“SAMRUK-ENERGY” JSC | Integrated ANNUAL REPORT

SUSTAINABLE DEVELOPMENT

In a contemporary world, it is not enough for a company to focus only on financial well-being in order to be successful, but also it is necessary to remember that we live in a society and we must take care of the environment and future generations, because operations of our Company are directly associated with the development of the country’s economy and ensuring reliable electricity and heat supplies.

The Company is aware of the importance of its influence on the economy, environment and society, and in an attempts to increase a long-term value, ensures its sustainable development in the long term, while balancing the interests of stakeholders.

The principles of sustainable development:

  1. openness
  2. accountability
  3. transparency
  4. ethical behavior
  5. respect for the interests of stakeholders
  6. legality
  7. respect for human rights
  8. intolerance to corruption
  9. inadmissibility of conflicts of interest
  10. personal example

Sustainable development principles were introduced by three levels:

  1. Strategic integration – principles of sustainable development were introduced in the Strategy (mission. values and strategic goals);
  2. Operational integration – all corporate decisions are made by the Company’s management based on the criteria of compliance with the principles and goals of sustainable development;
  3. Cultural integration is implemented as part of conducting training at the Company, publishing articles on the Company’s corporate portal, as well as within the Code of Business Conduct.

While integrating the principles of sustainable development into its operations, the Company states its adherence to the 10 principles of the UN Global Compact in its strategy and daily activities:

The Company assumed the following principles:

  1. In the area of respect for human rights: to support and respect the observance of human rights proclaimed by the international community; ensure its non-involvement in human rights violations.
  2. In the area of labor relations: to support freedom of association and recognition of the right for collective bargaining in practice; stand for the destruction of all forms of forced labor; advocate for the complete elimination of child labor; advocate for the elimination of discrimination in labor and employment.
  3. In the area of environmental protection: to contribute to the prevention of negative environmental impacts; take initiatives to increase responsibility for the environment; promote the development and dissemination of environmentally friendly technologies.
  4. In the area of fight against corruption: to resist all forms of corruption. including extortion and bribery.

In view of joining to the UN Global Compact, the Company annually publishes Progress Report, which it posts on https://www.unglobalcompact.org/ and on the Company’s corporate website https://www.samruk-energy.kz/ru/sustainability/soobshchenie-o-dostignutomprogresse-v-2018-godu-ao-samruk-energo

All information about the principles. programs of the Company, reports and new projects in the social, economic and environmental areas is posted on the corporate website in the section “sustainable development” https://www.samruk-energy.kz/ru/sustainability

The Company’s sustainable development activities are based on the practice of the best international standards.

The economic component of the Company’s sustainable development is aimed at increasing long-term value, ensuring the interests of shareholders and investors, increasing the efficiency of processes, growth of investments in the creation and development of more advanced technologies, and an increase in labor productivity.

The environmental component is aimed at minimizing the impact on biological and physical natural systems, efficient use of limited resources, the use of environmentally-friendly, energy- and material-saving technologies, the creation of environmentally acceptable products, minimization, processing and disposal of waste.

The social component is focused on the principles of social responsibility, which among others include ensuring occupational safety and preserving the health of employees. fair remuneration and respect for employees’ rights, individual development of personnel, and implementation of social programs for personnel, creation of new jobs, sponsorship and charity, conducting environmental and educational campaigns.

The Company analyzes its performance and risks in these three aspects, and strives to prevent or reduce the negative impact of its operations’ results on stakeholders.

The Company is aware that global factors affecting sustainable development will inevitably lead to restrictions, difficulties and risks in the process of doing business as a whole. The Company’s main task is not only to ensure survival in high-risk conditions with the help of proper forecasting and planning, but also to turn risks into opportunities and prepare for an unforeseen future.

The Company, applying a risk-oriented approach in its operations, strives to achieve a sustainable increase in value and competitiveness in the long term.

To this end, a comprehensive risk assessment is conducted regularly through the use of risk management tools and a systematic approach to sustainable development:

  1. an assessment of current and future risks associated with the action of global factors of sustainable development;
  2. forecasting of economic, social and demographic and environmental trends;
  3. analysis of social, environmental and economic aspects of the Company’s current impact on the region where it operates;
  4. development of actions aimed at managing the Company’s impact on the region where it operates, risk reduction and implementation of opportunities;
  5. improvement of risk culture in general, analyzing the effectiveness of risk management actions, identifying opportunities associated with current and future risks.

