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CSR Strategy: establishment and management of our relations with the environment

Corporate Social Responsibility is one of the pillars supporting the global strategy of the KGHM Polska Miedź S.A. Group. We are aware of the scale of our operations and impact on our broadly-defined environment. The purpose of our Corporate Social Responsibility activities is to limit the impact of our operations on the environment, support social development, promote health, arts and culture, and sport, and reinforce our position of a stable, developing, global leader that cares about the common good.

In 2016, the KGHM Polska Miedź S.A. Group advanced the CSR objectives as determined by the Company’s business strategy for the years 2015 to 2020, based on recognized international standards. The CSR Strategy pursued encompasses all of the social, ethical and environmental aspects of the Company’s operations and full responsibility and transparency in the management of our relations with stakeholders, including employees, customers, shareholders, suppliers and local communities. Using the best practices and guidelines, we maintain dialogue with local communities in order to better understand their needs and, as a good neighbor, implement projects to improve their quality of life.

Corporate Social Responsibility of the KGHM Polska Miedź S.A. Group is based on the outcome of our analysis of the social responsibility activities of KGHM, ISO 26000 Guidelines: Social Responsibility, the guidelines of the International Council on Mining and Metals, a strategy developed on the basis of the Ten Principles of the UN Global Compact Initiative, the sustainable development reporting guidelines of the Global Reporting Initiative (G4), consultations with senior management, local communities, employees and key stakeholders, best market practices (benchmarking against global mining companies), and KGHM Corporate Values.


Main objective: To reinforce our position as a stable, developing, global leader that cares about the common good

The Corporate Social Responsibility Strategy. Strategic initiatives.*

Create one global CSR

Initiatives

1. Standardize Global approach to CSR

2. Develop formal reporting process with review framework and set organizational boundaries for reportable indicators

3. Establish a global KGHM CSR team working on the basis of common strategic objectives

Strengthen community engagement efforts

Initiatives

1. Standardize the approach to dialogue with local communities

2. Support in contacts with stakeholders on the implementation of strategic projects

3. Develop formal systems for tracking, understanding and responding to stakeholder concerns

4. Develop a global KGHM volunteering program

Strengthen the position of a trusted and reliable business partner

Initiatives

1. Strengthen our relations with business partners

2. Design a system of verification if corporate actions are in line with codes of conduct of suppliers and customers and with KGHM Code of Ethics

3. Communicate expectations for suppliers of KGHM to align their actions with our corporate values and rules of conduct

4. Implement approved “Know Your Customer” policy

5. Train key sales personnel on Antitrust Policy

6. Meet voluntary commitments made to trade organizations

Develop and maintain our position of a responsible employer

Initiatives

1. Strengthen our position as a responsible employer, internally and externally, and build our leadership position in occupational safety

2. Obtain employee feedback on material issues and job satisfaction

Promote responsible environmental stewardship

Initiatives

1. Transparently communicate with stakeholders about environmental topics and promote KGHM as a company that cares about the environment

2. Continuously improve performance in energy consumption and green house gas emissions management, mine closure planning, and tailings management

3. Continuously improve our performance in energy consumption and greenhouse gas emissions, design plans for the rehabilitation of mined lands

* In 2017 a new Corporate Social Responsibility Strategy has been adopted. We have changed the main purpose and operational objectives.

The Corporate Social Responsibility Strategy is based on five key pillars. The first concerns the globalization of CSR. As an international corporation, we aim to standardize CSR programs. The standardization of activities also involves the second pillar, i.e. strengthening of local community engagement efforts and continue with the global KGHM volunteering program.

The third CSR pillar is the consolidation of our position as a trusted and stable business partner. The adoption of the Know Your Customer policy is a way of improving customer communications and strengthening customer relations. The communication aspect is also of fundamental importance to the fourth pillar—development and maintenance of our position as a responsible employer. We want to obtain feedback from employees, e.g. concerning their job satisfaction, more effectively. Our building of a leadership position in occupational safety will also be a constant priority.

The fifth and last CSR pillar is to be a Company that promotes responsible environmental stewardship. The key initiative in this respect is to create an energy management system to reduce energy consumption and greenhouse gas emissions. We believe that our Strategy helps the entire KGHM Group take effective CSR measures worldwide.

