Sustainability risks

Gränges works actively to monitor, manage and minimize sustainability related risks in a structured and proactive manner. Sustainability risks are included in the group-wide Enterprise Risk Management process.

Environmental and climate risks

Risk description: Environmental risks are mainly related to emissions to water, soil and air or releases of environmentally hazardous substances resulting from incidents and accidents in Gränges’ production facilities, such as fire, oil spill, or leakages. Such events may have financial, non-financial, as well as regulatory repercussions. Other environmental risks are related to natural resource scarcity. Climate transition risks include emerging regulation to incentivize reduced carbon emissions as well as carbon pricing mechanisms which could lead to higher costs for Gränges, for example increased costs in carbon taxes. Other transition risks include shifting customer and consumer preferences towards products carrying a lower climate impact, which could reduce the demand for Gränges’ products if not addressed properly. Climate physical risks are mainly related to acute physical risks with increased severity and frequency of extreme weather events. This could disturb not only direct operations but also the infrastructure supporting the production, including electricity supply and transportation. The potential financial consequences may include decreased revenue from reduced sales volumes and increased costs to repair potential damage at the sites.

Mitigating activities:

• Environmental Policy: Gränges Environmental Policy covers principles regarding environmental performance. All employees and contracted workers are required to follow the policy.
• Environmental management certifications: Gränges aims to have all its sites certified in accordance with the ISO 14001 (environmental management) and ISO 50001 (energy management) standards. All sites are certified against ISO 14001. The sites in Finspång, Saint-Avold, Shanghai, Salisbury, and Newport are certified against ISO 50001.
• Ambitious climate agenda: Gränges works actively to take product stewardship and has committed to reach net-zero emissions by 2040.
• Daily monitoring and management of emissions: Gränges monitors and manages emissions to air as part of the daily operations. Local authorities continually monitor compliance to ensure that emissions of nitrogen oxides, sulfur dioxide, particulate matter, volatile organic compounds (VOC) and, in some regions, oil emissions, are within permissible limits.
• Incident reporting: Gränges’ employees report environmental risk observations in site-specific incident management systems. Risks are managed in accordance with standardized routines and integrated as part of daily operations. Key risks are raised to the regional management teams and mitigation activities are implemented accordingly. Gränges takes a precautionary approach to environmental risks.
• Continuous monitoring of legislation: Gränges closely monitors changes in environmental policy and legislation.
• Emergency planning: Emergency planning and preparations are integrated in management systems, maintained at the site level including assessment of emergency situations and crisis management action plans.

Supply chain

Risk description: Supply chain risks include critical suppliers’ failure to deliver quality or material to Gränges, sustainability risks in the value chain as well as legal risks. Gränges’ products use large amounts of input materials. Insufficient supply or inadequate quality of products delivered would imply that Gränges cannot produce certain products of the quality expected from customers. Reductions or shutdowns of larger suppliers could also impact Gränges’ ability to manufacture and deliver products. Social risks and human rights violations are mainly related to indigenous rights in the extraction, mining and smelting activities. Extractive activities also carry a risk of forced and child labor, although there are few reports of this in aluminium mining. Environmental risks mainly occur in mining activities where there are risks related to, for instance, biodiversity loss, leakage and air emissions. Further, refining and smelting activities are energy- and water-intensive processes. Corruption risks are mainly linked to mining approvals, regardless of the country’s level of economic development or political system. Mismanagement of these risks may lead to undesirable effects on operational and financial results, such as increased costs, delayed deliveries, and possible claims from customers. It can also lead to reputational losses.

Mitigating activities:

• Supplier agreements: Gränges has agreements with suppliers in each market to ensure deliveries based on estimated volumes.
• Own production: Gränges has own cast houses in the production facilities which makes the company less sensitive to supply issues regarding for example aluminium slabs.
• Responsible Sourcing Policy and program: All sites are to operate a local responsible sourcing program. The program is used as a platform to enforce sustainable practices, ensure continuous improvement, develop collaboration, and build supplier relationships.
• Supplier Code of Conduct Policy: Significant suppliers are requested to sign Gränges’ Supplier Code of Conduct. By signing, suppliers declare to observe applicable laws and regulations, including the principles of the UN Global Compact, and to promote the implementation of these principles in their own supply chains.
• Sustainability risk screening and desktop assessments: Significant suppliers are screened annually in a desktop tool for potential environmental, social, and corruption risks. Suppliers identified to have a potential medium or high sustainability risk are required to complete an evidence-based and third-party verified desktop sustainability assessment.
• Follow-up and engagement: The results from the desktop assessments are integrated into the local supplier review procedures including supplier scorecards, discussions, and on-site visits, as applicable locally. The company also conducts on-site supplier audits depending on suppliers’ strategic importance and performance.

