2011 / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 3

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2 2011 / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 3 TABLE OF CONTENTS Message from the President About the Report Mission and CSR Strategy About NLMK Group Structure Corporate Governance Model Risk Management 2011 Highlights Stakeholder Engagement Contribution to Regional Development Social Policy Social Sector Investments Social Responsibility Projects Across the Country Altai Krai Belgorod Region Lipetsk Region Sverdlovsk Region Kemerovo Region Komi Republic Environmental Footprint Environmental Policy Principles Reducing the Impact on Air Impact on Water Waste Handling Environmental Protection Spending Most Effective Environmental Projects Environment Management System Public Appraisal of Environment Conservation Activities Improving Energy Efficiency Our Employees Employee Motivation Social Partnership Professional Training and Development Employee Health Improvement Occupational Health and Safety Product Responsibility Quality Assurance Customer Satisfaction Progress Against 2011 Objectives Objectives for 2012 Appendix Appendix 1. Company Operations: 5-year Highlights Appendix 2. Personnel Profile Appendix 3. GRI Contents Index Appendix 4. Russian Union of Industrialists and Entrepreneurs (RSPP) Basic Performance Indicators Index Feedback Form

3 Message from the President / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 5 Dear Readers! Before you is the NLMK Corporate Social Responsibility Report for 2011, a year of definite success for the Company. In 2011 we produced a record high 12 million tonnes of steel, while Company earnings increased by 40%, and net profits grew by 8%. Stronger output and financial performance are a reflection of our Company s rapid growth. We have increased output and sales of finished products, and expanded our presence around the world by establishing new production divisions in Europe and the United States. The Company has channelled significant financial resources into technology upgrades and expansion of production. These investments aim at the development of a sustainable and flexible business model, which will ensure stability of operations irrespective of market developments. These investments are driven by both organic growth in output and, most importantly, by qualitative changes involving the adoption of best available production practices and reliance on the latest achievements in technology which will lead to improved safety of processes, lowered impact on the environment and significant improvements in the quality of products. These objectives are just as significant to us as the economic benefits generated by investing into modernisation. The completion of construction work at the new Blast Furnace #7, a key project of our investment programme, became the year s most important achievement in the steel sector. The project incorporates state of the art technological innovations developed by leading Russian and foreign engineering companies and applies best available technology both in terms of production as well as in terms of protecting the environment. The recovery co-generation plant integrated with the blast furnace allowed Novolipetsk to increase its self-sufficiency in electric power to 56%. Overall, as a result of the Technology Upgrade Programme pursued between 1999 and 2011 power intensity has been reduced by 18%, achieving average energy consumption of 6.1 gigacalories per tonne in For 2012 our objective is to achieve an average of 5.9 gigacalories per tonne of liquid steel, on a par with the best performing steel producers in the European Union. With the launch of the new blast furnace we have created an additional 1,580 new jobs which require the most advanced skills. The Company then financed the training and skill development for the required number of employees who will operate the new blast furnace. New jobs are also created at the modern Kaluga Mini-Mill (KNPEMZ), which is currently under construction. After its commissioning the business will employ more than 1,250 employees at core and support operations, offering them high wages and fringe benefits. The Company has already provided at its expense training for the bulk of the KNPEMZ industrial personnel. For those with core steelmaking skills we have arranged for internships at operating Company businesses. Overall, training, re-training and skill enhancement courses were attended by more than 40,000 Company employees. NLMK has always been a trailblazer in the adoption of new ideas and technologies which would be subsequently introduced with success at other steelmaking businesses. Today we continue to develop and introduce innovative technologies. The Company employs 1,131 researchers involved in R&D activities. Their work so far has produced 250 effective patents and five patent applications, including two international applications, in In the last three years the Company has spent about RUB5 billion on research. An indispensable and very important prerequisite for modernisation of production capacities is their compliance with international environmental safety standards. In 2011 Company outlays for environment conservation projects at its main production site in Lipetsk alone amounted to around RUB4 billion, resulting in the completion of about 100 environmental activities involving the refurbishment and improvements in the operation of process equipment. With output growing by 5% we were able to achieve a reduction of 580 tonnes in emissions of atmospheric pollutants, while the per unit consumption of fresh river water was decreased by 4% to 2.2 cubic meters per tonne, which is significantly better than the level of best available techniques. Our goal is for all NLMK assets to comply with the best environmental standards. Our HR policy is aimed at motivating our employees to grow professionally, promoting productivity and developing our Corporate culture. With this in mind the Company is channelling significant outlays for purposes of personnel instruction, training and re-training which result in increased productivity. In 2011 labour productivity increased by an additional 7% over the preceding year, which also showed growth. The Company will continue to maintain sustainably high levels of wages and fringe benefits, while providing its employees with opportunities for career development and professional growth. The NLMK Group operates a socially responsible business. Companies within the Group are major employers and taxpayers. We maintain a continuous focus on improving the effectiveness of our corporate social responsibility programmes which are designed to provide support for education, health, culture, sports, and the establishment of a favourable environment for the communities where our businesses are present. We look forward to further fruitful cooperation and would like to express our sincere gratitude to all our partners for their interest, respect and trust in our company, expressed in the course of our cooperation. President (Chairman of the Management Board) A. Lapshin

4 01 ABOUT THE REPORT 6 / СОЦИАЛЬНО-ЭКОНОМИЧЕСКОЕ РАЗВИТИЕ МЕСТНЫХ СООБЩЕСТВ / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 7 Anatoly Litvinenko Head, Industrial Design Bureau, Novolipetsk Enjoys painting and is the author of more than 100 works, some of which were displayed at local, regional and national exhibitions, and are owned by private collectors in Russia and abroad. One of his paintings is displayed in the State Duma of the Russian Federation. Member of the Petrovskaya Academy of Science and Arts. In collaboration with the sculptor V. Chelyadin won the competition to design the bust of D. Chernov, the founding father of Russian metallography. NLMK continues its annual reporting cycle and presents its 2011 Corporate Social Responsibility Report (CSR Report) prepared in accordance with the Global Reporting Initiative s (GRI) third generation (G3) format of the Sustainability Reporting Guidelines and the Basic Performance Indicators Index developed by the Russian Union of Industrialists and Entrepreneurs (RSPP). In preparation of the Report the Company is continuously striving to increase the transparency of data and information related to corporate social responsibility. Information presented in the CSR Report includes both consolidated data for the Company as a whole, as well as examples of projects implemented at various NLMK Group businesses. Electronic copies of past CSR Reports are published on the Company web-site: and in Russian and English.

5 1 / ABOUT THE REPORT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 9 We have relied on our many years of experience cooperating with our shareholders, investors, business partners (customers and suppliers), employees, trade unions, regional authorities and local governments, supervising/regulating agencies, and the civil society to identify the various stakeholders seen as the potential audience of this Report. Information disclosed in this Corporate Responsibility Report regarding the principles, goals and performance achieved by the Company in the field of corporate social responsibility is intended to inform the public and all Company stakeholders. Information given in this Report refers to the 2011 reporting period. Assessing the priority of topics covered in this Report, we relied on stakeholder feedback regarding previous NLMK Corporate Responsibility Reports since Information provided in the Report covers mostly the social and environmental aspects of our business. Information on our economic performance featured in this Report is not exhaustive. More detailed information, presented in the form of consolidated financial statements prepared according to US GAAP, can be found at the Company website: The following terms are used in this CSR Report: NLMK Group, NLMK, the Company mean businesses included into the NLMK US GAAP consolidated financial statements. NLMK Group Businesses for the purposes of this CSR Report cover only the following businesses: Novolipetsk, Stoilensky, Altai-Koks, VIZ-Stal, Dolomit, Stagdok, NSMMZ, UZPS and Vtorchermet NLMK.

6 1 / ABOUT THE REPORT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 11 This CSR Report provides information about the core businesses comprising the NLMK Group and operating in the mining, scrap collection and steelmaking segments. The CSR Report covers both consolidated data and information for individual businesses: Novolipetsk, NLMK s main production site in Lipetsk, Stoilensky, Stary Oskol, the Belgorod Region, Altai-Koks, Zarinsk, the Altai Region, VIZ-Stal, Yekaterinburg, Dolomit, Dankov, the Lipetsk Region, Stagdok, Lipetsk, NSMMZ, Revda, the Sverdlovsk Region, UZPS, Berezovsky, the Sverdlovsk Region, Vtorchermet NLMK, Yekaterinburg. This Report does not cover information for businesses located outside the Russian Federation. The Company hopes that the CSR Report will give readers a clear understanding of NLMK s social mission and further promote an environment of trust and mutually beneficial cooperation. To engage all stakeholders in open dialogue, the Company invites all readers to express their views about the Company s sustainable development efforts. To facilitate this process, the Report features a section with contact and feedback information. Please share your views and comments regarding the format and content of the Report and send all your questions to the following address: NLMK 2 Metallurgov Square, Lipetsk,Russian Federation Fax: +7 (4742) [email protected]

7 1 / ABOUT THE REPORT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 13 In 2006 social programmes being implemented at the main production site in Lipetsk were analysed. Following the GRI Sustainability Reporting Guidelines, NLMK prepared its first Corporate Social Responsibility Report for 2006, presenting its social programmes as well as the economic and environmental aspects of its business. The analysis carried out in 2006 made it possible to define priorities in the area of corporate social responsibility for 2007 and to develop the social mission and strategic goals of the Company. Stakeholder feedback on the 2006 Social Report shaped the development of the mission and strategic goals. In 2008, we identified our stakeholder groups and priority social programmes. We set and allocated management tasks and organised their execution. We set up information gathering and processing methods to assess target achievement. NLMK s third Corporate Social Responsibility Report was prepared based on the GRI standard. The 2009 and 2010 Corporate Social Responsibility Reports provided clear and detailed information on how the Corporate Social Responsibility System functions at NLMK s key subsidiaries. Painting helps me look into the depths of the human soul, to express my delight and admiration at the miracles that surround us. A viewer, looking at my works, unwittingly becomes my interlocutor and perhaps even my confederate.

8 02 MISSION AND CSR STRATEGY 6 / СОЦИАЛЬНО-ЭКОНОМИЧЕСКОЕ РАЗВИТИЕ МЕСТНЫХ СООБЩЕСТВ / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 15 Sergey Bubnov Lead Engineer, Novolipetsk Centre for Technology Upgrades Sergey is a candidate master athlete in underwater orienteering, and his hobby is underwater photography Social Mission The Company sees its social mission in achieving sustainable development goals that support its long-term economic objectives, contribute to social welfare and promote environmental and human rights initiatives in regions where the Company operates. I started in underwater swimming, which includes swimming races in fins and underwater orienteering, in I simply can t get enough of the beauty of the underwater world. I like to share photographs with friends and close ones.

9 2 / MISSION AND CSR STRATEGY / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 17 Social Responsibility: NLMK s Strategic Objectives The combined efforts of the Company, its employees and the community are aimed at achieving the following strategic objectives: To create a favourable and predictable social and economic environment for its employees and local communities; To improve corporate governance frameworks for economic, environmental and social activities of the Company; To comply with international and national environmental standards with a focus on the best available technologies; To observe business ethics principles, and to oppose corruption and terrorism; To develop new products to meet customer expectations; To create an environment that promotes stronger performance by the Company s employees; To ensure sustainable improvements in welfare and social safety for the Company employees, and to create safe workplace and living conditions; To prevent all possible violations of human rights and applicable labour laws.

10 03 ABOUT NLMK 2011 / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 19 Boris Kotorov Bureau Head, Information Technology Department, Novolipetsk Candidate master athlete in mountaineering, and a regular participant in mountain climbing expeditions. Boris took part in ascents to Lenin Peak (Pamir Mountains), Mount Elbrus and The E. Korzhenevskaya Peak in the Caucasus. Coaches at the Irbis Mountaneering Club. NLMK is a leading international steel company strategically designed around a vertically integrated business model. A high level of self-sufficiency in key raw materials and energy ensures a low cost level of production, concentrated in the Central District of Russia. In addition, NLMK s rolling mill assets are located in close proximity to our key consumers in Russia, the USA and the EU. NLMK produces a wide range of steel products conforming to international quality standards. Furthermore, our flexible production chain, efficient distribution network and extensive geography of sales ensure that we are able to respond rapidly to changes in market demands.

11 3 / ABOUT NLMK / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 21 Group Structure NLMK Group NLMK Russia NLMK Europe NLMK USA Services NLMK Russia Flat NLMK Russia Long NLMK Russia Raw Materials NLMK Europe Strip NLMK Europe Plate NLMK Indiana Trading House NLMK Novolipetsk (main site) NSMMZ (steel, rebar) Stoilensky (iron ore) NLMK La Louviere NLMK DanSteel NLMK Pennsylvania Novexco VIZ-Stal (electrical steel) UZPS (metalware) Altai-Koks (coke) NLMK Coating NLMK Clabecq Sharon Coating Novex Trading Kaluga mill (under construction) Stagdok (limestone) NLMK Strasbourg NLMK Verona Insurance companies Dolomit (dolomite) Service and distribution centers NLMK Construction and Assembly Trust As part of our Strategy for Sustainable Growth, we are investing heavily into consolidating and developing our competitive advantages. In 2011, we expanded production capacity at our main site in Lipetsk, as well as strengthening our international presence in Europe and the USA. Vtorchermet NLMK (scrap) Nation Laminations (service centr in India)

12 6 / СОЦИАЛЬНО-ЭКОНОМИЧЕСКОЕ РАЗВИТИЕ МЕСТНЫХ СООБЩЕСТВ / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 23 USINSKY-3 RUSSIA ZHERNOVSKE GLUBOKI Asset Geography NLMK DANSTEEL MOSCOW KALUGA MINI-MILL NOVOLIPETSK DOLOMIT STAGDOK NSMMZ UZPS VIZ-STAL ZHERNOVSKOE-1 ALTAI-KOKS Legend NLMK Group produktion and assets* Coal assets Assets under construction USA NLMK INDIANA NLMK PENNSYLVANIA SHARON COATING NLMK LA LOUVIÈRE NLMK CLABECQ NLMK COATING NLMK STRASBOURG NLMK EUROPE 5 service centres NLMK VERONA STOYLENSKY * NLMK Group also includes a network of scrap collecting assets located in 39 regions of Russia

