Environmental & Social Information • Mar 18, 2019
Environmental & Social Information
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2018
| Management foreword | 4 |
|---|---|
| Our business model | 5 |
| Our market | 9 |
| Materiality assessment | 10 |
| Our contribution to sustainable development goals | 13 |
| Key business performance indicators | 14 |
| Principal risks and their management | 17 |
| Environment | 19 |
| Management approach | 20 |
| Policies and procedures | 21 |
| Energy and climate change | 22 |
| Water | 23 |
| Waste | 24 |
| People | 25 |
| Management approach | 26 |
| Health and safety | 26 |
| Employee well-being | 27 |
| Diversity and human rights | 28 |
| Diversity on the board | 29 |
| Business operations | 30 |
| Management approach | 31 |
| Responsible supply chain | 31 |
| Business ethics | 33 |
A core aspect of running a sustainable business is having a long-term perspective, particularly in times of challenges and tough economic conditions. Arctic Paper has been in the paper industry since 1740, and with stable ownership dating back to the 1940s, we are well positioned to take on the challenges of many decades to come. For years we have strived to develop our business in a sustainable manner, and we will continue to do so no matter the external circumstances.
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The paper industry has an inherent longstanding relationship with nature. Sustainably managed forests are the source of our main raw material. All of Arctic Paper's mills have chain of custody certificates to ensure Arctic Paper produces paper based on truly renewable resources. The production process at Arctic Paper Grycksbo is carbon-neutral, and this is a key feature of our coated paper brand G, produced at the mill.
We want to create a sound balance between people, production and communities. A strategic initiative within our strategy, "A Future in Paper," is creating a common corporate performance culture. The aim is to empower and enable all employees to clearly see and evaluate how they contribute to building a long-lasting, successful and sustainable business. Our employees are the ones who turn strategy into action, every day.
We continue to invest in resource-saving projects that will benefit both the environment and our business operations. In 2018 the decision was taken to invest further in sustainable hydro power at Arctic Paper Munkedal. The investment will double the amount of Arctic Paper Munkedal's energy supply produced by environmentally friendly hydro power. Early in 2019, Arctic Paper signed a 15-year contract with Adven AB, which will build and operate a biomass boiler plant with a capacity of 30 MW at Arctic Paper Munkedal. This will ensure lower, stable and predictable energy costs and reduce CO² emissions by 60 percent as we can phase out the use of natural gas and externally sourced electricity.
Our commitment to sustainability goes beyond the borders of our own business. To work towards a truly sustainable value chain, we want to ensure that our suppliers are committed to the same aim as we are. During 2018 we began the process of implementing our new code of conduct for suppliers. We believe that to achieve sustainable growth, we need to work together and maintain a continuous dialogue with all our stakeholders.
In times of changes and challenges, we need to stand firm and invest for the long term, to continuously improve our efficiency. We believe that operating a successful business goes hand-in-hand with sustainable development. Investing in sustainable resource efficiency and making sure that all employees perceive their contribution to this task is essential for Arctic Paper to remain a growing and profitable business for the future.
Michał Jarczyński CEO, Arctic Paper S.A.
Arctic Paper S.A. is a leading European producer of high-quality graphic paper listed on the stock exchanges in Warsaw (Giełda Papierów Wartościowych – GPW) and Stockholm (NASDAQ). The Group produces 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, and the advertising industry.
As of 31 December 2018, Arctic Paper S.A. employs about 1,250 people. Our business activities are based on the operations of three mills:
The mill has a production capacity of about 280,000 tonnes of paper per year and mainly produces uncoated wood-free paper for general use such as printing books, brochures and forms, and for producing envelopes and other paper products.
The mill has a production capacity of about 160,000 tonnes per year and mainly produces fine uncoated woodfree paper, used primarily for printing books and high quality brochures.
The mill has a production capacity of about 265,000 tonnes per year and produces coated wood-free paper used for printing maps, books, magazines, posters and advertising materials.
We manage 14 sales organisations across Europe, which support our activities and contacts with customers. Our head office is situated in Poznań (Poland) with a branch in Gothenburg (Sweden).
Arctic Paper S.A is also a majority owner (in possession of 51.0 % of the shares by the 31 December 2018) 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 over 400,000 tonnes of pulp annually. Arctic Paper has financial control over Rottneros, as it holds the majority of shares, yet operational control belongs to Rottneros including responsibility for the company's performance and sustainability matters. For 2018, the data for Rottneros is not available in the format reported by AP, but sustainability impact and performance will be reported in the subsidiary's separate report. We will be working towards establishing a reporting line between the companies to present this data in the future.
