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ЕВРАЗ. Годовой отчет за 2021 год - часть 7
Meet EVRAZ
EVRAZ in figures
Strategic report
CORPORATE GOVERNANCE
Financial statements
Additional information
ANNUAL REPORT & ACCOUNTS 2021
Boardroom diversity
process and once employed to ensure that
with the requirements of the UK Corporate
any recommended changes to the Board
•Obtained a full understanding from
•Deep dives into customer end-use of
their unique aptitudes and abilities are taken
management of the Group’s strategy, its
products, and the underlying culture of the
Governance Code.
for approval. All terms of reference
EVRAZ recognises the importance of diversity
into account.
key operations, business development
business.
for the committees are available
both at the Board level and organisation-wide.
plan as well as investment projects that
•Further consideration of risk appetite
on the Group’s website: www.evraz.com.
For more details, see the Nominations Committee
are underway or have been proposed.
focussing on operational risk issues.
Board committees
Report on pages 134-136 and the Sustainability
During the year under review, the Board
section on pages 54-78.
The Audit Committee consists of five
•Reviewed the HSE processes in place
•Enhanced review of the ESG and climate
adopted a new diversity policy, which
and considered developments planned
risk agenda by the Sustainability Committee
The following principal committees
non-executive directors, all of whom
notes that the Group remains committed
The Company believes that the Board’s
in that area.
and consideration of appropriate ESG
support the Board in its work: the Audit
are independent, which complies
to increasing diversity throughout its global
composition provides an appropriate
•Were briefed on EVRAZ’s HR structure
metrics by the Remuneration Committee for
Committee, the Remuneration
with the Code. The Board considers that,
operations and takes diversity into account
balance of skills, knowledge and experience.
and the Group’s employees, its digitalisation
incentives.
Committee, the Nominations Committee
as a whole, the committee has competence
during each recruitment and appointment
The Board members comprise a number
programme and IT development,
and the Sustainability Committee. Each
relevant to the industry sector in which
•Review by HR and the Remuneration
process, working to attract outstanding
of different nationalities with a wide range
and the EVRAZ business system.
Committee of remuneration structures to
committee has written terms of reference
the Group operates. Specifically, Deborah
candidates with diverse backgrounds, skills,
of skills, capabilities and experience from
align them with value creation.
that have been approved by the Board
Gudgeon and James Rutherford have relevant
•Were advised of existing Board processes,
ideas and cultures. EVRAZ sees diversity
a variety of business backgrounds. Biographies
along with holding meetings with key Board
and summarise its role and responsibilities.
recent financial experience.
as a crucial business driver.
of the Board members are provided
advisers to ensure appropriate knowledge
The Company undertakes regular
The committees review their respective
in the Board of Directors section.
of the regulatory environment in place.
performance evaluations of the Board in line
terms of reference each year and submit
The Board considers that this extends
to the composition of the Board
The programme was fully implemented for all
Board composition as of 31 December 20211
and the processes associated with Board
Board expertise
four new appointees, although the level of site
appointments.
visits and interaction with staff was severely
NAME
POSITION
COMMITTEE MEMBERSHIP
YEAR OF TENURE
The Board has determined that, as a whole,
curtailed due to COVID 19 restrictions.
Non-executive directors
The Board is aware of the guidance
it has the appropriate skills and experience
Alexander Abramov
Chairman
NC - member
10
issued by the Hampton Alexander review
necessary to discharge its functions.
Directors have full access to a regular
Alexander Frolov
Director
SC - member, NC - member
10
(predecessor of the FTSE Women Leaders
supply of financial, operational, strategic
Eugene Shvidler
Director
NC - member
10
Review) for FTSE 350 Companies with regard
All non-executive directors have the experience
and regulatory information to help them
Eugene Tenenbaum
Director
None
10
to female representation on boards exceeding
required to contribute meaningfully
discharge their responsibilities.
Executive directors
33%, and the Parker Review Guidance
to the Board’s deliberations and resolutions.
For more details, see the Nominations Committee Report
Aleksey Ivanov1
Director
SC - member
<1
on ensuring that each board contains
Non-executive directors assist the Board
on pages 134-136.
Independent non-executive directors
at least one person from an ethnic minority
by constructively challenging and helping
Maria Gordon1
Director
AC - member, SC - member
<1
background. It will take this into account
to develop strategy proposals.
Karl Gruber
Director
None
10
during every recruitment process.
Performance evaluation
Deborah Gudgeon
Director
AC - chair, RC - member,
6
The recruitment of new independent
NC - member, SC - member
The Board will ensure that female
non-executive directors in 2021 and 2022
An external annual Board evaluation
Alexander Izosimov
Director
RC - chair, NC - chair,
9
representation on the Board never drops
has strengthened the Board’s expertise
was conducted by Lintstock in 2020.
AC - member
below two members.
and widened its skills base. The Nominations
In 2021, an internal review was carried
Stephen Odell
Director
AC - member, NC - member, RC - member
1
Committee has commenced a process
out by the EVRAZ company secretary.
Sir Michael Peat
Senior independent director
None
10
The Board is committed to meeting best
to identify suitable candidates for the role
The review was carried out at the initiative
James Rutherford
Director
AC - member, NC - member,
1
practice standards in gender and ethnic
of independent non-executive director
and with the participation of the Company’s
diversity. While the nature of the steel
to replace the director who will be required
Nominations Committee. Questionnaires
Sandra Stash
Director
RC - member, SC - chair
1
and mining industries makes this more
to stand down at the 2022 AGM, having
were distributed to all Board directors for their
challenging, it does not diminish the Board’s
completed his term of nine years.
response and comment.
commitment.
Role and composition of each committee
The results were discussed at three levels:
COMMITTEE NAME
FUNCTION
COMPOSITION
LINK TO COMMITTEE
It will, of course, balance this with appointing
Introduction and professional
(i) among the members of the Nominations
REPORT
directors who can best serve the Company’s
development
Committee; (ii) between Alexander Izosimov
and shareholders’ interests by providing
(as chairman of the Nominations Committee)
Audit Committee
Audit, financial reporting, risk
All five members are independent
See pages 126-133
management and controls
non-executive directors
excellent governance and the appropriate
The chairman, supported by the Nominations
and Alexander Abramov (as chairman
Nominations Committee
Selection and nomination
All seven members are non-executive
See pages 134-136
challenges. Consequently, all appointments
Committee, is responsible for ensuring that
of the Board); and (iii) among the members
of Board members
directors, of which four are independent
will be made on the basis of merit.
there is a properly constructed and timely
of the Board as a whole.
Remuneration Committee
Remuneration of Board members
All four members are independent non-
See pages 140-153
induction for new directors upon joining
and senior management
executive directors
As stated in the Sustainability section, EVRAZ
the Board. Following the appointment
The Board’s performance was deemed
Sustainability Committee
Sustainability issues, including
Three of the six members are non-
See pages 137-139
sees diversity as a crucial business driver
of three new independent non-executive
to be satisfactory. The outcome of the 2021
2
(renamed from Health, Safety
health, safety and environmental
executive, including the chair
and strives to ensure that all employees’ rights
directors during the year and a further one in
Board evaluation called for:
and Environment Committee
matters
receive equal protection, regardless of race,
early 2022, a revised programme was drawn
•A review of board processes with regard to
since 14 December 2021)
nationality, religious belief, gender or sexual
up. The programme focused on ensuring that
major projects.
orientation. People with disabilities are given
all newly appointed directors:
•Further investor analysis to understand
1. Aleksey Ivanov and Maria Gordon were appointed as directors on 1 February 2022.
full consideration both during the recruitment
shareholder views, along with increased
2. The members of the Sustainability Committee as of 31 December 2021 were Sandra Stash (chairwoman), Alexander Frolov, Deborah Gudgeon and Olga Pokrovskaya,
•Worked with an existing Board director, who
who has continued as a non-executive member of the Sustainability Committee following her cessation as a Board member on 14 March 2016. With more than
acted as a mentor.
engagement with shareholders on
50% of EVRAZ operations based in the Russian Federation, the committee continues to value the contribution she brings in terms of her technical and regional
120
governance concerns.
experience. Mr Aleksey Ivanov and Ms Maria Gordon became members of the Committee on 1 February 2022 following appointment.
121
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ANNUAL REPORT & ACCOUNTS 2021
The internal audit function’s role in the Group
includes the formal risk assessment
•Human resources.
