Corporate Governance. We are committed to making a positive contribution to the UN Sustainable Devel- opment Goals. Our Sustainability Policy intends to set out general principles for approaching ESG (Environmental, Social and Corporate Governance) and sustainability topics. It sets the framework for managing these topics within the Arctic Paper Group. The Policy acknowledges the importance of sustainability topics to the Arctic Paper Group, its business model, long-term goals and day-to-day operations. The manage- ment rules of the ESG issues, which include the Sustainability Policy, are the foundation for implementing a sustainability approach to support the company’s objectives. The Policy has an educational role. Arctic Paper Group’s goal is to ensure that everyone knows and will follow the Policy in their daily operations. In order to make that happen, emphasis will be placed on the education of managers and top management. As a responsible organisation, Arctic Paper Group takes numerous measures to contribute to sustainable development. This policy breaks them down into environmental, social and corporate governance areas. At least every two years, Arctic Paper S.A. conducts a materiality assessment dening the most important topics it should contribute to. THE SUSTAINABILITY POLICY IS SUPPLE- MENTED BY THE FOLLOWING POLICIES IN PLACE AT ARCTIC PAPER GROUP: • Code of Conduct Policy, • Code of Conduct for Suppliers, • Diversity Policy. The implementation of the policies is supported by guidelines and instruc- tions from the management which helps everyone within the organisation to understand their impact and obligations. 30 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 2.4 Principal risk and their management In order to sustainably create value over the short and long-term, we need to periodically identify, analyse and mitigate the risks facing our organisation. In our business model we have to take into consideration a number of risks, dependencies and opportunities in the whole value chain from raw material to transportation of our products to the customers. Increasingly important is to value the risks and opportunities related to climate. Since 2019 we have expanded our report by reporting CO 2 emissions not only from our own mills but also from our major suppliers of raw materials, energy and trans- portation companies. We have also described the poten- tial risks connected to climate change. Climate change also offers an opportunity for our company in that we can be part of the solution by offering products manu- factured from renewable sources that can substitute for products based on fossil-fuel sources. Since 2020, the COVID-19 pandemic has become a major public health emergency and has created a new kind of global risk factor for the business envi- ronment around the world. Everyone needs to assess and manage the risks of COVID-19, and in particular, businesses should consider the risks to their employees and contractors. As an employer, Arctic Paper also has a legal responsibility to protect its employees from risk to their health and safety. We also need to make the effort to assess and manage the risks of COVID-19 as a possible serious threat to our daily business opera- tions which may have a signicant impact on the nan- cial condition of the Arctic Paper Group both currently and in the future. 31 2. COMPANY SUSTAINABILITY Our principal risks are explained in the table below, together with an over- view of actions taken to mitigate them. More detailed information with regards to specic mitigation plans can be found in later sections of the report, categorised by theme. RISK IMPLICATIONS MITIGATING ACTIONS TAKEN Environment and climate Not meeting national or EU-wide legal require - ments with regards to envi- ronmental standards • Fines from authorities • Reputational damage • Possible personal responsibility • Disruptions in operations • Careful monitoring of envi - ronmental standards and indicators • Early reaction system to changes in regulation • Introducing efciency-im - proving technologies Unintentional damage to the environment • Careful monitoring of envi - ronmental standards and indicators • Compliance with regula - tions and procedures Climate change can have an impact on the physical condi - tions for production • Disruptions in operations due to: • Drought • Flooding • Landslide • Malfunction in electrical equipment • Reputational damage • Raw material sourcing • Energy sourcing • Reducing water consumption • Increasing water by-pass capacity • Improving drainage • Plans for supply allocation • Increasing of cooling capacity for sensitive elec - tric equipment • Allocation of raw materials to core products and markets • Reducing specic energy consumption • Investing in renewable energy sources People Lack of competent employees (e.g., due to competition or difculties in nding new employees to replace an ageing workforce) • Disruptions in operations (insufcient quantity or quality of products) • Financial loss – money invested in training is lost • Creating an attractive and ethical workplace to attract and retain employees • Trainings and talents accquisition Accidents at work • Disruptions in operations • Departure of qualied personnel • Need for new investments at production sites if the damage is extensive • Fines from authorities • Health and safety training performed on a regular basis • Detailed analysis of all inci - dents – from risk observa- tion to injuries • Improvement plans in place for all our mills • Dedication to a zero-injury environment 32 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 RISK IMPLICATIONS MITIGATING ACTIONS TAKEN People and Business operations Limited visibility over suppliers and their human rights practices • Disruptions in operations • Reputational damage • Financial loss • Scrutiny over actions of suppliers in the form of signed declarations • Implementation Code of Conduct for Suppliers Global pandemic (ie. COVID-19) • Implementation of policies, building an awareness and routines among the entire organization in order to protect our employees and the operations • Keeping and promoting high health standards among employees and contractors Environment and Business Operations Shortage of pulp on the market, inability to buy certied pulp • Disruptions in operations • Financial loss • Loss of customer credibility • Careful monitoring of the market • Building long-term rela - tionships with qualied suppliers • Diversication of sources of energy, seeking new energy investments Disruptions in the energy market (e.g., lack of energy access or poor fuel quality) • Continuity plans developed for mills Poor weather conditions (e.g. ooding) (see also “climate”) • Country-specic risks – linked to the supply chain, production, and distribution • Risk due to climate change • Disruptions in operations • Financial loss • Increased regulatory burden • Reputational damage • Raw material sourcing • Energy sourcing • Careful monitoring of world affairs of the global business environment • Building long-term rela - tionships with qualied suppliers 33 2. COMPANY SUSTAINABILITY 2.5 Arctic Paper’s Partnerships At Arctic Paper we value our partnerships with external partners and see the positive impact of such cooperations on our company and our employees. We are eager to share our expe- rience and knowledge as a business partner and also want to learn from and support our partners. We cooperate with local communities and organi- sation as well as industry organisations. 34 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 Some of our partnerships • The Munkedal mill has established a very close and long-term (20-year) cooperation with the high school focusing on the technology of the production process. The school is situated at the mill facilities, which means the mill is ideally positioned to offer apprenticeship training to the students. The mill sponsors one teaching post with extensive knowledge in paper manufacturing. In return, the school is one of the mill’s most important recruitment sources. Arctic Paper Munkedals also grants a scholarship to the student with the best exam result each year. • Arctic Paper Grycksbo and Arctic Paper Munkedals are members of the Swedish Forest Industry Associa- tion (Skogsindustrierna). The Swedish Forest Industry Association acts as a forest industry employer associ- ation working with labour unions and various author- ities, and as a technical institution with a focus on supporting the industry by creating knowledge within such areas as the environment, energy product safety, standardisation and forestry management; presenting this knowledge and the industrial perspective to poli- ticians and authorities. We actively participate in the work of the association sitting on different committees. During 2021 Arctic Paper was represented on the energy committee and the environmental committée. For over a decade Arctic Paper has held the position of chairman of the environmental committee. In 2022, we will increase our engagement by participating in the product safety committee as well. 35 2. COMPANY SUSTAINABILITY • In Poland, Arctic Paper Kostrzyn is an active member of The Association of Polish Papermakers – an organ- isation of scientic, technical and managerial qual- ities with individual and corporate members whose activities are connected with the paper and paper converting industries. • Our mills are members of various regional chambers of commerce. Through these memberships we can create possibilities to network with professionals from other industries. This is a way of developing fruitful partner- ships both for individuals and businesses by informal learning and the exchanging of experiences. • Arctic Paper is an active member of local communities where our mills are situated. We support them by sponsorship activities for sport and cultural events, including : a football team, oorball team and a table tennis team. We donate an annual supply of free scrap paper to schools, kindergartens and clinics in the vicinity of the city of Kostrzyn nad Odrą. 36 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 2.6 Key business performance indicators Arctic Paper’s approach to corporate responsibility is centred on sustaina- bility of operations, in particular with regard to the mills. We have therefore established a set of key business performance indicators, which are period- ically measured and reported to management. These indicators allow us to better understand our impact on the environment and our employees, as well as better understand our business operations. Following this assess- ment, we can react accordingly. In 2021, Arctic Paper reviewed main key business performance and set new targets for longer time perspective. 37 2. COMPANY SUSTAINABILITY Environment & Business operations Value chain: % of pulp suppliers who are FSC® and/or PEFC™ certied We are aware of the fact that the envi- ronmental integrity of our business relies in part on our suppliers. As we source pulp for our production from a number of suppliers, we expect them to share our values with respect to environmental sustainability. Our aim is to be sourced by responsible and sustainable pulp suppliers who possess FSC ® and/or PEFC™ certications Business operations Value of complaints as share of annual turnover We want our customers to be satised with our approach to sustainability and our products. All complaints are carefully categorised and evaluated by our sales team and management. We aim to mini- mise the cost of claims, keeping in mind that not all complaints may be substanti- ated. The high increase in sales revenues is mainly due to price increases trig- gered by the rapid and substantial price increases in pulp, the major raw material. Value of complaints as share (%) of sales revenue. Sales revenue of 2021 (in MPLN) 2,431 1 0 Target 2025 2021 HERE ARE SOME EXAMPLES OF KPI WE MEASURE. MORE DETAILED KPI’S ARE SHOWN IN FOLLOWING CHAPTERS AND HISTORICAL DATA ARE INCLUDED IN TABLES AT THE END OF THE REPORT. 