Arctic Paper S.A. Poznan, Poland Arctic Paper S.A. (Filial) Gothenburg, Sweden
Arctic Paper Papierhandels GmbH, Austria Arctic Paper Benelux N.V., Belgium Arctic Paper Danmark A/S, Denmark Arctic Paper France SAS, France
Arctic Paper East sp. Zo.o Representative office, Ukraine
Arctic Paper Kostrzyn S.A., Poland Arctic Paper Munkedals AB, Sweden Arctic Paper Grycksbo AB, Sweden
Arctic Paper Deutschland GmbH, Germany Arctic Paper Italia Srl, Italy Arctic Paper Baltic States, Latvia Arctic Paper Norge AS, Norway Arctic Paper Polska Sp.z o.o., Poland
Arctic Paper Espana S.L., Spain Arctic Paper Sverige AB, Sweden Arctic Paper Schweiz AG, Switzerland Arctic Paper UK Ltd., United Kingdom
| Inputs | |||||
|---|---|---|---|---|---|
| — Human capital: › 1,250 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 |
||
| Business activities | |||||
| — Purchasing: › Sustainability in sourcing › Compliance with the Code of Conduct — Innovation: › Products and processes |
— Production: › Responsibility for employees, the environment and product quality |
— Sales: › Compliance with the Code of Conduct |
— Transportation and logistics: › Sustainability in delivery |
||
| Outputs | |||||
| — Recyclable and degradable products: › Sheets and reels › Coated and uncoated, wood-free and wood containing paper |
— Service offer: › Availability of standard products › Printing on demand (adjustable time frame, quality, quantity) › Delivery |
— Emissions and waste: › Affecting air, water, and land |
— Energy: › The mill in Kostrzyn sells heat and electricity › The mill in Grycksbo sells electricity |
||
| Results | |||||
| — Customer: › Customer satisfaction › Brand loyalty › Few customer complaints |
— Employees: › Stable employment and working conditions › Few accidents › Good relationship with trade unions › Small employee turnover |
— Society: › Taxes from employees and company › Provision of local employment › Other contributions |
— Financers and shareholders: › Interest and dividends |
The graphical paper market consists of two segments: wood free fine paper and wood containing paper, both divided in the sub-segments uncoated and coated paper. Our mills in
Key Products:
Munkedal and Kostrzyn produce uncoated wood free and wood containing paper, while the mill in Grycksbo produces
— Premium bulky book paper, produced and distributed under the Munken brand, developed specially for colour and monochrome printing of books.
coated wood free paper.
— Manufactured under the G-Print and Arctic brands, used primarily for printing books, magazines, catalogues, maps and personalised direct mail correspondence.
Arctic Paper's key focus is sustainable development in all areas where our business activities have a significant impact. This means that we aim to create value for shareholders, but not at the expense of opportunities for future generations.
Our three key sustainability aspects, the Environment, People and Business Operations, have been chosen based on a materiality assessment that we carried out in 2017. With the aim to identify areas where Arctic Paper can have a significant impact we engaged with both external and internal stakeholders, making use of both survey data and interviews.
The list of material aspects was also reviewed and validated internally, after which we arrived at out materiality mix. The materiality mix continues to be the basis of Arctic Paper's sustainability work and reporting structure.
The results of the stakeholder survey and management's valuation of sustainability factors is shown in a condensed form in the materiality matrix below.
| Basis for selection | Approach to stakeholders engagement |
Key Topics | Arctic Paper response | |
|---|---|---|---|---|
| Customers | Main source of value creation | › Direct contact through sales organisations › Direct contact through trial printing of new products › Indirect contact through merchants |
› Product functionality and development › Environmental impact from production and ways of improving its efficiency › Product certification › Compliance with laws and regulations › Meeting sustainability goals while offering competitive prices |
› Transparent presentation of environmental performance, such as in the EMAS-report › Using pulp manufactured from suppliers certified by FSC® or PEFC™ |
| Employees | Key capital for our ability to produce and sell our products |
› Appraisals › Employee surveys › Regular contact with labour unions |
› Environmental impact from production and ways of improving its efficiency › Initiatives to improve the well-being of employees › Health and safety |
› Mill-specific action plans for health and safety › Training programmes › Remuneration routines |
| Suppliers | Significant impact on our production capabilities |
› Close contact with major suppliers in order to keep them informed about our needs and demands › If needed, corrective actions |
› Responsible approach towards our supply chain › Business ethics |
› Audit of a major pulp supplier using a detailed form › Preparations for an Arctic Paper Suppliers Code of Conduct under way |
| Authorities | Compliance with legal obligations |
› Direct contact through reporting › Cooperation within sectoral organisations |
› Compliance with legal requirements › Minimising the negative impact of business operations |
› Transparent reporting, both for financial and non-financial performance › Active participation in sectoral initiatives |
| Shareholders | Expectations of return on investments |
› Shareholder meeting › Capital market day meetings |
› Support for Arctic Paper's sustainability work › Potential business risks related to sustainability issues |
› Transparent reporting, both for financial and non-financial performance |
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 SDGs. We have identified six SDGs that we find are the most relevant to our operations and to which Arctic Paper best can contribute to.
| Theme | SDG focus area |
Impact on Arctic Paper core operations |
Impact on Arctic Paper value chain |
What Arctic Paper is doing? |
|---|---|---|---|---|
| People | › Systematic approach to health and safety in each mill › Annually approved action plans for health and safety › Occupational healthcare service at all sites › Rehabilitation services on offer › Keeping a register to analyse and prevention of accidents |
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| Environment | › State of the art water treatment facilities at all sites › Plans in place to improve water efficiency › Measurement and monitoring of indicators of water inflow and outflow › Employee education with regards to |
|||
| environmental behaviours › Improvements in energy efficiency › Measurement and monitoring of emission indicators › All mills are ISO14001 certified and fulfil EU EMAS |
||||
| regulations › Measurement and monitoring of waste management indicators |
||||
| Business operations |
› Freely-available paper profiles of all our products › Responsible supply chain practices › Strong focus on measuring and minimising the environmental impact of our business operations |
Arctic Paper's approach to corporate responsibility is centred on the sustainability of operations, in particular with regards to the mills. We have therefore established a set of key business performance indicators, which are periodically 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 assessment, we can react accordingly.
