Environmental, Social and Governance

Welcome to Global Ports Sustainability Report for 2021. The report provides our stakeholders with information on the Group’s sustainability strategy and how we performed in 2021.

Our vision is to be a partner of choice for shipping lines and freight forwarders as the best-connected independent container terminal operator in Russia with unequalled access to domestic and international trade flows. Therefore, we regard sustainability with its pillars of environment, society and governance (ESG) as an essential part of our strategy. And we are committed to driving Global Ports on a more sustainable path, in order to maximise the positive impact of ESG practices.

As the leading container ports group in Russia, we have long understood the importance of sustainability and we work hard to meet our ESG responsibilities. Our ambition is to be a sustainability leader in the container ports and logistics sector, underpinned and supported by the Group’s strong governance culture. We have made steady year on year progress in our ESG practices, increasing the level of ESG disclosures, expanding our standard metrics, and obtaining our sustainability ratings whose scores are increasingly considered by investors.

To implement our sustainability ambitions, our development strategy needs to evolve to keep pace with our stakeholders’ expectations and an expanding reporting landscape. Consequently, in 2021, we undertook a wide-ranging review of our sustainability approach. Recognising that sustainability is not a ‘one size-fits-all’ approach, we worked with a leading global sustainability consulting firm to create a detailed understanding of our sustainability positioning, including peer group comparisons, surveys of stakeholders, and analysis of best practices. The purpose of the review is to set new sustainability targets and goals, the achievement of which will add value for our stakeholders and maximise our ESG impact.

Although the past year has been an extremely challenging one, we have made good progress on achieving our ESG priorities during 2021. We continue to take our environmental stewardship responsibilities very seriously; over the past year, we focused on maintaining rigorous regulatory compliance and making improvements in three key areas: energy efficiency, environmental protection, and marine conservation. Safety is at the core of everything we do at Global Ports, and we elevated our focus on safety culture last year in our pursuit of a zero-harm environment. And we also continued to invest in building our employer brand, encouraging staff development and supporting the communities we serve.

As the industry leader, Global Ports has long advocated the importance of being a responsible business, and we continue to work hard to meet our broader responsibilities to society. As an organisation, we have reached the stage where if we are to continue to create sustainable long-term value, we need to chart a new, more sustainable course for the Group.

We recognise we are at the start of our sustainability journey, but we are committed to becoming a fully sustainable business and meeting the expectations of our stakeholders and society.

Environment

Our industry, like others, is working to develop sustainable business practices that reduce its impact on the environment. At Global Ports, environmental sustainability is a critical part of our business strategy, requiring a careful balance be struck between our growth aspirations and our sustainability obligations. We are committed to accelerating the integration of sustainable practices into our business operations, improving our carbon footprint and lowering emissions across our value chain.

The Group has a strong track record of compliance with environmental legislation. We are fully transparent and accountable when it comes to issues relating to the environment. Our environmental management system requires that all companies within the group evaluate and manage their environmental impacts, enforce local environmental laws and regulations, and make continuous improvements. All of the Group’s terminals carry comprehensive sustainability plans and these are embedded in all the Group’s investment programmes.

Strategically and operationally the Group made good progress in its environmental approach in 2021. The Group announced at its interim results in August 2021 it had made the strategic decision to cease all coal handling operations at its VSC terminal as of September 2021. This decision significantly reduced the environmental impact of VSC, and means it fully focused on handling more environmentally-friendly container handling.

Operationally, the Group intensified its efforts to support the environment. Priority projects included ones focused on energy conservation, emissions and green recycling.

Climate Change

Climate change is one of the most significant challenges facing mankind. Inaction is not an option if the world is to reverse the effects of climate change, and limit global warming to well below 2.0 degree above pre-industrial levels. At Global Ports we are determined to play our part by reducing our emissions, becoming more energy efficient, and improving climate change adaptation.

Compared to other modes of transportation, shipping is one of the most energy efficient ways to transport freight, moving 90% of the world’s goods. As leaders of the region’s logistics infrastructure, our ports can play an important part in the drive to decarbonise and be part of the solution to addressing climate change. Because our container terminals are strategically situated in the key gateways of Russia, they act as hubs connecting two of the most environmentally-friendly transport options, marine shipping and freight rail to create eco-friendly value chains.

At the same time, ports infrastructure faces increased risks from climate-related threats such as rising sea levels or severe weather events, which will require port operators like Global Ports to strengthen our climate change adaptation by upgrading our infrastructure and operations. Our approach to climate change, therefore, focuses on both adaptation and mitigation measures through cutting our greenhouse gas emissions, improving infrastructure resilience, and continuing to innovate.

While the Group complies with all mandatory rules and regulations regarding Greenhouse Gas Emissions (GHG), we recognise that the Group needs to improve its decarbonisation efforts. And in 2021 the Group made the environmentally significant decision to discontinue coalhandling at its VSC terminal in Russia’s Far East since September of the last year, reducing its carbon footprint.

The Group continued to make progress in its decarbonisation initiatives, with ongoing measure such as the introduction of more energy-efficient lighting systems and heating systems being supplemented by new initiatives in 2021 including introduction of green electricity charging points; greater use of electric vehicles and electric cranes; introduction of more efficient plant and machinery.

We stopped generating electricity using natural gas at one of the terminals.

As a result, we have again reduced our energy usage across the Group, with electricity and fuel consumption per tonne of cargo handled both falling for the fourth straight year.