Key trends and risks for the Company in the area of sustainable development

Trends

Risks

Opportunities

Economic aspect

Slowdown in electricity consumption growth rate

The deterioration of macroeconomic situation. the slowdown in demand for electricity; High planned rates of commissioning of new capacities exceeding the actual growth in demand

Effective use of the existing assets portfolio

Increasing instability of economic system due to resource-extracting industries’ exposure to crises resulted from global price volatility

Increase in the likelihood of crises occurrence that hinder access to financing of new projects

Improvement of production efficiency, modernization of existing assets

Increasing energy conservation and increasing the energy efficiency of the economy

Reduced demand for electricity from conventional generation

The use of coal in combination with advanced “clean coal” technologies

Environmental aspect

Trend for economy decarbonisation

Deterioration of competitive positions of coal generation against gas, HPP, NPP, RES

Obtaining loans on favorable terms for development of new projects (“clean coal”, underground gasification of coal, methane extraction. Development of renewable energy sources);

Improvement of quality of used fuel

Introduction of more stringent environmental regulations

Toughening of the maximum permissible concentration of harmful substances; Increase in the rates of payment for emissions; Stricter requirements for water consumption – transition to recycling water supply. tightening of temperature regimes; Waste disposal expenditures

Expansion of “green” technologies use

Increase in environmental requirements of local communities

Environmental activity of mass media, incl. at the absence of sufficiently professional analysis, the creation of a negative image of the company

PR as a “green” leader and the company that manages natural resources in a responsible manner, enhance the loyalty of community

Social aspect

Slowdown in population growth rate

Slowdown in demand for electricity

If feasible, development of export potential

Increase in demand for highly qualified specialists

Lack of qualified specialists. “outstripping” the increase in the cost of labor and the increase in the share of payroll in costs

Performance improvement; Improving the quality of production; Improving the quality of education and training of specialists

Reduction of attractiveness of job in the industrial sector

Increasing difficulty of filling the Company’s vacancy

Development of personnel reserve, continuity of positions within the Company

For efficient and successful management of economic, environmental and social aspects, the Company implements sustainable development initiatives in the below areas relying on mentioned principles, external and internal appraisal of the Company’s performance, risks in sustainable development:

  1. the introduction of high ethical standards and building a corporate culture based on trust;
  2. introduction of sustainable development principles and application of a risk-based approach in the practice of project management at all investment stages: assessment and management of the impact on the social, environmental and economic areas (forced relocation. biodiversity. cultural heritage. etc.) in accordance with Sustainable development guidelines of the Company;
  3. an increase in financial sustainability;
  4. facilitate responsible procurement based on principles of fair and free competition, mutual benefit. transparency and full responsibility for the commitments made, as well as the introduction of requirements for suppliers to comply with ethical standards and guidelines for suppliers of the Company, set out in the Guidelines for sustainable development of the Company;
  5. improving the safety culture through the involvement of employees in occupational safety management system and increasing the effectiveness of control over the occupational health and safety management system through application of international standards;
  6. increasing the level of social responsibility, following the principles of the UN Global Compact, investment in human assets;
  7. ensuring environmental sustainability, including the search and implementation of technologies, which are considered as the best from an environmental and economic point of view, streamlining of production processes, implementation of projects using renewable energy sources, identification and prevention of potential emergencies.

The Company is focused on adherence to the “green” economy principles. thus, it implements activities and achieves indicators specified in the Concept for the transition of the Republic of Kazakhstan to a “green economy”.

The initiatives that were first implemented in 2018 were prioritized based on the importance of a particular initiative for all key stakeholders. Key performance indicators of sustainable development initiatives are integrated into the system of strategic, medium-term planning and the KPI tree of subsidiaries. Key performance indicators were developed based on specifics of each subsidiary’s operations, the emphasis was placed, and threshold values were set respectively.

In accordance with the Sustainable Development Initiative Plan for 2018-2019, the overall achievement ratio of the plan reached 80%.

Of the 25 events planned for 2018, 20 were completed and 5 were not completed. The reasons of the failure are indicated in the Report on the implementation of the Initiative Plan for 2018, which you can find in the PDF version of the Annual Report. For unfulfilled measures, based on factors that contributed to the failure on achievement of the key indicator, measures were developed and implemented for 2019 to improve them

Interaction with Stakeholders

Stakeholder engagement plays an important role in activities of any Company.Interaction with Stakeholders

The approach of responsible, thought-out and efficient interaction with stakeholders contributes to the sustainable development of the Company.