We are committed to improving the energy efficiency of our operations. Investments in this area will have a positive effect on the environment, due to decreased emissions of pollutants, and on our financial performance.
| Business performance indicator | Target 2022 | 2018 | 2017 | 2016 |
|---|---|---|---|---|
| Total net energy consumption (MWh/tonnes of paper) | 1.9 | 2.1 | 2.0 | 2.2 |
| Tonnes of paper produced | 695,000 | 639,073 | 658,645 | 654,821 |
We are aware of the fact that the environmental 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 certifications.
| Business performance indicator | Target 2022 | 2018 | 2017 | 2016 |
|---|---|---|---|---|
| Share of pulp suppliers who are FSC and/or PEFC certified | 100% | 100% | 100% | 100% |
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 emergencies. When systematic problems are identified 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 light and heavy accidents at our workplaces.
| Business performance indicator | Target 2022 | 2018 | 2017 | 2016 |
|---|---|---|---|---|
| Accidents per million work hours | <4 | 8.5 | 8.0 | 8.4 |
We want our customers to be satisfied with our approach to sustainability and our products. All complaints are carefully categorised and evaluated by our sales team and management. We aim to minimise the cost of claims, keeping in mind that not all complaints may be substantiated. The high increase in sales revenues is mainly due to price increases trigged by the fast and big price increases on the major raw material, pulp.
| Business performance indicator | Target 2022 | 2018 | 2017 | 2016 |
|---|---|---|---|---|
| Value of complaints as share of sales revenue | 0.50 | 0.58 | 0.61 | 0.58% |
| Sales revenue (in PLN) | – | 2,293,553 | 2,247,973 | 2,296,869 |
In order to sustainably create value in the short and long-term, we need to periodically identify, analyse and mitigate the risks facing our organisation. Our principal risks are explained in the table below, together with an overview of actions taken to mitigate them. More detailed information with regards to specific mitigation plans can be found in later sections of the report, categorised by theme.
| Risk | Implications | Mitigating actions taken | |
|---|---|---|---|
| Environment | Not meeting national or EU-wide legal requirements with regards to environmental standards |
› Fines from authorities › Reputational damage › Possible personal responsibility › Disruptions in operations |
› Careful monitoring of environmental standards and indicators › Early reaction system to changes in regulation › Introducing efficiency-improving technologies |
| Unintentional damage to the environment |
› Careful monitoring of environmental standards and indicators › Compliance with regulations and procedures |
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| People | Lack of competent employees (e.g., due to competition or difficulties in finding new employees to replace an aging workforce) |
› Disruptions in operations (insufficient quantity or quality of products) › Financial loss – money invested in training is lost |
› Creating an attractive workplace to attract and retain employees |
| Accidents at work | › Disruptions in operations › Departure of qualified personnel › Need for new investments at production sites if damage is extensive › Fines from authorities |
› Health and safety training performed on a regular basis › Detailed analysis of all incidents – from risk observation to injuries › Improvement plans in place for all our mills › Dedication to a zero-injury environment |
|
| People & Business operations |
Limited visibility over suppliers and their human rights practices |
› Disruptions in operations › Reputational damage |
› Scrutiny over actions of suppliers in the form of signed declarations › Plans to introduce a Code of Conduct for Suppliers |
| Environment & Business operations |
Shortage of pulp on the market, inability to buy certified pulp |
› Disruptions in operations › Financial loss |
› Careful monitoring of the market |
| Disruptions in the energy market (e.g., lack of energy access or poor fuel quality) |
› Diversification of sources of energy | ||
| Poor weather conditions (e.g. flooding) | › Continuity plans developed for mills | ||
| Business operations |
Country-specific risks – linked to the supply chain, production, and distribution |
› Disruptions in operations › Financial loss › Increased regulatory burden |
› Careful monitoring of world affairs |
Arctic Paper S.A. has a long-standing commitment to environmental 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. 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 development and evaluation of our products, processes and routines.
The ISO 14001 management system is in place at all of our mills. It guides the way we manage our environmental responsibilities at the mills, and how we work on continuously improving them. All certificates are widely available on our website.
In this report, we present the consolidated environmental performance of our three mills. The mills publish separate EMAS-reports, where more information on individual environmental performance is available. In addition, more environmental data regarding our products can be found on our website, in the form of product-specific environmental declarations called "Paper Profiles". Importantly, each Paper Profile documents the environmental impact across the whole supply chain, as our Business operations are highly reliant on our suppliers.
Taking into account our production process, we focus our environmental efforts on four main areas selected during our materiality analysis. These areas will guide the next sections of this chapter: energy consumption, CO² emissions, water consumption and waste management. We believe that our targets, defined in relation to production volumes, clearly demonstrate our commitment to progress in the area of environmental sustainability.
Environmental policies are present at the group and mill level. The environmental management system at all three mills is guided by ISO 14001. Arctic Paper S.A. is proud not only to have introduced routines and procedures to improve the environmental performance of our mills, but also to have efficiently integrated these routines and procedures into our daily operations.