Initiatives which support the accomplishment of our Corporate Social Responsibility objectives:

- Global standardization of our CSR approach

- Standardization of our approach to dialogue with local communities

- Support for contacts with stakeholders for the implementation of strategic projects

- Strengthening of relations with our business partners

- Building of a responsible employer image (internally and externally) and a leadership position in occupational safety

- Improved effectiveness of communication activities to promote KGHM as a company that cares about the environment

KGHM INTERNATIONAL LTD. also emphasizes the impact and importance of social responsibility in its activities. The CSR policy, strategy and systems in place facilitate dialogue, strengthen mutual trust among stakeholders, identify opportunities for sharing value, and contribute to improved production results, while minimizing impacts to the envrionemtn. KGHM International Ltd. develops its responsibility through broadly-defined teamwork, including, among other things, working together with management, customers and suppliers, local communities, and authorities. The Company takes account of the impact of its decisions on the environment, including the natural environment. It always acts transparently and ethically, respecting the law and integrity. KGHM International Ltd. applies procedures governing management methods and taking account of human rights, including health and safety matters. The Company’s internal regulations are based on the ISO 26,000 system and recommendations of the Mining Association of Canada.

Relations with local authorities in Poland, Chile, the US, and Canada

Wherever we operate or want to operate, we hold meetings with local authorities. The municipality of Jerzmanowa is an example of our commitment. In 2016, we made a financial contribution to the widening and strengthening of a local road. By working together with the local authorities, our employees, local residents and other users may now enjoy comfortable transportation.

In 2016, the KGHM Group was also in talks with the municipality of Żukowice about the location for a tailings pond for the Głogów Copper Smelter. Thanks to our good relations, the local authorities were receptive and we agreed to provide the municipality with funds to cover its current needs and a social package for local residents. The municipality of Żukowice also found its way into our soil testing program and, based on the test results obtained, the KGHM Group provided farmers with lime.

GOOD PRACTICE

Preparatory work on the expansion of the Żelazny Most tailings pond to include the Southern Quarter:

- Seven monitoring meetings following the execution of the Agreement—with the village heads and mayor of the municipality of Polkowice

- 41 people were supported by KGHM employees in returning to the labor market and gaining new qualifications, 18 people were hired

- 187 children were provided free recreation

- Five “white Saturdays” – 251 people were medically examined

In 2016, KGHM’s Robinson mine, Nevada, US, continued its collaboration with the state and federal agencies, and the municipality of Ely and White Pine County. At the Sierra Gorda mine in Chile, the first Community Trainee 2016 program involving local community education and training was implemented.

Social dialogue

We view social dialogue as a key and strategic operational management tool which supports our investments. As a Group, we are getting ready to structure social dialogue and we intend to establish a team trained for holding talks with our stakeholders in Poland and abroad.

Social dialogue as an operational management tool

Relations with indigenous peoples

As the KGHM Polska Miedź S.A. Group operates on several continents, it enters into contact with different cultures and interacts with local, indigenous populations. Maintaining correct relations is one of our priorities

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KGHM uses its best efforts for its operations to respect the cultural heritage of indigenous peoples historically residing near the Company’s facilities. Any business activity of the Company involves an analysis of the Company’s impact on local communities and indigenous peoples.

In 2016, KGHM Polska Miedź S.A. did not have any land disputes with indigenous peoples, and the location of the Company sites in 2016 (as in 2015) did not result in the need for resettlements, which protected the indigenous peoples’ livelihoods from being affected.

On 4 March 2017, Stk’emlúpsemc te Secwépemc Nation announced that they do not give free, prior and informed consent for the publicly-reviewed development plan by KGHM AJAX MINING INC. to build a mine. The Company is seeking the best possible solution for all the interested parties. In 2016, the location of the KGHM INTERNATIONAL LTD. sites in 2016 (as in 2015) did not result in the need for resettlements for indigenous people.