RISK MANAGEMENT AND INTERNAL CONTROL
is to provide an independent, objective,
process, consideration of the results
•Transportation, sourcing, raw materials
innovative, responsive and effective value-
of management’s internal control self-
and energy supply.
added internal audit service. This is achieved
assessment and the identification
•Digital effectiveness, as well as effective,
The aim of the risk management process
is to identify, evaluate and establish
Risk appetite is considered in evaluating
through a systematic and disciplined
of management concerns based
efficient and continuous IT service.
is to identify, evaluate and manage
management actions for risk mitigation
strategies and setting objectives within
approach based on assisting management
on the results of previous audits. It ends
potential and actual threats to the Group’s
at a regional level, as well as at the Group’s
the Group’s strategic and budgeting cycle,
in controlling risks and monitoring
with an internal audit plan, which the Audit
The internal audit function at EVRAZ
ability to achieve its objectives.
major steel and mining operations.
in decision making and in developing
compliance, as well as improving
Committee approves.
is structured on a regional basis, reflecting
The Risk Management Group maintains
risk management actions and methods,
the efficiency and effectiveness of internal
its geographic spread of operations.
The EVRAZ Enterprise Risk Management
a corporate risk register that represents
as well as in identifying particular risks
control systems and governance processes.
Audit resources are predominantly allocated
The internal audit function aligns common
(ERM) process is designed to identify,
a summary of this information. Business
and uncertainties that require specific
Once a year, the function provides
to areas of higher risk and, to the extent
internal audit practices throughout
quantify and respond to these threats,
unit management teams and other relevant
Board oversight. The strategic objectives
an opinion of the overall effectiveness
considered necessary, to financial
the Group through quality assurance
as well as to monitor the Group’s
bodies are accountable to the Risk
set by EVRAZ are aligned with, and risk
of the internal controls in place at EVRAZ.
and business controls and processes,
and improvement programmes.
prevention and mitigation system.
Management Group, which consists
mitigation actions are reflective of,
with appropriate resource reservation for ad
of business unit and function vice
the risk appetite approved by the Board.
During 2021, the Group’s head of internal
hoc and follow-up assignments.
With the current speed of technological
Management maintains a risk register that
presidents.
The Group takes a robust approach
audit and the secretary of the Audit
changes and the emergence of new risks,
encompasses both internal and external
in relation to risk management. Risk
Committee attended all the committee’s
In 2021, internal audit projects covered
internal audit goes beyond the traditional
threats. The level of risk appetite
The Board has delegated primary oversight
appetite for some specific business
meetings and addressed any reported
the following risks at the Group:
approach and develops new competencies,
approved by the Board is used to identify
of the internal control process at EVRAZ
processes (for example, health and safety,
deficiencies in internal control as required
•Cost effectiveness.
such as the use of analytical tools for big
particular risks and uncertainties that
to the Audit Committee, which discusses
fraud, security, bribery and corruption)
by the committee.
data analysis, to better identify potential
-Product competition.
require specific Board oversight. In 2021,
any major internal control findings that
is assessed, defined and evaluated
risks that threaten the company ability to
•HSE: health and safety.
the process in relation to principal
exceed the Board’s risk appetite.
separately from the rest of the processes.
The internal audit planning process
achieve its goals.
-HSE, environmental.
risks and uncertainties was consistent
starts with the Group’s strategy
•Capital projects and expenditure.
with the UK Corporate Governance Code,
The EVRAZ Business Security department
Management reassesses the risk
the FRC Guidance on the Strategic Report
is led by a vice president and has specific
appetite at least once a year through
Components of the internal control system
issued in July 2018 and the abovementioned
responsibility for preventing and detecting
the Risk Management Group, which
FRC guidance issued in September 2014.
business fraud and malpractice, including
reports on the analysis to the Audit
COMPONENT
BASIS FOR ASSURANCE
ACTION IN 2021
fraudulent behaviour by employees,
Committee. The committee then makes
Assurance framework — principal
•Annual self-assessment by management at all
In 2021, the internal audit function reviewed
Executive management is responsible for both
customers and suppliers. Robust
recommendations to the Board regarding
entity-level controls to prevent
major operations of the internal control system
the results of management’s internal control self-
internal controls in place and mitigating
internal controls help to minimise
the level of risk appetite.
and detect error or material
using the EVRAZ Assurance Framework.
assessment and evaluated the overall effectiveness
actions related to risk management
risk, and the EVRAZ Business Security
fraud, as well as to ensure
of the governance, risk management and internal
•Review of the self-assessment by the internal
throughout the Group’s business
department ensures that appropriate
The Risk Management Group
the effectiveness of operations
audit function.
control system.
and operations. This serves to encourage
processes are in place to protect
and the Audit Committee last reviewed
and compliance with principal
•Assessment of the overall effectiveness
All major production sites were certified as having
external and internal regulations
of the governance, risk and control framework.
a risk-conscious business culture.
the Group’s interests.
the Group’s risk profile in November 2021.
effective overall governance, risk management
and internal control.
EVRAZ applies the following core principles
EVRAZ also maintains a comprehensive
Based on the results of the most recent
Investment project management
Project delivery is closely monitored against project
•Effectiveness of project management
to identifying, monitoring and managing
financial reporting procedures (FRP) manual
review, management concluded that
and management of project risks is monitored
plans resulting in high-level action to manage
risk throughout the organisation:
detailing the Group’s internal control
the risk-acceptance approach employed
by an established management committee
project investment for both timely delivery and
and subcommittees.
planned project expenditure. (incl. Management
•Risks are identified, documented,
and risk management systems and activities.
by EVRAZ had not changed and that
committee, BU's Investment Committee, Corporate
assessed and monitored, and their
The manual was last updated in November
the risk appetite remained the same
•Reviewed by the internal audit function.
Investment committee).
profile is regularly communicated
2021 to reflect changes in internal processes.
as in the prior year. An appropriate
Operating policies and procedures
Operating policies and procedures are updated
to the relevant levels of the management
The document was prepared in accordance
recommendation regarding the level of risk
•Implemented, updated and monitored
by the management.
as per internal initiatives by the operational
team. The business management
with the Financial Reporting Council (FRC)
appetite was made to the Audit Committee
management and in response to recommendations
•Reviewed by the internal audit function.
team is primarily responsible for ERM
Guidance on Risk Management, Internal
and to the Board on 18 November 2021.
from the internal audit function.
and accountable for all risks assumed
Control and Related Financial and Business
Operating budgets
Operating budgets are prepared by the executive
in the operations.
Reporting issued in September 2014.
•Approved by the Board.
management and approved by the Board.
•Monitored by the controlling unit.
•The Board is responsible for assessing
•Reviewed by the internal audit function.
an optimal balance of risk (risk
Internal audit
appetite) through the alignment
of business strategy and risk tolerance
Risk appetite
Internal audit is an independent appraisal
on an enterprise-wide basis. In addition,
function established by the Board to evaluate
Objectives for 2022
the Board oversees and approves risks
Risk appetite is an important part of the risk
the adequacy and effectiveness of controls,
outside the Group’s defined risk appetite
management process, and it serves
systems and procedures at EVRAZ,
Further development of the risk management
In 2022, in addition to continuing
been a focal point for management
and reviews any significant internal
as a measure of the risks that management
which helps to reduce business risks
system and risk management practices
to implement ongoing initiatives that aim
and are recognised as principal risks.
control weaknesses.
is willing to accept in pursuit of value.
to an acceptable level in a cost-effective
is planned for 2022. In 2021, the Group
to improve risk management (in HSE,
EVRAZ also continues to closely work
manner. The Board approved the internal
focused on enhancing its health and safety
equipment maintenance and repairs, IT
with other risks related to climate change
•EVRAZ has established a reporting
process involving business unit
The Board has approved a risk appetite
audit charter on 26 February 2020. The
risk management methodology, including
projects and other processes), the Group
and sustainability development, including
management teams and other relevant
in accordance with the risk management
Audit Committee reviewed the charter on 20
the risk of mass quarantine of workers due
plans to focus more on addressing
decarbonisation, biodiversity and social
122
bodies at major enterprises. Its aim
methodology adopted by EVRAZ.
January 2022 and agreed with no changes.
to COVID-19. This work will continue in 2022.
environmental risks, which have always
risks, among others.