Our mills are also EMAS-registered, which means that they fulfil additional requirements, beyond ISO 14001. Among others, these include stricter rules on how to measure and evaluate environmental performance. The certification 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 certified system of energy management, ISO 50001. This means that the energy system implemented at the mill follows a systematic approach, aimed at continuously improving energy consumption and energy efficiency.
Our mills in Grycksbo, Kostrzyn, and Munkedal have chain of custody certificates for FSC (Forest Stewardship Council) and the corresponding for PEFC (Programme for the Endorsement of Forest Certification). This means that we can guarantee our customers that our products come from responsible sources. Below we present the logos and certificate numbers for our mill at Munkedal.
Arctic Paper S.A. is aware of the environmental regulations affecting our industry, and we carefully monitor the regulatory environment in Poland and Sweden, and at European Union level. Apart from legal requirements, we are also interested in the best practices in our business, and carefully follow developments in these areas. As an example, in the EMAS reports we benchmark our environmental figures on emissions to water to the Best Available Techniques (BAT) reference figures, 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 in the industry.
The overarching goal of our environmental 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
Arctic Paper S.A. purchases energy both as fuel (biomass and natural gas) and as electricity (from the local 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, refiners and pumps.
Various types of energy efficiency programmes are in place at all three of our mills. One recent example of a large project implemented to improve heat energy consumption is the introduction of new heat recovery systems at our mill in Grycksbo 2015, in Munkedal in 2016 and in Kostrzyn in 2017, replacing old, less efficient systems.
During 2018 the vacuum system in the Kostrzyn mill has been modernised as old water ring vacuum pumps have been replaced by turbo fans giving improved energy efficiency by decreasing the electricity consumption and enhance heat recovery. Also older refiners have been replaced in the Kostrzyn mill with new, state of the art, equipment giving improved quality and lower specific energy consumption
In Grycksbo a rebuild of the steam system have made it possible to use steam of lower pressure in the drying process hence giving lower energy consumption.
After intense investments in energy during the last three years the plan for 2019 to optimize and trim the new installations and machinery and continuously evaluate our processes to identify future investments. Smaller energy saving projects will be undertaken during the year, all part of the overall energy investment plan.
Below you can find the latest figures on our energy consumption, one of our key performance indicators regarding environmental sustainability.
| Key performance indicator | Target 2022 | 2018 | 2017 | 2016 |
|---|---|---|---|---|
| Total net specific energy consumption (MWh/tonne paper) | 1.9 | 2.1 | 2.0 | 2.2 |
| Total production of paper (in tonnes) | 695,000 | 639,073 | 658,645 | 654,000 |
Pollutants created during the energy production process leave our mills through chimneys as air pollutants, and as biomass ash. Air pollutants, in particular CO² , 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 financial, legal and commercial costs for our business. The
above-described actions to improve energy efficiency are crucial in scaling down our relative CO² emissions.
We have been dedicated to reduce emissions for a number of years now. In 2008, a significant investment in a biomass boiler was made at the Grycksbo mill, making the steam generation process at the mill fossil free.
| Key performance indicator | Target 2022 | 2018 | 2017 | 2016 |
|---|---|---|---|---|
| CO² emissions (kg/tonne paper) |
270 | 293 | 282 | 297 |
| Total production of paper (in tonnes) | 695,000 | 639,073 | 658,645 | 654,821 |
The total and specific CO² emissions from our mills increased in 2018 compared to 2017. CO² emissions increased in the Munkedal mill between 2017 and 2018 due to a change in the way steam is produced at the Munkedal mill: electricity from the grid is to a large extent replaced by a natural gas boiler (This trend started already in 2017).This means that CO²
emissions were moved from the electricity supplier to the mill.
Water is an indispensable resource in the paper production process. It is used to slush the pulp into a fibre stock, and then to transport fibres to the paper machine head box. 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 purified on site, before being released back to the rivers from which it came – Warta, Munkedalsälven and Grycken. Internal effluent treatment plants conduct mechanical, biological and chemical treatments. At the same time, the separated deposit from the effluent treatment is mixed and dewatered, and then recycled as soil improver.
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. It measures organic compounds which consume oxygen during decompositions; very high levels of oxidisable organic material may be detrimental to aquatic life forms. As good practice, we also
monitor the quality of our water inputs; not something required from us by regulators.
Recently we put in a place a programme to reduce our emissions to water at our mill in Munkedal. Part of the programme was the installation of a separate water purification system for the power supply station in 2017, in order to improve our opportunities for water recycling. In addition, the modernisation of the vacuum system in Kostrzyn, described previously in the context of energy efficiency, will also have important water-saving properties when trimmed and optimised. In Grycksbo we made an important re-build of the waste water treatment plant during 2014, when pre-flotation before the biological treatment was installed. This, together with other measures falling within the scope of continuous improvements have, during the last four years, resulted in a 20% decrease in the amount of organic substances in emissions to water from the mill.
| Key performance indicator | Target 2022 | 2018 | 2017 | 2016 |
|---|---|---|---|---|
| Specific water consumption (m3/tonne of paper) | 7.0 | 7.9 | 7.5 | 7.6 |
| COD (kg/tonne paper) | 0.42 | 0.48 | 0.45 | 0.43 |
| Total production of paper (in tonnes) | 695,000 | 639,073 | 658,645 | 654,821 |
In Munkedal and Grycksbo specific COD emissions increased slightly as a consequence of high frequent trial productions with new products and production equipment , with accordingly, unstable production conditions. In Grycksbo there was an impact on the water usage during a start-up period for a new cyclone package in one of the paper machines. Initial unbalances in water systems were successively corrected.