The goal of stakeholder engagement is to choose the right strategic development of the Company and ways for improvement of its operations, as well as to assist it in achieving a level of sustainable development that benefits everyone, including the Company, its stakeholders and society as they have opportunity to learn, define and analyze: needs, expectations and opinions of internal and external stakeholders; challenges and perspectives from the stakeholders point of view; the most significant issues of concern to internal and external stakeholders.

The principles of the Company’s interaction with stakeholders

  1. Respect and consideration of interests, opinions and preferences of stakeholders;
  2. Timely and regular provision of information to stakeholders;
  3. Responsible performance of assumed obligations.

The basis of stakeholder engagement is the identification of stakeholders that have a significant impact on the Company and the degree of stakeholders’ dependence on the Company, the creation of materiality matrix and Stakeholder engagement plan. The Company updated the Stakeholder Map in 2018, having identified a complete list of potential stakeholders with whom it interacts in the course of its operations; the map describes the contribution of stakeholders and their interests. After that, the Company ranked the stakeholders by importance for the Company using the Mitchell, Agle and Wood model.

When developing the Stakeholder Map, the Company followed the Methodology, which includes 4 stages:

  1. IDENTIFICATION
  2. ASSESSMENT OF SIGNIFICANCE
  3. IMPACT ASSESSMENT
  4. GRAPHIC ILLUSTRATION

“Samruk-Energy” JSC Stakeholders map

To date, the Company’s stakeholders are the population, employees, shareholders, Suppliers, “Samruk-Energy” JSC group of companies, trade unions, partners, consumers, government agencies, competitors, financial institutions, public associations, media, affiliates, rating and audit firms.


The Company, as part of its activities, is a member in the following national and international organizations, associations/organizations:

The CIS Electric Power Council (hereinafter – CIS EPC). Participation as an observer since 2012.

The Executive Committee is a permanent interstate coordinating body of the CIS Electric Power Council. Membership in the CIS EPC allows participating in the processes of integration of the CIS member states’ energy systems, including ensuring collective energy security; Provision of parallel operation of power systems; Creation of a common electric power market, involvement in preparation of international agreements in power sector; Technical regulations. unification and harmonization of laws and regulations in power industry, etc. The company can participate in public meetings. meetings of working groups, seminars conducted by the CIS EPC.

Kazakhstan Electricity Association (hereinafter – KEA), Membership since 2011. Membership in KEA allows exchanging information and participation in development of a regulatory legal framework in power sector, as well as conferences. Seminars, forums and other events held under the auspices of the KEA.

KAZENERGY Association (since 2009), Membership in KAZENERGY Association allows participating in government initiatives and activities aimed at improving the investment climate in the Republic of Kazakhstan, in developing and implementing measures to increase production and scientific and technical potential; as well as the Company may receive assistance in legal, economic, organizational and management matters. The Company provides substantial financing for a variety of events hosted by KAZENERGY Association, including forums, the publication of national reports on the prospects for the development of the fuel and energy sector of the Republic of Kazakhstan.

The National Chamber of Entrepreneurs of the Republic of Kazakhstan (hereinafter referred to as the RK NCE), Membership from 2013, Membership in the RK NCE helps to strengthen ties with business environment, effective development of electricity business, including as part of improvement of RK regulatory framework.

Coordination Electric Power Council of Central Asia (hereinafter – CEPC CA), Participation as an observer since 2014. Membership in CEPC CA contributes to strengthening business ties between the countries of Central Asia, provides an opportunity to participate in activities in power industry held by CEPC CA.

World Energy Council (hereinafter – WEC). Membership since 2008. Membership in WEC represents a program for a limited number of the world’s leading energy companies interested in working with WEC on projects and issues of a global and regional nature. The WEC program allows Samruk-Energy to participate in exclusive events and round tables that promote the development of cooperation with international organizations.

UN Global Compact. Membership since 2011. In the context of joining the UN Global Compact, the Company declares its commitment to following the ten principles of the Global Compact in its strategy and day-to-day operations.


The Company interacts with all stakeholder on an ongoing vbasis in order to obtain feedback and take into account their opinions when formulating topics that are especially important for them.

In order to hold an effective dialogue between the Company and all its stakeholders, in November 2018. Stakeholder Engagement Plan for 2019 was developed and approved, which sets out the principles and requirements for interaction, the procedure for identifying and analyzing stakeholders, interaction and information sharing activities. The stakeholder engagement plan is posted on the Company’s website (https://www.samruk-energy.kz/images/2019/korp-upravlenie/plan steikholder 28_11_18.pdf ).