123
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ANNUAL REPORT & ACCOUNTS 2021
The executive team is responsible
STAKEHOLDER ENGAGEMENT
for the day-to-day stewardship of all
OUR GOAL
stakeholder relationships and its members
report to the Board on key metrics
and initiatives. The Board, either directly
To build honest and supportive relationships
EVRAZ uses various communication channels to ensure that its stakeholder
or through its committees, engages or
with all stakeholders on the Group’s path
engagement approach covers all stakeholder groups and facilitates two-way
oversees engagement with the Company’s
towards sustainable development.
stakeholders through a number
communication and feedback.
of governance activities (which are described
in more detail, along with further information
B
Engagement by Board members
about the Company’s engagement with key
stakeholders, on page 149.)
М Engagement by management
Shareholders and investors
Employees
REGULAR CAPITAL
ROADSHOWS FOLLOWING FINANCIAL
RUSSIAN AND INTERNATIONAL
DIRECT ENGAGEMENT
DEVELOPMENT OF A
REGULAR EDUCATIONAL
REGULAR INTERACTION
MARKETS DAYS
REPORTING ANNOUNCEMENTS
INVESTMENT CONFERENCES
OF DEDICATED BOARD
SAFETY CULTURE
PROGRAMMES TO
WITH TRADE UNIONS
MEMBERS
DEVELOP EMPLOYEES’
PROFESSIONAL SKILLS
М
М
М
B
М
М
М
SITE VISITS
DAY-TO-DAY ENGAGEMENT
INTERNAL PORTAL FOR
REGULAR EMPLOYEE
CORPORATE NEWSPAPERS
HOTLINE
EMPLOYEES
ENGAGEMENT SURVEY
М
М
М
М
М
М
Engagement with the following stakeholder groups is primarily undertaken by management through the engagement mechanisms
set out below. Key issues are reported to the Board through management’s monthly Board Report.
Customers
Suppliers
Local
Government and
Media
Industry
and contractors
communities
regulatory authorities
organisations
Regularly monitoring customer
satisfaction levels
Discussions with potential suppliers
Implementing various social,
Regular meetings with
Hosting regular press conferences
Organising and participating in
infrastructural and environmental
representatives of government and
conferences, as well as other industry
projects based on local communities’
regulatory authorities at federal,
events
Meetings and feedback sessions with
Electronic platform for suppliers
needs
regional and local levels
Supporting and initiating mutual
clients and EVRAZ management
communication projects
Initiating and supporting various
Educational programmes for
Organising social events for
Disclosure of information concerning
social, economic, educational and
Electronic platform for clients
contractors to ensure high level of
populations of regions where EVRAZ
the Group’s social, economic and
Supporting regional TV channels and
environmental projects
workplace safety
operates
environmental performance
newspapers.
Site visits to production assets
Holding direct dialogues with local
Agreements on regional socio-
Organising site visits.
communities
economic development
Day-to-day and ad-hoc engagement
124
125
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ANNUAL REPORT & ACCOUNTS 2021
AUDIT
COMMITTEE MEMBERS AND ATTENDANCE
COMMITTEE
REPORT
The Audit Committee members are all
Committee meetings by invitation,
The committee met ten times during 2021
independent non-executive directors
providing additional technical expertise
and three times in early 2022 prior to the
and have a wide range of skills
and valuable regional knowledge.
publication of this Annual Report. Two of
I am pleased to present the Audit
of the pandemic on all aspects
and experience. Deborah Gudgeon
the meetings in 2021 related to specific
Committee Report for the year ended 31
of the committee’s responsibilities and work
is a chartered accountant with recent
The CFO and senior members
single topics, namely the independence
December 2021.
was regularly evaluated throughout
and relevant financial experience.
of the Group’s finance function, the head
of the external auditor and the accounting
the year. However, I am pleased to report
Alexander Izosimov and Stephen
of Internal Audit and the external auditors
treatment for the demerger of PSJC
There were a number of changes
that the committee met in person
Odell provide key strategic, industrial
attend all committee meetings. During
Raspadskaya (“Raspadskaya”) in the 2021
to the composition of the committee
in Moscow in January 2022 and also
and commercial expertise. Jim Rutherford
the year, key members of the executive
financial statements.
during the year. Laurie Argo stepped
visited the operations of EVRAZ NTMK
brings further recent and relevant financial
management team and Risk Management
down upon her retirement from the board
and EVRAZ KGOK.
experience. As disclosed in the Corporate
Group are invited to present to the Audit
in June 2021, replaced by James Rutherford
Governance Report on pages 118-119,
Committee on specific matters relevant
and Stephen Odell. I would like to thank
As always, I would like to extend the thanks
Olga Pokrovskaya attends the Audit
to the committee’s work.
Laurie for her diligent contribution
of the committee to the executive
to the work of the committee and welcome
and financial management of the Group,
Jim and Stephen. Maria Gordon joined
the internal audit department and our
the Audit Committee from 1 February 2022
external auditor, EY, for their continuing
Deborah Gudgeon
ACTIVITIES AND WORK OF THE COMMITTEE IN 2021
following her appointment to the Board.
diligence and valued contribution
Independent Non-Executive Director
to the work of the committee during 2021.
COVID-19 continued to effect
The Audit Committee has continued
During 2021, the Audit Committee focused
transformation project. In North America,
the committee’s work and all meetings
to focus on the integrity of the Group’s
on the significance of climate related matters
the IT security mitigation plan was updated
during 2021 were held virtually. The impact
financial reporting, the related internal
for the Group and the work of the committee,
and extended to reflect the strong
control framework and risk management
in particular the risk and control profile
progress already made against key targets
including finance, operations, regulatory
of the business, financial reporting and TCFD.
and emerging risks. There is now a common
compliance, corruption and fraud. These
Consideration of climate-related and ESG
IT governance structure across the business
areas were comprehensively reviewed
factors have been embedded in all aspects
headed by the CEO as recommended
and the committee requested and received
of the committee’s work, particularly in areas
by the Audit Committee but, given
regular updates from the Group’s financial
were longer term judgements are required
the significance of IT security to the Group’s
ROLES AND RESPONSIBILITIES OF THE AUDIT
and operational management, internal
such as viability or impairment modelling
risk profile and resilience, and the level
audit, compliance officer and vice
and related disclosures. In June 2021,
of digital transformation throughout
COMMITTEE
president of legal affairs and security,
the committee received an update report from
the business, the committee will continue
as well as the external auditor.
Deloitte on climate-related regulation, TCFD
to review this area in 2022 and beyond.
and the Group’s approach and readiness.
The work of the committee is determined
The Audit Committee minutes are tabled
with the risk register and risk appetite
The FRC undertook a limited scope review
In close collaboration with the Sustainability
In October 2021, an employee of Raspadskaya
by its terms of reference. These
at board meetings and the Chairman
proposed by management, before they
of the EVRAZ viability and going concern
Committee, the committee considered
admitted offering monetisable services
were updated during 2021 to reflect
provides an oral update on the committee
are considered by the board.
disclosures in the 31 December 2020 Annual
the controls over the collation of non-financial
to a state official for two years as set out
latest best practice and, in particular,
proceedings. Key matters
Report and Financial Statements during
data that underpin key climate and ESG
on page 78. The employee had attended
effective and appropriate co-ordination
and recommendations are communicated
I confirm, on behalf the Group, its
2021 as part of their Thematic Review.
metrics and will keep this evolving area under
anti-corruption online training and was
with the Sustainability Committee.
to the board on an ad hoc basis if
compliance during the year commencing
The review was based upon the relevant
review in 2022.
fully aware of the Group’s Anti-Corruption
The updated terms of reference
appropriate.