Workplace safety risks

Risk description: Health and safety risks mainly relate to incidents or accidents in the cast house or rolling mills, which can cause damage to fingers, hands, feet and legs. Other risks are exposure to chemicals and the risk of fire, which can be hazardous to employees’ health. Further, employees and other individuals may be injured if the implementation of safety procedures is unsuccessful or inefficient. Unsafe workplaces can lead to increased employee turnover as well as higher operating costs and production interruptions. Safety and health incidents can also lead to reputational damage for the company. The facilities may be interrupted if Gränges fails to implement safety processes or if implemented processes are not efficient and, if they are not remedied quickly and time efficiently, could prevent normal execution of the work. All of the above examples can have a negative impact on Gränges’ operations, reputation, financial position and results.

Mitigating activities:

• Occupational Health & Safety Policy: Gränges’ Occupational Health & Safety Policy covers principles regarding safety performance. All employees and contracted workers are required to follow the policy.
• Safety certifications: Gränges aims to have all its sites certified in accordance with ISO 45001 safety management standards. The sites in Shanghai and Konin are certified against this standard and the sites in US and Finspång are preparing for certifications.
• Global OHS Key Risk Standards: Gränges has standards issued for identified key risk areas of the business. Gap assessments and action plans relative to the global standards are conducted yearly.
• Daily monitoring and management: Gränges has strict safety routines and continuously invests in safety measures to prevent and mitigate workplace accidents and injuries. A 5S system has been implemented to ensure a clean, orderly and safe work environment.
• Incident reporting: Gränges focuses on preventing workplace injuries and ensuring safe behavior.
• Health and safety training: Gränges arranges comprehensive health and safety training for all employees at least annually. Targeted safety training is also carried out for specific safety aspects.
• Best practice sharing: Gränges shares safety experiences and best practices through internal cross assessments and safety meetings.

Employee risks

Risk description: Employee risks are mainly related to lack of access to and difficulty to attract and retain qualified and skilled employees, due to high competition on the labor market. Gränges operates in a traditional industry where competition for qualified employees is high. Job opportunities are located outside metropolitan areas which tends to reduce the number of available qualified candidates. There are also risks relating to not having a diverse workforce as this is a prerequisite for a productive and innovative organization. If Gränges fails to attract, develop, retain and motivate qualified personnel needed in the business, it would make it more difficult for the company to deliver goods and services in accordance with customers’ expectations. As a result, it could lead to significant future loss of revenue, increased costs and lack of diversity, which may have a significant negative impact on Gränges’ operations, earnings and financial position.

Mitigating activities:

• Attractive workplace: Gränges strives to offer good working conditions and interesting career development opportunities to attract, develop and retain qualified employees.
• Structured recruitment process: The company runs a structured recruitment process to ensure that the company hires competent and skilled employees. All else being equal, individuals from underrepresented groups are given recruitment priority.
• Leadership development: Gränges conducts regular performance and development discussions to ensure motivated and engaged employees. The company also works actively with training opportunities, talent management and succession planning as well as strengthening the corporate culture and core values.
• Local diversity plans: Gränges supports an inclusive work environment which leverages employees’ different perspectives, experiences and ideas. Trainings are regularly held on the importance of inclusion and having a diversified workplace.
• Health and wellbeing: Gränges offers its employees occupational and non-occupational health services including access to occupational health care, regular health checks and access to medical care.

Ethical and compliance risks

Risk description: Gränges operates in many different markets, with local laws and regulation. It can sometimes be challenging as complex market conditions can lead to situations where employees are uncertain how to act. Misconduct, fraud, violation of laws and regulations and internal policies, or other improper acts carried out by Gränges’ employees, representatives or partners could have an adverse effect on Gränges’ business, reputation, profit and financial position. Such action could involve a breach of applicable regulations on, for example, public procurement, secrecy, contractual costs, internal control of financial reporting, the environment and trade. The risk of corruption and bribery exists in some markets where Gränges conducts business. Corruption can prevent economic development, distort competition, lead to increased costs and destroy confidence, reputation and brand.

Mitigating activities:

• Code of Conduct Policy: Gränges Code of Conduct outlines ethical principles and gives guidance to employees on how to act and conduct business. All employees and board members, as well as temporary staff, must follow the principles. All employees should annually conduct training in the Code of Conduct.
• Anti-Corruption Policy: Gränges Anti-Corruption Policy outlines principles to prevent bribery and other types of corruption. All Gränges’ employees and board members must adhere to the policy and all white-collar employees should annually conduct training in anti-corruption.
• Whistleblower Function: Gränges has a Whistleblower Function which is managed by an external company and can be accessed online or via telephone.
• Continuous monitoring and management: Gränges continuously monitors legislative and regulatory developments through external partners, and through membership in various industry organizations.
• Global trainings: Gränges regularly informs its employees of relevant changes that the company must follow. The company also trains relevant employees to ensure good knowledge and understanding of legal risks and requirements.