Rolls_of_steel

How Severstal is putting its corporate purpose into practice

Andrew Hayes
Managing Partner

One of the largest Russian companies listed in London, steel-maker Severstal is meeting its ESG challenges head on, as Andrew Hayes finds in conversation with director Sakari Tamminen.

Finnish industrialist Sakari Tamminen was recently in London as the senior independent director at Severstal, one of Russia’s leading vertically integrated steel companies listed on the London Stock Exchange. He was here to lead the company’s annual capital markets day to give a deep dive into the business to investors, alongside the executive management team.
He was in buoyant mood, boosted by asset manager East Capital’s decision to award Severstal its prestigious ‘Best Corporate Governance Award’ where they highlighted the company’s commitment to dividends, an improving environmental footprint and enhanced reporting on emissions. “We are naturally pleased to see our approach recognised by a valued blue-chip shareholder, but we are on a journey and will continue to build on the progress we have made in recent years,” he said.

Severstal’s mission has been ‘to be the leader in value creation’ but Tamminen and the board are also now putting ‘reinventing the future of steel’ at the heart of the company’s purpose.

Steel production is one of the most energyconsuming and CO2-emitting industrial activities in the world. A real challenge for corporates is to prove to stakeholders that they are reducing their environmental impact, most notably CO2 emissions and waste water discharge. “Steel is a crucial component of a modern economy and is infinitely recyclable” said Tamminen “but we recognise our duty to ensure we operate as responsibly as possible.”

To that end, Severstal has set clear 2025 objectives around reducing work fatalities, weight of discharge wastewater pollutants and atmospheric pollutants. “Only with clear targets can our commitments be measured by investors and others” said Tamminen, “and we will further develop these to set additional measurable, robust targets that our stakeholders can monitor and assess. We will be the leader in our industry.”

Workforce engagement

Tamminen stressed that getting Severstal’s culture fully aligned to both its strategy and ESG commitments has been one of the board’s top priorities. He refers to the old maxim that culture ‘eats strategy for breakfast’ and is keen to emphasise that this area has been a long-term commitment of Severstal’s principal shareholder, billionaire entrepreneur Alexey Mordashov. “Engaging with our workforce has always been a top priority for Alexey and we are pleased that 81% of colleagues across the business engage with the platforms we have put in place such as employee surveys – this is an improvement of 21 percentage points from five years ago”, said Tamminen. “An early indicator of culture being not fit for purpose is lack of engagement, absenteeism and health and safety moving in the wrong direction. We are moving firmly in the right direction with the board focused on ensuring that the executive management team is also delivering on our vision to be a leader in innovative and safe collaboration in steel production.”

He said that the company also has a strong sense of social purpose in the communities where it has a significant influence. “Our business has a huge impact on the communities in which we operate. We are investing in education, training as well as sport and a better environment.” With real passion he talks about the environment in Cherepovets, the town that has grown up around Severstal’s massive steel plant, which has been transformed over the last 20 years to improve the environment for young people, SMEs and even to develop an industrial tourism industry. Severstal employs over 29,000 people in the town.

He referenced the commitment of the executive management team to the capital markets day in London every year as a demonstration of this.

Investor commitment

Tamminen welcomed the commitment of investors to engaging with the company on ESG. This was illustrated by the company’s response to an unusual request from the Church of England’s pension board on behalf of almost 100 European investors asking what risks Severstal’s operations pose to the environment. The request followed the collapse of Vale’s mining dam in Brazil which released a torrent of waste into nearby communities.

Not only did Severstal’s investor relations department provide a detailed response, but they made it available to all stakeholders. And as Tamminen said, “we were proud to do so.”

As Russian corporates struggle with the famous Russian ‘discount’ in capital markets, Severstal believes that it is leading the way to reduce this with its approach to ESG.

Andrew_Hayes

 

Andrew Hayes is managing partner at Hudson Sandler.

Sakari_Tamminen

 

Sakari Tamminen is the senior independent director at Severstal.

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This article originally appeared in the Winter 2019/20 edition of IR Society’s Informed magazine

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