1 January 2021 with the provisions
legal and accounting framework rather
Policy, the Regulations for Interaction with
were approved by the board
of the Competition and Markets Authority
than a detailed knowledge of the EVRAZ
The IT security of the Group was reviewed
Government Bodies and the Employee Code
in 14 December 2021 and can be accessed
The Audit Committee reviews
Order 2014 on mandatory tendering
business or underlying transactions but
again during 2021 and early 2022.
of Conduct. The Audit Committee considered
at: www.evraz.com.
the Group’s governance, risk and control
and audit committee responsibilities.
raised no questions or queries regarding
The committee reviewed the results
the implications of this case, in particular that
environment annually, together
the disclosures in the Annual Report
and recommendations of the 2021
it was uncovered as a result of a Russian police
and Financial Statements.
information security audit in the Russian
investigation rather than the Group’s internal
Federation together with the digital
processes. Management were challenged
126
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to demonstrate that this was an isolated
At the request of the Board, the Audit
In the light of escalating geopolitical tensions
and finished steel products. The Audit
the scenarios include any new financing
to support the demerger. The committee
incident, how the breach was not identified,
Committee reviewed the draft Viability
relating to Ukraine, the committee asked
Committee reviewed management’s
beyond that currently committed although
also considered a report by an independent
and their response in terms of upgrading
Statement and supporting analysis
management to model a severe downside
going concern analysis which tested
management continue to monitor
expert on the potential outcome of the
processes, systems and controls to strengthen
produced by management. The committee
scenario to test the resilience of the business
two scenarios: a base case and a flexed
opportunities for the future raising of funds.
shareholder vote on the transaction. The
the compliance framework. An internal
considered the scenarios in the context
to a material and sustained interruption over
downside scenario based upon pricing
Based upon this review, the committee
committee concluded that it was now highly
compliance investigation revealed no similar
of the updated risk register, current
the viability period. This was considered
close to the bottom of the range of current
concluded that liquidity is unlikely to be
probable that the transaction would complete
arrangements and the enhanced controls over
operating environment and Group strategy.
in the context of the Group’s previous
investment analyst forecasts. Both
eliminated or covenants breached in any of
in the next twelve months and approved
the use of property will be regularly checked
In particular, the committee considered
ability to withstand market turbulence and
scenarios reflect the effect of the highly
the three scenarios.
the accounting treatment of Raspadskaya
by compliance managers across EVRAZ going
the implications of climate change, the highly
reconfigure its’ cost base. The scenario
probable demerger of the coal business
as Assets Held for Distribution and, as the
forward. This will be an area of heightened
probable coal demerger and emerging risks
assumed a reduction in Russian export sales
(Note 13), the scheduled repayment
Following these detailed considerations,
coal business is a major business segment of
focus for the committee during 2022.
over the viability period. The assumptions
outside the CIS to nil over the period and the
of debt including US$750 million of US
the Audit Committee resolved
EVRAZ, as a Discontinued Operation.
and mitigating actions underpinning each
other factors, including further international
denominated notes due in 2023 (Note
to recommend the going concern basis
During the course of the year, the committee
scenario and the working capital required
sanctions. The resulting material reduction in
22) and the effect of the new excise tax
of preparation for the Financial Statements
received regular updates of the legal risks
for the effective operation of the business
EBITDA was partially mitigated by reduced
on liquid steel and higher taxes on mineral
as at 31 December 2021 to the Board.
Impairment of goodwill
register to allow consideration of the most
post demerger were reviewed and tested.
capital expenditure of $500 million per annum.
extraction introduced by the Russian
and non-current assets
appropriate accounting treatment
Decarbonisation is now recognised
The scenario assumes that the Group can
Federation from 1 January 2022 (Note 30).
Significant accounting
(Note 6)
and the effectiveness of the sanctions
as a principal risk of the business
raise additional capital in 2023 and 2024 but
The risks associated with climate change,
judgements and management
compliance controls was monitored.
and the impact was tested for the first
not the additional mitigating actions available
in particular the introduction of carbon
estimates
The committee considered management’s
time in 2021 using assumptions agreed
to management including further reductions
pricing were considered but are not
impairment assessment for the financial
The committee undertook a self-
with the committee. The committee challenged
in capital expenditure and other cash costs
anticipated to have a significant impact
year in the context of the current
assessment to consider its’ own performance
management’s assumptions underpinning
and the deferral of dividends. The committee
in the going concern assessment period.
Accounting Treatment of the
and future trading environment
and developed a plan to reflect the extended
the business interruption scenario post
considered this severe downside scenario and
PSJC Raspadskaya Demerger
of the Group, including assumptions
terms of reference and return to in-person
demerger and this was updated to reflect
concluded that it did not threaten the viability
Given the heightened geopolitical risk
(Notes 2 and 13)
on future prices, the new excise tax
meetings.
an extended downtime.
of the business.
and uncertainties relating to Ukraine, the
on liquid steel and higher taxes on mineral
Audit Committee asked management to
The Audit Committee considered
extraction in the Russian Federation,
test the resilience of the business over the
the accounting treatment for the potential
the continuation of tariffs and duties
period of the going concern assessment
demerger of the Group’s coal business
in North America and their impact
SIGNIFICANT FINANCIAL REPORTING ISSUES
through a severe downside scenario.
on a number of occasions during 2021.
on the recoverable amount of the affected
This assumed a reduction in capital
At 30 June 2021, the demerger was still
assets. Impairment testing was undertaken
CONSIDERED IN 2021
expenditure to US$500 million and tested
under consideration by the Group
as at 30 September 2021 and reassessed
the extent to which EBITDA could fall over
and had not been approved by the Board
at 31 December 2021 when no further
the period while maintaining an operating
or various regulatory authorities
impairment indicators were identified.
The Audit Committee’s primary objective
The Audit Committee considered
accounting treatment is set out in Notes
level of liquidity. This fall in EBITDA
in the UK and Russian Federation.
is to support the Board in ensuring
several financial reporting issues
2 and 13. The financial statements remain
reflects a highly material interruption to
Given the uncertainties, the committee
A charge of US$30 million is recorded
the integrity of the Group’s financial
in relation to both the interim results
impacted by fluctuations in the key
the Group’s current business, reflecting
concluded that the classification,
in the financial statements in 2021
statements and Annual Report, including
for H1 2021 and the financial results
functional currencies of the business
a reduction of Russian export sales
measurement and presentation
(US$310 million 2020) relating to
review of:
for the year ended 31 December 2021.
(primarily the Russian rouble) against
outside the CIS to nil and other possible
requirements of IFRS 5 should
impairments at EVRAZ ZMSK
These included the appropriateness
the presentation currency of the financial
factors, including further international
not be applied and Raspadskaya
(US$13 million) and EINA (US$9 million),
•Compliance with financial reporting
standards and governance requirements;
of the accounting policies adopted,
statements as set out in Note 2 but
sanctions. The committee considered
was not accounted for as Assets Held
primarily result of the impairment of
disclosures and management’s estimates
the effect of these fluctuations was not
incremental mitigating actions available to
for Distribution to owners in the interim
equipment which was replaced following
•The material financial areas in which
significant accounting judgements have
and judgements. Papers produced
material in the current year.
management such as further reductions in
financial statements at 30 June 2021.
the EAF fire at the Pueblo steel mill.
been made;
by management on the key financial
capital expenditure and other cash costs
The balance relates to the discontinued
reporting judgements and reports from
and the deferral of dividends.
On 14 December 2021, the Board approved
operation of Raspadskaya.
•The critical accounting policies
and substance, consistency and fairness
the external auditor on the audit process
the proposed demerger of Raspadskaya
of management estimates;
for the full year and interim results
Going concern (Note 2)
The committee carefully considered all
and a circular detailing the transaction was
The committee considered management’s
were reviewed by the committee.
three scenarios including the projected
published. The Audit Committee met on 31
assumptions and preliminary assessment
•The clarity of disclosures; and
EVRAZ is exposed to a wide range
use and source of funds for the period
December 2021 to consider the accounting
of the implications of future carbon taxes
•Whether the Annual Report,
taken as a whole, is fair, balanced
In accordance with IFRS 5 “Non-current
of risks and inherent uncertainties as set
to June 2023, including scheduled loan
treatment of the demerger. The positive
in the Russian Federation and noted
and understandable, and provides
Assets Held for Sale and Discontinued
out on pages 84-96, many of which
repayments, committed funding, free cash
response of the investment community to
the sensitivity analysis which showed
the information necessary
Operations”, the coal assets are classified
are outside the control of the Group.
flow after committed capital expenditure
the circular was considered together with
a potential future impairment of EVRAZ
for shareholders to assess the Group’s
as an asset held for distribution
During 2021, high iron ore and coking coal
and the Group’s dividend policy. None of
the recommendations from 3 proxy agencies
ZMSK of US$768 million.
performance, business model, strategy,
to owners and a discontinued operation
prices combined with rebounding demand
principal risks and uncertainties.
as at 31 December 2021. The effect of this
supported stronger prices for semi-finished
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Financial statements
Additional information
ANNUAL REPORT & ACCOUNTS 2021
FAIR, BALANCED AND UNDERSTANDABLE
RISK MANAGEMENT AND INTERNAL CONTROL
In considering whether the Annual Report
have looked like if Raspadskaya had not been
The committee considered whether the
This should be read in conjunction with
the Statement of Principal Risks and
Assessment of the Group’s
is fair, balanced and understandable,
consolidated. In contrast with the statements
description of the business, principal risks
the Risk Management and Internal Control
Uncertainties to be included in the Annual
Risk Profile and Control
the committee considered the information
of operations presented on the face of the
and uncertainties, strategy and objectives
section on pages 122-123 .