13 3 / ABOUT NLMK / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 25 NLMK Russia is the Group s key business segment comprising mining, coke chemical, steel producing and rolling assets. Russian assets produce over 90% of crude steel. Mining assets and coke chemical capacities cover 100% of the Group s metallurgic raw material needs, including iron ore concentrate, fluxes and coke. Flat steel Novolipetsk is the Company s core production site located in Lipetsk in the Central region of Russia some 500 kilometres from Moscow. The facilities are situated in close proximity to key nationwide transportation routes. The site s production capacity is 9.9 million tonnes of steel per year, and 9.2 million tonnes of flats. Long steel The Nizhneserginsky Steel Plant (NSMMZ) is one of the leading billet and long steel producers in the Urals region. It has 2.1 million tonnes per year of steelmaking capacity, and 2 million tonnes per year of rolling capacity. The Urals Precision Alloys Factory (UZPS) is one of Russia s largest metalware manufacturers with a metalware production capacity of 0.5 million tonnes per year. VIZ-Stal is Russia s leading producer of electrical steel with a capacity of over 200,000 tonnes per year. Its operations are located in the city of Yekaterinburg in the Urals region. The Kaluga Mini Mill (KNPEMZ) currently under construction has a crude steel and long product capacity of around 1.5 million tonnes per year. Raw materials Stoilensky is Russia s third largest producer of iron ore concentrate. It fully covers NLMK s growing demand for iron ore. Stoilensky is located in Stary Oskol in the Belgorod region, within the Kursk Magnetic Anomaly region and close to NLMK s main steel production site in Lipetsk. It produces about 12 million tonnes of iron ore per year and has a total of about 5 billion tonnes of ore in reserves. Altai-Koks is Russia s leading producer of high-quality metallurgical coke located in the city of Zarinsk in the Altai region. It has the capacity of 5 million tonnes of coke per year. Altai- Koks supplies its products to NLMK Group businesses, as well as to customers in Russia and overseas. Dolomit produces furnace dolomites and is located in the city of Dankov in the Lipetsk region. In 2011 the company produced 2.1 million tonnes of products. Stagdok is Russia s second largest producer of fluxing limestone. The business is situated in the city of Lipetsk. In 2011 the company produced 3.2 million tonnes of products. Vtorchermet NLMK NLMK handles the collection and processing of scrap. It operates outlets in 39 regions of Russia. Vtorchermet has a processing capacity of up to 4 million tonnes of scrap per year, making the Group 80% self-sufficient in scrap million tonnes Finished steel product output (+12%)

14 3 / ABOUT NLMK / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 27 NLMK Europe has six production sites specialised in the manufacture of high-quality rolled products, and a network of steel processing and distribution units in the EU. NLMK Europe comprises two business units, Strip Products and Plate Products. Strip products NLMK La Louvière (Belgium) has an annual hot-rolled steel production capacity of 2.6 million tonnes. NLMK Coating (France) has an annual cold-rolled steel production capacity of 0.33 million and an annual galvanised steel production capacity of 0.29 million tonnes. NLMK Strasbourg (France) has an annual cold-rolled steel production capacity of 0.38 million and an annual pre-painted steel production capacity of 0.11 million tonnes. Plate products NLMK DanSteel A/S (Denmark) is a thick plate manufacturer consolidated in the beginning of It has a production capacity of 0.6 million tonnes per year. NLMK Clabecq (Belgium) has an annual thick plate production capacity of 0.9 million tonnes. NLMK Verona (Italy) has an annual thick plate production capacity of 0.45 million tonnes and a steel production capacity of 0.34 million tonnes. 12 million tonnes Steel output (+4%)

15 3 / ABOUT NLMK / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 29 NLMK USA has a diversified base of flat steel producing assets comprising three production sites. It has an electric arc furnace (EAF) steelmaking capacity of 0.7 mtpy and a hot-rolling capacity of 2.7 mtpy with a common distribution structure. NLMK Indiana (Portage, IN) has an annual steelmaking capacity of 0.7 million tonnes and an annual hot-rolled steel production capacity of 0.9 million tonnes. NLMK Sharon Coating (Sharon, PA) has an annual galvanised steel production capacity of 0.8 million tonnes. NLMK Pennsylvania (Farrell, PA) has an annual hot-rolled steel production capacity of 1.8 million tonnes and an annual cold-rolled steel production capacity of 0.7 million tonnes. Supportive business includes logistics, service and trading operations which help to diversify the Group s sales as well as streamlining the movement of commercial cargo. Sales activities in the Group s export markets are done through trading companies. Main Types of Products: Coke Coke is the main fuel used in blast furnaces to produce pig iron. Coke is produced by processing coal. Pig Iron The Company uses the bulk of its pig iron output for making steel in-house. Slabs The Company produces slabs both for further processing in-house and for sales in the export markets. Billets Steel billets are used in the manufacturing of a variety of long products, including channels and shapes. Hot-Rolled Flat Steel Hot-rolled steel products are used in construction, railroad, agricultural and automotive machinery manufacturing, and in the production of pipes and storage tanks. Cold-Rolled Flat Steel Cold-rolled flats are used to manufacture the bodies of automobiles, tractors and agricultural machines, as well as in steel structures, stampings, household appliances, roofing and facing materials. Hot-Dip Galvanised Steel This is used in the manufacture of rollformed sections, steel structures, car parts, and components for household appliances. Pre-Painted Steel This is used in steel structures, instrument cases, household appliances, roofing tiles, and other goods. This type of steel boasts high resistance to atmospheric corrosion, decorative qualities, and combines strength and plasticity. Grain-Oriented (Transformer) Steel Grain-oriented (GO) steel is used to manufacture magnetic cores for power and distribution transformers of various capacity, large-scale electrical machinery, turbines for hydro generators, electrical welding equipment, high and low-voltage electrical equipment. Non-Grain Oriented (Dynamo) Steel It is used in the manufacture of stators and rotors used in electric motors, generators of varying capacity, ballast transformers and other electrical equipment. Reinforcement Bars Long steel products used to reinforce cement-based structures in roadbuilding, construction of buildings and installations. Wire Rod Round-shaped thin sections of steel manufactured by rolling billets, used in the manufacture of wire, bolts and nails. Metalware Wire, nails, mesh, fasteners and fittings, etc.

16 3 / ABOUT NLMK / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 31 Sales Markets The Company s sales strategy is based on establishing efficient sales channels and a flexible marketing system as well as efficient management of human resources. The Company continuously monitors and analyses developments in key markets and identifies long-term sales directions. 4.5 million tonnes High value added product sales (+30%) A wider sales geography and higher production volumes in 2011 resulted in 12.8 million tonnes of steel products being sold by the NLMK Group, 9% more than in This was particularly true for HVA products, including plates, coldrolled, pre-painted and electrical steel, up 30% to 4.5 million tonnes. At the same time, slab sales weakened to 3.1 million tonnes (-18%), due to their processing at our own rolling mills. Because there was more stability in the Russian markets, we were able to increase our domestic sales by 15% year-on-year. The key principles for NLMK Group s sales strategy can be found at the Company website at: Sales by region in 2011 Russia EU Middle East, incl. Turkey Asia and Oceania North America Other Sales by products in 2011 Hot-Rolled Steel Pig Iron Cold-Rolled Steel Electrical Steel Pre-Painted Steel Long Products and Metalware Slabs and Billets

17 3 / ABOUT NLMK / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 33 CORPORATE GOVERNANCE MODEL NLMK s corporate governance framework ensures a clear separation of the strategic and day-to-day management of the Company between shareholder representative bodies and the Company s management. The distribution of powers and delineation of activities helps establish accountability for proposing and making decisions at all levels. The Company s corporate governance is implemented in accordance with the Russian Federation Law on Joint-Stock Companies, other regulatory acts governing the activity of joint-stock companies in the Russian Federation, the NLMK Charter, the Corporate Governance Code and other internal documents of the Company. The Company adheres to international good corporate governance practices in order to safeguard the rights and interests of its shareholders and investors. Corporate governance principles as defined by the NLMK Corporate Governance Code: The Company: The Company seeks to implement efficient and transparent procedures for safeguard ing the rights and interests of its shareholders stipulated in the applicable legislation, the Charter and other regulatory documents of the Company; The Company considers increasing its shareholder value as one of its main aims; The Company enforces a policy of equal treatment for all shareholders, either minority or majority, Russian or foreign; The Company upholds the right of shareholders to participate in the management of the Company by encouraging shareholder participation in meetings, voting on issues included in the agenda, the prompt receipt of information on Company activities, its management, control and auditing bodies; The Company seeks to ensure compliance with the applicable legislation and interna tional corporate governance standards. The Company is committed to the following: The policy of observing third party rights, including creditors and employees of the Company, as stipulated by applicable legislation, the Charter of the Company and other corporate documents; The unified corporate policy in respect of the Company s subsidiaries and affiliates and other legal entities in which the Company is the founder, a participant or a member; The policy of information transparency; The policy of good ethics in doing business.

18 3 / ABOUT NLMK / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 35 Shareholder Meetings The meeting of shareholders is the supreme management authority at NLMK. Each NLMK common share provides its owner, a Company shareholder, with the same scope of rights. The shareholders exercise their set of rights related to participation in the management of the Company by voting and approving decisions at General Meetings of Shareholders. Shareholders holding in aggregate at least 2% of the Company s voting stock are entitled to propose agenda items for the Annual General Meeting of Shareholders and to nominate candidates for the Board of Directors, the Internal Audit Committee and the President (Chairman of the Management Board). Board of Directors NLMK s Board of Directors defines the strategic areas for the development of the Company and exercises general oversight over the Company s operations. The Board of Directors ensures that the Company operates by the Charter, the Corporate Governance Code and resolutions of the General Meetings of Shareholders. The Board of Directors comprises nine members. Members of the Board of Directors are elected by the General Meeting of Shareholders for a term until the next annual shareholders meeting. The Chairman of the Board of Directors is elected by the members of the Board of Directors from within by securing a majority of votes from the total number of members of the Board of Directors. The Chairman of the Board of Directors is Mr. Vladimir Lisin. Three out of nine members of the Board of Directors are independent directors. The Board of Directors supervises the operations of the Company and evaluates its performance and development by relying on information reported by the Board s committees: the Strategic Planning Committee, 12.8 the Audit Committee, and the Personnel, Remuneration and Social Policy Committee. The Strategic Planning Committee Develops recommendations on priority guidelines for the Company and its development strategies, including long-term measures to enhance the Company s efficiency, improve its financial performance and investment appeal. The Audit Committee Develops recommendations on the efficient control of financial and economic activities of the Company, including annual independent external auditing of financial statements. The Personnel, Remuneration and Social Policy Committee Drafts recommendations on the human resources policy. The Committee also deals with social issues, environmental safety, and handles relations with national and local authorities. million tonnes Finished steel product sales (+9%)

19 3 / ABOUT NLMK / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 37 NLMK s Governance Structure & Business and Finance Supervision Bodies President and Management Board The President (Chairman of the Management Board) is the sole executive authority of the Company. The collective executive authority of the Company is the Management Board (eight top managers of the Company comprise the Management Board). The President (Chairman of the Management Board) manages the day-to-day operations of the Company, arranges for the execution of resolutions adopted by the General Meeting of Shareholders and the Board of Directors. The acting President (Chairman of the Management Board) is Mr. Alexey Lapshin. Independent Auditor General Meeting of Shareholders Audit Committee 19% EBITDA margin The Company s day-to-day activities in the areas of social and environmental responsibility are run by the Management Board; its members are approved by the Board of Directors based on the nominations made by the President (Chairman of the Management Board) taking into account the recommendations of the Personnel, Remunerations and Social Policy Committee. Members of the Management Board put significant emphasis on the promotion of corporate social responsibility in their respective lines of activity. Internal Audit Commission Board of Directors President (Chairman of the Management Board) Members of the Management Board Strategic Planning Committee Personnel, Remuneration and Social Policy Committee Senior VicePresident, General Director Vice-President, CFO Vice-President, Sales Vice-President, HR and Management Systems Vice-President, Development and Environment Vice-President, Head of Iron Ore Division Vice-President, Head of Coal Division

20 3 / ABOUT NLMK / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 39 Risk Management One of the key components to managing the Company s sustainable development is efficient risk management. Risk management is a continuous, transparent and integral process involving every employee of the Company at various stages: Detecting and continuously monitoring risks; Evaluating potential exposure of NLMK Group s business to risks; Distributing liability by risk owners; Developing risk management measures; Control over critical risks; Implementing reporting on risk management. In the Company, in collaboration with the leading advisor on risk management (Marsh), performed an efficiency assessment of the existing risk management system, developed recommendations for its improvement, and issued internal documents regulating risk management procedures within the Company. Starting from 2010, the risk management process is implemented independently. Within this integrated approach to risk management, the responsibilities of core participants are distributed as described in the following table: I have been an athlete all my life and I love to travel. Life would be incomplete without mountaineering. AUTHORITY Board of Directors Management Board Vice-Presidents, Division Heads (risk owners) Vice-President (CFO) Business Units RESPONSIBILITY Assure shareholders that the Company has identified key risks and is successfully managing them Monitor effectiveness of the risk management system and internal audit function Identify division-specific risks and implement risk management actions Monitor perfomance of the risk management system, generate consolidated risk management reports Identify risks, define and implement risk management practices Alongside financial risks, the Company manages non-financial risks. The Company sees non-financial risks as risks which may emerge within the context of its interaction with various key stakeholders, i.e. government authorities, shareholders, employees, business partners, local communities, customers and suppliers, and understands these to include social sector risks, environmental risks, personnel risks, reputational risks, corporate governance risks, business partnership risks and other risks. In an effort to reduce the probability of these risks, NLMK consistently checks its activities for compliance with the effective legislation in the area of developing internal standards and programmes for environmental and industrial safety, interaction with related parties, including its personnel.

21 3 / ABOUT NLMK / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 41 RISK DESCRIPTION MITIGATION MEASURES 2011 DEVELOPMENT RISK DESCRIPTION MITIGATION MEASURES 2011 DEVELOPMENT Environmental Related to potential negative impact on the environment as a result of constructing and operating production facilities. To reduce environmental risks, chemical composition of emissions and effluents is monitored. Commissioning of new environmentally friendly process equipment and upgrading of existing facilities. Our recycling rate exceeds 100%. In 2011, NLMK s environmental investments amounted to RUB4.5 billion. Reputational Lower customer satisfaction with product quality and delivery time. NLMK monitors customer satisfaction levels with product quality and delivery times on a regular basis. In 2011 the integrated customer satisfaction rating, i.e. product quality and Company operations, was 8.3 on a scale of 10 ( good ). Social Personnel Unfavourable social and economic developments in the regions where the Company operates. Risk related to shortage of qualified personnel. The Company is implementing a variety of social support programmes promoting the development of sport, culture, health, education, and charity in the regions where it is present. In order to prevent personnel risks the Company has developed a set of corporate standards for personnel management which govern employee hiring and dismissal practices, training and professional skill evaluation, procedures for awarding employees, youth engagement, implementation of in-house social sector programmes targeting employee health improvement and welfare, etc. In 2011, the Company allocated over RUB560 million to charity. Over 40,000 employees completed professional training programmes in Occupational safety and health risks Related to industrial and occupational accidents resulting in injuries and occupational illnesses of employees. All Group production sites have developed and enforced occupational safety and health standards. Employees are provided with personal protection equipment and occupational hygiene products. In 2011 spending on occupational safety activities exceeded RUB485 million. Company occupational health and industrial safety policy is compliant with the OHSAS international standard.