0.50 0.36 Share of pulp suppliers who are FSC ® and/or PEFC™ certied 100% 0 Target 2025 2021 100% 100% 38 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 Environment & Climate Energy consumption: Total net energy consumption (MWh/tonne of paper) We are committed to improving the energy efciency of our operations. Investments in this area will have a posi- tive effect on the environment, due to decreased emissions of pollutants, and on our nancial performance. * Energy sold to external partners not included. Target of 2025 and gures for 2016-2020 are recalculated by including purchased heat. Biomass and hydropower People Injuries per million work hours We have a systematic approach to safety. We train our employees on an annual basis and ensure that our management is well-equipped to handle safety emer- gencies. We also have programmes for risk assessments. When problems are identied during the production process, targeted continuous action plans are put into place. In addition, we have trained rescue teams at all of our mills. We are committed to minimising the number of injuries at our workplaces. During 2021 there was an increase in number of injuries. After the investiga- tions we foundthat they are mainly due to human errors. As we are very concerned regarding the negative development regarding number of injuries, we will increase our focus on behavioural safety and on preventive activities in order to further develop our safety culture. Lost time injuries per million work hours 10 0 Target 2025 2021 <4 11.3 Tonnes of paper produced 500,000 0 Target 2025 2021 695,000 636,613 Of which from internal energy production based on renewable sources MWh/tonnes of paper 1 0 Target 2025 2021 1.1 0.36 Total net energy consumption (MWh/tonnes of paper) 2 0 Target 2025 2021 1.9 2.2 1 39 2. COMPANY SUSTAINABILITY SUSTAINABLE SUPPLY CHAIN FOR CLIENT SATISFACTION 40 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 Our business operations are based on well-established and tru- sted relationships with different stakeholders. Therefore, we need to ensure that all of our business operations are transparent – from sustainable sourcing, the production and delivery of our products, to the communication of our results to external stakeholders. Arctic Paper cooperates with a wide network of suppliers from around the world. These suppliers provide us with raw materials, chemicals, energy, logistics and other services that enable us to serve our customers. Aside from the sustainability of our own operations, it is crucial that we consider the approach taken by our suppliers. We aim to choose suppliers who can and are willing to assure us that they respect our values with regards to People and the Environment. Our suppliers have to follow the Code of Conduct for Suppliers of Arctic Paper . In addition, we want to be transparent and ethical in everything we do. We have established and follow a Code of Conduct and Sustainability policy, however, we are aware of the need to raise awareness of these topics among our employees. From our perspective as Arctic Paper's customer it is important that Arctic Paper continue to maintain the highest product quality. 3.1 Responsible supply chain Arctic Paper is deeply integrated into the global value chain. We have over 200 suppliers of materials, 30 of whom cover more than 90 percent of the purchased value and are considered core suppliers. 41 3. SUSTAINABLE SUPPLY CHAIN FOR CLIENT SATISFACTION In our paper mills, we have proce- dures to help us produce paper with the smallest possible direct impact in terms of pollutants to water, air and land (waste). As the environment has no borders, the impact of our suppliers is of high importance, hence we gather infor- mation regarding their environmental performance so that we may make informed purchase decisions based on product specications and environ- mental performance. Today the supplier with an excess of 90 percent of purchased value provides us with environmental declarations, which helps us to perform a life-cycle analysis for our products. To ensure that our core Suppliers take a responsible approach to their busi- ness, we ask them to submit a specic written report. This report is meant to detail their environmental performance with regards to energy consumption, pollutants to air, water and raw materials – in particular wood. We also ask them for information as to whether a Code of Conduct and a Corporate Social Responsibility policy are in place. At the same time, we expect our suppliers to take note of our Code of Conduct and Corporate Social Responsibility policy. We wish to follow a similar approach with regard to the rest of our suppliers. Arctic Paper expects its suppliers to comply with the high stan- dards and values represented by our organisation. From 2019 we started a procedure by which all our suppliers are required to comply with our Code of Conduct for Suppliers either by signing our Code or by the sup- plier providing us with an equiva- lent document. We managed to achieve 90% compliance by the end of 2021, with the longterm target of all our suppliers com- plying with the above. Our Code of Conduct for Suppliers of Arctic Paper covers the most important areas: Laws and Regulations, Human and Labour Law, Corruption and Bribery, the Environment. This document is attached to each contract and is expected to be signed alongside the contract. Suppliers are also expected to follow the require- ments set forth in this document. The Code of Conduct for Suppliers applies to all Arctic Paper suppliers as well as all third parties contracted by our suppliers. Those suppliers who have their own Code of Conduct or CSR policy which are compatible with the Arctic Paper values described in our Code of Conduct for Suppliers, are asked to provide us with a copy of the appropriate documentation. This is equivalent to signing the Arctic Paper Code of Conduct for Suppliers. 42 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 3.2. Environmental assessment of suppliers and responsible sourcing Due to the nature of our business, we devote a lot of attention to our pulp suppliers in particular. We additionally expect them to full the demands of the FSC® and PEFC™ certication, and hence be audited by a third party in relation to forest management. If we believe that our partner does not comply with our ethical requirements, we aim to confront and challenge them to change their behaviour, whereby Arctic Paper may offer guidance specifying which issues need to be improved. The supplier is then expected to take corrective actions, within a reasonable time, in order to meet the requirements in question. In the event that we are unsuccessful, we are prepared to end the cooperation. 43 3. SUSTAINABLE SUPPLY CHAIN FOR CLIENT SATISFACTIO We nd it important to verify the state- ments of our pulp suppliers, which is why products sent over by our suppliers are subject to a three-step verication proce- dure. First, we ask our suppliers to submit an environmental declaration, safety data sheets (following REACH EU Regulation) and the technical parameters of their products. Second, we test small samples of the products in our laboratories, to see if they possess the stated proper- ties. Third, we conduct mill trials to see how the products behave in the produc- tion environment. Similar procedures are used for other suppliers. We also perform yearly checks into the validity of certicates possessed by our suppliers. In this way, we are able to certify the quality of our products. In this spirit, we also perform audits of our suppliers, to conrm their compliance with our Code of Conduct for Suppliers. Due to Covid-19 pandemic global restrictions and in order to keep our employees and our suppliers’ employees safe we postponed the planned audits. Since then the pandemic conditons have not changed, unfortunately, therefore we decided to postpone the audits again and come back to them when the situation stabilises. Share of core suppliers providing existing signed environmental declarations 100% 0 Target 2025 2021 100% 90% Share of core suppliers who signed the Code of Conduct for Suppliers or has their own code of conduct 100% 0 Target 2025 2021 90% 90% 10 8 6 4 2 0 Target 2025 2021 10 1 Number of suppliers who are subject to audits performed by Arctic Paper to conrm compliance with the Code of Conduct for Suppliers 44 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 Since 2019 in cooperation with the Book Chain Project, we have been evaluating Arctic Paper Kostrzyn’s processes for respon- sible sourcing.The outcome of the evaluation helps us to improve our shared best practices and processes at the mill, and see the new opportunities and challenges which we face when managing responsible sourcing. We demonstrate a deep understanding for the sourcing countries of raw materials and the sustainability issues at forest level and have put strong, formal processes in place to keep up to date with new developments relating to forest issues/ challenges. We regularly visit our supplier mills, to evaluate their environmental performance, forest plantations and nurseries. We follow industry analysts from Brian McClay and Hawkins Wright. We also work with NEPCon, who share information and suggestions on sourcing countries. Each time we request a written report on envi- ronmental performance from our suppliers, and gather extensive data on energy, air and water pollutants and raw materials. OUR PURCHASING POLICY INCLUDES REQUIRE- MENTS TO ESTABLISH FIBRE TRACEABILITY, TO ENSURE NO PRODUCT CONTAINS CONTRO- VERSIAL SOURCES DEFINED AS: • Illegally harvested forest, or harvesting not approved by the authority in question; • Wood harvested in opposition to traditional or citizen’s rights; • Wood from high conservation-value forests; • Wood harvested in areas being changed from naturally occurring forest into plantations; • Wood harvested in an area where genetically modied trees have been planted; • Wood harvested in violation of ILO principles (Inter- national Labour Conference 1998 – ILO Declaration on Fundamental Principles and Rights at Work) We believe that the strength of our supply chain is based on reli- able, long-term relation- ships with our suppliers. We make changes in our supplier portfolio to improve standards in all respects – economic, ethical and environ- mental. If a correction is necessary, we are open to re-establishing relations with previous suppliers once the correction has taken place. 45 3. SUSTAINABLE SUPPLY CHAIN FOR CLIENT SATISFACTION 3.3 Transportation Effective and sustainable transport was one of the subjects underlined by our stakeholders as a result of Arctic Paper’s stakeholders survey. The impact of trans- port on pollution and the overall condi- tion of our environment is undeniable. When deciding on which companies we can entrust with transporting our prod- ucts, we announce bids for particular routes. Factors we take into consider- ation when deciding on transportation services are the quality of the documen- tation provided, the price offered and the impact a given transport operator has on the environment. Transport operations cause noise, emis- sions to air and consumption of fuels (mainly fossil fuels). Truck engines are divided into various EURO classes, in which higher gures represent engines with lower emissions, especially of nitrogen oxides and carbon monoxide. We keep track of transportation statistics, which cover the transport of ready goods from our mills to their places of desti- nation. We are focused on increasing the percentage shares of operations of EURO 5 and EURO 6 classes. 46 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 The large transportation companies that are our main supplier of transportation services are focused on high transporta- tion efciency combined with an envi- ronmental prole, thus they are continu- ously renewing their vehicle eets which moves the density point towards the higher EURO classes. Having regard to the huge environmental effect of transpor- tation we want to increase the efciency of our transport chain while reducing CO 2 emissions by implementing intermodal trans- port into our logistics process. In 2020 and 2021 around 20% of deliveries made from our mills to our customers were transported as inter- modal transport. Although our target will be to increase intermodal transpor- tation wherever possible, this needs to be done in cooperation and with the approval of our customers as intermodal is more time-consuming and requires different planning by both sides than traditional truck transportation does. Share of Euro 3 and Euro 4 engine class 100% 0 Target 2025 2021 0% 0% Share of Euro 5 engine class 100% 0 Target 2025 2021 30% 34% Share of Euro 6 engine class 100% 0 Target 2025 2021 70% 66% THUS OUR TARGET FOR THE YEAR TO COME IS TO EMPLOY ONLY TRUCKS WITH ENGINE CLASS EURO 5 AND ABOVE. 