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Most of the waste emanating from our plants is sorted and sent for external recycling. Comparably smaller volumes of waste are used for energy recovery or are sent to landfills, and even smaller volumes of dangerous waste are sent for controlled destruction by third party contractors.
All our mills use certified 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 management balance year– on-year and constantly improve waste recycling efficiency.
| Key performance indicator | Target 2022 | 2018 | 2017 | 2016 |
|---|---|---|---|---|
| Recycling or energy extraction (kg/tonne of paper) | 11 | 8.7 | 12.8 | 11.5 |
| Hazardous (kg/tonne of paper) | 0.2 | 0.3 | 0.2 | 0.4 |
| Landfill (kg/tonne of paper) | 0.4 | 0.2 | 0.4 | 0.4 |
| Total production of paper (in tonnes) | 695,000 | 639,073 | 658,645 | 654,821 |
The increase in hazardous waste consists of alkaline water used for system cleaning in the Munkedal mill. The cleaning frequency was heavily increased due to a sharp increase in biological activity in the white water during the very warm summer
Our employees are our most valuable capital. We take care of them by creating a work environment which prevents and minimise the risk of injuries. We have a systematic approach to safety at our mills. Each of them has implemented its own site-specific health and safety policy, complemented by appropriate routines and procedures. In case of an accident, employees are to report to the nearest manager, supervisor or a safety officer present at all sites. After an accident is reported, it is added to the accident register and discussed with management. Every accident is followed up on; when appropriate, an action plan is put into place.
Arctic Paper S.A. want to take responsibility for our employees and other people working for us and we believe every employee should be treated with respect. This is also declared in our Corporate Social Responsibility policy and in our Code of Conduct. We strive to make our mills and sales offices safe workplaces, where employees have equal opportunities for development. We are aware of the fact that continuous dialogue with our employees is beneficial 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, hence what should be important to us.
The safety of our employees is our top priority. To provide a safe workplace, all of our mills have an occupational health service, as well as rescue teams, trained to react in case of emergencies. Some of our employees are also part of the local fire brigade, and are therefore trained to respond to both internal and external incidents and accidents.
We carefully analyse all health and safety incidents raised by our employees, conscious that if we do not react, they may bring serious consequences in the future. We therefore maintain a register of "near misses" and accidents, where all incidents are recorded and analysed. As a next step, we propose action plans to mitigate the risk that a near-miss could
become a serious accident. The progress of each action plan is periodically monitored and reported to management. We are planning to create even more detailed analyses of all incidents – from risk observations to injuries.
Arctic Paper S.A. also encourages good habits; for example, in the Kostrzyn mill we offer a premium to our non-smoking employees, while in the Grycksbo and the Munkedal mills we have gyms available to employees, hence actively encouraging a healthy lifestyle. Additionally, our mill in Kostrzyn provides private medical and dental care for its employees, to encourage regular medical check-ups and timely medical attention.
| Key performance indicator | Target 2022 | 2018 | 2017 | 2016 |
|---|---|---|---|---|
| Number of lost time injuries (LTIR) per million working hours | <4 | 8.5 | 8.0 | 8.4 |
There is a small increase in accidents during 2018 compared to 2017. The difference is within the historical variation and should not be seen as a trend.
Today very few accidents are caused by equipment malfunctions. A significant risk factor is human behaviour, hence the focus of safety work is becoming more and more oriented on creating a safety culture based on the basic idea of "think first, then do". Risk assessment before any new machinery is put into operation or working method implemented is the most important tool for increased safety.
The physical and mental well-being of our employees is of crucial importance to our company. We encourage dialogue with different stakeholders; with our employees through oneto-one conversations, and with trade unions through appropriate meetings. As the needs of our employees are evolving, we have decided to actively monitor and react to them, rather than create fixed boundaries for our actions in respect to wellbeing.
In 2017 we piloted an employee satisfaction survey in our company. The results of the survey were analysed in December 2017. The responses were aggregated into Engagement Capital, a score designed to give an overall measure of the amount of commitment, discretionary effort and intent to stay that employee's exhibit. Questions in the survey fell into the categories of past, present, and future; the average of the three was the overall Engagement Capital score.
The survey demonstrated to us the need for better communication about our future and our employees' place in it. At the same time, when planning our next steps, we know we cannot forget about issues raised by our employees that affect their past and present.
We have also creating a new strategy for the company. The strategy describe the direction in which we want our business to go, and outline how we are planning to get there. Given that our employees are our most important capital, the strategy take into account their place at the firm, their dedication and their growth. We want our employees to become involved and actively participate in the implementation of the strategy.
Our plans therefore include improving the performance culture at Arctic Paper. This means applying a broader approach in structuring the practice of performance conversations, and encouraging employees to set and evaluate the goals they set for themselves. This will help them to develop their skills and abilities, while at the same time helping we achieve the goals defined in the strategy. We believe that the synergy effect will positively impact the work environment and will bring tangible benefits to our business. As we have observed notable differences in responses across the company, we also recognise our managers have an important role in facilitating dialogue and communicating future opportunities. As a part of a general action plan for the whole company development, a performance culture is established on central level. During 2019 local adaptions of the central plan should be implemented.