22 3 / ABOUT NLMK / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 43 Communications Policy The Company pursues a communications policy based on the following principles: Equal access to information by all shareholders, investors, and other stakeholders; Regular and timely provision of information; Reliability and integrity of information; Prompt and accessible disclosures; Confidential treatment of information containing national, official or trade secrets, and monitoring the use of insider information. The Company s official website provides shareholders, investors and other stakeholders with the most detailed information on the Company s operations. Membership in National and International Organisations NLMK is a member of the Russian Union of Industrialists and Entrepreneurs (RSPP) as well as a member of the RSPP s regional division in the Lipetsk Region. The Union is represented in legislatures of all levels, allowing the Company to take part in law-making activities, to influence decision making on regional economic development, as well as to maintain a transparent dialogue with the authorities, and through this to steadily reduce its business risks. NLMK is a member of the World Steel Association (WSA, formerly known as the International Iron and Steel Institute, IISI), the world s largest non-profit association of steel companies accounting in aggregate for more than 75% of global steel production. Membership in this reputed organisation allows the Company to safeguard the interests of Russian steelmakers internationally in a more effective manner and to develop its business in line with the shared industry trends and strategic objectives. As a member of the World Steel Association the Company takes an active part in the Steeluniversity.org educational project, an e-learning portal. NLMK is a member of the non-profit Russian Steel Consortium. The core activities of the consortium focus on developing rules and policies for promoting a civilised market for ferrous metal products in Russia, designing the rules for interaction with other steel companies, governmental and municipal authorities and the public at large.

23 3 / ABOUT NLMK / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 45 Calendar of Events 2011 JANUARY NLMK Group companies successfully complete the registration of their products as required by Regulation EC #1907/2006 (REACH). Complying with European Union registration procedures for chemical substances allows NLMK Group to continue to export its products freely to the European market. US$11.7 billion Revenue (+40%) APRIL European Bank for Reconstruction & Development (EBRD) awards NLMK a prize for its achievements in the area of environmental and social improvement. The prize for Excellence in Sustainable Energy and Climate Change was awarded by an independent panel of judges. This decision recognises NLMK s strong commitment to and success in developing a comprehensive energy efficient strategy, setting an excellent example of management, and promoting the development of new skills associated with modern environmental technologies and energy management practices. NLMK wins the right to explore and develop the Zhernovki Gluboki plot of the Zhernovskoye coal deposit located in the Kemerovo region. The license fee is RUB420 million. NLMK signs definitive agreements to purchase a 50% interest in Steel Invest and Finance from Duferco Group. The transaction will significantly enhance NLMK s international downstream portfolio through the complete integration of 7 rolling with total rolling capacity of over 5.5 mtpy and several distribution facilities. MAY VIZ-Stal wins the Russia s Top 100 Corporations: Environment and Environmental Management competition, and its Air and Water Protection and Industrial Ventilation Laboratory (AWPIVL) was recognised as one of the best environmental protection units in the country. The honorary title of Environmentalist of the Year 2011 was awarded to Sergey Makurov, Chief Executive Officer of VIZ-Stal. Tatyana Kostcheyeva, Head of AWPIVL, received the honorary badge of Best Manager in the Field of Environmental and Industrial Safety. Novolipetsk passes a series of audits conducted by TÜV SÜD, the independent German certifying agency. TÜV SÜD experts examined the Company s overall Quality Management System (QMS) confirming its compliance with international standard ISO 9001:2008 Quality Management System Requirements. They also confirmed NLMK s QMS in HRC production compliance with the European Council Directive 97/23/EG Pressure Equipment and Technical Regulations AD 2000 W extending the scope of the certificate to incorporate carbon steel concast slab production as per DIN EN In addition, experts confirmed that NLMK s HRC production complies with Directive 89/106/EEC and the Company received the right to use the CЄ mark on steel produced for the construction industry. Novolipetsk successfully completes a recertification audit of its Environmental Management System. The recertification confirms the Company s compliance with requirements specified under international standard ISO 14001:2004. The audit was undertaken by TÜV Rheinland Cert GmbH (Germany). The certification agency made the decision to extend the validity of the universally recognized environmental standard for NLMK for the next three years. JUNE VIZ-Stal wins the Best Business in Social and Economic Performance nomination in the Business Laureates Stars of the Urals 2011 competition and the Star of the Urals main prize for winning the competition for four years in a row. Novolipetsk successfully passes another audit conducted by TÜV SÜD for compliance with the requirements of international standard ISO/ TS 16949:2009, Quality management systems Particular requirements for the application of ISO 9001:2008 for automotive production and relevant service part organisations.

24 3 / ABOUT NLMK / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 47 JULY Vladimir Semendyaev, machine operator at Stoilensky Mining receives the Order of Friendship. The award was presented in the Kremlin by President Dmitry Medvedev. Based on the outcome of the Disclosure of Employer s Actions to Observe the Rights of Its Employees regional project VIZ-Stal receives the Employer s Certificate of Trust, confirming its leadership in terms of compliance with labour laws. The project was sponsored by the Sverdlovsk Region State Labour Inspectorate in collaboration with the Sverdlovsk Union of Industrialists and Entrepreneurs, the Urals Chamber of Trade and Industry and the local federation of trade unions. Altai-Koks passes the first supervisory audit of its Quality Management System for compliance with the requirements of the ISO 9001:2008 international standard, which applies to the production of coke and chemical by-products. AUGUST Novolipetsk announces the launch of hot testing at its new 3.4 mtpy Blast Furnace #7 (BF-7). US$2 billion Investments into development OCTOBER NLMK acquires the National Laminations group, a grain-oriented (transformer) steel processing and distribution company. This acquisition will enhance NLMK s position in the Indian market as one of the leading suppliers of grain-oriented electrical steel, controlling production from crude steel production to delivery to the final customer.

25 3 / ABOUT NLMK / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 49 NOVEMBER Blast Furnace #7 is awarded a prize in the 2011 Major Event of the Year in the Russian Metallurgy Sector Competition instituted by the Organising Committee of the Metal-Expo 2011 International Industrial Exhibition. During the same exhibition the NLMK Company corporate magazine also won a prize for Best Corporate Magazine in the 2011 Best Corporate Media in the Russian and CIS Metallurgical Sector. The Verkh-Issetsky Rabochiy, the corporate newspaper of VIZ-Stal, an affiliate of the NLMK Group, became the winner in the Best Publication by Metallurgical and Metalware Companies nomination. Also, the NLMK Group website became a winner in the 2011 Best Internet Project by Rolled Steel Producers. NLMK s 2010 Annual Report brings home multiple awards from recent national contests. NLMK is recognised in five categories at the 13th Yearly Federal Contest of Annual Reports and Corporate Websites organised by Securities Market magazine and Investor.ru in cooperation with the Federal Service for Financial Markets: Best all-round representation 1st place; Best interactive annual report 1st place; Best level of information disclosure in an issuer s annual report 2nd place; Best annual report in the metals and mining sector; Best annual report among Central Federal District public companies. NLMK also wins two categories in the 13th Yearly Federal Contest of Annual Reports organized by the RTS and MICEX Stock Exchanges, where the Annual Report was named: Best presentation of the company s investment case in an annual report; Best annual report among Central Federal District companies.

26 3 / ABOUT NLMK / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 51 NOVEMBER VIZ-Stal successfully completes the recertification audit of its Quality Management System (QMS), performed by the British Standards Institution (BSI) certification authority, for compliance with the requirements of the ISO 9001:2008 international standard, once again reaffirming its commitment to improving the quality and competitiveness of its products in the global markets. Based on the outcome of the audit the certificate was extended until UZPS successfully passes an inspection audit of its Quality Management System (QMS) for compliance with the requirements of the ISO 9001:2008 international standard. Based on the findings of the audit, UCSI Uralsertifikat, the certification authority, noted that the productive operation of the QMS was ensured by the effective coordination between units within the company. NSMMZ passes a recertification audit for compliance with the requirements of the ISO 9001:2008 international standard, conducted by TUV International RUS. DECEMBER NLMK Group businesses Novolipetsk and Altai-Koks become winners in the Best Russian Companies: Dynamics, Effectiveness, Responsibility-2011 competition organised by the Russian Union of Industrialists and Entrepreneurs. Novolipetsk was awarded first place for Social and Environmental Responsibility in the Efficient Personnel Development Policy special nomination; and Altai- Koks was awarded for Dynamics and Effectiveness in the Sustainable Dynamics of Business Development nomination. US$2.3 billion EBITDA

27 04 STAKEHOLDER ENGAGEMENT 6 / СОЦИАЛЬНО-ЭКОНОМИЧЕСКОЕ РАЗВИТИЕ МЕСТНЫХ СООБЩЕСТВ / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 53 Father Gennady Okorokov Lead Electrical Engineer, Electrical Engineering Division, Chief Power Engineer Service, Altai-Koks Son Sergey Okorokov Engineer, Environment and Technology Monitoring Laboratory, Production Control Department, Altai-Koks NLMK perceives corporate social responsibility as a systematic activity involving the selection and application of the most efficient stakeholder engagement methods leading to mutually beneficial decisions. When identifying key stakeholders, the Company considered the extent of their influence over NLMK Group operations. This approach generated the following list of stakeholders: Company employees, shareholders and investors, customers and suppliers, government regulators and supervisors, trade unions, public organisations, local communities within the Company s areas of operations, including potential employees. The Okorokov family enjoys hang-gliding, paragliding, travelling on foot and by water. They have white-water rafted on Charysh, Korgon, Kumir and Katun mountain rivers with sections which are categorised as grade 2 and 3 difficulty. The most important thing is to live an active life and not be afraid of challenges. As the saying goes, Walk and ye shall reach. Nowadays success and health have become a fashion. One needs to start young if they want to lead a healthy lifestyle, and one needs to exercise. Then one will have enough stamina for both productive work and for sound recreation.

28 4 / STAKEHOLDER ENGAGEMENT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 55 Employees Wage and salary levels, social safety nets (fringe benefits), professional development (career advancement), site security and work conditions. Opinion polls, Dial 06 counselling service, union meetings, appointments to discuss personal issues, shift meetings, media including corporate publications. Trade Unions Compliance with sectoral wage agreement, compliance with collective labour agreements, compliance with labour regulations, awareness of Company operations, wage levels and social safeguards for employees, work environment and labour safety. Conferences and meetings, discussion and execution of collective labour agreements, labour dispute commissions, Joint Commission of Administration and Union, Social Insurance Commission, Labour Safety Commission, qualifications and personnel review commissions. Shareholders and Investors Operational and financial performance, Company strategy, dividend payments, corporate governance, free-floating ordinary NLMK shares available through Russian stock exchanges, shares issued by NLMK and traded at the LSE of global depositary shares. Meetings with senior Company managers, annual reports and financial statements, quarterly performance presentations, teleconferences to discuss quarterly, six-month, and annual performance, media publications, corporate website. NLMK Group Customers Local Communities Issues of Interest Fulfilment of contractual obligations, Product quality and prices, timely review and resolution of customer complaints and claims, technical upgrade and development, operational and financial performance, financial and non-financial risks. Regional social and economic development, environment, public health, funding charity programmes, awareness of Company operations, reliable and transparent information, employment opportunities. Engagement Methods Annual reports and financial statements, conferences, forums, business meetings, Russian and international professional unions and organisations, media publications, corporate website. Media, through representatives of public organisations;,through members of legislative assembly at various levels, career orientation activities, conferences, meetings. Government Authorities Compliance with applicable laws, tax liabilities, regional social and economic development, environment protection. Participation in government activities, including legislatures, Participation in international and Russian professional and public organisations, meetings, dialogues, media. Public Organisations Compliance with applicable laws, environment, regional social and economic development, charity. Conferences, clubs, meetings and other events, media, addresses, corporate website. Suppliers Long-term cooperation opportunities, fulfilment of contractual obligations, timely review and resolution of complaints and claims, operational and financial performance. Annual reports and financial statements, conferences, forums, business meetings, Russian and international professional unions and organisations, media publications, corporate website.

29 4 / STAKEHOLDER ENGAGEMENT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 57 Employees Wage adjustments, response to proposals, opportunity for career growth, improvements in working conditions. Trade Unions Strict compliance with all social benefit and safeguard commitments, identified in the collective bargaining agreements. The Company gets regular feedback from key stakeholders through polls and consultations, and engages them in discussions and work group meetings to review specific issues, as well as through standing committees, etc. By developing a framework for stakeholder engagement the Company seeks to improve its current approaches to dialogue with a view to identify problems and develop solutions more quickly. Shareholders and Investors Availability of specialised units responsible for relations with shareholders and investors; a dedicated section for shareholders and investors on the Company website. NLMK Group Customers Local Communities Government Authorities Feedback Reliance on inputs from consumer satisfaction surveys when entering into subsequent contracts. Financial assistance to support sports, health, education, and culture activities; funding for programmes of juvenile health improvement and promotion of healthy lifestyles; charitable assistance provided to vulnerable households. Availability of a specialised unit responsible for government relations; Company participation in various Federal and regional programmes. NLMK feels that developing and publishing annual reports on sustainable development is one of the essential tools for stakeholder engagement. The Company has published Corporate Responsibility Reports since 2006 to keep stakeholders well informed on the Company s development strategy, management systems and socially significant results, which is a pre-requisite of any constructive dialogue. Public Organisations Consideration of all matters; participation in the pursuit of joint projects. Suppliers Open-bidding arrangements; contact details for procurement unit posted at Company website.

30 05 CONTRIBUTION TO REGIONAL DEVELOPMENT 6 / СОЦИАЛЬНО-ЭКОНОМИЧЕСКОЕ РАЗВИТИЕ МЕСТНЫХ СООБЩЕСТВ / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 59 Social Policy Darya Menshikova Administrative Assistant, NLMK-Urals, a subsidiary of Novolipetsk in Yekaterinburg Enjoys cross-country motorcycle racing, regular participant in unofficial competitions of amateur racers in the Urals region, in both unisex and women s races. Pursuing its corporate social responsibility policy in the regions where it operates, NLMK, together with the State and local communities, plays an active role in improving the quality of life, and in promoting stable regional social and economic development. As part of our development strategy, we are pursuing a number of long-term programmes focusing on several priority objectives: To promote sustainable development of territories where the Company operates; To support macroeconomic stability of local communities; To develop partnerships with regional and local authorities; To create comfortable living conditions for Company employees and local residents; To create and maintain the reputation of a good-faith and attractive employer.