47 3. SUSTAINABLE SUPPLY CHAIN FOR CLIENT SATISFACTION 3.4. Commitment to client satisfaction Actions are continuously taken to diminish the risk of complaints. In 2019, our technical teams from three mills drafted a new Complaint handling proce- dures and policy and issued General Recommendations for handling and accepting complaints. These documents aim to create, from the perspective of the sales company and customers, a predict- able, consistent, time and cost-efcient claims handling process. Our customers are one of main stake- holders of Arctic Paper.Customer satisfaction is one of the top material aspects of maintaining the integrity of our operations. We want to be sure that our customers are satised with the way we carry out business and with the products and services we provide them. Our customers pay attention to our efforts to manage Arctic Paper as sustainable business and their feed- back is of high importance to us. This way we can grow and evolve while meeting their expectations and needs. Our customers value our high-quality products and innovative attitude when providing new eco-friendly products and solutions. For this reason, we care- fully monitor all customer complaints and listen to their opinions about our products and operations. We categorise and evaluate all submitted complaints. Evaluation is primarily done by our sales teams and when necessary by management. We make sure that every complaint is addressed and resolved. Our target is to minimise the value of complaints, while remaining aware of the fact that not all complaints submitted to us are substantiated. Value of complaints as share (%) of sales revenue. Sales revenue of 2021 (in MPLN) 2,431 1 0 Target 2025 2021 0.50 0.36 48 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 49 3. SUSTAINABLE SUPPLY CHAIN FOR CLIENT SATISFACTION ENVIRON- MENT AND CLIMATE 50 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 4.1 Management approach Arctic Paper has along-standing and pioneering commitment to environ- mental and social sustainability. We are proud of creating positive value by enabling and encouraging customers to use and recycle products made mainly using renewable resources. At the same time, we try to minimise the negative impact of our production and transportation services by engaging in sustainable practices at each stage of the paper production cycle. In addition to complying with environmental laws and regulations, we want to make sure that we work together with our major stakeholders to understand the forces driving sustainability within our industry. This, together with our internal follow-up work, is the basis for the develop- ment and evaluation of our products, processes and routines. Combating climate change through products and solutions based on renewable materials and renewable energy, while replacing plastic and fossil materials, is a natural part of Arctic Paper's new strategy. For paper and packaging, the goal is to become carbon neutral by 2030, and for the Group this will be achieved by 2035. Certications The ISO 14001 management system is in place at all of our mills. This guides the way we manage our environmental responsi- bilities at the mills, and how we work on continuously improving them. All certi- cates are widely available on our website. In this report, we present the consoli- dated environmental performance of our three mills. The mills publish separate EMAS-reports, where more information on individual environmental performance is available. In addition, more environ- mental data regarding our products can be found on our website, in the form of product-specic environmental decla- rations called “Paper Proles”. Impor- tantly, each Paper Prole documents the environmental impact across the whole supply chain, as our Business operations are highly reliant on our suppliers. Product Company Mill Information gathered from to Certified environmental management system at the Mill since Aprill 2000 Environmental Management Company systems ensure traceability of the origin of wood __ yes __ no __ 100% recovered paper Environmental parameters Product composition The figures are based on methods and procedures of measurement approved by the local (or national) environmental regulators at the production site. The figures include both paper and pulp production. Water COD kg/tonne AOX k g/tonne N Tot kg/tonne P Tot kg/tonne Air SO 2 kg/tonne NO x kg/tonne CO 2 (fossil) kg/tonne Solid waste landfilled BDkg/tonne /tonne of final product kWh Purchased electricity consumption E-mail Phone (Address) Contact More information Date of issue More information about Paper P rofile can be found on www. paperprofile.com This product contains biomass carbon equivalent Arctic Paper Kostrzyn S.A. PL 66-470 Kostrzyn nad Odrą 0048 95 72 10 219 [email protected] ARCTIC PAPER KOSTRZYN S.A. ARCTIC PAPER S.A. AMBER GRAPHIC 7,02 ISO 14001:2015 0,15 0,027 495 0,04 0,13 1,84 43 14.04.2021 31.12.2020 1.01.2020 185 x Enviromental aspects of wood procurement 64% of FSC ® and 36% of PEFC™ Grzegorz Mariańczyk Paper Mill Information Arctic Paper Kostrzyn S.A. Paper Mill Environmental Declaration Product information: Amber Graphic Amber Graphic is a white, uncoated fine paper which is used for books, dictionaries, manuals, advertising material, brochures and catalogues, in mono and full colour. Available in grammages from 50 to 170 g/m 2 . The environmental data below reports only emission from the paper production and not emission in the total production chain from forest to customers. Mill Environmental Parameters 2020 Mill Environmental Objectives 2021 Product BAT 1 Description 2 Water Quantity 3 10,5 < 20 m 3 /t Water (kg/t) COD 0,27 < 1,5 kg/t Ntot 0,093 < 0,1 kg/t P tot 0,005 < 0,012 kg/t Air SO 2 0,04 kg/t NO 2 0,56 kg/t CO 2 417 kg/t Energy Steam 2079 kWh/t Process 535 kWh/t Waste Reuse 10,54 BDkg/t Landfill 0,34 BDkg/t Mill Environmental Objectives 2021 Decrease in steam consumption by upgrading PM heat exchangers. Reduction of chemical consumption by upgrading the short PM loop. Minimizing water consumption by modernizing the water supply system. Maintaining high efficiency of the water treatmenet plant 1 BAT = Best available t echnique according IPPC. 2 All figures expressed per ton of paper 3 Effluent water from waste water treatment plant For more information about environmental o objectives see EMAS environmental report Technical Support Team Arctic Paper Kostrzyn S.A. PL- 66 470 Kostrzyn nad Odrą, Poland Phone: +48 95 721 556 +48 95 721 558 Mill contact: Arctic Paper Kostrzyn S.A. PL- 66 470 Kostrzyn nad Odrą, Poland Phone: +48 95 721 600 Fax: +48 95 7524 133 51 4. ENVIRONMENT AND CLIMATE Policies and procedures The overarching goal of our Sustainability policy is to mitigate the adverse impact of our mills’ processes on the environment. We are committed to doing so both by introducing new solutions and improvements to the operations of our mills and by educating our employees about ways to protect the natural environment. The environmental management system at all three mills is guided by ISO 14001. Arctic Paper is proud not only to have introduced routines and procedures to improve the environmental performance of our mills, but also to have efciently integrated these routines and proce- dures into our daily operations. Our mills are also EMAS-registered, which means that they full additional requirements, over and above ISO 14001. Among others, these include stricter rules on how to measure and evaluate environmental perfor- mance. The certication also means that we need to present detailed information on our environmental performance in EMAS reports, available on our website. Additionally, our mill in Grycksbo has a certied system of energy management, ISO 50001. This means that the energy system in place at the mill follows a systematic approach, aimed at continuously improving energy consumption and energy efciency. Arctic Paper does not have any forestland, hence we do not have a direct impact on forest management and global deforestation. We can have an indirect impact through our pulp suppliers. Our mills in Grycksbo, Kostrzyn, and Munkedal have a chain of custody certicates for FSC ® (Forest Stew- ardship Council ® ) and the corresponding for PEFC™ (Programme for the Endorsement of Forest Certi- cation™). This means that we can guarantee our customers that our products come from responsible sources. On next page we present the logos and certi- cate numbers for our mill at Munkedal. 52 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 We extensively train our employees on PEFC™ and FSC ® product origin control systems. Our training is based on NEPCon materials (NEPCon is a non-prot organisation that supports better land management and business practices that benet people, nature and the climate). We assess specic risks including unclear ownership structures and risk of bribery. Arctic Paper is aware of the environmental regula- tions affecting our industry, and we carefully monitor the regulatory environment in Poland and Sweden, as well as at the European Union level. Apart from legal requirements, we are also interested in best practices within our business, and carefully follow developments in these areas. As an example, in the EMAS reports we benchmark our environmental gures on emissions to water to the Best Available Techniques (BAT) refer- ence gures, prepared by the European Commission in collaboration with industry experts. These lead us to conclude that our environmental performance is aligned with the best practices within the industry. Taking into account our production process, we focus our environmental efforts on four main areas selected during our materiality assessment. These areas will guide the next sections of this chapter: energy consumption, CO 2 emissions, water consumption and waste management. We believe that our targets, dened in relation to production volumes, clearly demonstrate our commitment to progress in the area of environmental sustainability. 53 4. ENVIRONMENT AND CLIMATE 4.2 Energy and emissions Energy Climate change requires a revision of the entire industry’s social and economic attitude. As a company which is committed to environmental and social sustainability, we are focused on seeking new possibilities to improve our business activities and production processes by implementing new energy sources and increasing our energy efciency. The energy pillar is one of the four pillars of Arctic Paper’s 4P Strategy published in 2021. The shift from fossil to non-fossil energy sources is one of the main tasks for this planet. We are taking measures to create this future. Behind our power pillar stands the clear vision to make this change possible. Hydropower, solar panels and other forms of green energy in combi- nation with intelligent waste/bio energy plants - all based on renewable sources. Arctic Paper purchases energy both as fuel (biomass and natural gas) and as electricity (from the local power grid). We also produce electricity at our mills using hydropower plants (Arctic Paper Munkedal), counter-pressure steam turbines (Arctic Paper Grycksbo and Arctic Paper Kostrzyn) and gas turbines (Arctic Paper Kostrzyn), which we also sell to the market when appropriate. The most energy-intensive processes in paper production are the generation of steam, which is used in the drying of paper and the operation of motors used in paper machines, reners and pumps. Our goal is to reduce the amount of energy required at every stage of our production process. Energy efciency is of the highest importance for the paper production cycle. We run projects for increasing the proportion of renewable energy sources used for our plants. Our energetic projects and programmes can help us to reduce greenhouse gas emissions, decrease demand for energy imports and drive down production costs. Each year we initiate various types of energy efciency programme at all three of our mills with the aim of reducing their environmental impact. We optimise and trim all installations and machinery and continuously evaluate our processes to identify future investments. 2021 year was difcult as the market, due to the COVID-19 pandemic, rapid global increase in demand for energy and increasing energy prices. has been unpredictable giving a high frequency of market-related halts in our produc- tion process. Energy consumption levels increase signicantly during starts and stops of the machines without any 54 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 saleable production. Beside the frequent starts and stops, the shorter order ow also meant that the grades of paper produced were changed more often than usual. The paper machines also consume more energy when changing grades. In 2020 the construction phase for a new hydro powerplant in Munkedal was nished. The plant will double the hydropower production at the mill from 12 GWh to 25 GWh per annum. Since January 2021 it has been running the regular production runs a regular production. During 2021 the erection of solid fuel boiler was started. The boiler is planned to come into operation at the beginning of Q3 2022. The new boiler is designed to be able to handle a broad spectrum of different solid fuels such as bark, peat, branches, demolition wood and sorted burnable waste such as plastic, scrap wood, paper, textiles etc An energy mapping of the total opera- tion in Munkedal has been done over the course of the year and a number of poten- tial energy saving projects has been listed. On the other hand, the product variety at the mills has gradually changed into the direction of packaging grades with higher demands for strength thus demanding more rening energy. 