Report prior to the Board’s consideration.
Environment
it had received throughout 2021 together
consolidated financial statements, intra-
were consistent with the understanding
with discussions held with management
group transactions with Raspadskaya are
of the Board, and whether the controls
EVRAZ has an integrated approach to risk
The risk profile of the business will be
Internal Audit evaluates the overall
in the year, and the preparation process
not eliminated but treated as transactions
over the consistency and accuracy of the
management to ensure that the review of
reassessed in Q2 of 2022 by the Risk
effectiveness of the Group’s governance,
adopted. The committee also liaised
with a related party, and unrealised profits
information presented in the Annual Report
and consideration of current and emerging
Management Group and Audit Committee
risk and control environment annually and
closely with the Sustainability Committee
or losses of Raspadskaya are excluded from
are robust. Given the escalating geopolitical
risks inform the management of the
following the highly probable demerger of
this is considered by the Risk Management
in relation to information and metrics
the consolidated financial statements of
tension relating to Ukraine, the committee
business at all levels, the design of internal
the Group’s coal assets. Any changes to the
Group and the Audit Committee. The
included in the Annual Report relating
EVRAZ plc.
considered whether the potential risks
controls and the internal audit process. The
risk register or recalibration of the Group’s
chairman of the Audit Committee tables
to TCFD, sustainability management
to the business were appropriately and
Group’s financial reporting procedures,
risk appetite will be recommended to the
the assessment of the governance, risk and
and climate change risks.
Preparation of the Annual Report
adequately disclosed.
internal controls, risk management systems
Board.
control environment with the Board.
is an iterative process: management agree
and activities are documented in a Financial
After considering the presentation of
the key overall messages at an early
Taking into account the disclosure implications
Reporting Procedures (FRP) manual. The
Internal audit findings on control issues
The Audit Committee monitors the internal
discontinued operations on the face of the
stage to ensure a consistent message
of the issues discussed in this report,
updated manual was reviewed by the Audit
that exceed the Group’s risk appetite
control environment throughout the year
financial statements, the Audit Committee
in both the narrative and financial
the committee recommended to the Board
Committee in January 2022.
are reported to the Board by the Audit
and engages with management to ensure
agreed with management that supplementary
reporting; regular meetings are held
that, taken as a whole, it considers
Committee and followed up the Group’s
the effective resolution of any deficiencies
information not required by IFRS be included
to review the draft Annual Report
the Annual Report to be fair, balanced
The risk profile was reviewed and updated
Management Committee. Progress on the
identified by internal audit. The effective
in the consolidated financial statements
and for management and committee
and understandable. The Audit Committee
by the Risk Management Group and
timely and effective resolution of issues is
mitigation of key risks continues to be
(Note 35) to assist users in understanding
members to provide comments; detailed
recommended approval of the Group’s
the Audit Committee in November 2021,
monitored regularly by the committee.
a key focus of the committee. In 2021,
the performance of the coal business in the
reviews of appropriate draft sections
2021 Consolidated Financial Statements
and the assessment was finalised in
the committee reviewed progress on the
year, supplemented by additional disclosures
are undertaken by the relevant directors
by the Board. Both recommendations
January 2022. The assessment included
The Audit Committee reviews
information security mitigation plans
and the strategic report. This financial
and board committees and external
were accepted by the Board.
the updated risk register, management’s
whistleblowing activity quarterly, including
developed following the cyberattack at
information illustrates what the Group’s
advisers.
recommendation on the level of risk
details of each report and its’ resolution.
EVRAZ North America in March 2020
consolidated statements of operations would
appetite of the Group and how that
Significant whistleblowing reports are
and the regular annual assessments
appetite is applied to strategic, financial
shared with the committee on an ad hoc
across the business, as well as the digital
and operational decisions of the business
basis as they arise. The committee also
transformation strategy. Other areas
in practice. Following the review, a new
considers the bi-annual report of the
considered included progress on the
OTHER MATTERS
principal risk was added to the register,
security department including the progress
repairs and maintenance transformation
decarbonisation, and the principal risks
on follow-up investigations and resulting
project across the Russian assets and
UKBA
Anti-corruption training is all online
Sanctions compliance controls
relating to potential regulatory actions
actions in relation to fraud and theft.
health and safety. The Audit Committee
and, as a result, was not impacted
by government and capital projects
considered whether any of these matters
During 2021, two key anti-corruption policies
by the pandemic. The objectives
The committee continued to monitor
were recalibrated to reflect a heightened
had implications for the risk and control
were updated to reflect latest best practice
of the training are set out on page 78.
developments in the UK, US and EU
probability. The committee also reviewed
environment of the Group.
and adopted: On Vetting New Vendors and
In 2021, the transition to a bespoke internal
sanctions regime in 2021, consider the
On Gifts and Business Hospitality. Using
anti-corruption training programme
implications for the Group’s control
the updated framework for monitoring
continued via the Group’s Learning
processes, procedures and reporting
compliance with EVRAZ’ anti-corruption
Management System. This will create
framework and assess the Group’s
policies, compliance during 2021 was
a total internal programme covering
compliance. The legal department
INTERNAL AUDIT
tested and the compliance risk register
anti-corruption, significantly extending
has formal responsibility for sanctions
was recalibrated to reflect the results and
the capacity to provide initial and refresher
compliance including verification and
updated for newly identified risks. The
training across the Group. Contractors
due diligence on counterparties, contract
The Audit Committee receives quarterly
conclusions is also reviewed by the
The Audit Committee reviewed the
results and updated compliance risk register
and vendors can now undertake a new
procedures, internal training of EVRAZ
internal audit reports detailing significant
committee. The internal audit plan for
Internal Audit Charter in January 2022 and
were reviewed by the Audit Committee in
standalone course on EVRAZ’ anti-
employees and liaising with external legal
internal audit findings, progress on the
2022 was reviewed by the Audit
concluded that no revisions were required.
February 2022. Notwithstanding the incident
corruption principles which was launched
advisers. During 2022, the legal department
timely and effective resolution of
Committee and judged to be aligned to
An annual assessment of the effectiveness,
at Raspadskaya, the committee noted further
in December 2020. This is now a condition
plans to digitalise the sanctions control
outstanding findings across the business,
the updated risk profile. Overall, the
independence and quality of the internal
progress in reducing risk.
for participating in EVRAZ’ tenders.
processes.
the status of any ad hoc projects and
committee considers the current internal
audit function was undertaken by way of
revisions to the current year audit plan.
audit resource to be adequate for the
questionnaire to committee members,
An annual internal audit report
internal control and risk management
management and the external auditors and
summarising all major results and
assurance requirements.
found to be very satisfactory.
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Financial statements
Additional information
ANNUAL REPORT & ACCOUNTS 2021
underpinning each position, as well as the
of permitted non-audit fees relative to
December 2017 and 2018. In 2017, following
EXTERNAL AUDIT
robustness and level of challenge provided
audit fees and the authorisation process
consideration of the UK Corporate
by EY to management in arriving in an
for the approval of fees. The policy was
Governance Code, EU legislation on audit
agreed position.
updated in November 2021 to limit the
regulation and the performance of EY, the
The Audit Committee is responsible for
The conclusion of the committee was that
particularly around key audit matters, and
proportion of non-audit services to audit
committee recommended that, subject
monitoring the ongoing effectiveness and
it still considered EY to be independent
coordinated efforts from both EY and
During 2021, the committee continued
fees by legal entity of the external auditor.
to the agreement of satisfactory terms, a
independence of the external auditor,
despite the technical breach. In reaching
EVRAZ management.
to monitor the various enquiries into the
Irrespective of the prior approval of the
further audit tender be deferred until the
as well as making recommendations to
this conclusion, the committee considered a
independence and effectiveness of audit
CFO and Audit Committee Chairman, all
summer of 2020 to allow for an orderly
the Board on the re-appointment of the
number of factors including:
firms, together with the EY response. There
fees are reported to the Audit Committee
and effective rotation for the year ended 31
external auditor.
continues to be a constructive engagement
for noting and comment.