31 5 / CONTRIBUTION TO REGIONAL DEVELOPMENT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 61 Social Sector Investments In identifying its social sector investments the Company s primary focus is on projects that would promote realistic improvements in the welfare of local communities. Programmes focused on the social sector are developed with the active participation of regional governments and the general public. In order to ensure the utmost effectiveness of its social sector investments the Company does regular monitoring of its impact on the social and economic developments in localities where it is present. Payment of taxes and provision of jobs Improving the social environment Priority Areas for Social Sector Investments Support for sports, health, education and culture Engaging the younger generations Charitable activities Payment of Taxes and Provision of Jobs NLMK Group companies are major taxpayers in almost all regions where the Company operates. Therefore, we see full compliance with applicable laws and payment of corporate income taxes in the regions where income is generated as a priority for corporate social responsibility. Taxes paid by the Company help foster the development of other industrial sectors, agriculture, construction and social welfare. The Company makes a significant contribution to employment opportunities for local residents, providing jobs with competitive salaries. Almost all NLMK Group employees are residents of local communities. In RUB NLMK paid million in corporate income taxes to the consolidated budget of the Lipetsk Region 51.9 In 2011, thousand people were working at NLMK Group

32 6 / СОЦИАЛЬНО-ЭКОНОМИЧЕСКОЕ РАЗВИТИЕ МЕСТНЫХ СООБЩЕСТВ / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 63 Improving the Social Environment In cooperation with the local governments the Company is pursuing activities to improve the existing arrangements for managing housing, and to enhance the effectiveness and transparency of spending allocated for the maintenance of the social sector in urban areas where NLMK Group businesses are located. Company experts play an active part in the legislative work of the municipal and provincial governments where the Company is present. As members of municipal and provincial legislative assemblies they are well aware and informed of the most pressing needs of the local communities, making it possible to incorporate the needs of various social groups and the strategic priorities for the development of the territories in the design of social sector programmes. NLMK employees are also represented in the Public Chamber, and regional offices of the Russian Union of Industrialists and Entrepreneurs and other NGOs. Promoting Sports, Health, Education and Culture The Company sponsors children s and youth sports schools and facilities, sports clubs and athletes. Funds are allocated to the maintenance of sports facilities (stadiums, sports palaces, gyms, etc.) and the acquisition of sports equipment. The Company supports children s development activities and sponsors studios, libraries, museums, art galleries, and also provides funding for the preservation and proper maintenance of historical monuments and architectural landmarks, and other cultural, religious and historical sites. The Company places special emphasis on improving the professional training system. NLMK consistently helps basic educational institutions to arrange their learning processes, to create a comfortable environment and provide quality education. The Company participates in public cultural, sports and theme-based events arranged by vocational training institutions, i.e. Worker Initiation, Open-Door Day, Final School Day, Vacancy Fair, University Comedy League, Student Spring, Autumn Debuts, professional skill competitions, etc. NLMK is the founder of the Novolipetsk Medical Centre, a non-profit organisation which provides medical care and health improvement services to Company employees and local residents.

33 5 / CONTRIBUTION TO REGIONAL DEVELOPMENT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT thousand schoolkids from over 70 schools took part in professional training activities Career guidance for school and college students is given special emphasis and is provided on a continuous basis by Company employees. It involves a number of programmes and events, including the following: Engaging Younger Generations Being a preferred employer in the region is a pre-requisite for helping the Company recruit the most creative and technically skilled personnel. By assisting the younger generation in obtaining advanced knowledge and skills the Company is creating a talent pool for the future. As part of its sponsorship and charity work the Company is funding improvements in the physical infrastructure of kindergartens, secondary schools, colleges, vocational training schools, creative learning centres, orphanages and boarding schools. The Company funds maintenance and renovations of educational facilities, procurement of equipment and modern learning aids, computers and sporting goods. Open House events for school students at vocational training institutions; Tours of Company businesses and facilities; Training programmes for school children, including Internet Vacation, E-Vacation, Young Steelworker s School, Introduction to Science; Competitions in English, drawing, writing and applied arts.

34 5 / CONTRIBUTION TO REGIONAL DEVELOPMENT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 67 To ensure the long-term development of its talent pool the Company supports a targeted NLMK Student Programme by paying tuition support for children of Company employees attending the best technical and economic colleges in Russia. Over the years running the NLMK Student Programme Since 2005, 18 graduates of Moscow State University, Moscow Institute of Steel and Alloys, State University of Management, Plekhanov Russian Economic University, Higher School of Economics, Voronezh State University, Higher School of Economics and other acclaimed Russian colleges and universities received high-grade education. Currently, 37 people are studying under the Programme. The Company offers students internship opportunities at NLMK Group production facilities. During their internship students are supervised by experienced professionals. During the summer school break the Company welcomes the children of its employees, as well as children from lowincome families and orphanages to its health resorts and recreation facilities. Cross-country motorcycle racing is that part of my personality which craves risk, adventure, and variety. This sport requires complete commitment and dedication: you need to be completely focused, spare no effort, and plan every move at least two steps ahead. 3.6 Over thousand students from 61 schools and colleges had the opportunity to do an internship with NLMK 1,800 Over children of the Company employees took part in health-improving activities. RUB32 NLMK allocated around million for these purposes

35 5 / CONTRIBUTION TO REGIONAL DEVELOPMENT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 69 Charitable activities The Company provides financial aid to vulnerable households. As part of its social programmes the Company offers monthly benefits, medication and medical care support, and treatment at health resorts and preventive clinics for pensioners and veterans of World War II, most of who are former NLMK employees. Aid is also extended to orphans, and rural communities. RUB260 million In 2011 the Company spent about on sponsorship support for socially insecure households in the regions where it operates Social Responsibility Projects Across the Country Key NLMK Group businesses in the mining and metals sector operate in six different regions of Russia, including the Altai Krai, Belgorod, Lipetsk, Sverdlovsk and Kemerovo Regions, and the Komi Republic. Altai Krai Improving the Social Environment Altai-Koks donated RUB90 million to the municipal government of Zarinsk to provide support for pre-school educational establishments which the company had handed over to the municipality in Recreational Activities for Children Altai-Koks allocated RUB6 million to finance summer recreation activities for the children of its employees, paying for accommodations for 386 children at the corporate Bodrost preventive clinic and Lesnaya Dal children s health camp. They were joined for the school holidays by 20 kids from the Zarinsk Municipal Orphanage, the cost of their stay covered at the expense of Altai-Koks. Charitable Activities Altai-Koks continues to provide support to the Zarinsk Orphanage on a regular basis and has donated to it more than RUB600,000 in The business also assists in organising municipal events, i.e. activities to commemorate the Soviet military pullout from Afghanistan, the Tyagun Marathon winter cross-country skiing races, and others. Belgorod Region Improving the Social Environment In 2011 Stoilensky took part in establishing the Kursk Magnetic Anomaly Museum, by donating RUB6 million to restore the building that will house the proposed museum. The KMA Museum is unique in the way that it will be the first establishment of its kind in the Belgorod Oblast fully dedicated to depicting the history of the Region s achievements in labour. Around RUB13 million were donated by Stoilensky in 2011 to aid in the implementation of various social projects in Stary Oskol. Recreational Activities for Children About RUB12 million were allocated for recreational activities for children. During the school holidays 400 children of company employees were accommodated at a number of resorts for preventive care and treatment, of which 100 stayed at the Black Sea resorts as part of the Mother and Child programme. Charitable Activities Stoilensky is providing assistance to war veterans who have retired from government employment and are registered with the municipal Veteran s Council, by paying a monthly supplemental benefit at its own expense. The company also provides financial support to the Russian Society for the Blind and the municipal Association of Persons with Disabilities. In 2011 Stoilensky allocated RUB7 million for providing assistance to veterans and retirees.

36 5 / CONTRIBUTION TO REGIONAL DEVELOPMENT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 71 Lipetsk Region Improving the Social Environment Novolipetsk donated more than 31,000 tonnes of crushed stone made from steelmaking slag to various rural governments and communities in the Lipetsk and Tambov Regions. The NLMK social responsibility programme was launched in 2010 and aims to provide assistance in the improvement of rural roads. It covers 13 districts in the Lipetsk Region and another nine in the Tambov Region. Under this assistance programme Novolipetsk maintains 155 contracts with rural communities to supply crushed stone made from steelmaking slag free of charge. Supporting Sports By providing assistance to the Lipetsk Metallurg Sports Club NLMK is taking an active part in the promotion of shooting sports in Russia. The Lipetsk Metallurg SC trap and skeet shooting facility is one of the most advanced in Russia and is equipped in line with modern requirements, allowing it to host international competitions. In March 2011 merited master athlete and 2006 world champion Vitaly Fokeev had won the double-trap competition and set a new world record by scoring 148 targets out of 150 at a meet in Concepcion (Chile) during the first leg of the ISSF World Cup Shotgun This victory by the Lipetsk athlete has allowed Russia to obtain its fourth license out of eight allowed for the 2012 Olympic Games shooting competitions. In June 2011 at the ISSF World Cup tournament in Munich another Lipetsk Metallurg SC athlete Lyubov Jaskevitch, an international class master athlete, won fifth place in the women s air pistol competition, earning an Olympic Games slot for Russia. In 2011 the Lipetsk Region shotgun team won the Russian National Team Competition, the Russian National Team Championship and the final leg of the Russian Students Spartakiad V.

37 5 / CONTRIBUTION TO REGIONAL DEVELOPMENT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 73 Support for Education Between 2011 and 2013 NLMK intends to allocate some RUB120 million for the Programme to Modernise the Vocational Training System in the Lipetsk Region. This Programme, designed by NLMK in collaboration with the Government of Lipetsk Region, became one of the winners in the competition for regional education development programmes, sponsored by the Russian Ministry of Education and Science. An agreement between the company and the Government of the Region for cooperation in this area was signed in July Activities under the programme include, among other things, vocational guidance for youngsters, development of new educational programmes, renovation of teaching facilities and replacement of teaching aids, and provision of assistance in finding relevant employment for graduates. Competitive Enrolment in Educational Institutions that Provide Training in Professions and Skills of Priority for Novolipetsk (persons per place) In 2011 NLMK extended financial aid to the following academic institutions: RUB7 million Lipetsk Vocational School No.10 RUB7.1 million Lipetsk Metallurgy College RUB7.6 million Lipetsk State Technical University Charitable Activities The company has channelled more than RUB125 million through the Miloserdie Charity Fund for the implementation of 10 social programmes. Targeted assistance has been provided to more than 33,000 vulnerable residents of the region. Throughout the year one of the Novolipetsk cafeterias has been providing free meals to individuals eligible under social security programmes. Cultural and sports events and recreation in summer camps, as well other activities, are arranged during school breaks and winter holidays for orphaned children. The company donates more than RUB10 million for these purposes annually. Company employees have collected in excess of RUB320,000 in charity donations for orphanages and child care institutions in Lipetsk and the Lipetsk Region. Sponsored child care institutions have received sporting goods, board games and toys for development and recreation activities during summer vacation in health improvement facilities. The NLMK Miloserdie Charity Fund had prepared 550 gift boxes with candy and provided financial assistance to seven child care institutions for the purposes of improving their physical infrastructure PL LMK LGTU Recreational Activities for Children In 2011 more than 730 children from Lipetsk have been accommodated at the Prometey children s camp for recuperative rest. The company has allocated in excess of RUB7 million for these purposes.

38 5 / CONTRIBUTION TO REGIONAL DEVELOPMENT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 75 Sverdlovsk Region Improving the Social Environment A new library building was commemorated in Niznie Sergi. The redesign of one of the municipal buildings had been commissioned by NSMMZ and completed by UralNIIAS; the company donated the project free of charge to the community. Over the past two years NSMMZ social responsibility activities included the renovation of a building to house an arts development facility for children, which was donated to the municipal government, and the renovation of a dormitory and the Urals Hotel. In 2011 NSMMZ had spent RUB6.5 million for the purposes of improving the sanitary protection zone around its premises. The programme included the installation of a pedestrian walkway along Chernyshevsky Street and the clearing of the Revda River embankment. The company had spent RUB3 million to procure and plant poplars, maples, and cotoneaster and rowan trees. Vtorchermet NLMK Urals had provided assistance in organising the Lom (Scrap) International Festival, by giving away 10 tonnes of scrap metal to participants in the garden sculpture festival which was held in Yekaterinburg in August Recreational Activities for Children In 2011 NSMMZ had spent about RUB5 million for summer vacations of children of its employees from Revda, Nizhnie Sergi and Berezovsky. A total of fortysix children were accommodated at the Vita Resort in Anapa, on the coast of the Black Sea. Another 147 kids were accommodated in three shifts at the Romantika country health-improvement camp. The Gorny Len resort and health improvement camp near the city of Asbest hosted 78 children of the employees of VIZ-Stal. Another 30 kids joined their parents for vacation on the Black Sea as part of the Mother and Child Programme. The business had spent in excess of RUB2 million for recreational activities for children in 2011.

39 5 / CONTRIBUTION TO REGIONAL DEVELOPMENT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 77 Charitable Activities NSMMZ operates its charitable activities through its in-house Zabota-Pomosch-Miloserdie Charity Foundation. The Foundation is running the following programmes: Targeted assistance to retired veterans in Revda, Nizhnie Sergi and Berezovsky; Social aid for underage children, low-income households, and maternity and child-raising support; Social assistance for the promotion of physical fitness and sports. Throughout 2011 the business has been providing financial support to veterans, and assisted in the sponsorship of sports events, including those arranged by the Revda Martial Arts Federation and Youth Sports Academy, and provided aid to local schools. Every year it also provides New Year gifts to children at the Degtyarsky and Revda orphanages. NSMMZ has received the Silver Seal from the municipal government of Revda for its active participation in social work and assistance provided to the needy, based on the social work done by local businesses and civil society organisations. VIZ-Stal is a regular sponsor of the Yekaterinburg Orphanage #10, and also takes an active part in social projects undertaken by the governments of the Sverdlovsk Region, Yekaterinburg and Verkh-Isset District. Kemerovo Region Improving the Social Environment As part of the preparations for the construction of an underground mine to develop the Zhernovsky-1 site in the Novokuznetsk District of Kemerovo Region NLMK signed an agreement for social and economic cooperation with the government of the region. The agreement calls for the Company to allocate RUB5 million for social programmes in the region, another RUB5.5 million for building a pedestrian bridge across the Uskat River in the village of Anisimovo, Novokuznetsk District, and more than RUB2.5 million to repair a motorway connecting the village of Zhernovo to the Chernovoy Naryk River. Komi Republic Improving the Social Environment NLMK s victory in the competition for the right to develop the Usinskoe coal deposit in the Komi Republic will have a definite impact on the social and economic development of the region. The development of the licensed site will create at least 1,250 new jobs, of which more than 80% will be on a preferential basis offered to residents of the Komi Republic, helping to reduce unemployment in the city of Vorkuta and attract new investors and additional labour into the republic. Once the coal mining business reaches its design capacity it is expected to generate about RUB2.9 billion in tax revenue for governments at all levels. Under the licensing agreement the Company has also committed itself to the construction in Vorkuta of a sports facility with a swimming pool at an estimated cost of around RUB250 million. Future employees of the mining operation will receive training and subsequently will be offered re-training and skill enhancement opportunities. NLMK intends to spend RUB10 million annually for these purposes.