55 4. ENVIRONMENT AND CLIMATE In Kostrzyn a press section in Paper Machine no. 1 has replaced the traditional model with a shoe press. This gave us a signicant decrease in thermal energy consumption and a small increase in elec- trical energy. In addition, older reners in the Kostrzyn mill have been replaced with new, state-of-the-art equipment giving improved quality and lower specic energy consumption. In 2020 a new vacuum equipment (turbofans) was installed. One of the most recent projects completed in 2021 in Kostrzyn is the launch of a solar panel farm with a capacity up to 1MWp, which increases the share of renewable energy in the mill's total energy consumption. KEY PERFORMANCE INDICATOR TARGET 2025 2021 Total net specic energy consumption (MWh/tonne paper) 1.9 2.2 Total net energy consumption (GWh/year) 1320 1419.7 Total production of paper (in tonnes) 695,000 636,613 In Grycksbo a number of energy projects completed in recent years altogether contribute an energy saving comparable with the energy consumption of 480 regular households in the Nordic region. An important project for energy saving was the replacement of old reners with modern energy-efcient machines. Below you can nd the latest gures on our energy consumption, one of our key performance indicators regarding environmental sustainability. The specic energy consumption reported in the table below is expanded compared to the previous reporting year (also by historical data) by including purchased heat. 56 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 Emissions Carbon neutrality of business opera- tions is one of the main determinants of a sustainable approach by industries. Pollutants created during the energy production process leave our mills through chimneys as air pollutants, and biomass ash. Air pollutants, in particular CO 2 , accumulate in the atmosphere, contributing to climate change. Emission levels are monitored by management. Emissions carry an environmental cost, and they can also be associated with considerable nancial, legal and commer- cial costs for our business. By denition – carbon neutral means – “if something such as an organisation or activity is carbon neutral, it removes the same amount of carbon dioxide from the environment as it releases into the environment” 1 . Packaging pillars by 2030 and on all pillars(- together with energy and pulp pillars) by 2035. We have been dedicated to reducing emissions for several years. Historically, the most important step in reducing CO 2 emissions was made in Kostrzyn in 2007, when the coal boiler was replaced by a modern natural gas boiler equipped with gas turbines and counter-pressure steam turbines, and in Grycksbo in 2008, when a signicant investment in a biomass boiler was made, making the steam generation process at the mill fossil-free. Our new 4P Strategy has set out a road map which will helps us to reach our carbon neutrality goal and increase diversication of energy sources based on renewable sources including: solar panels, hydropower and wind turbines. One of the most recent projects in this area implemented at the Kostrzyn mill is modernisation of the PM1 recuperation system with an effective reduction of heat consumption and CO 2 emissions by 2,784 tonne/year. The upgrade of the venting system at PM1 and PM2 which allows heat recovery has resulted in a reduction of heat consumption and CO 2 emissions by 1,575 tonne/year and by 3,725 tonne/ year, respectively. We also encourage and help our employees to contribute toward our common goal of becoming a carbon neutral business and community. We believe that every small effort or single change in our daily routine, which reduces our carbon footprint, has a signicant impact on climate. One of those small improvements and inputs into a sustain- able work environment is the installation of charging stations for employees’ electric cars at the Grycksbo mill. Employees utis- lising bio energy for domestic heating can also benet from a rebate agreement with a local bio energy supplier. Below we present our greenhouse gas emissions levels based on Green- house Gas Protocol (GHG Protocol) accounting and reporting standards to measure, quantify and manage greenhouse gas emissions. 1 Cambridge Business English Dictionary © Cambridge University Press 57 4. ENVIRONMENT AND CLIMATE KEY PERFORMANCE INDICATOR (KG CO 2 /TONNE PAPER) TARGET 2025 2021 Direct CO 2 emissions 215 199 Indirect specic CO 2 emissions from external electricity suppliers 1 – 11 Indirect specic CO 2 emissions from our major supplier of raw material 2 60 78 Indirect specic CO 2 emissions from our transporters 3 35 33 Total indirect specic CO 2 emissions 115 122 Total specic CO 2 emissions – 321 Total CO 2 emissions (k tonnes /year) – 204 Total production of paper (in tonnes) 695,000 636,613 THE GHG PROTOCOL CORPORATE STANDARD CLASSIFIES A COMPANY’S GHG EMISSIONS INTO THREE ‘SCOPES’. Scope 1: direct emissions from sources owned or controlled by the company. Scope 2: indirect emissions from the generation of purchased electricity consumed by the company. Scope 3: all other indirect emissions (not included in scope 2). This includes emissions that occur in the value chain of the reporting company, including both upstream and downstream emissions, which occur from sources not owned or controlled by the company. We have divided this group into two sections, relative to the most rele- vant participants in our supply chain: suppliers of raw materials (including pulp, ller coating pigment totally covering >90% of purchased raw material value ) and transportation companies. 1. Figures describing the average CO 2 load for the national grid in Poland and Sweden . 2. Covering >90% of the purchased raw materials (calculated as purchase value). 3. Figure based on average delivery points in Europe. Figures for direct CO 2 emissions from 2016-2020 have been recalculated and the contribution from externally-sold energy has been deducted. The CO 2 contribution from externally-sold energy is presented in the next table. 58 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 CO 2 CONTRIBUTION FROM ENERGY SOLD (HEAT AND ELECTRICITY) TO EXTERNAL CONSUMERS 2021 Exported energy (GWh/year) 103 Tonne CO 2 per GWh 228 Tonne CO 2 per year 23.4 During 2021 a larger fraction of steam was produced with imported exces heat from another company close to our production site at Kostrzyn mill, thus less natural gas was consumed and this led to lower direct CO 2 emissions. As we are not in full control of the amount of surplus heat from our neighbour we have set the target based on an average external heat delivery. The indirect specic emissions from our transporters are lower than in 2020 as a consequence of higher share of intermodal transport (combination of road and railroad transport). This set up causes longer delivery times, which under current pandemic circum- stances is accepted by our customers. It should be noted that the CO 2 gures from our external sources are based on the most recently available data. In most cases, we used data from 2020 as not all of our external partners were able to provide us with 2021 data at the date of publication of this report. 59 4. ENVIRONMENT AND CLIMATE 4.3. Sustainable circular production and waste A sustainable circular production system Arctic Paper is part of an industry that is to a large extent based on renewable wood from rationally managed forests. We are proud of being part of a sustainable circular production system. This means that resources are used, reused and recycled with little or no waste. In our case, the circular system starts with the renewable raw material wood. 60 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 The base in the circular system is the ever grooving forest and the renewable raw material that is fetched therefrom. 1. RAW MATERIAL Arctic Paper only buys pulp based on raw material from sustainably managed forests. This is ensured by the FSC and PFSC certi- cations. Pulp wood is a renewable raw material that comes from thinning and felling and consists of wooden parts that can't be used as timber. 2. PULP MILL Artic Paper purchases pulp from various suppliers and owns 51% of the Swedish pulp manufacturer Rottneros AB, with two ISO 14001 certied mills. Rottneros has its own sustainability report at www.rottneros.com 3. PAPER MILL Arctic Paper’s three paper mills are ISO 14000 and EMAS certied. To minimize CO2 emis- sions, Arctic Paper invests in sustainable energy. Grycksbo has a completely fossil-free energy solution. In Munkedal, similar investments are being made in a biomass boiler, and hydropower is expanded from 12 to 24 GWh. 4. CONSUMER Arctic Paper is a premium manufacturer of graphic paper and kraft paper. For customers, re- newable, circular and recyclable raw material as well as sustainable production are impor- tant factors in the choice of supplier. 5. PAPER RECYCLING All Arctic Paper’s paperboards are recyclable and part of a circular system. A large part of all pack- aging as well as graphic paper is recycled and reused, for example, for the produc- tion of newsprint and tissue. 6. BIOMASS FUEL The by products from the pulp and paper mills, such as logging residue, tall oil and bark, are further rened into biomass fuels. The combustion of biomass fuel emits carbon dioxide, which the growing forests reabsorbs from the air as a step of the photosynthesis cycle. 1. RAW MATERIAL 2. PULP MILL 3. PAPER MILL 6. BIOMAS FUEL 5. PAPER RECYCLING 4. CONSUMER CO 2 CO 2 61 4. ENVIRONMENT AND CLIMATE Most of the waste emanating from our plants is sorted and sent to external recycling. Comparably smaller volumes of waste are used for energy recovery or are sent to land- lls, and even smaller volumes of dangerous waste are sent for controlled destruction by third party contractors. All our mills use certied handlers of waste. The volumes of different kinds of waste are appropriately reported to the handlers and the authorities. We closely monitor these values to ensure we maintain our waste manage- ment balance year-on-year and constantly improve waste recycling efciency. Waste KEY PERFORMANCE INDICATOR TARGET 2025 2021 Recycling or energy extraction (tonne/year) 6,950 5,697 Recycling or energy extraction (kg/tonne of paper) 10 8.9 Hazardous waste (tonne/year) 139 85.5 Hazardous waste (kg/ tonne of paper) 0.2 0.13 Landll (tonne/year) 139 156 Landll (kg/tonne of paper) 0.2 0.25 Total production of paper (tonnes) 695,000 636,613 Waste volume may vary from one year to another as the volume of gener- ated waste to some extend is dependent on (re)construction and/or scrapping projects, thus the target is set in a long time perspective. 62 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 4.4 Water Water is an indispensable resource in the paper production process. It is used to slush the pulp into a bre stock, and then to transport bres to the paper machine headbox. Since the stock is dewatered once it is placed in the paper machine, most of the water can be reutilised in the mill. Water which is not recirculated is puried on-site, before being released back to the rivers from which it came – Warta, Munkedalsälven and Grycken. Internal efuent treatment plants conduct mechanical, biological and chemical treatments. At the same time, the sepa- rated deposit from the efuent treatment is mixed and dewatered, and then recy- cled as a soil improver or raw material for coverage of historically polluted areas such as old deposits. We carefully monitor the quality of our water outputs; most notably we focus on Chemical Oxygen Demand (COD). COD indicates the effect the discharge water will have on the receiving environment; in our case the three rivers Warta, Munked- alsälven and Grycken. It measures organic compounds which consume oxygen during decomposition very high levels of oxidisable organic material may be detrimental to aquatic life forms. As good practise, we also monitor the quality of our water inputs, exceeding the require- ments set by regulators. We have implemented a program- me to reduce our emissions to wa- ter at our mill in Munkedal. Part of the programme was the installation of a separate water purication sys- tem for the power supply station in order to improve our opportunities for water recycling. The decrease of COD level is mainly a consequence of better oper- ating conditions in our Kostrzyn mill. A modernisation of the vacuum system was conducted, replacing old water ring vacuum pumps with turbofans, which have had important water-saving prop- erties. Few of the most recent initiatives in this area include an upgrade and improvement of the mechanical raw water purication plant at the Grycksbo mill and rebuilding of the water intake piping at the Kostrzyn mill. 63 4. ENVIRONMENT AND CLIMATE Our mill in Grycksbo has participated in a project organised by the Swedish Forest Industries Federation regarding the environmental impact of old sedi- ments. The main objective of this project was to improve the current monitoring programmes in order to be able to eval- uate the impact and ecological signicance of sludge emissions. In order to assess the degree of environmental impact, a selected group of sh perch - was tested. KEY PERFORMANCE INDICATOR TARGET 2025 2021 Water consumption (m 3 /year) 4,865,000 5,218,369 Specic water consumption (m 3 /tonne of paper) 7.0 8.2 Emissions of COD to water (tonne per year) 292 308 Specic emissions of COD to water (kg/tonne paper) 0.42 0.48 Total production of paper (in tonnes) 695,000 636,613 Using sh for environmental impact studies is a method that has been used for decades by the Swedish environmental monitoring system. One of the goals of the project was to also collect historical data and compare them with current data. In addition, the harvested sh were used to assess their health and reproductive capacity, and to develop a standardised procedure for this that could be included as part of future environmental monitoring programmes. 