We would be thrilled to see the effects of our plans reflected in greater engagement with the survey and in survey responses in the coming years, demonstrating that our employees feel well-treated, proud of working for us and content with their work-life balance. Performing the surveys is an opportunity to see changes affecting Arctic Paper; based on the results of the 2017 survey, we set specific targets in terms of the response rate and well-being indicators, and aim to monitor them as our key performance Indicators in this area.
| Key performance indicator | Target 2022 | 2018 | 2017 | 2016 |
|---|---|---|---|---|
| Employee survey response rate | 65 | n.a. | 52% | – |
| Overall engagement capital | 55 | n.a. | 42% | – |
Beside the employee satisfaction survey, we want our employees to have another well-defined channel through which they can express what is important to them. We have already seen in the past that ongoing dialogue can lead to improvements in the well-being of our employees. During 2018 local surveys on mill level have been done in order to guide local management to improve employee's wellbeing. As an example can be mentioned that information screens has been mounted on eight (8) different places in the Munkedal mill in order to enhance information spreading. In Arctic Paper Grycksbo a team consists of representatives from management and employees has been organized in purpose to identify and implement improvements. Next global survey are planned to 2019/Q3.
In addition, we hold two annual meetings of our representatives at the European Works Council in order to get even more insight and perspective into the needs of our employees. We aim to continue this practice in the years to come, just as we are committed to maintaining a good relationship with trade unions.
Another factor influencing our company's development is the level of competency among our employees. We aim to strengthen our relationships with employees by providing opportunities for professional and personal development. The need for training and education is crucial and is defined and communicated in yearly performance conversations.
As explained in our Code of Conduct and our Corporate Social Responsibility policy, we do not accept any discrimination in our Business operations. Arctic Paper does not have a dedicated diversity policy; however, our Management Board has been striving to employ competent, creative people, holding appropriate qualifications, professional experience and education, who respond to the company's needs.
Arctic Paper S.A. sees diversity as a strength. It is a tool for new ideas, innovations. We want Arctic Paper S.A to mirror the societies in which it is operating, and we want to make sure we promote and integrate people of diverse backgrounds. Arctic Paper S.A chooses not to report specific quantitative targets in terms of diversity. Instead, our target in this area is to keep employing those most suited, regardless of gender, sexual preferences, ethnic background, etc., for the positions we have open.
| Key performance indicator (excluding emp loyees of Rottneros AB) |
2018 2017 |
2016 | ||||
|---|---|---|---|---|---|---|
| Blue-collar employees |
White-collar employees |
Blue-collar employees |
White-collar employees |
Blue-collar employees |
White-collar employees |
|
| Number of employees | 807 | 416 | 811 | 420 | 806 | 421 |
| Women | 124 | 171 | 129 | 170 | 126 | 173 |
| Men | 683 | 245 | 682 | 250 | 680 | 248 |
| Age < 30 | 106 | 16 | 92 | 17 | 90 | 20 |
| Age 30-50 | 353 | 220 | 365 | 223 | 358 | 225 |
| Age > 50 | 348 | 180 | 354 | 180 | 358 | 176 |
No major reorganisations have taken place during 2018, hence the overall manning structure is unchanged.
We remunerate employees according to their qualifications and the value they create for the company. The adjustment to local conditions necessitates the use of slightly different systems between our mills. Overall, our employees' remuneration depends on their results at work, the agreement between the Swedish Employers Association and the trade unions (applicable to Swedish operations), and the economic situation of the company (Polish operations). All conditions are documented and communicated accordingly. We also have a separate remuneration policy for the management at the group level.to Swedish operations), and the economic situation of the company (Polish operations). All conditions are documented and communicated accordingly. We also have a separate remuneration policy for the management at the group level.
We believe in equality of opportunity when it comes to development. Mill-level procedures are in place to guide our recruitment and remuneration processes. As an example, we annually make regular payroll overviews in all our mills.
Currently, all employee suggestions and concerns can be raised with mill managers. The Kostrzyn mill has a specific committee of internal and external stakeholders, tasked to evaluate complaints. Additionally, the mill in Kostrzyn has an anonymous system in place, whereby complaints and suggestions can be raised in a phone call directly with the CEO. The management is considering implementing a whistleblowing system that would be open to all employees, so that they can anonymously report deviations from the Code of Conduct and the Corporate Social Responsibility policy. We are proud that in 2018 none of our employees raised any concern over discrimination.
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 section.
In our recruitment to the company board we do not apply gender and/or minority quotas. At any given moment, we search for the best professional know-how, respecting the principle of equal opportunity regardless of gender, age, nationality and sexual preference.
At present, since spring 2018 our Management Board is made up of a Chief Executive Officer and a Chief Financial Officer. These functions were entrusted to two specific persons, irrespective of their gender, on the basis of their professional background and experience. While we are interested in monitoring the diversity make-up of our management board as performance indicators, we do not plan to put in place a specific diversity policy regarding the board, as explained above.
| Key performance indicator | 2018 | 2017 | 2016 |
|---|---|---|---|
| Total count of Management Board | 2 | 2 | 5 |
| % of women on the Management Board | 0% | 0% | 20% |
| % of men on the Management Board | 100% | 100% | 80% |
Our business operations are based on well-established and trusted 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 net of suppliers around the world. Those 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. In 2018 we have established Code of Conduct for Suppliers of Arctic Paper Group.