40 06 ENVIRONMENTAL FOOTPRINT 6 / СОЦИАЛЬНО-ЭКОНОМИЧЕСКОЕ РАЗВИТИЕ МЕСТНЫХ СООБЩЕСТВ / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 79 Konstantin Lyubavin Senior Shift Foreman, Oxygen Shop, Novolipetsk Konstantin is a musician and one of the founders of Diggadgy, a musical band renowned in Russia and other countries of the world. He plays a number of musical instruments, including ethnic instruments, among them the Indian sitar, and enjoys classical Indian music Environmental Policy Principles In 2011 as a strategic line of business NLMK Group s Environmental Policy underwent no changes despite the developments in the commodity markets. The Company believes that by developing and consistently implementing the corporate principles of our Environmental policy we can eliminate the potential risks of limiting NLMK Group s development based on environmental criteria. RUB18.4 billion invested into environmental protection over the last 5 years

41 6 / ENVIRONMENTAL FOOTPRINT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 81 Corporate Environmental Policy Principles: Public accountability for the business effect on the state of the environment; Compliance with environmental laws and regulations; Reliance on the best available technology during construction and the modernisation of facilities, and the decommissioning of obsolete and aged production facilities; Improvements in production processes, environmental technology and equipment with a view to contain the negative impact on the environment; Rational use of natural resources; Design and implementation of effective waste recycling solutions; Transparency of environmental information. In line with its Corporate Environmental Policy Principles in 2011 the Company has defined the following priority objectives: Achieve design performance in terms of environmental impact for newly commissioned technical upgrade projects, including for environment conservation projects; Sustain targeted environmental footprint indicators; Reduce stockpiles of previously accumulated waste.

42 6 / ENVIRONMENTAL FOOTPRINT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 83 Reducing the Impact on Air Aggregate atmospheric emissions by Group businesses in 2011 remained almost unchanged year-on-year and amounted to 313,100 tonnes (an increase of 0.3%), mainly driven by Altai-Koks. Increased output of finished products for the Group in 2011 of 8% year-on-year did not result in deteriorated environmental performance. Moreover, aggregate Group data shows a trend towards a quicker pace in the reduction of the negative impact on atmospheric air compared to output growth rates. NLMK Group Gross Emissions, 000 tonnes NLMK Long Products Stoilensky Altai-Koks VIZ-Stal Dolomit Stagdok Novolipetsk Novolipetsk continues to remain the major contributor (88.5% of total emissions) to the Group s impact on atmospheric air. At the same time, with steel output in 2011 at the main production site of 9.74 million tonnes (an increase of 5% year-on-year) gross atmospheric emissions stood at 277,200 tonnes, and in fact have decreased by 0.2% rather than increased compared to Altai-Koks, with emissions of 30,300 tonnes in 2011, is another major source of impact on atmospheric air and accounts for 9.7% of the Group s total gross emissions in In 2011 atmospheric emissions grew by about 12.7% over year-on-year, while coke production (with 6% moisture content) increased by 11.1%.

43 6 / ENVIRONMENTAL FOOTPRINT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 85 In 2011 the share of NLMK Russia Long in total emissions by the Group was 0.74%. Emissions by NLMK Russia Long were reduced to 2,302 tonnes (a 35% reduction year-onyear, driven by a 13.5% decrease in production due to slumping market demand for long products. Stoilensky accounts for less than 0.75%, or 2,355 tonnes, of total company emissions in With iron ore production growing in 2011 by 8.8% year-on-year, emissions were reduced by 9.8%. The raw materials division businesses, Stagdok and Dolomit, account for 0.19% and 0.09%, respectively, of gross emissions by the Group. At the same time, Stagdok has reduced its emissions in 2011 by 1.2% year-on-year, on account of a 0.6% reduction in output, while emissions by Dolomit increased by 36.5%, with its output growing by 35.8%. Within the Group VIZ-Stal makes a rather insignificant impact on the environment. Suffice it to say that its share in total Group emissions is below 0.04% and amounted to 126 tonnes in 2011, for a reduction of 8% year-on-year while output increased by 11%.

44 6 / ENVIRONMENTAL FOOTPRINT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 87 Impact on Water In 2011 consumption of water by NLMK Group businesses remained almost unchanged year-on-year and was reduced by 0.4% to 73.7 million cubic meters. Water consumption by Group businesses varies depending on their nature, scale and production profile. Water Consumption by NLMK Group Businesses, millions of cubic meters per year NLMK Long Products Stoilensky Altai-Koks VIZ-Stal Dolomit Stagdok Novolipetsk As noted earlier (see the NLMK 2010 CSR Report), the water consumption profile within the Group has changed dramatically with the completion of renovations on the process water supply system at Novolipetsk. Stoilensky accounts for the greatest share, 55%, of total water consumption by the Group, with Novolipetsk consuming 29%, while Altai-Koks consumes less than 10% of the total, and the balance is accounted for NLMK Russia Long businesses (4.5%), VIZ-Stal (1.9%), Stagdok (0.13%), and Dolomit (0.05% of total). Same as in 2010, Stoilensky remained the major consumer of water with 40.4 million cubic meters. In 2011 Stoilensky increased its consumption of water by 3% year-on-year, while output grew by 8.8%.

45 6 / ENVIRONMENTAL FOOTPRINT 88 Pollutants Discharged with Waste Water by NLMK Group Businesses, 000 tonnes At Novolipetsk water consumption was reduced by around 2% to 21.4 million cubic meters through the streamlining of water disposal flows. In 2011 water consumption by Altai-Koks increased by 5.1% and reached 7.0 million cubic meters, while output increased by 11.3%. Decreases in water consumption in 2011, compared to 2010, were recorded at VIZ-Stal, by 20.5% with output growing by 9.9%, and at NLMK Russia Long, where it decreased by 26% while output fell by 13.5%. At Dolomit water consumption in 2011 remained at 2010 levels at 36,000 cubic meters, while at Stagdok it increased by 11.8%. An advantage of some NLMK Group businesses, including Novolipetsk, Stoilensky, Altai-Koks, and VIZ-Stal, is the existence of drainless water disposal systems, which prevent the dumping of pollutants with industrial wastewater. Under the circumstances in 2011 among Group businesses the greatest impact on the water basin due to pollutants discharged with wastewater was made by NLMK Russia Long, with 221 tonnes, or 65.4% of the 338 tonnes per year total for the Group; Dolomit accounts for a significant share of 27.5%, or 93 tonnes; a less significant share of the impact is attributed to VIZ-Stal, with 7.1%, caused by discharge of rain and water from melted snow. In 2011 discharges of pollutants with wastewater by Group businesses increased by 10% due to increased discharges of all Group businesses which dispose of wastewater NLMK Long Products Stoilensky Altai-Koks VIZ-Stal Dolomit Stagdok Novolipetsk

46 6 / ENVIRONMENTAL FOOTPRINT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 91 Waste Handling In 2011 Stoilensky accounted for 92.7% of all waste generated by Group businesses, while Novolipetsk accounts for 6.4%, and all other businesses for 0.9%. Waste Generation at NLMK Group Businesses, millions of tonnes The Group s companies represent different segments of the mining and steel industry and show varying volumes of waste generation, ranging from thousands of tonnes per year at Dolomit,, to dozens of millions of tonnes per year at Stoilensky. Waste generation by Group businesses in 2011 amounted to 62.6 million tonnes, an increase of 10.3% over 2010, and was driven by a number of positive developments, including: 52.2 Increase in output of products (mining and dressing waste, slags, solid process waste, etc.); Commissioning of advanced gas scrubbing systems for BOF operations at the main production site (sludge and dust); Completion of construction work on technology upgrade projects (construction debris) NLMK Long Products Stoilensky Altai-Koks VIZ-Stal Dolomit Stagdok Novolipetsk

47 6 / ENVIRONMENTAL FOOTPRINT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 93 The profile of production waste for group businesses has not changed. Wastes generated at NLMK Group companies are classified as low hazard wastes: 98% of these are Grade V (non-hazardous), and ca. 2% are Class IV (low-hazard). Waste generation in 2011 unmatched by output growth rates increased both for Group businesses which account for the bulk of waste generation, including a 12% increase for Stoilensky, an 8.9% increase for Novolipetsk, and a 31.2% increase for Altai-Koks, as well as for low volume waste generators, with a 24% increase for Dolomit, and a 44% increase for Stagdok. Stoilensky produces the largest amount of waste. Due to a 10.7% increase in output in 2011 there was a pro-rated increase in waste generation by 10.5% year-on-year, reaching 58.0 million tonnes. This was accompanied by a 1% increase in the volume of recycled waste, while the waste recycling rate remained almost unchanged, showing a decline of 0.5% from 5.5% in 2010 to 5.0% in Waste recycling at Novolipetsk reached 98.3%. In 2011 the amount of waste previously accumulated at the slag dump was reduced by 460,000 tonnes. Waste generation at Altai-Koks in 2011 increased by 31.2% over 2010 and reached 117,000 tonnes. Nevertheless, this does not pose an environmental risk, because almost all the waste is recycled. In 2011 Altai-Koks increased its waste recycling rate to 97.2% from 96.6% in NLMK Russia Long has reduced its waste generation by 22% year-on-year, due to both lower output, with output declining by 13.5%, and scheduled maintenance activities, while increasing the volume of recycled new and accumulated waste. In 2011 the volume of recycled waste increased to 588,000 tonnes, compared to 2010, the waste recycling rate increased to 141.3% in 2011, including recycling of previously accumulated waste, compared to 93.5% in At VIZ-Stal waste generation has decreased by 31.3%, to 9,200 tonnes, while the volume of recycled waste has decreased by 43.4%, to 5,200 tonnes, and the rate of waste recycling fell to 56.5%, compared to 68.7% in In 2011 Dolomit s waste generation increased by 24% with output increasing by 35.8%, while at Stagdok waste generation grew by 44% and output decreased by 0.6%. Dolomit showed deteriorated performance in terms of its waste recycling rate, which decreased by 4.5% year-on-year to 85.3%. On the other hand, Stagdok improved its waste recycling rate by 43.9 percentage points, reaching 85.9% waste recycling, offsetting any negative impact from increased waste generation. The most sound waste handling was reported in 2011 by NLMK Russia Long, with a recycling rate of 141.3%, Novolipetsk, with 98.3%, Altai-Koks, with a waste recycling rate of 97.2, and by Stagdok, where the waste recycling rate increased significantly from 52% to 85.9%. Unlike its individual affiliates the Group as a whole is showing a low waste recycling rate of 12%, which has declined by 0.9 percentage points year-on-year.

48 6 / ENVIRONMENTAL FOOTPRINT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 95 Environmental Protection Spending Mitigation of negative impacts on the environment is driven by regular investment activities of the Group s businesses. In 2011 the Group invested RUB4,516 million in environment-focused technology upgrades and environmental activities, compared to RUB4,697 million in Between 2007 and 2011 the Group has spent RUB18.4 billion on environmental conservation projects. Environmental Investments, RUB million 1,777 3,066 4,356 4,557 4,516 NLMK Long Products Stoilensky Altai-Koks VIZ-Stal Dolomit Stagdok Novolipetsk Most Effective Environmental Projects In 2011 the effectiveness of environmental projects was secured through the following activities pursued by NLMK Group businesses: Completion of construction of large scale environmental conservation projects and technology projects with an environmental benefit; Renovation of existing facilities for achieving a significant environmental benefit; Maintenance of equipment in a serviceable state in order to preclude emissions; Recycling part of stockpiled wastes for purposes of land reclamation and other purposes. Novolipetsk: Completion of construction of Blast Furnace #7; Construction of the recovery cogeneration plant (RCP); Installation of BOF-1 in BOF Shop #2, equipped with a system for capturing and scrubbing fugitive emissions; Phase 1 of the reconstruction of Central Exhaust System-2 at sintering operations; Reconstruction of heating machine #3 at hot rolling operations In 2011 the following key projects with environmental benefits have been implemented across NLMK Group production sites within the context of Phase 2 of the Technical Upgrade Programme: large-scale environmental projects implemented in 2011

49 6 / ENVIRONMENTAL FOOTPRINT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 97 Altai-Koks: Repairs of coking chamber doors at coking batteries Nos. 1,2,3,4, and 5; Relining of heating partitions of coking chambers at coking batteries Nos. 1, 2, 3, and 4; Repairs of exhaust installations at coking sections Nos. 1 and 2. NLMK Russia Long: Reconstruction of gas scrubbing system at EAF Shops Nos. 1 and 2 (Phase 1); Installation of a POST-2 permanent observation station for monitoring the state of the sanitary protection zone. Stoilensky: Replacement of SIOT-7 cyclone and DN-24 smoke exhauster in order to improve the efficiency of installations and reduce emissions of dust at the beneficiation plant; Mounting of FKC-4000 installation for scrubbing dust from exhaust air at the crushing and screening plant of the beneficiation plant (separation efficiency of 95%); Planting of trees (Phase 1) for the forest shelter belt seven meters wide and one kilometre long to reduce the discharge of dust beyond the allocated plot from the right side areas of the tailings dam. Dolomit: Replacement of five cyclone units at beneficiation plant #5; Acquisition of 15 containers for collecting waste contaminated with oils. Environment Management System Three NLMK Group businesses Novolipetsk, Stoilensky, and Dolomit - have introduced Environmental Safety Management Systems which are compliant with international standards. At Novolipetsk the Environment Management System complies with the ISO 14001:2004 Environment Management System international standard and has been in operation since In 2005, 2008, and 2011 Novolipetsk had successfully completed recertification audits performed by TÜV CERT (Germany) for compliance with ISO 14001:2004. RUB4.5 billion in environmental investment

50 6 / ENVIRONMENTAL FOOTPRINT / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 99 x30 reduction in effluent discharge over the last 5 years management In late 2007 Stoilensky had certified its Environment Management System for compliance with ISO 14001:2004, and in 2010 it successfully passed the recertification audit by Det Norske Veritas, and a regular supervisory audit in In 2011 Dolomit completed certification of it Environment Management System for compliance with ISO 14001:2007, and obtained a certificate issued by the Moscow-based SOYUZCERT, a certification body for integrated management systems. VIZ-Stal is preparing to certify its management system for compliance with ISO 14001:2004. Altai-Koks is continuing work on system procedures based on ISO 14001:2004. Public Appraisal of Environment Conservation Activities In 2011 NLMK Group businesses Novolipetsk and Altai-Koks became winners in the Best Russian Companies: Dynamics, Effectiveness, Responsibility competition organised by the Russian Union of Industrialists and Entrepreneurs in the Environmentally Responsible Business nomination. In addition Novolipetsk won the main prize for finishing first in the Russia s Top 100 Ecology and Environmental Management competition instituted by the State Duma, Council of the Federation, and the Russian Federation Ministry of Natural Resources and Environment. In line with the principle of openness of environmental information, in 2011 Novolipetsk held two round-table meetings for the public, which focused on the 2011 report on environment conservation activities and the arrangements for in-house monitoring of sources of emissions and the sanitary protection area, and included site visits.