In 2018, the Company had the Plan of communications with stakeholders. published in the Annual Report following the results of 2017 (to learn more, please click on the link: https://www.samruk-energy.kz/ru/shareholder/annual-reports). The main objective of the Plan is to create a mechanism for timely and high-quality provision of information to stakeholders. Monitoring stakeholder engagement during the reporting period allowed the Company to effectively interact with the shareholder, investors and other stakeholders based on a clear understanding of their priorities.

In order to identify material topics (aspects) for the Company’s operations and stakeholders, as well as their ranking, in 2018 internal and external stakeholders were surveyed by completing a specially developed questionnaire, in which the shareholder, key employees, subsidiaries, partners, financial institutions, professional communities, associations, etc. were surveyed. Moreover, in an attempt to cover all stakeholders, the Company posted an online questionnaire for all stakeholders (https://www.samruk-energy.kz/ru/shareholder/annual-reports) in the published interactive version of the Annual Report on the Company’s results for 2017.

In the course of a survey, stakeholders evaluated the significance of each of the topics proposed in the questionnaire on a five-point scale for disclosure in the annual report, and could also supplement the list with aspects that were not included, but were significant in the opinion of the stakeholder.

To evaluate the identified relevant aspects for their completeness and balance, discussions with the participation of the Company’s management were held and a materiality matrix was created, which gives a visual representation of sustainable development topics that are important for the Company and stakeholders.

The horizontal axis provides an assessment of the materiality of aspects for stakeholders, and the vertical one – an assessment of the materiality of aspects for the Company.

Topics that received an assessment of significance above 4 points for stakeholders and for the Company were recognized as the most significant and were shown in the text of the annual report. They are located at the top of materiality matrix.

Matrix of materiality of "Samruk-Energy" JSC

The following topics were considered as significant:

  • The company’s contribution to the country’s economy;
  • Increase in company value;
  • Decent wages and compensation;
  • Safety and health of employees and contractors;
  • Energy efficiency;
  • Fight against all types of corruption, including extortion and bribery;
  • Reducing GHG emissions and other pollutants (NOX. SOX and other significant pollutants);
  • Compliance with environmental obligations;
  • Efficient use of resources, energy and water;
  • Safety and health protection of residents of the regions of operation;
  • Development of innovation and operating efficiency.

Analysis of the current materiality matrix and the new materiality matrix shows that the Company and its stakeholders consider issues related to the development of innovation and operating efficiency, energy efficiency, ensuring safe working conditions not only for employees of “Samruk-Energy” JSC group of companies but also for employees of contracting organizations. issues of decent wages and compensation, etc. as significant.

This Report discloses all significant aspects for the stakeholders and the Company (high importance zone).

The Company pursues high standards of social responsibility; therefore, it improves interaction with stakeholders. Maintaining mutually beneficial relationships with stakeholders is utmost important for it. For effective interaction with the shareholder, potential investors, consumers of products and other stakeholders, relying on the principles of transparency and openness, the Information Policy is available at the Company. The policy determines the information, which is subject to disclosure to all stakeholders, the principles, terms for publishing and communicating information to all stakeholders.

As part of interaction with stakeholders, in 2018 the Company introduced a single feedback mechanism with stakeholders, having created a Base of complaints and suggestions across “Samruk-Energy” JSC group of companies with a purpose of examining the concerns of all stakeholders. The analysis was carried out by consolidating of requests (complaints and suggestions) across “Samruk-Energy” JSC group of companies, and was conducted to identify systemic issues, determine the effectiveness of existing mechanisms for interaction with stakeholders for addressing concerns of stakeholders in the future. As part of research conducted, for completeness of the analysis, the Company additionally introduced “Feedback” forms on the corporate website https://www.samruk-energy.kz/ru/feedback-all. Feedback is intended for any stakeholders who may ask for advice, leave feedback, suggestions and any other concerns within the scope of the group of Companies’ operations. In addition, a feedback form was created on the Company’s website for the category of persons associated with the investment projects being implemented, where local communities, employees of contractors, or persons related to the project may express their opinion.

These appeals were analyzed in terms of the aspects concerned, the identification of regions with the highest number of appeals, the category of persons who sent their appeals to the group of companies, statistics on the subject of appeals and analysis of complaints. Each complaint was assigned a category.

COMPLAINTS

Reasonable

Partially reasonable

Unreasonable

withdrawn

3

12

28

2

Total: 45

 

 

 

The conclusions based on requests from stakeholders were informed at the meeting of the Company’s Board of Directors, where recommendations were made and actions aimed at improvement of stakeholders’ interaction quality were developed.