December 2021. This is in line with Group
•The low level of the UK component
audit fee relative to the size of the
Effectiveness and
with the external auditor to determine the
policy which is to conduct an external
During 2021, EY provided reporting
group audit fee, reflecting the Group
Independence
implications of potential recommendations
During 2021, non-audit fees totalled
audit tender every five years. As a result of
accountant services to the Group in
structure and Moscow headquarters,
on the EVRAZ audit process both in current
US$1,396,000 including US$456,000 in
the exigencies of the COVID-19 pandemic
respect of the prospective demerger of the
and integrated audit approach;
There is an established framework through
and future years.
respect of the interim review and US$785,000
and travel restrictions, the committee
Raspadskaya coal assets. These services are
which the Audit Committee monitors the
in respect of the Coal business demerger
determined that a fair and effective tender
•The generally accepted practice that
required by the listing rules for a Class 1
a UK firm lead in relation to capital
effectiveness, independence, objectivity
Members of the Audit Committee and
(in 2020, the total was US$521,000 including
process could not be undertaken in either
transaction and are not prohibited. Certain
markets work;
and compliance of the external auditor
management completed a questionnaire to
US$465,000 for the interim review). Other
2020 or 2021 and should be deferred until
of these services can only practically be
with ethical, professional and regulatory
assess the effectiveness and independence
non-audit fees in 2021 consisted mainly of
these criteria could be met. The latest
•The reporting accountant work does not
performed by the incumbent auditor.
form part of the information relevant to
requirements. These include:
of the 2020 external audit process during
limited assurance over cybersecurity controls
regulatory guidance, performance of EY
Services were provided by both the UK
the 2021 audit opinion and significant
2021. This was found to be satisfactory but
(US$62,000), limited assurance on the
and terms agreed with them in respect
and the Russian Federation practices of
elements of the work was performed by
contained some criticism in relation to the
the 2021 sustainability report (US$39,000)
of year ended 31 December 2022 were all
•Review and approval of the external
EY. In late August 2021, the committee
a separate EY team and partner;
audit plan for interim review and year-
breach of the ethical standard during 2021.
and agreed upon procedures required by
considered in reaching this decision. It is
was informed that there had been an
end audit, including consideration of
the Strategic Innovation Fund of Canada
the intention of the committee to run an
•The reporting accountant fee is not
inadvertent breach of the Revised Ethical
material to EY at a department, country
the audit scope, key audit risks, audit
As all audit committee meetings in
(US$28,000). Non-audit fees were 51.5% of
external audit tender for the 2023 financial
Standard 2019 by EY in respect of the non-
or global level; and
materiality and compliance with best
2021 were virtual, there was not the
the audit fee in 2021 compared to 19% in 2020
year during 2022.
audit fee threshold at the UK practice level.
practice;
opportunity to meet with the external
primarily due to the coal business demerger.
•The engagement team, firm and
The FRC guidelines require that non-audit
network have complied with relevant
auditor in person during the year.
At the UK EY entity level, non-audit fees were
The Audit Committee continues to consider
•Review and approval of the external
fees cannot exceed 70% of the average
ethical independence requirements
auditor’s engagement letter;
However, the external auditor attended
97% of the audit fee again due to the coal
EY to be effective and independent in its
audit fee for the proceeding three years
other than this breach.
•Review of the FRC’s annual Quality
all of the meetings during the year and
business demerger.
role as auditor and has provided the Board
either at a consolidated level or at the UK
Inspection Report, the most recent
there was a regular virtual dialogue
with its recommendation to shareholders
country practice level. There is provision
EY updated the Committee on how their
being for 2020/21 dated 23 July 2021
without management to consider
that EY be re-appointed as external auditor
for pre-clearance with the FRC in certain
internal processes had been updated to
and the EY response in the context of
the appropriateness of the Group’s
for the year ended 31 December 2022.
circumstances where this cap may be
ensure that any potential future breach
the EVRAZ audit;
accounting policies and audit process.
Re-appointment of the
breached in a given year. Globally, EY were
would be pre-identified and pre-cleared
•Consideration of EY’s reports on the
The committee chairman also had regular
external auditor
comfortably within this threshold 38% but
with the FRC if necessary. At the request of
interim review, annual report and
virtual meetings with the Senior Statutory
a breach at the UK component audit level
the Audit Committee, EY and management
representation letters; and
Auditor outside of committee meetings.
EY was appointed as an external auditor
was not identified or pre-cleared with the
agreed to implement a look forward
of EVRAZ in 2011. Steve Dobson stepped
•Review of the EY management letter
FRC until the Group approached EY to
independence monitoring system to
on the 2020 audit, consideration of
Engagement of the external auditor
down as audit engagement partner
undertake additional work.
identify any future breaches.
management’s response and proposed
for non-audit services is managed in
following completion of the audit for the
actions.
accordance with the Group’s policy which
year ended 31 December 2020 and was
Following disclosure of the breach, the
The committee considered the impact of
can be found on the website: www.evraz.
replaced by Danny Trotman.
Committee Chairman engaged with EY and
the continuing COVID-19 pandemic on
The committee was updated regularly during
com. The policy identifies a range of non-
the FRC to consider the implications of the
EY’s audit approach in 2021. Although
the final quarter of 2021 and early 2022 on
audit services which are prohibited on
Following the tender process in 2016,
breach for the external auditor and the
physical site visits were still constrained,
the key risk areas in the audit process by
the basis that they could compromise the
the committee recommended the
Group. The Audit Committee held a special
the committee noted EY’s digital approach,
both the external auditor and management,
independence of the external auditor. It
re-appointment of Ernst & Young LLP (EY)
meeting in September 2021 to consider
the high level of interaction between
providing transparency and allowing the
establishes threshold limits for the level
as external auditor for the years ended 31
the independence of the external auditor.
primary and component audit teams,
committee to assess the assumptions
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Additional information
ANNUAL REPORT & ACCOUNTS 2021
Board and committee
and concluded as part of discussions
Sustainability governance
NOMINATIONS COMMITTEE REPORT
composition
with the chairman and senior independent
director that none of the candidates
During 2021, the committee considered
The Board agreed that its size
on the short list justified not appointing
the best way to monitor the governance
“During the year, the Nominations
the Board and the newly appointed
and its committees were appropriate
the internal candidate. Consequently, based
of sustainability initiatives across the Group
Committee focused on several key issues
directors, while the Company finalised
for the Group’s ongoing needs.
on the committee’s recommendation,
at Board level. It concluded that since
to support the Board, including: identifying
the complicated proposed demerger
The committee considered the mix
the Board appointed Aleksey Ivanov as CEO
the Group expects sustainability issues
a new chief executive officer; recruiting
of the metallurgical coal assets consolidated
of skills and experience of its members
effective from 1 September 2021. Korn Ferry
to be managed and implemented
three new independent non-executive
under Raspadskaya. The Board deemed
before commencing a search for new
also provide remuneration consultancy
at the level of business units, with support
directors to replace the directors who had
that both directors remained independent
non-executive directors as detailed
advice to the Remuneration Committee.
from the vice president for corporate
joined the Board during the Company’s
in accordance with the UK Corporate
in the section below.
strategy, the Audit Committee should
initial public offering; and considering
Governance Code.