51 07 IMPROVING ENERGY EFFICIENCY 6 / СОЦИАЛЬНО-ЭКОНОМИЧЕСКОЕ РАЗВИТИЕ МЕСТНЫХ СООБЩЕСТВ / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 101 Improving energy efficiency is among NLMK Group s strategic priorities aimed at reducing production costs as energy prices grow. The Company s energy efficiency strategy encompasses: Sergey Androsov Repairman, Reinforced Concrete Shop, Novolipetsk Winner of the Iskra-2008 corporate competition of singers, performs his own renditions of songs from Ghost of the Opera; participated in Wings of Victory Festival of patriotic songs Achieving the level of BAT (Best Available Techniques) for energy consumption per product unit by modernising processes and infrastructure; Cost reduction for NLMK Group businesses through reducing energy costs given the 100% energy self-sufficiency. RUB170 million saved through improving energy efficiency

52 7 / IMPROVING ENERGY EFFICIENCY / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 103 Key activities to increase energy efficiency: Improvements to the industrial process resulting in lower energy consumption due to revamping and technical upgrading; Maximum recycling of secondary energy supplies generated during industrial processes; Minimisation of losses in energy supply systems; Implementation of regular energy checks; Certification of NLMK Group companies for compliance with ISO Energy Management System. In 2011 NLMK implemented 82 initiatives to promote the efficient use of fuel and energy resources, including: Renovation of steam pipelines and the replacement of thermal insulation; Installation of pressure controllers in the steam supply systems; Renovation of heat insulation surfaces for machinery running on fuel; Installation of control and shutoff valves in the air supply systems; Replacement of obsolete equipment with modern facilities with lower energy consumption; Optimisation of pump operations by controlling flow rate and pressure. Energy consumption was reduced by 19 million kwh, gas fuel by 2400 tonnes of equivalent fuel, heat energy by 18,400 Gkal. Actual savings on purchases of fuel and energy resources amounted to RUB72 million*. * In 2011 prices In 2011 a project to improve the energy efficiency of ceiling lighting systems by relying on advance lighting equipment was completed across 28 production units of Novolipetsk. The project involved the replacement of more than 33,000 luminaires, resulting in improved illumination of work places and a 58% reduction in electricity consumption. On an annualised basis the reduction in energy consumption for illumination purposes amounts to million kilowatt-hours, or 12 megawatts.

53 7 / IMPROVING ENERGY EFFICIENCY / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 105 Efforts to improve energy efficiency were pursued by other NLMK Group businesses. Energy efficiency efforts implemented in 2011 helped achieve the following results: At Altai-Koks, energy consumption was reduced by 2.6 million kwh and heat energy by 20,900 Gkal, saving over RUB2* million; At Stoilensky, energy consumption was reduced by 6.6 million kwh, and heat energy by 1,000 Gkal, saving a total of over RUB17.8* million; * In 2011 prices In 2011, as part of the BF-7 complex, NLMK commissioned a recovery cogeneration plant. The plant will run on secondary blast furnace gas formed during pig iron making to generate electrical and heat energy. The plant s energy generating capacity is 150 MW. In 2011, the share of inhouse energy generation in NLMK s energy consumption balance amounted to 45%, or 269 MW, including 209 MW through the use of secondary energy sources. Specific energy intensity of steel produced by NLMK was reduced by 0.3% in 2011 vs to 6.1 Gkal/t of steel. 80 energy efficiency projects Over completed

54 7 / IMPROVING ENERGY EFFICIENCY / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 107 At VIZ-Stal, natural gas consumption was reduced by 523,000 m3, and heat energy by 1,200 Gkal, saving RUB2.6* million; At NSMMZ, energy consumption was reduced by 35.7 million kwh, saving a total of RUB75.5* million. In order to further improve the energy efficiency of production operations and reduce costs, NLMK Group businesses have designed and approved respective organisational and technical efforts for implementation in * In 2011 prices European Bank for Reconstruction & Development (EBRD) has awarded NLMK 60 a prize for its achievements in the area of environmental and social improvement. Over The prize for Excellence in Sustainable Energy and Climate Change was awarded by an independent panel of judges. This decision recognizes NLMK s strong commitment to and success in developing a comprehensive energy efficient strategy, setting an excellent example of management, and promoting the development of new skills associated with saved million kwh modern environmental technologies and energy management practices. What does singing mean to me? I have long been asking myself the same question. Maybe it means the same thing as for many generations before me: the opportunity to express myself and show my personality. Art adds colour to our lives.

55 08 OUR EMPLOYEES 6 / СОЦИАЛЬНО-ЭКОНОМИЧЕСКОЕ РАЗВИТИЕ МЕСТНЫХ СООБЩЕСТВ / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 109 Olga Valitova Head of Clerical Office, VIZ-Stal Enjoys cross-country bicycle racing. Completed a 1000 kilometre long cycling circuit of the Pamir Mountains, and negotiated the highest automobile mountain crossing in the CIS, the Ak-Baytal, at an elevation of 4,650 meters Skilled employees are one of the key factors behind the effective operations of the NLMK Group. The Company is pursuing an active personnel policy aimed at attracting and retaining the most talented young employees, regular increases in wages, use of various types of incentives, conducting professional training and personnel development programmes, ensuring a safe working environment, and improving the social safeguards for the employees. NLMK Group Personnel Policy Guidelines: Social partnership between employees and employers, and shared responsibility for performance; Performance-based remuneration; Continuous improvements in working conditions; Provision of equal opportunities for all employees; Provision of fringe benefits and social safeguards through the implementation of corporate social responsibility programmes.

56 8 / OUR EMPLOYEES / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 111 Personnel policy objectives are pursued through the following: Providing NLMK Group businesses with personnel which meet the requirements of a modern-day operation: Ensuring the innovative nature of instruction provided by backbone educational institutions and institutions where some of the instruction has a bearing on Group businesses; Creating an up-to-date system for continuous instruction, training and re-training of personnel; Improving arrangements for attracting personnel and assisting employees in the adjustment process. Implementation of programmes for NLMK Group personnel development and motivation: Maintaining wages and social safeguards for Group employees at an adequate level; Promoting personnel quality and professional mobility within the Group; Improving remuneration arrangements by consistently introducing uniform compensation and personnel motivation policies within the Group, implementation of modern incentive schemes; Creating a working environment that will allow employees to maintain their ability to work throughout their professional careers; Encouraging a stable social and psychological climate within personnel teams at group businesses; Implementation of programmes to improve the health of employees and members of their families; Improving the quality of the social environment and the housing conditions for employees. Enhancing productivity of labour: Streamlining management processes; Improving work management arrangements; Automation and mechanisation of production, service and subsidiary processes; Improving the efficiency of operations of equipment, machinery, and tools; Outsourcing of auxiliary processes or reliance on contractors; Personnel skill and motivation enhancement.

57 8 / OUR EMPLOYEES / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 113 Headcount by regions Labour Efficiency Growth in Steel Production, t/person* 51.9 thousand people Number of employees in % reduction in employment year-on-year In 2011 the Company made efforts to improve business management arrangements, increase labour productivity, cut the headcount of non-core personnel by outsourcing non-core operations. In 2011 several affiliates were established by transferring personnel from the main production site in Lipetsk, including the NLMK Accounting Centre, Gazobeton-48, and Novolipetsky Private Security Company. Businesses within the NLMK Russia Long division have transferred repair and IT personnel to previously established Zavod InTekhRemont and ATS-Inform affiliates. 31,100 Lipetsk Region 6,400 Belgorod Region 6,300 Sverdlov Region 4,300 Altai Territory 3,800 Others Steel output per one employee at the main production site in Lipetsk in 2011 grew by 7% year-on-year to 329 tonnes per person, mainly driven by the implementation of the labour productivity improvement programme * Note: data for the Lipetsk production site Vtorchermet NLMK in 2011 rolled out the Personnel and Labour (PaL) information system, which is already in operation at core Group businesses. The PaL information system allows for the automation of all human resource management operations and analytical review of personnel date, helping Company management to quickly assess any quantitative and qualitative changes in human resources and to make sound managerial decisions.

58 8 / OUR EMPLOYEES / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 115 Employee Motivation The NLMK policy for motivating its employees is geared towards paying competitive wages linked to higher output, increased labour productivity and improvements in how the business is managed. The Company is consistently and continuously implementing programmes which target increased wages for Company s employees. Improvements in compensation arrangements within the Company are based on the development and application of fair and exact criteria for monetary remuneration, which would take into account the utmost contribution of all divisions and every individual employee to the common cause. The Company s labour incentives policy sets no restrictions as to the amount of remuneration and benefits accruing to either temporary staff or part-time employees. NLMK Group businesses do not practice discrimination based on sex, age, ethnic background or religion, nor do they use child labour or forced labour % Increase in NLMK Group average wage level year-on-year RUB32.4 thousand NLMK Group average wage level in 2011 Changes in Average Wage from 2000 to 2011, RUB* 6, , , , , * Note: data for the Lipetsk production site 21, , The Company safeguards the welfare of its employees by offering benefits packages, which include, among others, the following: Compensatory cash payments; Separation allowances; Financial aid; Additional cash payments envisaged by collective bargaining agreements. RUB950 In 2011, the Company allocated around 26, , , million in social support for its employees

59 8 / OUR EMPLOYEES / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 117 In addition to wages and various bonuses Company employees are provided with fringe benefits, including mandatory and voluntary medical insurance for employees and a private pension plan. Mandatory medical insurance for employees provides coverage for in-patient and out-patient treatment to the extent envisaged under the regional Mandatory Medical Insurance Programmes, excluding sophisticated surgical procedures and expensive diagnostics and therapy procedures. Core NLMK Group businesses maintain voluntary medical insurance programmes for their employees, allowing them access to: In-patient and out-patient medical services (including medical consultations); First air treatment at on-site medication stations; Preventive medical examinations; Dental prosthetic services; Treatment at health resort facilities; Advanced medical assistance at specialized clinics for complicated medical conditions. RUB100 In 2011, the Company spent around million on voluntary medical insurance for its employees

60 8 / OUR EMPLOYEES / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 119 Company s Spenditure on Voluntary Medical Insurance in 2011(RUB million) Novolipetsk Stoilensky Altai-Koks 51 The Company is actively pursuing a private retirement benefit programme. NLMK is a founding shareholder of the Sotsialnoe Razvitie (Social Development) Private Pension Fund with representative offices in 11 regions of Russia. VIZ-Stal NLMK Long Products Stagdok Dolomit Total RUB276.5 contributions from the Fund founders account for over million

61 8 / OUR EMPLOYEES / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT Over thousand people from 8 regions of Russia are the Fund depositors, including thousand current and former employees of NLMK 2.9 thousand employees of NLMK concluded a supplementary Over non-state pension agreement in 2011 the maximum pension amount was RUB42 thousand The pension funds of the Sotsialnoe Razvitie Private Pension Fund increased in 2011 by RUB58.4 million and reached RUB2,190.9 million

62 8 / OUR EMPLOYEES / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 123 Social Partnership Together with the trade unions the Company is building a social partnership framework serving as a basis for mutual benefit and cooperation. Labour law provisions and additional benefits and guarantees for employees are stipulated in the collective bargaining agreements in place at all businesses of the Group. Compliance with commitments under collective bargaining agreements is monitored by joint commissions representing both the administration and trade unions. A continuous dialogue helps reach understandings on wages and streamlining of the management structure, ensure safe and healthy working conditions, and the introduction of benefits which improve the welfare of employees. In 2011 all commitments under the collective bargaining agreements in effect at NLMK Group businesses were mostly fulfilled. Professional Training and Development An essential area for Company human resources policy is the establishment of an integrated system for professional training and personnel development which aims to provide NLMK Group businesses with employees who are effective, socially stable, and capable of performing current and future tasks in line with the development strategy of the Company. The integrated system for professional training and personnel development is based on the policy of creating an environment conducive to full-scale utilisation of their labour and creative potential by each employee and helping them to develop a sense of corporate solidarity and dedication to Company interests. Average duration of training (in hours) per NLMK employee per year: 61% 129 Blue collars: 26 White collars: Key areas covered by the occupational training system include the following: Worker training within the context of job accommodation and initial skill development programme; Training for workers to acquire additional (related) skills; Skill improvements for Company employees across all areas of professional expertise; Training for the talent pool; Professional development for top managers. of Novolipetsk employees have the highest 5-8 class skill qualifications 43 thousand employees More than have completed professional training and skill enhancement in 2011

63 8 / OUR EMPLOYEES / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 125 RUB115 million the Company has spent for professional training and development of its personnel The Company maintains a number of initiatives focusing on personnel development, including the following: Job accommodation and mentorship; Talent pool development and training; Skill and performance reviews; Youth engagement programmes; In 2011, the Company has hired more than 3,000 young employees. More than 1,800 young employees have completed the employee adjustment programme. More than 3,000 employees are mentors for young personnel Talent pool development programmes are in place at all NLMK Group businesses. These focus on ensuring succession and preparing existing personnel for promotion to fill vacant manager and specialist positions. Competitions, contests, etc. 4thousand In 2011, the talent pool included some Training for members of the talent pool includes mandatory and complementary training. The mandatory training programme for members of the talent pool includes: Training of managers for their first appointment to a future position; Internship for a future position; Obtaining permits and authorisations (examinations) for eligibility to service hazardous facilities, i.e. facilities monitored by Rostekhnadzor and other supervisory agencies. future employees

64 8 / OUR EMPLOYEES / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 127 Complementary training includes: Participation in training sessions which encourage the development of managerial and communications competencies; Proficiency in foreign languages; Training under the President s Programme. In 2011 more than 3thousand members of the talent pool have completed training for future positions NLMK Group Leader 2020 Programme has a special place in the system for training and developing the talent pool. The objective of the programme is to create a team of young managers capable of occupying senior executive positions in the Company in the near future. The programme involves more than 800 hours of intensive training with 20 international level instructors and prominent international and Russian business personalities. During the two years of its operation more than half of the programme participants have been appointed to key positions in core production units of the Company. Annual skill reviews focus on identifying and encouraging the most effective and talented managers and specialists. Based on the findings of the reviews the better performing employees may be offered financial rewards or other incentives, professions development and career advancement opportunities. 4,876 employees of NLMK: In 2011 skill reviews were completed for a total of 2,496 (50.6%) managers; 2,302 (47.9%) specialists; 78 (1.5%) administrative staff. Based on these reviews 486 employees were promoted to the highest (first) skills grade and received cash supplements to their wages. In order to enhance the attractiveness of blue-collar and engineer jobs and to identify top performing employees and incentivise them the Company is holding corporate competitions, including Best in Profession, Foreman of the Year, and Engineer of the Year professional skills competitions, and also the Young Leader and the Best Mentor competitions. 54 corporate competitions were held in 2011 with participation by about 3,000 employees

65 8 / OUR EMPLOYEES / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 129 Employee Health Improvement All NLMK Group businesses operate programmes to provide their employees and their families with health improvement, sanatoria and health resort treatment and care. Employees working in harmful and hazardous environment are eligible for medical and preventive care on a priority basis. Every year NLMK Group employees enjoy the services of Company-owned sanatoria and preventive treatment facilities, as well as health resorts throughout the Russian Federation. More than 4thousand сemployees benefitted from treatment at sanatoria and health resorts in 2011 The Company helps to promote wellbeing by encouraging physical fitness and sports activities. All the production divisions of NLMK Group companies maintain gyms and rehabilitation centres, where the employees can recuperate at the end of their shift. The recuperation centres are equipped with fitness rooms, saunas, pools and whirlpool facilities. The Company promotes mass sports through annual Corporate Olympic Games, and intra-company football, volleyball, basketball, swimming, chess, table tennis and shooting championships and tournaments, as well as cross-country skiing and track and field meets. In 2009 Novolipetsk commissioned the Sports Park sporting centre located in a forest zone covering an area of 4,000 square meters. It offers perfectly equipped sports grounds and facilities. Among them are a squash ground, the only one in Lipetsk, two tennis courts, a perfectly equipped gym, rooms for aerobics and billiards, bowling, a sauna, a swimming pool with whirlpool massage, a playground where parents can leave a kid while they are doing sports. During 2011 Novolipetsk implemented a programme to reduce loss of time caused by temporary disabilities. The programme involved a review of the incidence of temporary disability among personnel, activities to prevent incidence of disease, i.e. flu vaccinations, sanatoria and health resort treatment, elimination of smoking, and promotion of a healthy lifestyle. These activities helped to reduce loss of time by 15%.