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Over the years KGHM INTERNATIONAL LTD. has developed formal programs to ensure that we maintain dialogue with the communities affected, or perceived to be affected, either directly or indirectly by our activities. This dialogue is important to ensure that we maintain trust, identify opportunities to share value, and to improve our performance. Stakeholder identification, prioritization and subsequent engagement have been carried out at each site and projects. The formalized systems will continue to be enhanced at each location as part of our on-going CSR Strategy. The systems are based on the ISO 26000 and the Mining Association of Canada’s Towards Sustainable Mining (TSM) Frameworks.

By actively engaging in honest and transparent dialogue with the communities of interest, we can better understand issues of concerns and identify opportunities to minimize impacts.

All sites and project assess environmental and social impacts and risks. These assessments are carried out in accordance to regional and national requirements.

Negotiations between the Company and First Nations concerning KGHM Ajax’s project in Kamloops continue but have been on hold with SSN since March 4, 2017 while continuing with Lower Nicola Indian Band. Stk’emlúpsemc te Secwépemc Nation have expressed opposition to the project obtaining an EA Certificate but remain engaged on a number of levels. As requested by the Stk’emlúpsemc te Secwépemc Nation, the Company helped finance an independent project assessment. The Company intends to sign an agreement which envisages benefits for the local community for the entire life of the mine.

In 2016, our facilities in Poland were visited by Pablo Domeyko, a great-grandson of Ignacy Domeyko, after whom the Sierra Gorda mine in Chile is symbolically named. Ignacy Domeyko greatly contributed to Chile’s economic growth by discovering rich mineral deposits, developing university education, and mining. Pablo Domeyko’s visit contributed to good relations between Poland and Chile.

Economic impact

Two-hundred thousand. We estimate that is the number of people who, directly or indirectly, have jobs thanks to our Group.

We have been the largest employer in Lower Silesia for decades and one of the largest in Poland. The Copper Basin is the richest area in the province thanks to our operations.

By partnering with local suppliers, customers, intermediaries, wholesalers, we contribute to the economic growth not only of Lower Silesia but also thousands of companies all over Poland. The need to develop innovative mining methods and collaboration with research institutes fosters scientific progress by ensuring funding for research and specialized education.

We are one of the largest taxpayers in Poland. In 2016, we paid about PLN 750M in corporate income tax and nearly PLN 1.5bn in mineral extraction tax. All in all, in 2016, we paid PLN 3.7bn in various taxes and fees. KGHM Polska Miedź S.A.’s socially responsible tax policy also has an effect on the amount of taxes we pay.

Taxes and fees paid by KGHM Polska Miedź S.A. in 2016

1. Mineral extraction tax

2. ZUS (social security), including:

3. Corporate income tax (CIT) of the KGHM Group

4. Corporate income tax (CIT)

5. Contributions funded by the employer

6. Contributions funded by the employee

7. Advance payments of personal income tax (PIT) due remitted by KGHM as the payer

8. Property tax
9. Maintenance fees

10. Excise duty

11. Mining use fees

12. Environmental protection fees

13. PFRON (State Fund for the Rehabilitation of the Disabled) contributions]

14. Fees for public lease (perpetual usufruct) of land

15. Waste storage fees

Aid and support

The KGHM Group is a good neighbor and a trusted investor. We support local communities, social organizations, scientific, art and culture, and sport institutions. We promote active lifestyles and help those in need.

The KGHM Polska Miedź S.A. Foundation, which carries out philanthropic and charitable activities, is one of the pillars of our social responsibility. It supports socially useful projects and people in need.

In 2016, the KGHM Polska Miedź S.A. Foundation financially supported several valuable initiatives in the following four areas: health and safety, sport and recreation, science and education, and culture and tradition. We financially supported 374 projects with a total amount of more than PLN 13M. The Foundation also made 143 donations amounting to nearly PLN 1M to individuals in need.

Activities of the KGHM Polska Miedź S.A. Foundation in 2016

Numerous initiatives to save Lower Silesian cultural heritage and tradition

The “We Save Monuments” project intended to give new life to and preserve sacred and secular architecture, including: the Ex-Cistercian Complex in Krzeszów and the Collegiate Church in Głogów. Financial contributions to various art and cultural events, including the International Chopin Competition in Duszniki Zdrój, the Peace Concerts in Jawor, theatrical events and art workshops for children and youngsters.