The Committee also paid close
be in charge of monitoring performance
the Board’s diversity policy.
attention to senior management
and control in this regard, while the HSE
The committee focused on the Board’s
Succession planning
succession for positions below the CEO
Committee should consider initiatives
Using the services of a search agency,
diversity throughout the year, especially
and endorsed several recommendations
and developments. As a result, the Audit
the committee conducted a thorough
given that it does not yet meet
The Nominations Committee considered
made by him following his appointment
Committee made the appropriate changes
review of potential external candidates
the Hampton-Alexander (predecessor
succession planning for its independent
on 1 September 2021.
to its terms of reference, and the HSE
before agreeing to recommend that
of the FTSE Women Leaders Review)
non-executive directors in the context
Committee widened its terms of reference
the Board appoint Aleksey Ivanov,
guidelines on gender diversity. This
of length of service. A number
and changed its name to the Sustainability
the Group’s senior vice president, as CEO
situation is expected to improve after
of independent non-executive directors
Board performance evaluation
Committee. The terms of reference for all
to take over from Alexander Frolov, who
the two longest serving directors step
were due to retire at either the 2021 or
committees are available on the EVRAZ
remains as a non-executive director.
down following the completion of
2022 AGMs although the Board asked
In 2021, as required by the UK Corporate
website.
the Raspadskaya demerger and new
two of retiring directors to remain on
Governance Code, the Company
Following a search, the committee was
appointments are announced to replace
Alexander Izosimov
the board until the conclusion of the
undertook a Board performance evaluation
also pleased to recommend to the Board
independent directors who will need
Independent Non-executive Director
demerger of the Coal business. The search
that was conducted by the Company
the appointment of three individuals as new
to step down at the 2022 AGM.
and Chairman of the Nominations
for their replacements commenced
Secretary following the review that
Performance of Chairman
independent non-executive directors who
The committee conducted a detailed review
Committee
in 2020 and was concluded in the first
was carried out in 2020 using an external
and Individual Directors
provide a wealth of experience across
of the proposed Board diversity policy,
half of 2021. The сommittee engaged
facilitator, Lintstock LLP. Upon conclusion
several areas of specialisation, including:
which the Board adopted during the year.”
The Inzito Partnership as an external search
of the review, the Committee considered
The senior independent non-executive
manufacturing; investment and finance;
consultancy to assist with the recruitment
the outcome of the report and prepared
director sought views from all directors
and sustainability. Although Sir Michael
of independent non-executive directors
an action plan for the Board to review
about the chairman’s performance
Peat and Karl Gruber had both completed
to join the Board. In addition, the existing
and approve. The plan reflected continuing
and contribution. The independent
nine years’ service as independent non-
The Board delegates the Nominations Committee’s role
board members recommended several
improvements to the Board’s processes,
non-executive directors considered
and responsibilities, which are set out in the written terms
executive directors, the committee
suitable candidates, whom the committee
information flow and risk management.
the conclusions of this review at a meeting
of reference:
was pleased that they agreed to remain
reviewed along with the ones identified
on 24 February 2022.
in their positions to support both
policies/#tabs-reference
by the search consultancy. As a result
The outcome of the review and the action
of this process, Stephen Odell, James
plan are described in the Corporate
As in the past, the review concluded
Rutherford and Sandra Stash joined
Governance section on page 120.
that the chairman continues to make
the Board on 15 June 2021. The
an important contribution to the Group,
Inzito Partnership continues to assist
including through his industry knowledge,
the committee in identifying further
Independence
experience and contacts. It also noted
Role
Stephen Odell and James Rutherford.
attended each meeting, except for one
suitable candidates to join the Board
of non-executive directors
that the chairman was not independent
Si Michael Peat served as the chairman
meeting that Mr Abramov was unable
in 2022. The Inzito Partnership has no other
in terms of his appointment as required
The Nominations Committee is responsible
of the Nominations Committee until
to attend.
contractual relationships with the Group.
The Nominations Committee reviewed
by Provision 9 of the UK Corporate
for making recommendations to the Board
15 June 2021, when Alexander Isozimov
the independent status of the non-
Governance Code. However, it found that
on the structure, size and composition
took over. Mr Karl Gruber stepped down
The Company Secretary served
The committee also worked with Korn
executive directors based on the provisions
in view of his experience and knowledge,
of the Board and its committees. It also
as a committee member on 15 June 2021.
as the сommittee’s secretary.
Ferry, an external search consultancy,
of the UK Corporate Governance
his independence of judgement was not
oversees succession planning for directors
Mr Alexander Frolov became a member
to identify suitable candidates to take
Code. It confirmed the appropriateness
considered to be impaired.
and senior management.
on 1 February 2022.
over as the Group’s CEO following
of the independent status of each
Mr Frolov’s desire to step down from
of the independent non-executive directors.
In addition, the review noted that
Throughout 2021 four of the six
Activity During 2021
executive duties after over 14 years
The Board confirmed the independence
the chairman has retained his position since
committee members were independent
in this role. Korn Ferry helped to prepare
of Karl Gruber and Sir Michael Peat, who
the Group’s IPO in October 2011. He has
Committee Members
non-executive directors.
During 2021, the Nominations Committee
the profile of an ideal candidate, and then
remained as independent non-executive
therefore served in excess of nine years,
and Attendance
considered the following matters.
identified a long list of over 40 individuals
directors even though they had completed
longer than the limit suggested by Provision
The сommittee met on four occasions
worldwide who met the profile. Following
over nine years of service. They remained
19 of the Code. The Nominations Committee
The Nominations Committee members
during 2021 and held one joint meeting
an internal review, a short list of 11
on the Board to assist with the transition
has considered this situation and,
as of 31 December 2021 were Alexander
with the Remuneration Committee.
candidates were assessed in detail based
to the new independent non-executive
as described above, values his extensive
Izosimov, Alexander Abramov,
As reported on page 119, all members
on the approved criteria. Korn Ferry then
directors, and to provide support during
experience and expertise on the Group’s key
134
Eugene Shvidler, Deborah Gudgeon,
interviewed the only internal candidate,
the demerger process.
markets and the steel sector. The committee
135
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Strategic report
CORPORATE GOVERNANCE
Financial statements
Additional information
ANNUAL REPORT & ACCOUNTS 2021
believe his continuing as chairman
The Board considers that this extends
The Board currently meets these criteria.
is in the Company’s best interest.
to the composition of the Board
SUSTAINABILITY COMMITTEE REPORT
In addition, during the transition of Board
and the processes associated with Board
The committee continues to review
(Health, Safety and Environment Committee before 14 December 2021)
members, having the same chairman helps
appointments.
and monitor the Group’s performance
with the Board’s continuity and stability.
against its diversity policy, including aspects
The committee therefore, with the chairman
The Board is aware of the guidance
such as age, gender and educational
recusing himself, recommended
issued by the Hampton Alexander
and professional backgrounds. More
to the Board that he be nominated
review (predecessor of the FTSE Women
information about diversity is disclosed
“In 2021, EVRAZ reorganised the HSE
to the use of improper ‘lock out, tag out’
for re-appointment at the 2022 AGM.
Leaders Review) for FTSE 350 Companies
in the Our People section of the Sustainability
Committee of the Board and renamed
procedures, an area that will be of intense
with regard to female representation
section on pages 72.
it the Sustainability Committee. This
focus for us in 2022.
The chairman of the Group
on boards exceeding 33% and the Parker
change reflects the expectations of both
and the chairman of the Nominations
Review Guidance on ensuring that each
stakeholders and the Group leadership
As we look to 2022, the Group will
Committee discussed the performance
board contains at least one person from
and will enable the Board to increase its
work on further integrating its safety
of the individual directors, including
an ethnic minority background. It will take
2022 Priorities
focus on climate change and other ESG
management system into its operating
the time they have to devote
this into account during every recruitment
matters.
model, including by engaging staff
to the Group’s business. They noted no
process.
The Nominations Committee will continue
more to achieve improvements in both
concerns and determined that none
to fulfil its general responsibilities
In the year, EVRAZ continued
processes and human factors. We will
of the independent non-executive
The Board will ensure that female
with particular emphasis on compliance
to concentrate on developing a more
also increase our efforts to define
directors have an overly significant number
representation on the Board never drops
with the UK Corporate Governance Code,
mature, risk-based and systematic
and operationalise our approach
of roles.
below two members.
board diversity and succession planning.
approach to safety culture. This
to managing climate change risks
helped it to improve its LTIFR to 1.21,
and opportunities to meet our stated
The Board is committed to meeting best
The committee will conclude a search
compared with 1.35 in 2020. Despite
GHG reduction aspirations and our short,
Diversity policy
practice standards in gender and ethnic
to replace the independent non-
this achievement, tragically, there
medium and long-term targets.”
diversity. While the nature of the steel
executive director who will step down
were eight fatalities, compared with five
In 2021, the Nominations Committee
and mining industries makes this
at the 2022 AGM after serving for nine
in the previous year. Four related
Sandra Stash
recommended to the Board that it adopts
more challenging, it does not diminish
years.