66 8 / OUR EMPLOYEES / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 131 Occupational Health and Safety The Company operates hazardous technology and processes, and is responsible for the lives and health of its employees. Its incumbent industrial safety and occupational health management system is built in compliance with international standards. NLMK s mission is to produce safe consumer products in a healthy and safe working environment. The Company s OHS policy covers the following areas: Application of uniform standards for OHS management activities; Regular monitoring of OHS arrangements at Company divisions for compliance with statutory Federal and local requirements; Conduct of proper medical examinations and reviews of employees health and improvements in their quality; Preventive actions to reduce the incidence of occupational diseases; Regular reviews of workplaces for compliance with working environment requirements; Material, organizational, technology and methodology equipment support for the corporate OHS system, provision of employees with quality personal and collective protective equipment, medicines and other preventatives. The Technical Upgrade Programme involves large-scale efforts to decommission obsolete and install modern equipment compliant with international occupational safety requirements. These measures allowed for significant improvements in conditions of employment and helped mitigate the effects of harmful and hazardous production factors.

67 8 / OUR EMPLOYEES / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 133 Occupational safety commissions, representing both the trade unions and Company administration, are maintained at NLMK Group businesses and undertake the following activities: Training personnel in the safe operation of hazardous facilities and industrial and occupational hygiene is an integral element of Company s OHS activities. All NLMK Group businesses provide OHS briefings and reviews of personnel on a mandatory basis for compliance with safe operation standards. Review workplace operating environments; Ensure provision of work wear, footwear and personal protective equipment to employees; Prevent job-related injuries and occupational disease; Certify workplaces for compliance with operating environment requirements, and participation in inquiries into industrial incidents. Cross-country cycling to me means more than just the opportunity to improve my physique and be stronger than the other competitors. It gives me the exhilarating feeling of control over challenging situations, over each and every turn and bend in the track, and the instantaneous response to the changing environment.

68 8 / OUR EMPLOYEES / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 135 For 2012 all NLMK Group companies have identified measures to reduce injuries and incidence of disease for their employees and to eliminate industrial accidents and incidents. The bulk of funding is spent on improving the workplace environment, providing employees with modern work clothes and footwear, personal protective equipment and preventive nutrition, milk and tea. Funding for Occupational Safety Activities, 000 RUB Company Novolipetsk Altai-Koks Stoilensky VIZ-Stal Dolomit Stagdok NSMMZ UZPS Vtorchermet NLMK TOTAL Occupational injury rates for NLMK Group businesses are shown in Appendix 2.

69 09 PRODUCT RESPONSIBILITY 6 / СОЦИАЛЬНО-ЭКОНОМИЧЕСКОЕ РАЗВИТИЕ МЕСТНЫХ СООБЩЕСТВ / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 137 Pavel Schukin Blast Furnace Gasman, Blast Furnace Shop #1, Novolipetsk Candidate master athlete, rugby As a major global producer of steel and rolled steel products, NLMK Group recognises its significant role in domestic sustainable development processes. The Company believes that an effective steel and steel products business must be built on continuous improvements in quality management and manufacture quality products which would fully meet customer requirements and expectations.

70 9 / PRODUCT RESPONSIBILITY / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 139 Quality Assurance The most obvious proof of reliable control over quality assurance and production processes and their compliance with customer requirements is that the Company holds a certificate of conformity to international standards applicable to its Quality Management System. The Novolipetsk quality management framework complies with ISO 9001:2008 Quality Management Systems and ISO/TS 16949:2009 Quality Management Systems Particular requirements for the application of ISO 9001:2008 for automotive production and relevant service parts organisations. Strong technology and organization of production processes and the quality of Novolipetsk products are recognized by the following Russian and foreign organisations: TÜV SÜD (Germany), Lloyd s Register (Great Britain), American Bureau of Shipping ((ABS), Sweden), Det Norske Veritas (Norway), Bureau Veritas (France), Germanischer Lloyd (Germany), Registro Italiano Navale (RINA), Russian Maritine Register of Shipping, the Rosstroy Federal Construction Products Technical Qualification Centre, etc.

71 9 / PRODUCT RESPONSIBILITY / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 141 Novolipetsk has passed a series of audits conducted by TÜV SÜD, the independent German certifying agency. TÜV SÜD experts examined the Company s overall Quality Management System (QMS) confirming its compliance with international standard ISO 9001:2008 Quality Management System Requirements. They also confirmed NLMK s QMS in HRC production compliance with the European Council Directive 97/23/EG Pressure Equipment and Technical Regulations AD 2000 W extending the scope of the certificate to incorporate carbon steel concast slab production as per DIN EN In addition, experts confirmed that NLMK s HRC production complies with Directive 89/106/EEC and the Company received the right to use the CE mark on steel produced for the construction industry. Other Group businesses are also employing quality management systems. The Altai-Koks quality management system is certified for compliance with the ISO 9001:2008 international standard for the manufacture of coke and chemical by-products. Altai-Koks is one of the first businesses in Russia whose testing unit has successfully completed the accreditation procedure for compliance with the requirements of the ISO/IEC General Requirements for Competency of Testing and Calibration Laboratories international standard with the German testing accreditation authority DAkkS GbmH.

72 9 / PRODUCT RESPONSIBILITY / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 143 VIZ-Stal complies with the requirements of ISO 9001:2008. Annual audits of its quality management systems are conducted by the British Standards Institution (BSI) certification authority. The Stoilensky Quality Management System conforms to ISO 9001:2000. This was confirmed in the course of an audit by the Det Norske Veritas certification authority. The NSMMZ Quality Management System is certified for compliance with requirements of the ISO 9001:2008 international standard. In 2011 UZPS passed an inspection audit for compliance of its Quality Management System with the requirements of the ISO 9001:2008 international standard. In accordance with the requirements of the European Union Directives RoHS, 1907/2006 REACH regulation applicable to harmful substances, the Company is obtaining certificates of conformance for all types of steel products. The specialised laboratory at the main production site in Lipetsk has received accreditation as technically competent (certificate #ROSS RU ChS07 of September 22, 2010) and is on a regular basis taking measurements for trace quantities of hazardous substances in all products. Novolipetsk and Altai-Koks have duly completed notification procedures in accordance with the newly adopted Turkish legislation on control over chemicals. A notification file for the Group s products, namely pig iron and ammonia sulfate, was prepared similar to European Union REACH regulations. All documentation was submitted to the Turkish Ministry of Environment and Forestry in March The filing has enabled NLMK Group companies to continue exporting its products to Turkey, which provides for the largest export market for NLMK.

73 9 / PRODUCT RESPONSIBILITY / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 145 The previous year saw the completion of a number of large-scale projects: Completion of construction of one of the world s most advanced blast furnaces, BF-7, with a capacity of 3.4 million tonnes of pig iron; Commissioning of the recovery cogeneration plant powered by exhaust gases from blast furnace operations; Steel smelting operations at Novolipetsk saw the construction of a new 300-tonne BOF, installation of a continuous steel casting machine, a pig iron desulphurising unit, and ladle furnaces; The rolling operations benefitted from the commissioning of a new line for producing pre-painted flats which are in high demand in Russia, with a capacity of 200,000 tonnes per year, and the reconstruction of a continuous furnace, whose productivity after the renovations was increased by more than 20%; A new beneficiation section with a capacity of 2,000,000 tonnes was commissioned at Stoilensky. Today VW, Daimler, General Motors, Opel, Fiat, Renault and many other automobile manufacturers use NLMK steel to produce their cars. The Group businesses plan to continue following the REACH requirements and EU RoHS directives for all their products supplied to the EU market. In 2011 the Company continued with the implementation of Phase 2 of its Technical Upgrade and Development Programme which focuses on increasing output and improving the quality of its products. In 2011, NLMK Group s capital investments totalled US$2 billion, +40% year-on-year

74 9 / PRODUCT RESPONSIBILITY / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 147 Customer Satisfaction NLMK continuously works to improve its products and customer service. Company activities are guided by customer needs and requirements and the Company strives to best meet the expectations of its partners. In order to verify and refine customer requirements the Company engages its customers through regular meetings, reviews domestic and international developments in the area of product quality improvement, monitors changes in the markets. Regular meetings and discussions with partners help the Company identify effective solutions to existing and future issues and opportunities for developing new and improving existing products. «Я твёрдо верю в удачу, связанную с силой духа команды. Регби как командная спортивная игра даёт мне это сполна.» Strategic counterparts, including automobile and components manufacturers, household appliance manufacturers and the electrotechnical industry producers, are engaged in productive cooperation, allowing for speedier resolution of any existing issues and introduction of new types of steel products. In October 2011 Lipetsk hosted the traditional NLMK in the Russian Metals Market and Regional Distribution business conference. The conference was organised by the Russian Union of Metal Exporters and NLMK. More than 80 managers and experts representing the metals sector, traders, media and consumers from various parts of Russia took part in the conference. Key topics of the conference included production and marketing policy, plans for the development of NLMK Group businesses, new products, and the prospects for developing the production of galvanised steel and pre-painted flats. The Company intends to continue the interaction with its customers while improving its information sharing and flexibility in the changing market situation.

75 9 / PRODUCT RESPONSIBILITY / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 149 In 2011, the integrated customer satisfaction rating, i.e. product quality and Company operations, was 8.3 on a scale of 10 ( good ). The Company reviews customer satisfaction at the end of each year. Satisfaction is assessed on the basis of the technical features of products, production organisation levels and timeliness of deliveries. Customer satisfaction is assessed for the purposes of identifying major customer-related issues, potential improvements in operations and products, including priority areas for future development. Novex Trading SA (a trading company within NLMK Group) has been chosen by Schneider Electric as its preferred supplier. The Company demonstrated a high level of performance in terms of product quality, logistics, cost saving, technical and process innovations, sustainable development and cooperation, meeting all the requirements set forward by Schneider Electric. Currently only 250 of Schneider Group s suppliers have been honoured with the preferred supplier title. To best meet customer requirements and improve the competitive edge the Company continues to enlarge its product range, marketing new products. In 2011, the NLMK Group was mastering the production of a new product high permeability transformer steel. There is a growing demand for this type of steel in both emerging and developed markets. NLMK Group experts have developed a unique process technology that is now being implemented at both production sites, Novolipetsk and VIZ-Stal. In 2011, Novolipetsk has developed new types of products: Merchant C45 slabs for VERONA STEEL; S500QL vacuum degassed slabs with sulfur content for DUFERCO CLABECQ; Specialty low carbon and low alloyed HX220PD steel; Cold rolled flats from HC180B steel compliant with EN

76 10 PROGRESS AGAINST 2011 OBJECTIVES 6 / СОЦИАЛЬНО-ЭКОНОМИЧЕСКОЕ РАЗВИТИЕ МЕСТНЫХ СООБЩЕСТВ / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 151 Vladimir Bukatkin Hydrogeologist, Mining Operations, Stoilensky Founder of the palaeontology museum at Stoilensky, paints in oils and watercolours Objectives Improve social responsibility reporting in line with best international practice. Improve stakeholder engagement. Development of Social Responsibility Reporting Corporate Governance Progress The Company s sixth Social Responsibility Report for 2011 was made in accordance with GRI sustainability reporting guidelines. A growing number of NLMK stakeholders are being engaged. Effectiveness of joint decisions is improving. Implement a comprehensive programme of risk management at NLMK. In accordance with recommendations from MARSH, a global advisor company, NLMK has independently organised its risk management process independently.

77 10 / PROGRESS AGAINST 2011 OBJECTIVES / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 153 Objectives Progress Improving Production Effectiveness Roll-out the Enterprise Planning System (ERP) to NLMK. Group companies. In 2011 ERP system was adopted at the following NLMK Group companies: VIZ-Stal and Altai-Koks. Novolipetsk implemented the maintenance, repair, and overhaul (MRO) functionality. Implement measures to further increase labour productivity. Increased labour productivity at Novolipetsk (329 tonnes of steel per person in 2011, +7% year-on-year) Personnel Policies Improve the system of financial and moral incentives for Company employees. In 2011 the average employee wages at NLMK Group s Russian businesses increased to RUB32,400. Develop personnel engagement procedures at the subsidiaries and align them with uniform corporate standards. HR and Labour Information System adopted at the main Company businesses. Continue with the practice of executing collective bargaining agreements at NLMK Group businesses. Ensure compliances with commitments under collective bargaining agreements. In 2011 collective bargaining agreements were in place at all NLMK Group businesses. Collective bargaining agreement commitments were mostly fulfilled in 2011.

78 10 / PROGRESS AGAINST 2011 OBJECTIVES / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 155 Objectives Progress Objectives Progress Occupational Safety Environmental Protection Implement measures designed to create a healthy and safe working environment for Company employees. In 2011 the Company spent more than RUB480 million on occupational safety and workplace environment improvements. Implement nature conservation measures scheduled for 2011 as part of Phase 2 of the Technical Upgrade and Development Programme. Spending on technical upgrade programmes targeting improved environmental performance by the NLMK Group in 2011 amounted to RUB4.5 billion. Social Policies Customer Satisfaction Implement programmes targeting macroeconomic development of regions where the Company is present. All measures proposed for 2011 were implemented. The Company donated more than RUB260 million for social and sponsorship programmes. Continue to focus on responding to customer requests communicated via the customer satisfaction survey. For 2011 the integrated customer satisfaction rating, i.e. product quality and Company operations, was 8.3 on a scale of 10 ( good ). When I paint watercolours or draw maps it helps me to shape my thought properly, to scale down cumbrous things on paper, to get the proper perspective of scale. And, of course, it gives me great pleasure.

79 11 OBJECTIVES FOR / СОЦИАЛЬНО-ЭКОНОМИЧЕСКОЕ РАЗВИТИЕ МЕСТНЫХ СООБЩЕСТВ / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 157 Dennis Spichka Purchasing Expert, Kamensk-Uralsk Operation of Vtorchermet NLMK Urals Bodybuilder, prize winner of the Sverdlovsk Region Open Championship Social Responsibility Reporting Improve social responsibility reporting in line with international best practice. Corporate Governance Improve stakeholder engagement. Improve the integrated risk management system at NLMK. Improve Efficiency of Operations Maintain and support the Enterprise Resource Planning (ERP) system at the Group businesses. Introduce SAP ERP at NSMMZ. Implement measures to increase labour productivity.