In addition, we want to be transparent and ethical in everything what we do. We established and follow a Code of Conduct and a Corporate Social Responsibility policy, however we are aware of the need to raise awareness of these topics among our employees.
Arctic Paper is deeply integrated into the global value chain. We have over 200 suppliers of materials, 30 of whom cover more than 90 % of the purchased value and are considered core suppliers.
To ensure that our core suppliers have a responsible approach to their business, we ask them to submit a specific written report. The 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 want to follow a similar approach with regards to the rest of our suppliers.
Our Code of Conduct for Suppliers of Arctic Paper Group covers the most important areas: Laws and Regulation, Human and Labour Law, Corruption and Bribery, Environment. This document would be attached to each contract above a certain threshold, and expected to be signed alongside the contract. Arctic Paper expects its Suppliers to comply with high standards and values represented by our organization. The suppliers are expected to follow the requirements set out in this document. Code of Conduct for Suppliers applies to all Arctic Paper Group suppliers and third parties contracted by our suppliers.
Those suppliers that have their own Code of Conduct or CSR policy which are compatible with Arctic Paper values described in our Code of Conduct for Suppliers are asked to provide us with a copy of equivalent document. That is equal to signing of AP Code of Conduct for Suppliers.
Our aim for 2019 is to reach at least 75% of compatibility with our Code of Conduct for Suppliers rules either by signing of our Code or providing us with equivalent document by supplier.
Due to the nature of our business we put a lot of attention on our pulp suppliers, in particular. We additionally expect them to fulfil the demands of the FSC and PEFC certification, 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. Arctic Paper may offer guidance specifying which issues need to be improved. The supplier is then expected to take corrective actions, within reasonable time, in order to meet the requirements in question. In case we are not successful, we are prepared to stop the cooperation.
We find it important to verify our pulp suppliers' statements, which is why products sent over by our suppliers are subject to a three-step verification procedure. First, we ask our suppliers to submit sheets with an environmental declaration, safety data sheets (following REACH) and technical parameters of their products. Second, we test small samples of the products in our laboratories, to see if they possess the stated properties. Third, we conduct mill trials to see how the products behave in the production environment. Similar procedures are used for other suppliers. We also perform yearly checks into the validity of certificates possessed by our suppliers. In this way, we are able to certify the quality of our products. In this
spirit, we are also planning to perform audits of our suppliers, to confirm their compliance with the planned Code of Conduct for Suppliers.
| Key performance indicator | Target 2022 | 2018 | 2017 | 2016 |
|---|---|---|---|---|
| Share of core suppliers providing existing signed environmental decla rations |
80 | 64 | 75 | 56 |
| Share of core suppliers who signed the Code of Conduct for Suppliers | 80 | n.a. | n.a. | n.a. |
| Numbers of suppliers who are subject to audits performed by Arctic Paper to confirm compliance with the Code of Conduct for Suppliers |
10 | n.a. | n.a. | n.a. |
| Share of pulp suppliers who are PEFC and/or FSC certified | 100% | 100% | 100% | 100% |
When deciding on which companies we can entrust with transporting our products, we announce bids for particular routes. Factors we take into consideration when deciding on transportation services are: the quality of the documentation provided, the price offered and the impact a given transport operator has on the environment.
Transport operations cause noise, emissions to air and consumption of fuels (mainly fossil fuels). Truck engines are divided into various EURO classes, in which higher figures represent engines with lower emissions, especially of nitrogen oxides and carbon monoxide. We keep track of transportation statistics, which cover transport of ready goods from our mills to their places of destination. We are focused on increasing the percentage shares of operations of EURO 5 and EURO 6 classes.
| Key performance indicator | Target 2022 | 2018 | 2017 | 2016 |
|---|---|---|---|---|
| Share of Euro 3 engine class | 0% | 1% | 3% | 3% |
| Share of Euro 4 engine class | 5% | 6% | 11% | 13% |
| Share of Euro 5 engine class | 50% | 54% | 53% | 50% |
| Share of Euro 6 engine class | 45% | 39% | 34% | 34% |
The large transportation companies that are our main supplier of transportation services are focused on high transportation efficiency combined with an environmental profile, hence they are continuously renewing their vehicle fleet moving the density point towards the higher EURO classes.
We value transparency in internal and external relations, as any unethical behaviour may expose us to risk of reputational damage and financial loss. Our Code of Conduct contains clear guidelines regarding the business behaviour of our employees, including a zero-tolerance of bribes, corruption and other unethical acts.
We are aware of the fact that our sales offices, and purchasing and logistics departments are those where the risk of corruption and bribery exposure is most significant. Our approach to anti-corruption measures in these areas is structurally embedded in our processes.
We have a 7-step approach to procurement, which limits the space for unethical behaviour. First, we divide item purchases into sourcing groups. Then, we gather information about the sourcing groups and the market. In the next steps, we create a portfolio of potential suppliers and choose a strategy for each sourcing group. We then negotiate with a selection of supplies, and integrate further with our chosen suppliers. Lastly, we continuously monitor the procurement market to make sure our contracts remain competitive. All decisions made during this process are never dependent on one person, which reduces the risk for bribery or corruption. For large investment projects, decisions regarding investment purchases are made by a dedicated committee, and we are considering extending this practice to other large purchases.
The logistics department have a similar purchasing system in place.