Independent Non-Executive Director
a Board diversity policy that restates
the Board’s commitment.
Chairwoman of the Sustainability
EVRAZ’ commitment to increasing
In addition, the committee will continue
Committee
diversity throughout its global operations
It will, of course, balance this
to consider development and succession
by taking diversity into account during
with appointing directors who can best
planning for senior management.
each recruitment and appointment
serve the Company’s and shareholders’
process and working to attract outstanding
interests by providing excellent governance
candidates with diverse backgrounds,
and the appropriate challenges.
skills, ideas and culture. EVRAZ sees
Consequently, all appointments will
ROLE AND RESPONSIBILITIES
diversity as a crucial business driver.
be made on the basis of merit.
Sustainability Committee reports
was increased to four a year. The new terms
•Reviewing HSE strategy, monitoring
to the Board of Directors on matters
pertinent parts of any independent
of reference can be found on the Group’s
concerning employee wellbeing,
operational audits and making
website.
occupational safety and environmental
recommendations for action or
protection, as well as local communities.
improvement as deemed necessary.
It receives monthly HSE updates
and provides a quarterly report to the Board,
In 2021, the agenda of issues submitted
and its tasks include:
to the committee expanded significantly
See the link
to include global warming, biodiversity
•Assessing the effects of the Group’s HSE
en/company/governance/
initiatives on key stakeholder groups,
and socio-economic trends that directly
policies/#tabs-reference
such as employees and local residents,
influence EVRAZ’ activities.
as well as their reputational impact.
•Liaising between the management
In December 2021, the Board decided
and the Board when there have
to expand the body’s role and responsibilities
been fatalities or serious incidents
and rename it the Sustainability Committee.
in the workplace, including to ensure
Its membership was increased to ensure
that remedial action is implemented
more diverse experience and contribution,
effectively.
while the number of regular meetings
136
137
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Strategic report
CORPORATE GOVERNANCE
Financial statements
Additional information
ANNUAL REPORT & ACCOUNTS 2021
HSE strategy review
COMMITTEE MEMBERS AND ATTENDANCE
In 2021, the Sustainability Committee conducted three reviews of the implementation of the Risk Management Project and Environmental
Strategy. The following new corporate HSE initiatives were considered.
In 2021, Karl Gruber resigned as Chairman
During 2021, the members of the
In 2021, the committee held three meetings:
of the Sustainability Committee, Sandra
Sustainability Committee included Karl
two scheduled ones on 9 February and
Stash was appointed as the new chair. Ms
Gruber (stepped down as the chairman
28 July and an additional one on 22 October
Stash has served as a senior executive
of the committee on 15 June 2021),
to discuss the approach to embedding
New environmental
for leading global companies for many
Sandra Stash as the new chair, Alexander
sustainability issues into the committee’s
Safety culture
HSE transformation
initiatives as part of the
years and has significant experience
Frolov, Olga Pokrovskaya and Deborah
duties. All of them had the necessary quorum
development
Environmental Strategy
in sustainability.
Gudgeon.
and were convened as required. They
included reviews of current issues and HSE
Reduce HSE bureaucracy in safety
•Identify key areas for improvement
•Online monitoring of air emissions
initiatives at the divisional level.
through audits
processes, thereby creating more
•RCC methane utilisation programme
management time for employee
•Focus more on the safety versus
engagement, and reorganise the HSE
•RCC dust suppression programme
production dilemma
team to enhance it and its abilities
•Reduction of water discharge from
•Encourage safer behaviour
EVRAZ NTMK and EVRAZ ZSMK
ACTIVITIES DURING 2021
into the third-party (Vodokanal)
programme
Below is a summary of the Sustainability Committee’s performance of its duties in 2021.
In addition, the committee supported the
HSE audit review
•the update of the Best Available
divisional management’s efforts in the
Techniques (BAT) standards for
HSE performance review
In 2021, contractor LTIs were included in the
In addition, the committee reviewed
following HSE initiatives, finding that they
metallurgy in Russia;
During the reporting period, the Group’s
Group’s LTIFR calculation.
the Group’s reputation index, COVID-19
are generally on track.
•the update of the Russian state
operations underwent compliance
Throughout the year, the committee applied
statistics and employee vaccination status.
methodology for setting individual site
inspections by state supervisory agencies
the following criteria to review the Group’s
The committee applies the following
limits for water discharge;
and internal HSE auditors, and the
HSE performance:
criteria to evaluate EVRAZ’ environmental
committee reviewed:
•the Russian federal experiment
performance:
HSE regulatory changes
regarding air emission levels in 12 pilot
•Fatal incidents.
•the HQ Industrial Safety Department’s
•Lost-time injuries (LTIs).
•
Key air emissions, including nitrogen
HSE Policy review
cities;
audits of processes and structural units
oxides (NOx), sulphur oxides (SOx), dust
In 2021, the Sustainability Committee
at EVRAZ facilities;
•Lost-time injury frequency rate (LTIFR),
•new Russian average annual levels for
calculated as the number of injuries
and volatile organic compounds.
In 2021, the Committee reviewed EVRAZ’
evaluated the risks and opportunities related
the maximum permissible concentration
•the environmental risks identified
resulting in lost time per 1 million hours
Non-mining waste and by-product
HSE Policy (which was approved in 2016),
to the introduction of new regulation. During
(MPC) of pollutants in air emissions.
through the HQ Environmental
•
worked.
generation, recycling and re-use.
taking into consideration the new global
the year, EVRAZ took part in discussions
Management Directorate’s internal audit
•new atmospheric air damage calculation
•Enforcement of cardinal safety rules.
•
Fresh water intake and water
challenges and stakeholder expectations.
regarding drafts of HSE-related regulations
methodology;
and risk assessment process;
management aspects.
It defines the Group’s main priority:
as part of professional associations (such
•Progress on health and safety initiatives.
•the Climate Action Plan to Reduce
•the Internal Audit Department’s audits of
Non-compliance-related environmental
favourable living conditions for future
as the World Steel Association, Russian
Pollution (Colorado (US), House Bill 1261).
the HSE function;
•Industrial safety risk assessment.
•
levies (taxes) and penalties.
generations. The key thesis determining
Steel Association and Russian Union of
•external environmental inspections
After every fatality, severe injury and incident
Environmental commitments
the direction of sustainable development
Industrialists and Entrepreneurs). These
EVRAZ participates in work groups created
carried out by environmental regulators,
•
involving significant damage to property
and liabilities.
is to develop without prejudice to the
help the steel industry to form positions in
as part of the Russian Steel Association
as well as the implementation of
at EVRAZ, the Sustainability Committee
Major environmental litigation
future. The new HSE Policy includes
various areas, including:
and Russian Union of Industrialists and
remedial action.
•
conducts an investigation to determine the
and claims.
commitments on global warming, issues
Entrepreneurs.
•EU carbon border tax regulation;
root cause and courses of remedial action.
Asset coverage with environmental
related to biodiversity and the involvement
•
This involves recording a detailed description
permits/licences.
of contractors in safety processes.
of the scene, the sequence of events, root-
•
Public complaints.
The CEO approved it on 29 September 2021.
cause analysis and corrective measures
Material environmental incidents and
COMMUNITY RELATIONS PERFORMANCE
•
implemented.
preventative measures.
Environmental risk assessments.
•
In 2021, the Sustainability Committee
During the year, the committee reviewed
outlets, government representatives and
reviewed the Group’s corporate social
COVID-19 statistics and measures to ensure
local communities. The efforts that EVRAZ
responsibility (CSR) events, including
safe working conditions for employees, as
has undertaken to build sustainable
numerous social programmes:
well as to support medical and pre-school
partnerships with key stakeholders
institutions in local communities where the
were rated as satisfactory. The Group’s
•EVRAZ for Cities.
Group operates.
reputation index shows a consistently high
•EVRAZ for Kids.
•EVRAZ for Sport.
performance over the last three years.
In addition, the committee reviewed the
•EVRAZ for Employees.
•EVRAZ Against COVID 19 activities.
results of the annual reputation audit,
For more details on HSE issues, see the Sustainability
engaging businesses, clients, media
section on pages 74-75.
•EVRAZ ESG agenda media coverage.
138
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