64 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 Due to the COVID-19 pandemic the frequency of halts in production and changing of grades produced has been much higher than usual. Unfavourable production conditions caused by the changing market situation had a large impact on the unit level of water consump- tion. As the central functions in our efuent treatment plants are based on biological degradation of pollutants, consistent oper- ating conditions are important for optimal function. Due to the many starts and stops in production and grade changes, working conditions for the efuent treatment plants was less favourable during 2021. Despite this 2021 is showing a lower specic water consumption compared to 2020 and 2019. The specic water consumption in Munkedal since 2019 has increased as a consequence of the ongoing construction of a new hydropower plant there. During construction, a recirculation pipe for efuent water to in-going fresh water has been dismantled. The new hydropower plant was put in to operation at the end of December 2020 and since then the situa- tion, from this perspective, has normalised. 65 4. ENVIRONMENT AND CLIMATE 4.5 Biodiversity CASE STUDY: Arctic Paper Munkedals AB has implemented Habitat improvements in the Munkedal river. We carry out this habitat improvement work in order to create better condi- tions for all migratory sh. The Munkedal river has been used for the oating of round wood. In the 17th century all major stones were removed from the river bed to facilitate this activity. These stones and blocks have probably been used for construction and to strengthen the river banks. The Munkedal river has a naturally reproducing popula- tions without any cultivation of juvenile salmon. The wild salmon spawn in watercourses where the young salmon grow for two years before they migrate as salmon smolt (at a length of about 15 centimeters) to the sea to grow further, returning and after a few years to their birth river for spawning. Salmon and seatrout fry and smolt are strongly territorial and depend on protection in the form of stones of various sizes. It is very important for the populations of salmon and sea trout to nd places for shelter and to hide from the current. It is also important that there are enough large stones and blocks to increase the number of territories and sites. In principle, the more stones and blocks, the more salmon and trout can inhabit a certain area of river. 66 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 Larger boulders and smaller stones have therefore been placed out in the river to create shelter and a more irregular water surface to protect the young salmon from predators. Gravel beds have been created so smaller sh can be safe when there is less water in the river. Such gravel beds are also the ideal substrate for the salmon to hide their eggs in during spawning. Our hope and aim is that this project strengthens the salmon and seatrout population and improves the habitat for other species living in the Munkedal river. The increased amount of shelter heightens the population’s resil- ience to coping with periods of drought. The Munkedal and Örekil rivers, which belong to the Örekil river water system, open in to the Nature protected Gullmars- fjord in Munkedal municipality. The water course is a spawning and reproduction area for the genuine and original salmon and seatrout populations. This salmon population is a priority species and must be preserved within the Örekil Natura 2000 area. Test shing in the Munkedal and Örekil river has been carried out annually since the 1980s. It’s a sh conservation measure that is used to get an idea of the sh population in the water. The yearly control programme consists of aquatic chemical sampling, benthic faunal surveys and sample shing approved by the county administrative board. To get comparable results, it is important that the electric shing takes place in equal conditions with regards to temperature, water ow and time of the year. After being weighed and measured, the young salmons and seatrouts are gently released again. 67 4. ENVIRONMENT AND CLIMATE PEOPLE 68 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 5.1 Working at Arctic Paper – Management approach Arctic Paper takes responsibility for our employees, other people working for us and the societies in which we operate. Our employees are one of the most important stakeholders inArctic Paper. We consider our employees as our most valuable resource. We believe every employee should be treated with respect. This is also declared in our Sustainability Policy and in our Code of Conduct. We strive to make our units safe workplaces, where employees have equal opportunities for development. We are aware of the fact that continuous dialogue with our employees is benecial for both sides: for employees – by giving them an opportunity to express their needs and concerns, and for us – to understand what is important to them, and thus what should be important to us. We believe in observing our social responsibilities and being a partner in the development of the society in which we are located. By doing this we create an environment which is attractive to live and work in. Working today means agile commitment to new conditions due to digitalization, societal changes or new demands from clients. We are proud of the exibility and the adaptation of our employees in these fast changing and challenging times. Michał Jarczyski CEO Arctic Paper S.A. 69 5. PEOPLE Employment structure of Arctic Paper TOTAL MEN WOMEN AGE<30 AGE 30-50 AGE>50 2021 Blue-collar 765 640 125 128 320 317 White-collar 401 242 159 19 204 178 70 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 No major reorganisations have taken place during 2021, hence the overall workforce structure is unchanged. Arctic Paper’s intention is to offer employees standard, permanent unlim- ited employment agreements in our operations for the purpose of providing employment security and stable work conditions. Only substitutes for vacan- cies and project-hired persons have limited employment agreements. 2021 Number of permanent unlimited contracts 1166 Number of temporary contracts 35 Employee turnover rate KEY PERFORMANCE INDICATOR TARGET 2025 2021 AVERAGE 2018-2020 Turnover <10%/year 5.8 n/a New Hires – 53 56 Resigned – 37 54 Retired – 31 26 DEFINITION HOW WE CALCULATE THIS KPI Annual turnover rate % = Number of emloyees who left the company (with permanent contracts) (Beginning + ending number of employees) / 2 × 100 71 5. PEOPLE 5.2 Our employee well-being and satisfaction The well-being of our employees is of crucial importance to our company. Well-being is strongly associated with engagement. Working conditions and employee satisfaction are the top mate- rial topics emphasised by our employees in our Materiality Matrix research. Surveys carried out among our employees show that the opinion on well-being has changed due to the pandemic situation. In order to meet the needs of our employees we have to redesign our future attitude to well- being. We have to be more responsive by widening the range of well-being activities and preventative by rede- signing work and people processes and the work environment. We need put more effort into understanding of well-being needs, and encouraging our employees to seek new activities that can be safer and more valuable in the new work environment. We promote an empathetic manage- ment attitude and want to provide exibile work conditions whenever it’s possible, something that can help to improve the working conditions. WE ARE COMMITTED TO: • Understand the reasons why employees currently do not participate in well-being programmes and helping them to nd new opportunities; • Identify underlying drivers of poor employee wellness and rede- signing of work and people processes in order to prevent future problems; • Offer a exible work environment – not just exibility as to when and where individuals get to work, but exibility in all aspects of work, helping employees feel autonomous in making decisions about what works best for them. • Train and provide our managers with clear guidance on what to do, and more importantly, what not to do, in order to effectively support employees’ emotional health. 72 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 BENEFITS AND INITIATIVES INFLUENCING OUR EMPLOYEES AND THEIR FAMILIES WELL-BEING Our mills support our employees and their families by granting them extended social benets programmes. We encourage good habits and healthy lifestyles. We organise and support different health programmes such as non-smoking and eating healthy food. We also provide regular medical examinations for our employees. We offer wellness allowances that employees can choose how to use their needs and interests. WE SPONSOR EVENTS AND DIFFERENT ACTIVITIES IN THE LOCAL COMMUNITY, IN WHICH OUR EMPLOYEES AND THEIR FAMILIES ARE ABLE TO PARTICIPATE. OUR ACTIONS: • Supporting local sport clubs and cultural events such as a donation for the development and promotion of wrestling association in Kostrzyn, or the Grycksbo mill sponsoring IBF Falun – a championship oor-ball club and ice hockey club in Sweden; • Organising sports competitions for employees e.g. shing competitions; • Donating paper to schools and kindergartens; • Co-nancing purchase of ENT- otolaryngology and head diagnostics equip- ment by Kostrzyn mill; • Sponsoring health benets programmes and insurance for employees at mills; • Funding Christmas vouchers and organising Christmas celebrations with gifts for mill employees’ children; • Offering reduced costs vacations at summer cottages in Sweden; • Supporting our retired employees’ organisation by co-nancing summer camp and organising regular events Our annual budgets for sponsorships and charity activities in 2021: APGrycksbo: 200 thousand SEK APKostrzyn: 54 thousand PLN APMunkedals: 1 million SEK (including sponsorship to the school, without school support abt. 200 thousand SEK) 73 5. PEOPLE Our Employees satisfaction ENGAGEMENT METRIC ARCTICPAPER 2021 ARCTICPAPER 2019 BENCHMARK Culture/Values 42% 31% 53% Compensation & Rewards 21% 43% 68% In 2016 we decided to start measuring our employees satisfaction and set our targets using benchmarks from similar industries in Europe. Over the years we have implemented activities to increase both the numbers of participants and the engagement capital. After the 2019 result we faced problems in engaging and implementing activities among our employees. Despite the pandemic situa- tion in 2020 and 2021, 2021 result shows an increase in the engagement capital. Our greatest strengths comparing to benchmark, where we also see an increase of satisfaction over the years, are job search behaviour and agility factors. Our employees seems to desire to stay in the company, which also our employee turn over rate shows. ENGAGEMENT METRIC ARCTICPAPER 2021 ARCTICPAPER 2019 BENCHMARK Job-Search Behavior 76% 72% 63% Agility 45% 44% 36% * Job search behavior refers to employees’ desire to stay with the organization, based on whether they intend to look for a new job within a year, whether they frequently think of quitting, whether they are actively looking for a job, or have begun to take tangible steps like sending out resumes. Responses for the job search behavior questions are reversed scored as a result, the percentage of employees scoring favorably equals the percentage of employees who “intend to stay” or have no intention of leaving the organization. ** The organization’s ability to sense and respond to change. Work today is multi-directional, reporting lines are more complex and markets are less predictable. Agile organizations that adapt to this new work environment through effective change management can increase the probability of change success. Firms with high levels of agility have better nancial outcomes because they are able to sustain engagement over time despite change. We continuously improve our organiza- tion and adopt quickly to new working methods and work conditions. We see an overall positive increase when we measure employee perceptions of how well the organization has estab- lished corporate values. We will also implement updated corporate values in our 4P strategy framework and continue to strive for overall recognition among our employees. In compensation and rewards factors we measure employees’ perception of pay fairness and recogni- tion. We are aware of our weakness in this area, partly in connection with the complicated pandemic situation and we will put more efforts in communication of performance levels in the company. 