When it comes to sales, we have set price lists approved by our management which is then 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 financial performance of the company. We offer bonuses to our clients on 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 about awareness. A part of the induction programme for new employees at our mill in Kostrzyn covers the area of business ethics. This includes topics such as laws and regulations, anti-bribery and anti-corruption measures, human rights and environmental responsibility.
In 2018, Arctic Paper has expanded the programme to cover all units within the group. In order for our programme to reach as many employees as possible, we are also planning to organise a training for those already employed at the company. Hence, our key performance indicator in this respect is the number of our employees who attended such training. We also aim for our employees to sign declarations that they have familiarised themselves with our Code of Conduct. We are planning to have specialised training for those employed in procurement, logistics and sales, the three areas in which we consider the risk of abuses to be the largest; a more basic, yet comprehensive training would be offered to other employees.
| Key performance indicator | Target 2022 | 2018 | 2017 | 2016 |
|---|---|---|---|---|
| Number of employees who participated in the Business ethics training programme (during the year and in total) |
1000¹) | 179 (578) | 34 (419¹) ) |
22 (419¹) ) |
1) Accumulated figure
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.
Another aspect of maintaining the integrity of our operations is ensuring that our customers are satisfied with the way we carry out business and with the products we provide them. For this reason, we carefully monitor all customer complaints.
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, yet we are aware of the fact that not all complaints submitted to us are substantiated.
| Key performance indicator | Target 2022 | 2018 | 2017 | 2016 |
|---|---|---|---|---|
| Value of complaints as share of sales revenue | 0.5 | 0.58 | 0.61 | 0.58 |
| Sales revenue (in PLN) | 2,293,553 | 2,247,973 | 2,296,869 |
Actions are continuously taken in order to diminishing the risk of complaints. For example, new web inspection systems (high speed, high resolution cameras) were installed during the second half of 2017 in the mills in Munkedal and Kostrzyn. A new instrument for fibre characterisation has been installed in the Munkedal mill in 2018. An expansion of the cleaning equipment (cyclones) in front of paper machine 5 in Munkedal is ordered for installation in the first half of 2019. These systems helps to improve the delivered quality. New stock cleaning equipment (cyclones) have been installed on PM9 Grycksbo in order to improve quality.
Due to fact, that Arctic Paper S.A. is a stock listed company, we are obligated to follow the principles set forth in the "Good Practice of GPW Listed Companies 2016". We comply and adhere to all applicable laws and regulations in the European Union countries that we operate in. A large part of those laws and regulations are uniform across the Union, although we are vigilant about any differences. Legal and regulatory compliance is a business necessity, 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 a breach of law or regulations. We separate them into business and non-business related, as well as into fines bigger and smaller than 2 million PLN. With regards to legal and regulatory compliance, our target is to minimise our risk of being sued.
| Key performance indicator | 2018 | 2017 | 2016 | |||
|---|---|---|---|---|---|---|
| Total number of open legal cases | Fine bigger than 2 million PLN |
Fine smaller than 2 million PLN |
Fine bigger than 2 million PLN |
Fine smaller than 2 million PLN |
Fine bigger than 2 million PLN |
Fine smaller than 2 million PLN |
| Business-related | 0 | 0 | 0 | 0 | 0 | 0 |
| Non-business related | 0 | 1 | 0 | 0 | 0 | 0 |
As of December 31st of 2018 we are engaged in litigation which concerns a working accident that occurred in 2016 in our paper mill Arctic Paper Grycksbo AB.
The Work environmental authority has issued a fine of 300.000 KSEK which we have appealed. The investigation is still ongoing.
Apart from transparency in internal and external relations, we value constant and transparent communication with our stakeholders, as explained in our Corporate Social Responsibility policy. We understand that different topics have varying degrees of importance to our stakeholders. This is why we use different channels to communicate our actions.
A commonly used communication channel is our Investors Relation mailbox. Upon receiving a query, the message is forwarded to the person most competent to answer it. At the moment, this only covers the area of investor relations, yet we aim for there to be a centralised inbox for all queries.
Below we include a matrix explaining how different communication channels are used to communicate issues regarding our material themes to different stakeholders. This Sustainability Report serves as a base point for information regarding our work on sustainability issues and is as such an important channel of communication.
| Customers | Employees | Suppliers | Shareholders | |
|---|---|---|---|---|
| Environment | › EMAS report › "Paper Profiles" on our website › Environmental policy |
› EMAS report | › EMAS report › Code of Conduct and Corporate Social Responsibility policy › "Paper Profiles" on our website |
› EMAS report › "Paper Profiles" on our website › Environmental policy |
| People | › Direct communication through sales offices › Code of Conduct and Corporate Social Responsibility policy |
› Intranet, widely accessible to all employees › Meetings, both one-on-one and in groups › Training and education |
› Direct communication through purchasing departments › Code of Conduct and Corporate Social Responsibility policy |
› Our Code of Conduct and Corporate Social Responsibility policy |
| Business operations |
› Direct communication through sales offices › Press releases › Meetings |
› Periodical and annual reports › Annual meetings › Press releases › Code of Conduct and Corporate Social Responsibility policy |
Head Office (Poland) Arctic Paper S.A. J.H. Dąbrowskiego 334 A PL-60406 Poznań
Head Office (Sweden) Arctic Paper S.A. (Filial) Stampgatan 14 SE-41101 Gothenburg
Investor relations [email protected]
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