80 11 / OBJECTIVES FOR / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 159 Personnel Policies Improve the system of financial and moral incentives for Company employees. Develop personnel engagement procedures at the subsidiaries and align them with uniform corporate standards. Continue with the practice of executing collective bargaining agreements at NLMK Group businesses. Ensure compliance with all commitments under collective bargaining agreements. Social Policies Implement programmes targeting the macroeconomic development of regions where the Company is present. Environmental Protection Implement nature conservation measures scheduled for 2012 as part of Phase 2 of the Technical Upgrade and Development Programme. A male bodybuilder s ambition goes beyond the need to be strong. It s about being both strong and enduring, because sometimes it takes physical strength in combination with brains to get the job done. Occupational Safety Implement measures designed to create a healthy and safe working environment for Company employees. Customer Satisfaction Continue to focus on responding to customer requests communicated via the customer satisfaction survey.

81 12 APPENDIX APPENDIX 1 6 / СОЦИАЛЬНО-ЭКОНОМИЧЕСКОЕ РАЗВИТИЕ МЕСТНЫХ СООБЩЕСТВ / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 161 Valery Vasnev Mechanic, Vehicles Department, Novolipetsk A sports tourist since elementary school. Awarded the Service to the Country Medal 2nd Grade; active advocate of aquatic sports in the region Company Operations: 5-Year Highlights Description Key Production Indicators ( 000 tonnes)* Steel output 9,177 10,500 10,614 11,547 11,968 Commercial slab output 3,153 3,093 3,440 3,614 3,251 Flat products 5,341 5,009 5,002 5,710 7,256 Pre-painted steel Electrical steel Long products and metalware 84 1,334 1,364 1,404 1,545 *Data for NLMK Group

82 12 / APPENDIX / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 163 Description Description Key US GAAP Financials (US$ million)* Total assets 13,076 14,065 12,502 13,899 17,257 Sales revenue 7,719 11,699 6,140 8,351 11,729 Equity 8,992 8,690 8,718 9,675 10,147 Gross profit 3,742 5,391 1,990 2,948 3,360 Equity-to-Assets ratio (in %) 69% 62% 70% 70% 59% Operating profit 2,998 4, ,795 1,666 Current liquidity ratio Profit before tax and minorities 3,157 3, ,722 1,682 Quick assets ratio Net profit 2,247 2, ,255 1,358 Receivables turnover EBITDA 3,336 4,538 1,444 2,349 2,282 Inventory turnover *Data for NLMK Group

83 12 / APPENDIX / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 165 Description Description Profitability Indicators based on US GAAP Statements* 1.4. Company Taxation ( 000 RUB) ** Operating profit margin 39% 35% 15% 21% 14% Federal taxes (incl. customs duties) 5,430,879 6,912, ,061 1,264,205 1,906,605 Net profit margin 29% 19% 4% 15% 12% Lipetsk region fiscal budget 12,494,937 14,779,540 4,560,890 8,230,274 9,421,520 EBITDA margin 43% 39% 24% 28% 19% of which Return on assets 21% 17% 2% 10% 9% Regional budget 9,827,728 13,151,880 2,966,596 6,433,490 7,678,352 Return on equity 28% 26% 2% 14% 14% Local budgets 1,259,678 1,627,660 1,594,294 1,796,784 1,743,168 EBITDA to assets 31% 33% 11% 18% 15% Extra-budgetary funds 1,407,531 1,702,919 1,540,772 2,194,112 3,398,254 Earnings per share (US$) **Data for the parent company (Novolipetsk) *Data for NLMK Group

84 12 / APPENDIX / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 167 APPENDIX 2 Description Novolipetsk Altai-Koks VIZ-Stal Stoilensky Stagdok Dolomit NSMMZ UZPS By employment,% Vtorchermet NLMK Description Novolipetsk Altai-Koks VIZ-Stal Stoilensky Stagdok Dolomit NSMMZ UZPS Number of Employees and Wages Vtorchermet NLMK Full time Temporary Part-time Wage bill, RUB million 12, , , ,611.3 Average headcount, of which: 29,623 3,764 1,756 6, , ,528 Managers 2, Specialists 3, Administrative staff Average wage, RUB 35,431 26,605 36,223 26,914 25,307 24,238 30,078 28,057 24,290 Personnel turnover rate, % Overall Below 30 years of age Production staff (workers) 23,387 2,998 1,344 5, , ,114 By sex (%) Men Women By age, % below Over

85 12 / APPENDIX / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 169 Description Novolipetsk Altai-Koks VIZ-Stal Stoilensky Stagdok Dolomit NSMMZ UZPS Vtorchermet NLMK OHS Indicators Fatal accidents Incident frequency rate* Incident gravity rate** Disability Lost Days One can truly enjoy aquatic sports when they believe they can master all the elements and understand the true meaning of sport. Personnel Training Indicators Average number of training hours per employee Production staff (workers) Managers, specialists, office staff Note: Sex, age and type of employment based on December 31, 2011data. * Accident frequency rate: the number of incidents per 1000 employees. ** Accident gravity rate: the number of disability days on average per incident.

86 12 / APPENDIX / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 171 APPENDIX 3 # Standard disclosures and indicators of GRI guidelines Section of CSR Report Page GRI Content Index # Standard disclosures and indicators of GRI guidelines Section of CSR Report Page 1. Strategy and Analysis 1.1. Statement about the relevance of sustainability to the organization and its strategy 1.2. Description of key impacts, risks and opportunities Message from the President, Mission and CSR Strategy Risk Management, Contribution to Regional Development, Environmental Footprint 2. Organisational Profile 2.1. Name of the organisation About the Report Primary brands and products About NLMK Operational structure of the organisation About NLMK Location of organisation s headquarters About the Report Number of countries where the organisation operates Group Structure Nature of ownership and legal form Corporate Governance Model Markets served Group Structure Scale of organisation Group Structure Significant changes during the reporting period regarding size, structure or ownership Message from the President, About NLMK Awards received during the reporting period 2011 Highlights 44 4, 14 38, 58, 78 4, Report profile 3.1. Reporting period About the Report Date of most recent previous report About the Report Reporting cycle About the Report Contact point for questions regarding the report and its contents About the Report 6 Report scope and boundary About the Report Process for defining report content About the Report Boundary of the report About the Report Any limitations on the scope or boundary of the report About the Report Significant changes from previous reporting periods in the scope, boundary or measurement methods applied in the report About the Report Table identifying the location of the Standard Disclosures in the report Appendix 3. GRI Contents Index Governance, Commitments and Stakeholder Engagement Governance Governance structure of the organisation, including main committees 4.1. under the highest governance body responsible for specific About NLMK 18 tasks, such as setting strategy or organisational oversight 4.2. Indicate whether the Chair of the highest governance body is also an executive officer About NLMK Number of members of the highest governance body that are independent and/or non-executive members About NLMK Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body About NLMK, Stakeholder Engagement 18, Processes in place for the highest governance body to ensure conflicts of interest are avoided About NLMK 18

87 12 / APPENDIX / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 173 # Standard disclosures and indicators of GRI guidelines Section of CSR Report Page # Standard disclosures and indicators of GRI guidelines Section of CSR Report Page 4. Governance, Commitments and Stakeholder Engagement Governance 4.8. Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental and social performance and the status of their implementation Mission and CSR Strategy, About NLMK, Contribution to Regional Development, Environmental Footprint 4.9. Procedures of the highest governance body for overseeing the organization s identification and management of economic, About NLMK 18 environmental and social performance Commitments to External Initiatives Externally developed economic, environmental and social charters, principles, or other initiatives to which the organization Our Employees 108 subscribes or endorses Membership in associations or national/international advocacy organisations About NLMK 18 Stakeholder Engagement List of stakeholder groups engaged by the organisation Stakeholder Engagement Basis for identification and selection of stakeholders with whom to engage Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group Key topics and concerns that have been raised through stakeholder engagement and how the organization has responded to those key topics and concerns, including through its reporting About the Report, Stakeholder Engagement 14, 18, 58, 78 4, 52 Stakeholder Engagement 52 Stakeholder Engagement, Contribution to Regional Development, Environmental Footprint, Our Employees, Product Responsibility 52, 58, 78, 108, Performance Indicators Economic Performance Indicators Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations EC1 and other community investments, retained earnings and payment to capital providers and governments EC3 EC7 EC8 EC9 Coverage of the organisation s defined pension benefit plan obligations Procedures for local hiring and proportion of senior management hired from the local community at locations of significant operation Development and impact of infrastructure investments and services provide primarily for public benefit through commercial, in-kind or pro bono engagement Understanding and describing significant indirect economic impacts Contribution to Regional Development, Appendix 1. Company Operations: 5-year Highlights, Appendix 2. Personnel Profile Our Employees, Appendix 1. Company Operations: 5-year Highlights 58, 161, , 161 Contribution to Regional Development 58 Contribution to Regional Development, Appendix 1. Company Operations: 5-year Highlights 58, 161 Contribution to Regional Development 58 Environmental Performance Indicators EN2 Percentage of materials used as recycled input materials Environmental Footprint 78 EN5 Energy saved due to conservation and efficiency improvements Environmental Footprint 78 EN8 Total water withdrawal by source Environmental Footprint 78 EN13 Habitats protected and restored Progress Against 2011 Objectives 150 EN14 Strategies, current actions and future plans for managing impacts on biodiversity Environmental Footprint 78 EN16 Total direct and indirect greenhouse gas emissions Environmental Footprint 78 EN20 NOx, SOx, and other significant air emissions by type and weight Environmental Footprint 78 EN21 Total water discharge by quality and destination Environmental Footprint 78 EN22 Total weight of waste by type and disposal method Environmental Footprint 78 EN26 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation Environmental Footprint 78 EN28 Monetary value of significant files and total number of nonmonetary sanctions for non-compliance with environmental laws Environmental Footprint 78 and regulations EN30 Total environmental protection expenditures and investments Environmental Footprint 78

88 12 / APPENDIX / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 175 # Standard disclosures and indicators of GRI guidelines Section of CSR Report Page # Standard disclosures and indicators of GRI guidelines Section of CSR Report Page 5. Performance Indicators Social Performance Indicators LA1 Total workforce by employment type, employment contract and region Appendix 2. Personnel Profile 166 LA2 Total headcount and employee turnover Appendix 2. Personnel Profile 166 LA3 Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations Our Employees 108 LA4 Percentage of employees covered by collective bargaining agreements Our Employees 108 Percentage of total workforce represented in formal joint worker LA6 health and safety committees that help monitor and advice on Our Employees 108 occupational health and safety programmes LA7 Rates of injury, occupational diseases, lost days and absenteeism, and total number of work related fatalities Appendix 2. Personnel Profile 166 LA8 Education, training, counselling, prevention and risk-control programs in place to assist workforce members, their families or Our Employees 108 community members regarding serious diseases LA9 Health and safety topics covered in formal agreements with trade unions Our Employees 108 LA10 Average hours of training per year per employee by employee category Appendix 2. Personnel Profile 166 LA11 Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in Our Employees 108 managing career endings LA12 Percentage of employees receiving regular performance and career development reviews Our Employees 108 LA13 Composition of governance bodies and breakdown of employees per category according to gender, age group, minority group Appendix 2. Personnel Profile 166 membership and other indicators of diversity LA14 Ratio of basic salary of men and women by employee category Our Employees 118 Human Rights Performance Indicators HR6 Operations identified as having significant risk for incidents of child labour, and measures taken to contribute to the elimination Our Employees 108 of child labour HR7 Operations identified as having significant risk for incidents of forced or compulsory labour and measures to contribute to the elimination of forced or compulsory labour Our Employees Performance Indicators Society Engagement Performance Indicators Public policy positions and participation in public policy SO5 development and lobbying Product Responsibility Performance Indicators Life cycle stages in which health and safety impacts of products PR1 are assessed for improvement, and percentage of significant products and service categories subject to such procedures Type of product and service information required by procedures PR3 and percentage of significant products and services subject to such information requirements Practices related to customer satisfaction including results of PR5 surveys measuring customer satisfaction Stakeholder Engagement 52 Product Responsibility 136 Product Responsibility 136 Product Responsibility 136

89 12 / APPENDIX / NLMK CORPORATE SOCIAL RESPONSIBILITY REPORT 177 APPENDIX 4 # Indicator Description Section of CSR Report Page Russian union of industrialists and entrepreneurs (RSPP) basic performance indicators index # Indicator Description Section of CSR Report Page Economic Indicators 1.1. Key business principles Mission and CSR Strategy, Corporate Governance Model 14, Sales Appendix 1. Company Operations: 5-year Highlights Assessed taxes and other mandatory levies Appendix 1. Company Operations: 5-year Highlights Personnel expenses Our Employees, Appendix 2. Personnel Profile Fixed capital spending About NLMK, Product Responsibility 18, Community investments Contribution to Regional Development Voluntary pension plans Our Employees 108 Environmental Indicators 2.1. Share of recycled materials Environmental Footprint In-house consumption of fresh water Environmental Footprint Discharges of atmospheric air pollutants Environmental Footprint Discharges of effluents Environmental Footprint 78 Environmental Indicators Discharges of polluted effluents Environmental Footprint Waste generation Environmental Footprint Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation Environmental Footprint Investments in environmental protection facilities Environmental Footprint 78 Social Indicators Number of employees by territory Appendix 2. Personnel Profile Personnel turnover rate Appendix 2. Personnel Profile Share of personnel covered by collective bargaining agreement Our Employees Production-related injury rate Appendix 2. Personnel Profile Number of fatal accidents Appendix 2. Personnel Profile Disability time losses due to all causes Appendix 2. Personnel Profile OHS spending Our Employees Number of training hours per employee Appendix 2. Personnel Profile Interaction with governmental authorities on issues of public significance (social and economic development of regions of presence) Interaction with non-profit and non-government organisations on issues of public significance Participation in external initiatives, including development of government policy Participation in non-profit (sectoral) and/or national and international organisations whose activities are linked to company interests Stakeholder Engagement, Contribution to Regional Development 52, 58 Contribution to Regional Development 58 About NLMK Contribution to Regional Development 18, 58 About NLMK 18

90 FEEDBACK FORM You have just reviewed the NLMK Corporate Responsibility Report for We would like to know your opinion about the format and substance of the Report, and we look forward to relying on your comments and suggestions as we draft our future reports. 1. Did you find the information you were looking for or expected to see in the Report? Yes No I was not looking for anything in particular 2. What section of the Report was of greatest interest to you? 3. How do you rate the reliability of information provided in the Report? Yes, the information is reliable I am not sure that the information is reliable No, the information is not reliable If your answer is No or you are not sure, please, specify what information you disagree with or find doubtful? 4. Do you find the Report to be thoroughly detailed? Yes, it is No, it is not 5. Share your opinion about the scope and format of the Report. 6. What information of interest to you is missing in the Report and what would you like to see in subsequent Reports produced by the Company? 7. What is your relationship with the Company? Shareholder Potential investor Supplier Customer Representative of supervising/ regulatory authorities Local government official Representative of a federal authority Representative of a civil society organisation Representative of mass media Employee of the Company Researcher/post-graduate student/student Other (please specify)