74 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 KEY PERFORMANCE INDICATOR TARGET 2025 2021 Employee survey response rate 65% 65% Overall engagement capital 55% 51% Recruitment and talent acquisition At Arctic Paper we know that our employees are our organisation’s most valuable asset. Our goal is to recruit, develop and educate our employees, so they can support the organisation with their talents and personal skills, and thus ensure the effective management of Arctic Paper today and in the future. OUR KEY PRINCIPLES • We treat internal and external applicants with the same professionalism and respect for the individual; • Our recruitment processes are open and clear in communication with the applicants, as well as fair and uniform throughout the company; • We promote and offer equal opportunities for applicants for same positions; • We focus on competences and value personal interests and ambitions; • We create opportunities for promotion for current employees while recruiting new employees 75 5. PEOPLE DEVELOPMENT AND TRAINING OF OUR EMPLOYEES • We believe in equality of opportunity when it comes to development. Mill-level procedures are in place to guide our recruitment and remu- neration processes; • We remunerate employees according to their qualications and the value they create for the company. We make employees' remunera- tion dependent on the results achieved at work and the company's condition. Adjustment to local conditions necessitates the use of slightly different systems between our mills. Our employees’ remu- neration depends on their results at work, the agreement between the trade unions and the company’s economic situation. All condi- tions are documented and communicated accordingly. We also have a separate remuneration policy for management at the group level. We annually make regular payroll overviews at all our mills; • We provide the possibilities for employee development in accord- ance with the company's needs and the development of the compa- ny's environment; • We create interpersonal relationships in the company in accordance with our company’s principles; • We create a exible organisation with a minimal hierarchy; • We inform employees correctly and promptly about important company matters; • We pay attention to work-life balance; • We mainly focus on development connected to improving the H&S work environment, which means a focus on legal certicates and training in those positions. A crucial part is the on-boarding process to make sure that employees can perform their tasks safely. 76 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 Performance conversations We intend that every employee should have a yearly performance conversa- tion. This will help them to understand how they can contribute towards the company goals and to develop their skills and abilities. We believe that this will create a synergy effect which will positively impact the work environment and bring tangible benets to our business. KEY PERFORMANCE INDICATOR TARGET 2025 2021 Number of performance conversations 100% 48% 77 5. PEOPLE 5.3 Human rights Arctic Paper Group respects and promotes international human and labour rights. We expect the same commitment from our suppliers and subcontrac- tors, to which we refer in the Code of Conduct for Suppliers of Arctic Paper. • We do not allow discrimination or harassment of any kind directed at any group: employees, customers, suppliers. • Our employees have the right to organise them- selves, join associations and to negotiate with the company. • We do not allow forced or child labour neither in our mills nor on the part of our suppliers. • We always comply with local laws related to human rights. • We do not allow any form of forced labour or other abuses. • We offer our employees decent working condi- tions and care about their wellbeing. • We expect our suppliers to respect their workers’ right to form or join associations; refrain from any form of discrimination toward employees or their contractors and to provide a safe and healthy work environment. We have put measures in place to report situ- ations where human rights are violated in any way because of Arctic Paper Group operations. We have implemented a whistleblower system which enables our employees and busi- ness partners to report situations or behaviours which are not in line with Arctic Paper Group values and ethical prin- ciples, and can seriously affect our organisation or a person's life or health. Overall, we are committed to protecting the human rights of our employees. At the same time, we know that this issue also involves other, external actors in our value chain. This aspect is further explained in the “Responsible supply chain” chapter. 78 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 5.4 Health and safety Health and safety are top priority issues for us. We are creating a work environ- ment which prevents and minimises the risk of injuries. We have a systematic approach to safety at our mills. In 2019 we implemented a common health and safety policy and started cooperation between the mills in H&S issues. Each mill has also implemented its own site-specic health and safety policy, complemented by appropriate routines and procedures. Our mills have an occupational health service, as well as rescue teams trained to react in case of emergency. Some of our employees are also part of the local re brigade, trained to respond to both internal and external incidents and accidents. We carefully analyse all health and safety incidents raised by our employees, and take actions to avoid serious consequences in the future. • We maintain a register of “near misses” and accidents, where all incidents are recorded investigated and analysed. • We propose action plans to mitigate the risk that a near-miss could become a serious accident. Today, very few accidents are caused by equipment malfunctions. A signicant risk factor is human errors, hence the focus within work safety is becoming more and more oriented towards creating a safety culture based on the basic idea of “think rst, then do”. Risk assessment before any new machinery is put into operation or working method implemented is the most important tool for increased safety. Our target in this area is to create a zero-injury environment. As we are very concerned of the nega- tive development regarding number of injuries, we will increase our focus on behavioural safety and on preventive activities in order to further develop our safety culture. Lost time injuries per million work hours 10 0 Target 2025 2021 <4 11.3 79 5. PEOPLE 5.5 Diversity and inclusion AS A COMPANY WE COMMIT THAT: • When looking for new employees and conducting the hiring process, we focus on the candidate's skills and accomplishments; • We pay employees according to their position assessment, qualica- tions, experience and performance, regardless of diversity factors; • That each of our employees is entitled to respect and equal treat- ment is the basis for organisational performance; • We enable our employees to report (anonymously or not) any complaints about possible mobbing or unequal treatment; • We will train managers how to manage a diverse team and make the most of its potential; • We provide a work environment suitable for both men and women to work in. MANAGEMENT APPROACH AND INITIATIVES Arctic Paper Group promotes a culture of openness, and we see diversity as a strength that helps the organ- isation grow. It is a source of new ideas and innovation. The key principle for us is respect for diversity. There is no place in the company for discrimination against anyone because of gender, origin, age, religion, political or religious views, disability or other factors. Each of our employees has the chance to develop within the organ- iation and we try to offer them as many opportunities as possible to use their talents and skills. IN 2021 WE HAVE IMPLEMENTED DIVERSITY POLICY WHICH IS APPLICABLE TO ALL EMPLOYEES OF ARCTIC PAPER, REGARDLESS OF THE POSITION THEY HOLD WITHIN THE COMPANY. 80 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 Diversity among employees and within the Board As explained in our Code of Conduct, Sustainability policy and Diversity policy, we do not accept any discrimination in our business operations. Arctic Paper Management Board has been striving to employ competent, creative people, holding appropriate qualications, profes- sional experience and education and who respond to the company’s needs. The Arctic Paper sees diversity as a strength. It is a tool for new ideas and innovations. We want Arctic Paper to mirror the societies in which it operates, and we want to make sure we promote and integrate people of diverse backgrounds. Since 2018, our Management Board is made up of a Chief Executive Ofcer and a Chief Financial Ofcer. These functions were entrusted to two specic persons, irrespective of their gender, based on their professional background and experience. 2021 Total count of Management Board 2 % of women on the Management Board 0% % of men on the Management Board 100% THE SUPERVISORY BOARD OF ARCTIC PAPER S.A. 2021 Total count of Supervisory Board 5 % of women on the Supervisory Board 40% % of men on the Supervisory Board 60% THE MANAGEMENT BOARD OF ARCTIC PAPER S.A. Employment structure by gender in 2021 20 0 Men Woman 76% 24% 40 60 80 81 5. PEOPLE TAXONOMY 82 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 For the rst time in this report, Arctic Paper Group discloses information on the so-called the EU Taxonomy of environmentally sustainable activities. Obligations related to this were introduced by Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on establishing a framework to facilitate sustainable investments. Pursuant to the Commis- sion Delegated Regulation (EU) 2021/2178, in the rst year of application, Arctic Paper Group discloses the percentage of turnover, capital expenditure and operating expenditure eligible for the taxonomy, without the need to verify the Technical Eligibility Criteria, i.e. to determine what percentage of these three values is associated with environmentally sustainable activities. The following principles were used to calculate the percentage of turn- over, capital expenditure (CapEx) and operational expenditure (OpEx) eligible for the taxonomy: Turnover With regard to the turn- over, the basis was the total consolidated reve- nues of the Arctic Paper Group in 2021, disclosed in the consolidated nan- cial statement under the item "Revenue from the sale of paper and pulp" described in note 10. The numerator is assigned to the revenue from activ- ities qualifying for the taxonomy. CapEx With regard to capital expenditures (CapEx), the basis was capital expenditures settled in the Arctic Paper Group in individual factories and in the headquarter. The entire CapEx is included in the consolidated nan- cial statements under the item increases in non-cur- rent assets in note 16 and intangible assets in note 19.The numerator has that part of CapEx that is for eligible activities for the taxonomy. OpEx With regard to operating expenses (OpEx), the basis was constituted by all costs for the day-to-day servicing of the company's assets and for keeping them in proper condition. They include such costs as: personnel costs of persons responsible for maintenance and repairs, costs related to repairs and renovations of devices / installations. The part of the OpEx which relates to the activities qualifying for the taxonomy is assigned to the numerator. 83 6. TAXONOMY 1. Percentage of taxonomy-eligible turnover Arctic Paper Group generates revenues mainly from the production and sale of paper and pulp. This activity is not included in the taxonomy of Annexes I and II to the Climate Delegated Act (Commission Delegated Regulation (EU) 2021/2139). In 2021, Arctic Paper Group identied 5 business areas, the revenues from which qualify for systematics. ACTIVITY TAXONOMY-ELIGIBLE CODE VALUE '000 PLN SHARE % Transmission and distribution of electricity 4.9. 1,540.2 0.05% Renewal of water collection, treatment and supply systems 5.2. 75.2 0.00% Renewal of waste water collection and treatment 5.4. 35.6 0.00% Renovation of existing buildings 7.2. 1,703.1 0,05% Installation, maintenance and repair of energy efciency equipment 7.3. 