Promotion of health, wellness and safety

Financial support for healthcare institutions all over Poland, in the first instance in the Copper Basin and Lower Silesia, including Miedziowe Centrum Zdrowia and specialized clinics in Wrocław, intended for the purchase of advanced equipment and specialized medical devices.  

Projects intended to prevent social disadvantage of the disabled – financial support for away physical therapy treatments, purchases of physical therapy equipment, assistance in the modernization of establishments for the disabled. 

Financing of tests for residents and support for blood donation promotion, hemotherapy, volunteering, and financial contributions to medical scientific conferences. Donation of funds for the purchase of advanced rescue and firefighting equipment and specialized vehicles for local emergency services, including fire brigades and the police. 

Support for training and prevention activities, including the six months’ long “Your Five Minutes” flagship project completed in 2016 during which we trained more than 400 students from the Copper Basin on how to administer first aid over six months.

Promotion of science, education and physical activity among children and youngsters

The “Copper School of Mathematics” project involving additional classes for primary school pupils carried out in 18 schools in the Lubin, Głogów and Polkowice districts. Additional mathematics classes involved 720 class hours attended by 432 students.

Support for educational establishments to enable them to purchase teaching aids, computer and multimedia equipment, and modernize the infrastructure.

Donations for scholarships and financial contributions to scientific conferences, competitions and educational and integration activities for children and youngsters, and financial support for scientific research and field studies.

Involvement in the organization of “green school” trips to spas and all-year physical therapy and sport activities at swimming pools for children from municipalities located in the vicinity of the Legnica and Głogów Copper Smelters. In 2016, more than a thousand students took part.

Counteracting social disadvantage of individuals and families which have found themselves in need – we made cash donations to various organizations which hold Christmas events for the poor, including the distribution of Christmas gifts

We made 140 donations to individuals: 86 medical treatments and physical therapy’ 51 purchase of equipment; 3 eliminations of architectural barriers, and 3 on account of natural disasters and acts of god.

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GOOD PRACTICE

In 2016, among other things, we provided financial support for the purchase of a Full HD 3D laparoscopy set for the Digestive Tract and General Surgery Clinic and the General, Gastroenterology and Endocrinology Clinic of the Independent Public Clinical Hospital No. 1 in Wrocław. The Provincial Specialized Hospital in Legnica received a financial contribution from us for the purchase of an advanced ambulance equipped with a cardio-monitor for transporting newborns for the use of the Neonatology Department, including the Intensive Care Unit for Prematurely Born Babies, Newborns and Children, of the Provincial Specialized Hospital in Legnica.

In the fall of 2016, the fall run of the ECO-Health program was launched, involving Nordic walking. The program is financed by KGHM Polska Miedź S.A. Trainers from the Polish Nordic Walking Association from Lubin, Legnica, Głogów, Złotoryja and Chojnów launched free Nordic walking training. It was already the fifth time that KGHM encouraged local residents to care about their health as part of the ECO-Health project.

Donations made by the KGHM Polska Miedź S.A. Foundation to organizations and institutions in 2016

 
Area
Number of projects
Donation amount [in PLN]
1.
Health and safety
65
3,084,610.00
2.
Science and education
57
912,062.27
3.
Sport and recreation
104
2,455,486.00
4.
Culture and tradition
148
6,792,000.00
Total
374
13,244,158.27

Donations made by the KGHM Polska Miedź S.A. Foundation to individuals in 2016

 
Area
Number of donations
Donation amount [in PLN]
1.
Healthcare
140
849,262.00
2.
Social assistance
3
42,500.00
Total
143
891,762.00

Source: KGHM

Volunteering

We are particularly proud of our global employee volunteering program. Our program has already been in place for several years and, thanks to the commitment of our employees, we have carried out dozens of major projects and activities as part thereof. We have helped those in need and, at the same time, released huge amounts of positive energy and capabilities.

The benefits of the volunteering program are not only a positive image of the Company but also highly-motivated employees. Moreover, thanks to their participation, volunteers develop their own competencies, including leadership skills, teamwork, communication, and analytical or problem-solving skills. Such development pays off in the workplace. Volunteering strongly integrates us and strengthens our identification with the Company.

The “Copper Heart” employee volunteering program is in place at KGHM Polska Miedź S.A. For years, there have been individual initiatives of employees to spontaneously help others by sharing skills, competencies, knowledge and professional experience. Such initiatives have now been integrated and enjoy support at Group level. Our “Copper Heart” program proves that combining social activities and an opportunity to pursue one’s own interests is an excellent idea. Our program involves active participation in activities supporting local communities and environmental protection projects.

The Copper Heart program is not only a perfect fit with the Corporate Social Responsibility (CSR) Strategy of KGHM but also with our Business Strategy. Employee commitment reinforces our image of an organization which supports local communities and contributes to the development of our employees.

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GOOD PRACTICE

Volunteering events on account of our Earth Day 2016:

 - construction of beehives for bees and planting of nectar source plants
 - cleaning of lakes and ponds  
 - cleaning of the recreational water complex in Przemków
 - cleaning of woods and roads
 - tree planting  
 - environmental talk to elementary students

Our volunteers worked more than 700 man hours on Earth Day. They planted more than 3,800 trees and collected nearly 200 bags of garbage. They also made financial contributions to local environmental protection initiatives. We also published a set of eco-guidelines titled Don’t Be a Greenhorn When It Comes to Environmental Protection on our intranet.

The Innovation and Cultural Heritage Foundation - Revimine

The Innovation and Cultural Heritage Foundation – Revimine was established in 2014 by KGHM Polska Miedź S.A. to fulfil the initiatives aimed at protecting the cultural heritage and mining and smelting traditions in the Copper Basin. The Foundation supports projects and initiatives aimed at the technical, environmental and social rehabilitation of post-industrial areas after their decommissioning, environmental compensation and other activities significant for such processes.

Polish National Foundation

In 2016, KGHM Polska Miedź S.A. became one of the founders of the Polish National Foundation, an organization tasked with the promotion of the Polish economy and building a positive image of companies with a State shareholding.

The Foundation will make it possible to carry out projects on a Polish, European or global scale, ensuring the achievement of strong synergies. Ten out of the 17 founders of the Polish National Foundation are included in the Warsaw Stock Exchange index of the twenty largest companies and a further two are included in the WIG40 stock market index.

The purpose of the foundation will, in the first instance, be to promote and protect the image of the Republic of Poland and the Polish economy and to generate positive publicity for investments of companies with a State shareholding. Other goals of the organization are to partner with local communities and social and business organizations and to organize and finance social initiatives.

Respect Index

On 14 December 2016, the Warsaw Stock Exchange announced the composition of the RESPECT Index for the tenth time, including 25 companies, one of them being KGHM Polska Miedź S.A. We have been included in the RESPECT Index right from the start, i.e. since 2009. The Index comprises socially responsible, highest liquidity companies, i.e. companies comprised in the WIG20, mWIG40 or sWIG80 stock market indices. Companies which find their way into the RESPECT Index undergo a three-stage verification process conducted by the WSE and the Polish Association of Listed Companies. Such companies need to communicate flawlessly with the market via current and periodical reports and corporate websites. The third condition consists of socially responsible conduct towards the environment, local communities and employees, which is reviewed based on a questionnaire verified by Deloitte, the project auditor.

Our presence in the RESPECT Index demonstrates that we are a Company which maintains proper dialogue with the market, cares about its employees and managers, all the stakeholders and the natural environment. This is proof that we do business in a socially responsible way.

The presence of KGHM Polska Miedź S.A. in the RESPECT Index translates into our Company’s investment attractiveness. The fact that we care about investors is reflected in, among other things: a high quality of reporting, the level of our investor relations and information governance. We want to be a partner for professional investors and it is a matter of great prestige for us to be included in the RESPECT Index.

Investor communications consist in our regular participation in investor conferences, road shows and meetings with analysts in Poland and abroad. At the same time, we comply with our disclosure obligations by publishing current and periodical reports via the official reporting system (ESPI).

Moreover, in 2016, as part of building a sustainable company image, we maintained our rank in industry production reports, including WSS and Copper Survey.