1,333.0 0.04% TOTAL A 4,687.1 0.14% ACTIVITY TAXONOMY-ELIGIBLE VALUE '000 PLN SHARE % Turnover on activity taxonomy-non-eligible (B) 3,407,888.5 99.86% TOTAL A + B 3,412,575.6 100.00% 2. Percentage of taxonomy-eligible capital expenditure (CapEx) Capital expenditure (CapEx) qualifying for the taxonomy is related to the implemen- tation of future investment projects resulting from the adopted strategy of the Arctic Paper Group. Most of the indicated capital expenditures relate to projects aimed at improving the energy efciency of buildings, machines, devices and installations as well as diversifying energy sources – ie. installation of photovoltaic farms or building a hydropower plant, thanks to which it will be possible to systematically reduce energy consumption, which will contribute to the reduction of greenhouse gas emissions. 84 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 ACTIVITY TAXONOMY-ELIGIBLE CODE VALUE '000 PLN SHARE % Restoration of wetlands 2.1. 45.0 0.02% Electricity generation using solar photovoltaic technology 4.1. 3,842.3 2.03% Electricity generation from hydropower 4.5. 7,164.0 3.79% Electricity generation from bioenergy 4.8. 22,588.9 11.95% Transmission and distribution of electricity 4.9. 2,852.9 1.51% Installation and operation of electric heat pumps 4.16. 45.0 0.02% Construction, extension and operation of water collection, treatment and supply systems 5.1. 18.0 0.01% Renewal of water collection, treatment and supply systems 5.2. 4,250.5 2.25% Construction, extension and operation of waste water collection and treatment 5.3. 12,935.2 6.84% Renewal of waste water collection and treatment 5.4. 717.5 0.38% Collection and transport of non-hazardous waste in source segregated fractions 5.5. 1,091.7 0.58% Renovation of existing buildings 7.2. 3,266.1 1.73% Installation, maintenance and repair of energy efciency equipment 7.3. 4,971.2 2.63% Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings) 7.4. 85.1 0.04% Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings 7.5. 182.5 0.10% Data processing, hosting and related activities 8.1. 1,142.7 0.60% TOTAL A – 65,198.5 34.48% ACTIVITY TAXONOMY-ELIGIBLE VALUE '000 PLN SHARE % CapEx on activity taxonomy-non-eligible (B) – 123,890.7 65.52% TOTAL A + B – 189,089 100.00% 85 6. TAXONOMY 3. Percentage of taxonomy-eligible operating expenses (OpEx) The operating expenditure (OpEx) eligible for the taxonomy related to activities such as the repair and renovation of equipment, installations and buildings. They were related, inter alia, to with measures to improve the energy efciency of operational processes or to reduce greenhouse gas emissions. INCREASES IN TERMS OF VALUE '000 PLN NOTE Tangible xed assets without assets without the right of use 163,348 16.1 Right-of-use assets 13,976 16.2 Intangible assets 11,765 19 Investment properties – – 189,089 – 86 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 ACTIVITY TAXONOMY-ELIGIBLE CODE VALUE '000 PLN SHARE % Electricity generation from hydropower 4.5. 67.5 0.04% Electricity generation from bioenergy 4.8. 846.5 0.53% Transmission and distribution of electricity 4.9. 7,242.1 4.55% Storage of thermal energy 4.11. 22.5 0.01% Installation and operation of electric heat pumps 4.16. 4.5 0.00% Cogeneration of heat/cool and power from bioenergy 4.20. 114.8 0.07% Construction, extension and operation of water collection, treatment and supply systems 5.1. 450.0 0.28% Renewal of water collection, treatment and supply systems 5.2. 2,965.7 1.86% Construction, extension and operation of waste water collection and treatment 5.3. 630.0 0.40% Renewal of waste water collection and treatment 5.4. 2,905.3 1.82% Collection and transport of non-hazardous waste in source segregated fractions 5.5. 385.7 0.24% Composting of bio-waste 5.8. 918.0 0.58% Material recovery from non-hazardous waste 5.9. 265.5 0.17% Renovation of existing buildings 7.2. 1,743.8 1.10% Installation, maintenance and repair of energy efciency equipment 7.3. 45.0 0.03% Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings) 7.4. 90.0 0.06% Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings 7.5. 11.3 0.01% Data processing, hosting and related activities 8.1. 3,859.5 2.42% TOTAL A 22,567.7 14.17% ACTIVITY TAXONOMY-ELIGIBLE VALUE '000 PLN SHARE % OpEx on activity taxonomy-non-eligible (B) 136,656.0 73.84% TOTAL A + B 159,223.6 100.00% 87 6. TAXONOMY ABOUT THE REPORT 88 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 7.2 Contact ARCTIC PAPER S.A. ul. Fabryczna 1, 66-470 Kostrzyn nad Odrą, Poland [email protected] 7.1 Reporting period: the Year 2021 This report is prepared in line with the international GRI Stand- ards at the CORE level (with reference to TCFD - Task Force on Climate-related Financial Disclosures recommendations) and is not a subject to additional external audit . 89 7. ABOUT THE REPORT 7.3. ESG factsheet PAPER PRODUCTION 2021 2020 2019 2018 2017 Production (ton/year) 636,613 587,364 601,564 639,073 658,645 ENERGY 2021 2020 2019 2018 2017 Electricity from grid (GWh/year) 329.3 391.0 230.8 237.7 267.7 Electricity from internal sources: hydro- power, windpower, solar power (GWh/year) 20.6 0.264 3.4 9.4 10.1 Natural gas (GWh/year) 722.4 752.1 862.6 966.7 892.1 Bio fuels (GWh/year) 207.8 91.4 216.0 234.2 244.0 Purchased thermal energy (GWh/year) 241.3 193.9 186.5 212.6 215.0 Sold thermal energy (GWh/year) 53.1 46.7 44.7 45.4 45.8 Sold electricity (GWh/year) 49.6 71.1 71.4 59.1 63.7 Total net energy consumption (GWh/year) 1419.7 1311.6 1380.1 1547.8 1508.9 Net energy from renewable internal sources (GWh/year) 228 91 219 234 244 Total net energy consumption (MWh/tonne paper) – energy sold to external partners not included 2.2 2.2 2.3 2.4 2.3 Of which from internal energy production based on renewable sources – biomass and hydropower (MWh/tonne) 0.36 0.16 0.36 – – Net energy consumption for total energy export (thermal and electric energy) (GWh/year) 103 118 109 105 109 90 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 EMISSIONS TO WATER AND AIR 2021 2020 2019 2018 2017 Fossile CO 2 (tonne/year), from our own steam and electricity production 149,941 156,605 178,803 187,019 185,517 Fossile CO 2 (tonne/year), from our own steam and electricity production, dedicated for paper production 126,556 129,796 152,354 163,218 160,569 Direct CO 2 emissions kg/tonne – SCOPE 1 199 221 253 255 244 CO 2 emissions from energy sold (heat and electricity) to external consumers (tonne CO 2 /year) 23,385 26,809 24,948 23,800 24,948 CO 2 emissions from energy sold (heat and electricity) (tonne/GWh) 228 228 228 228 228 Fossile CO 2 (tonne/year), from purchased electricity 7,067 6,005 5,218 – – CO 2 emission factors for electricity from grid (kg CO 2 /MWh) (Sweden /Poland) 8.8/709.8 8.0/719 13.3/773 – – Indirect specic CO 2 emissions from external electricity suppliers – SCOPE 2 11 10 9 – – Indirect CO 2 emissions emanating from our major supplier of raw material (tonne/year) 49,668 43,003 43,826 – – Indirect specic CO 2 emissions from our major supplier of raw material – SCOPE 3 (kg/tonne of paper) 78 73 73 – – Indirect CO 2 emissions emanating from our transporters (tonne/year) 20,941 20,861 21,894 – – Indirect specic CO 2 emissions emanating from our transporters (kg/tonne of paper) SCOPE 3 32.9 35 36 – – WATER 2021 2020 2019 2018 2017 Water consumption m 3 /year 5,218,369 5,023,811 4,997,543 5,080,163 4,962,506 Specic water consumption (m 3 /tonne of paper) 8.2 8.6 8.3 7.9 7.5 Emissions of COD to water (tonne/year) 308 283 276 306 298 Specic emissions of COD to water (kg/tonne of paper) 0.48 0.48 0.46 0.48 0.45 91 7. ABOUT THE REPORT WASTE 2021 2020 2019 2018 2017 Recycling or energy extraction (tonne/year) 5,697 6,663 5,851 5,572 8,417 Recycling or energy extraction (kg/tonne of paper) 8.9 11.3 9.7 8.7 12.8 Hazardous waste (tonne/year) 85.5 269.7 117 202.2 107.1 Hazardous waste (Specic) (kg/tonne of paper) 0.13 0.46 0.20 0.32 0.16 Landll (tonne/year) 156 113.4 149.6 146 285 Landll (specic) (kg/tonne of paper) 0.25 0.19 0.25 0.23 0.43 SUPPLIERS 2021 2020 2019 2018 2017 Share(%) of core suppliers providing existing signed environmental declaration 90% 83% 98% 64% 75% Share(%) of core suppliers who signed the Code of Conduct for suppliers 90% 83% 85% n/a n/a Numbers of suppliers who are subject to audits performed by Arctic Paper to conrm compliance with the Code of Conduct for suppliers 1 3 4 n/a n/a Share(%) of pulp suppliers who are PEFC and/or FSC certied 100% 100% 100% 100% 100% TRANSPORTATION 2021 2020 2019 2018 2017 Share of Euro 3 engines class (%) 0% 0% 1% 1% 3% Share of Euro 4 engines class (%) 0% 1% 3% 6% 11% Share of Euro 5 engines class (%) 34% 44% 47% 54% 53% Share of Euro 6 engines class (%) 66% 55% 49% 39% 34% Indirect CO 2 emissions emanating from our transporters (ton per year) 20,941 20,861 21,894 – – Specic indirect CO 2 emissions emanating from our transporters (kg/ton) 32.9 35 36 – – 92 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 CUSTOMERS SATISFACTION 2021 2020 2019 2018 2017 Value of complaint as % of sales revenues 0.36 0.48 0.47 0.58 0.61 Sales revenues m PLN 2,431 2,016 2,309 2,293 2,248 HUMAN RESOURCES 2021 2020 2019 2018 2017 Worked Hours 1,770,249 1,755,076 1,835,225 1,878,369 – Number of Lost time injuries 20 12 16 16 – Lost time injuries per million worked hours 11.3 6.3 7.8 8.5 8.0 Total number of white collar employees 401 407 413 416 420 Total number of blue collar employees 764 774 770 807 811 Total number of white collar men employees 242 246 247 245 250 Total number of white collar women employees 159 161 166 171 170 Total number of blue collar men employees 639 655 652 683 682 Total number of blue collar women employees 125 119 118 124 129 Numbers of employees who participated in business ethics training during the year 381 32 20 179 34 Employee survey response rate (absolute) 745 n/a 855 n/a 629 Employee survey response rate (%) 65% n/a 74% n/a 52% Overall engagement capital 51% n/a 46% n/a 42% 93 7. ABOUT THE REPORT EMPLOYMENT STRUCTURE TOTAL MEN WOMEN AGE<30 AGE 30-50 AGE>50 2017 Blue-collar 811 682 129 92 365 354 White-collar 420 250 170 17 223 180 2018 Blue-collar 807 683 124 106 353 348 White-collar 416 245 171 16 220 180 2019 Blue-collar 770 652 118 110 315 345 White-collar 413 247 166 13 215 185 2020 Blue-collar 774 655 119 114 333 327 White-collar 407 246 161 16 212 179 2021 Blue-collar 765 640 125 128 320 317 White-collar 401 242 159 19 204 178 2021 2020 2019 2018 2017 Number of permanent unlimited contracts 1,166 1,181 1,183 1,224 1,229 Number of temporary contracts 35 17 31 28 26 2021 2020 2019 2018 2017 Total count of Management Board 2 2 2 2 2 % of Women on the Management Board 0% 0% 0% 0% 0% % of Men on the Management Board 100% 100% 100% 100% 100% 2021 2020 2019 2018 2017 Total count of Supervisory Board 5 5 5 5 5 % of Women on the Supervisory Board 40% 20% 20% 0% 0% % of Men on the Supervisory Board 60% 80% 80% 100% 100% 94 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 KEY PERFORMANCE INDICATOR BUSINESS RELATED NON-BUSINESS RELATED 2021 Fine bigger than 2 m PLN 0 0 Fine smaller than 2 m PLN 0 0 2020 Fine bigger than 2 m PLN 0 0 Fine smaller than 2 m PLN 0 0 2019 Fine bigger than 2 m PLN 0 0 Fine smaller than 2 m PLN 0 0 2018 Fine bigger than 2 m PLN 0 0 Fine smaller than 2 m PLN 0 0 2017 Fine bigger than 2 m PLN 0 0 Fine smaller than 2 m PLN 0 0 Business related legal cases are from customers. All others are dened as non-business. 