Cultivating mining and smelting traditions

In 2016, KGHM celebrated its fifty-fifth anniversary – in 1961, the enterprise “ZG Lubin w budowie (Lubin Mine under construction)” was transformed into “Kombinat Górniczo-Hutniczy Miedzi w Lubinie w budowie (Copper Mining and Smelting Industrial Complex under construction)”. Huta Miedzi Głogów (Głogów Copper Smelter), the Hydrotechnical Facility, the combined Polkowice and Sieroszowice mines and the Information Processing Centre also had their anniversaries. The anniversaries prove the many years of experience of the KGHM Group, its extensive knowledge and deep mining and smelting tradition. Attachment to industry values is an indispensable element of our organizational culture, celebrated by the Company’s authorities, employees and their families. We also invite local communities to take part in industry celebrations. We organize open events dedicated to the residents of our mining region and the surrounding areas.

Metallurgist’s Day

In 2016, we held festive celebrations on the Metallurgist’s Day, which is the second most important event in the copper mining region after the Miner’s Day. It is celebrated on St. Florian’s Day (the patron of firemen and metallurgists). Our outstanding employees received awards during the ceremony organized in Głogów. There was a copper-colored band, food and beer.

Miner’s Day

Due to the tragedy at ZG Rudna, in which eight miners died, mourning was declared at KGHM branches before Miner’s Day in 2016. For this reason, the central celebrations were limited to a minimum. Only an official celebration was held, during which awards and honors were given to our employees, such as the silver Krzyż Zasługi, gold, silver and bronze medals for Long Service, miner’s spades and distinctions.

Every day many of you risk their lives and health working for KGHM Polska Miedź S.A. Personally, I am full of admiration and great respect for your commitment and involvement. We are a unique community which combines all elements of socially responsible business. I would like to assure you that the Management Board of KGHM Polska Miedź S.A. will take care of the sustainable and stable development of our organization based on its underlying values. The safety of KGHM employees is our priority, therefore we rely on global solutions and implement the highest work standards. KGHM Polska Miedź S.A. takes part in creating a strong and innovative Polish economy for future generations of our workers and the residents of Lower Silesia. We can be proud of being a part of KGHM—a Company that sets new directions and leads socio-economic development. By sharing our common values: courage, cooperation, focus on performance, safety and responsibility, we create real progress opportunities not only for our region and country, but also for the world.. Radosław Domagalski-Łabędzki,
 President of the Management Board & CEO

It is our Miner’s Day tradition that our mines are visited by children. In 2016, the Lubin mine alone was visited by more than 400 school and kindergarten children. In 2016, we commemorated the thirty fifth anniversary of the ZG Rudna pacification. The Reverend Jerzy Gniatczyk Run with the participation of 400 runners was one of the events that accompanied the celebrations.

Distinguished employees of the KGHM Polska Miedź S.A. Group have our special respect. In 2016, 160 employees of the ZG Rudna branch who completed 25 or 35 years of professional and mining career received awards.

The projects executed in 2016 in the area of culture and tradition include the publication “Miedziorysy – Ludzie i tradycje Polskiej Miedzi” (Copper Lives – People and Traditions of Polish Copper) about the lives of long-time workers of the KGHM Group.

Copper with history

The history of copper mining and smelting in Lower Silesia began in the second half of the 1930s. At that time, German explorers found copper ore deposits in the North-Sudetic Basin area. Extraction works commenced in November 1938. The copper smelter near Bolesławiec was under construction in the years 1940–1945.

GOOD PRACTICES

In 2016, representatives of the Robinson mine in the USA provided financial support to many local organizations including “Memories of The Ruth Mining” which preserves the local mining heritage. The funds donated were used for the publication of a book presenting the local mining tradition.

The Carlota mine financially supported and actively participatedat the annual ‘Arizona Mining Day at the Capital’ Sudbury employeesparticipated in the annual MineOpportunity Challenge, an initiative promoting mining culture and educating school pupils about geology and engineering. Wealso provided a financial grant to support the Ontario Mining Association, which is involved in the promotion of the mining industry and related education. In 2016, it also hosted the international mine rescue competition, which both tested the rescuers’ skills and promoted safety standards for the industry. Eighteen teams from thirteen countries participated in the event.

In 2016 we also took part in the most important mining fair in Chile, EXPOMIN. We presented the KGHM Group’s long experience in the industry. The Sierra Gorda mine and KGHM participated in the local CESCO Week, actively promoting mining industry values.