95 7. ABOUT THE REPORT GRI INDEX 96 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 DISCLOSURE NUMBER GRI STANDARD TITLE DISCLOSURE NAME ADDITIONAL INFORMATION LOCATION IN THE REPORT Prole disclosures GRI 102-1 General Disclosures 2016 Name of the organization – Front page GRI 102-2 General Disclosures 2016 Activities, brands, products, and services – 1.1 Company Overview GRI 102-3 General Disclosures 2016 Location of headquarters – 1.1 Company Overview GRI 102-4 General Disclosures 2016 Location of operations – 1.1 Company Overview GRI 102-5 General Disclosures 2016 Ownership and legal form Consolidated Financial Statement of Arctic Paper Capital Group of 2021 – Shareholding structure 1.1 Company Overview GRI 102-6 General Disclosures 2016 Markets served – 1.1 Company Overview GRI 102-7 General Disclosures 2016 Scale of the organization – 1.1 Company Overview GRI 102-8 General Disclosures 2016 Information on employees and other workers – 1.1 Company Overview, 5.1 Working at Arctic Paper GRI 102-9 General Disclosures 2016 Supply chain – 3. Sustainable supply chain for client satisfaction GRI 102-10 General Disclosures 2016 Signicant changes to the organization and its supply chain No signicant changes in reporting period – GRI 102-11 General Disclosures 2016 Precautionary Principle or approach – 2.4 Principal risk and their management GRI 102-12 General Disclosures 2016 External initiatives – 1.1 Company Overview, 1.2 Governance and Business ethics, 2.2 Our contribution to the Sustainable Development Goals, 2.3 Responsible business GRI 102-13 General Disclosures 2016 Membership of associations – 2.5 Partnerships of Arctic Paper’s Partnerships Prole disclosures GRI 102-14 General Disclosures 2016 Statement from senior decision-maker – President of the Manage- ment Board interview GRI 102-15 General Disclosures 2016 Key impacts, risks, and opportunities – 2.4 Principal risk and their management 97 8. GRI INDEX DISCLOSURE NUMBER GRI STANDARD TITLE DISCLOSURE NAME ADDITIONAL INFORMATION LOCATION IN THE REPORT Ethics GRI 102-16 General Disclosures 2016 Values, principles, standards, and norms of behaviour – 1.1 Company Overview, 1.2 Governance and Busi- ness ethics, 2.2 Our contribution to the Sustainable Development Goals, 2.3 Responsible business GRI 102-17 General Disclosures 2016 Mechanisms for advice and concerns about ethics – 1.2 Governance and Busi- ness ethics, 2.3 Responsible business Governance GRI 102-18 General Disclosures 2016 Governance structure Consolidated Financial Statement of Arctic Paper Capital Group od 2021 1.3 Company’s structure and management on sustainability topics GRI 102-22 General Disclosures 2016 Composition of the highest governance body and its committees Consolidated Financial Statement of Arctic Paper Capital Group of 2021 - Statement on the appli- cation of the Corporate Governance Rules 5.5 Diversity and Inclusion GRI 102-21 General Disclosures 2016 Consulting stakeholders on economic, environ- mental, and social topics – 2.1 Materiality assessment GRI 102-23 General Disclosures 2016 Chair of the highest governance body Consolidated Financial Statement of Arctic Paper Capital Group od 2021 – GRI 102-26 General Disclosures 2016 Role of highest govern- ance body in setting purpose, values, and strategy – 1.3 Company’s structure and management on sustainability topics GRI 102-29 General Disclosures 2016 Identifying and managing economic, environmental, and social impacts – 1.3 Company’s structure and management on sustainability topics, 2.1 Materiality assessment, 2.4 Principal risk and their management GRI 102-31 General Disclosures 2016 Review of economic, environmental, and social topics – 1.3 Company’s structure and management on sustainability topics 2.1 Materiality assessment, 2.4 Principal risk and their management GRI 102-32 General Disclosures 2016 Highest governance body’s role in sustaina- bility reporting – – GRI 102-35 General Disclosures 2016 Remuneration policies Remuneration policy of Arctic Paper available as a separate document on webpage 1.3 Company’s structure and management on sustainability topics 98 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 DISCLOSURE NUMBER GRI STANDARD TITLE DISCLOSURE NAME ADDITIONAL INFORMATION LOCATION IN THE REPORT Stakeholders engagement GRI 102-40 General Disclosures 2016 List of stakeholder groups – 2.1 Materiality assessment GRI 102-41 General Disclosures 2016 Collective bargaining agreements Bargaining agreements are in place on mills level. – GRI 102-42 General Disclosures 2016 Identifying and selecting stakeholders – 2.1 Materiality assessment GRI 102-43 General Disclosures 2016 Approach to stakeholder engagement – 2.1 Materiality assessment GRI 102-44 General Disclosures 2016 Key topics and concerns raised – 2.1 Materiality assessment Reporting process GRI 102-45 General Disclosures 2016 Entities included in the consolidated nancial statements Consolidated Financial Statement of Arctic Paper Capital Group od 2021 1.1 Company Overview GRI 102-46 General Disclosures 2016 Dening report content and topic boundaries – 2.1 Materiality assessment GRI 102-47 General Disclosures 2016 List of material topics – 2.1 Materiality assessment GRI 102-50 General Disclosures 2016 Reporting period 01.01.2021 – 31.12.2021 6. About the report GRI 102-51 General Disclosures 2016 Date of most recent report Previous annual report published on March 16th 2021 – GRI 102-52 General Disclosures 2016 Reporting cycle Annual 6. About the report GRI 102-53 General Disclosures 2016 Contact point – 6. About the report GRI 102-54 General Disclosures 2016 Claims of reporting in accordance with the GRI Standards GRI Standards at the CORE level 6. About the report GRI 102-55 General Disclosures 2016 GRI content index – 6. About the report GRI 102-56 General Disclosures 2016 External assurance Assurance only to the extent required by the Act on statutory auditors and article. 49b paragraph. 9 of the Act about accounting 6. About the report 99 8. GRI INDEX DISCLOSURE NUMBER GRI STANDARD TITLE DISCLOSURE NAME ADDITIONAL INFORMATION LOCATION IN THE REPORT Specic disclosures on material topics Material topic: Health and safety of the employees GRI 103-1 Management Approach 2016 Explanation of the material topic and its boundary – Chapter 5 People GRI 103-2 Management Approach 2016 The management approach and its components – Chapter 5 People GRI 103-3 Management Approach 2016 Evaluation of the management approach – Chapter 5 People GRI 403-1 Occupational Health and Safety 2018 Occupational health and safety management system – 5.4 Health and safety GRI 403-2 Occupational Health and Safety 2018 Hazard identication, risk assessment, and incident investigation – 5.4 Health and safety GRI 403-3 Occupational Health and Safety 2018 Occupational health services – 5.4 Health and safety GRI 403-4 Occupational Health and Safety 2018 Worker participation, consultation, and communication on occupational health and safety – 5.4 Health and safety GRI 403-5 Occupational Health and Safety 2018 Worker training on occupational health and safety – 5.4 Health and safety GRI 403-6 Occupational Health and Safety 2018 Promotion of worker health – Chapter 5 People, 5.4 Health and safety GRI 403-7 Occupational Health and Safety 2018 Prevention and miti- gation of occupational health and safety impacts directly linked by busi- ness relationships – 5.4 Health and safety GRI 403-8 Occupational Health and Safety 2018 Workers covered by an occupational health and safety management system All workers are covered by an occupational health and safety management system 5.4 Health and safety GRI 403-9 Occupational Health and Safety 2018 Work-related injuries – 5.4 Health and safety 100 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 DISCLOSURE NUMBER GRI STANDARD TITLE DISCLOSURE NAME ADDITIONAL INFORMATION LOCATION IN THE REPORT Material topic: Customer satisfaction GRI 103-1 Management Approach 2016 Explanation of the material topic and its boundary – Chapter 3 Sustainable supply chain for client satisfaction, 3.4.Commitment to client satisfaction GRI 103-2 Management Approach 2016 The management approach and its components – Chapter 3 Sustainable supply chain for client satisfaction, 3.4. Commitment to client satisfaction GRI 103-3 Management Approach 2016 Evaluation of the management approach – Chapter 3 Sustainable supply chain for client satisfaction, 3.4. Commitment to client satisfaction Own measure – Value of complaints as share of sales revenue – 3.4. Commitment to client satisfaction Material topic: Climate change GRI 103-1 Management Approach 2016 Explanation of the material topic and its boundary – Chapter 4 Environment and Climate GRI 103-2 Management Approach 2016 The management approach and its components – Chapter 4 Environment and Climate GRI 103-3 Management Approach 2016 Evaluation of the management approach – Chapter 4 Environment and Climate GRI 305-1 Emissions 2016 Direct (Scope 1) GHG emissions – 4.2 Energy and emissions GRI 305-2 Emissions 2016 Energy indirect (Scope 2) GHG emissions – 4.2 Energy and emissions GRI 305-3 Emissions 2016 Other indirect (Scope 3) GHG emissions – 4.2 Energy and emissions GRI 308-1 Supplier Environmental Assessment 2016 New suppliers that were screened using environ- mental criteria – 3.2. Environmental assessment of suppliers and responsible sourcing Energy GRI 302-1 Energy 2016 Energy consumption within the organization – 4.2 Energy and emissions GRI 302-4 Energy 2016 Reduction of energy consumption – 4.2 Energy and emissions 101 8. GRI INDEX DISCLOSURE NUMBER GRI STANDARD TITLE DISCLOSURE NAME ADDITIONAL INFORMATION LOCATION IN THE REPORT Material topic: Water consumption management and minimizing water pollution GRI 103-1 Management Approach 2016 Explanation of the material topic and its boundary – 4.4 Water GRI 103-2 Management Approach 2016 The management approach and its components – 4.4 Water GRI 103-3 Management Approach 2016 Evaluation of the management approach – 4.4 Water GRI 303-1 Water 2018 Interactions with water as a shared resource – 4.4 Water GRI 303-2 Water 2018 Management of water discharge-related impacts – 4.4 Water GRI 303-3 Water 2018 Water withdrawal – 4.4 Water GRI 303-4 Water 2018 Water discharge – 4.4 Water GRI 303-5 Water 2018 Water consumption – 4.4 Water Material topic: Sustainable circular production system and waste management GRI 301-1 Materials 2016 Materials used by weight or volume – 4.3.Sustainable circular production and waste GRI 301-2 Materials 2016 Recycled input materials used – 4.3.Sustainable circular production and waste GRI 304-1 Biodiversity 2016 Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas – 4.3.Sustainable circular production and waste GRI 304-3 Biodiversity 2016 Habitats protected or restored – 4.5 Biodiversity GRI 306-1 Waste 2020 Waste generation and signicant waste-related impacts – 4.3.Sustainable circular production and waste GRI 306-2 Waste 2020 Management of signicant waste-related impacts. – 4.3.Sustainable circular production and waste GRI 306-3 Waste 2020 Waste generated – 4.3.Sustainable circular production and waste GRI 306-5 Waste 2020 Waste directed to disposal – 4.3.Sustainable circular production and waste Own measure – Results of test shing for fry – 4.5 Biodiversity 102 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 DISCLOSURE NUMBER GRI STANDARD TITLE DISCLOSURE NAME ADDITIONAL INFORMATION LOCATION IN THE REPORT Material topic: Working conditions and employee satisfaction GRI 103-1 Management Approach 2016 Explanation of the material topic and its boundary – Chapter 5 People GRI 103-2 Management Approach 2016 The management approach and its components – Chapter 5 People GRI 103-3 Management Approach 2016 Evaluation of the management approach – Chapter 5 People Own measure - Engagement capital – 5.2 Our employee well-being and satisfaction GRI 401-1 Employment 2016 New employee hires and employee turnover – 5.1 Working at Arctic Paper GRI 401-2 Employment 2016 Benets provided to full-time employees that are not provided to temporary or part-time employees – 5.2 Our employee well-being and satisfaction Material topic: Business ethics, legal & regulatory compliance, anti-corruption measures, transparency GRI 103-1 Management Approach 2016 Explanation of the material topic and its boundary – 1.2 Governance and Business ethics, 2.3 Responsible business GRI 103-2 Management Approach 2016 The management approach and its components – 1.2 Governance and Business ethics, 2.3 Responsible business GRI 103-3 Management Approach 2016 Evaluation of the management approach – 1.2 Governance and Business ethics, 2.3 Responsible business GRI 205-2 Anti-corruption 2016 Communication and training about anti-cor- ruption policies and procedures Business ethics training includes also anti-corrup- tion/anti-bribery topics 1.2 Governance and Business ethics, 2.3 Responsible business GRI 205-3 Anti-corruption 2016 Conrmed incidents of corruption and actions taken No incidents conrmed – Own measure – Number of employees completing the business ethics programme – 1.2 Governance and Busi- ness ethics Human rights protection in the workplace and in the supply chain GRI 412-3 Human Rights Signicant investment agreements and contracts that include human rights clauses or that underwent human rights screening – 3.1 Responsible supply chain, 5.3 Human rights GRI 412-2 Human rights 2016 Employee training on human rights policies or procedures Business ethics training includes also human rights topics 1.2 Governance and Business ethics, 5.3 Human rights 103 8. GRI INDEX DISCLOSURE NUMBER GRI STANDARD TITLE DISCLOSURE NAME ADDITIONAL INFORMATION LOCATION IN THE REPORT Training and development possibilities GRI 404-2 Training and Education 2016 Programs for upgrading employee skills and transi- tion assistance programs – 5.2 Our employee well-being and satisfaction GRI 404-3 Training and Education 2016 Percentage of employees receiving regular perfor- mance and career devel- opment reviews – 1.2 Governance and Business ethics, 5.2 Our employee well-being and satisfaction Diversity and inclusion GRI 405-1 Diversity and Equal Opportunity 2016 Diversity of governance bodies and employees – 5.5 Diversity and Inclusion GRI 406-1 Non-discrimination 2016 Incidents of discrimi- nation and corrective actions taken No incidents conrmed – Social engagement GRI 413-1 Local communities 2016 Operations with local community engagement, impact assessments, and development programs – 2.5 Arctic Paper’s Partnerships, 4.5 Biodiversity, 5.2 Our employee well- being and satisfaction 104 CORPORATE SOCIAL RESPONSIBILITY REPORT 2021 105 8. GRI INDEX
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