Meantime, we continue to collaborate closely with other participants in the logistics value chain to find solutions that create more eco-efficient logistics chains. We are working with our shipping clients, our suppliers, rail freight companies and trucking firms to make changes in this area.

Environmental Protection and Conservation

We are committed to being stewards of the natural environments in which we operate. A key strategic focus is minimising the environmental impacts of our port operations on the local ecosystems. The land, waterways and estuaries that we manage are valuable natural assets, and we continually review our operations to ensure that we are acting in an environmentally responsible way. At the heart of our approach is effective environmental management, acting to conserve, regenerate and protect the natural habitats, marine and land-based, around our terminals.

We implemented a number of environmental schemes and pilot projects to improve the environment at our locations during 2021. In 2021, the Group’s expenditure on environmental protection schemes was mainly focused on our VSC and ULCT terminals. For example, at VSC, in the Russian Far East, in cooperation with the Green Patrol organisation, we financed the work to de-pollute Lake Solyonoye and rid it of harmful oil products. This resulted in positive improvements to the ecology of the lake and its surrounding area based on analyses carried out by experts from the Admiral Nevelsky Maritime University.

Sustainability is also an important part of our port infrastructure capacity planning, in preparing for future expansion. We continue to work closely with local and regional governments ensuring that any potential environmental impacts resulting from land reclamation, reconstruction or development are properly quantified and addressed.

Water Usage

Global Ports is committed to actively manage its water resources, including being more efficient in how we use water. Across our terminals, waste is treated and recycled back to the waterways. The terminals are actively working to improve the efficiency of wastewater treatment to ensure the discharge of clean water in any conditions.

We are also working to conserve water usage across the Group through monitoring of water usage, and installing more water-efficient equipment. All water consumers have been equipped with water flow meters, which ensures 100% leakage control and monitoring of consumption at all times. Monitoring of water use is carried out monthly by taking readings from flow meters, which are equipped with all releases to water bodies and metering units of tap water from suppliers. The data is submitted as part of reports to the Federal Agency for Water Resources. We use recycled water for car washing in one of our terminals.

Waste Management

Waste is a major global issue and we have a responsibility to minimise the impacts of our operations. Tackling the waste challenge is therefore an important pillar of our environmental activities. Waste management is the subject of several Group programmes, focused on minimising how much waste we produce, repurposing and recycling where we can, and ensuring that disposing of waste takes place in the most eco-friendly way.

Safety

The health and safety of everyone who works at Global Ports is our top priority. We have a fundamental duty of care to ensure that our people are safe at all times and we are committed to placing safety assurance at the core of our operations and corporate culture.

Our zero-harm strategy has as its objective the removal of the risk of harm from all of our operations. To meet our zero-harm objective, our focus is on building a sustainable safety culture among our employees, contractors and other terminal visitors. We pride ourselves on setting high safety standards and continually seek to drive improvements in our performance.

The nature of the working environment at our terminals places high demands on our employees and contractors, meaning that they are regularly exposed to risks while doing their jobs. Every day of the year, we are tasked with ensuring that the safety of our employees, contractors and others who visit our terminals is accorded the highest priority.

Our approach to developing a sustainable safety culture is based on three principles:

• providing a safe working environment
• providing comprehensive implementation plans built around best practice safety and compliance standards
• offering comprehensive training focused on risk awareness and reduction

We constantly monitor health and safety risks to ensure that our risk controls and working practices are the safest they can be. We believe this approach leads to better safety outcomes. Our safety management system focuses on ensuring compliance with our safety standards to provide a safe work environment, based:

• Global Minimum Safety requirements (GMR) that are aligned with industry best practices
• Safety audits to improve compliance of individual terminals with GMR
• Safety briefings and information updates for our staff and contractors
• Safety walks programme of daily audits at each terminal
• Health and safety training for line management and employees staff
• General safety training drills
• Specialised training programmes for handling dangerous or hazardous cargoes
• Monitoring employees’ health and wellbeing to improve wellbeing and reduce incidence of occupational illnesses.

Safety Governance

The Board has overall responsibility for health and safety matters and is committed to continuous improvement in our safety culture and systems. The Board sets Health and Safety policy, agrees on safety standards and reviews performance.

The Chief Operating Officer is the senior executive responsible for health and safety compliance and performance monitoring. The Chief Operating Officer regularly reviews feedback and performance reports supplied by the individual business units and the Board receives monthly performance reports. The Group’s safety performance is regularly reviewed by the Board and any decisions taken are discussed and agreed with the executive team.

Safety Performance

In 2021, against the backdrop of COVID-19 Global Ports maintained its unwavering commitment to safety, paying a high level of attention to protecting the health and wellbeing of our employees, contractors, customers and suppliers.

Our group-wide programmes to improve safety awareness and build a strong safety culture made progress against the priorities we had set for 2021. These included improving our safety processes and controls and implementing our Fatal 5 programme, a behaviour-based safety campaign, focused on reducing five major recurring risks: working under the cranes, working at height, working with hazardous cargoes, obeying speed limits and working of contractors.

Improving safety compliance with our GMRs remains a core area of focus, as these are the cornerstone of our safety compliance framework. Management maintained its strict cycle of annual safety audits of terminals assessing compliance levels, agreeing safety improvements and issuing instructions. This focus on continuous safety has improved safety assurance across the Group, and contributed to a consistent reduction in the risk of fatality.

We recognise the importance of leadership and behaviours in creating a positive safety culture and encourage our managers to lead their teams by example. Our Safety Walk programme of daily safety audits continues to deliver high levels of compliance. The ritual of daily safety audits has taken firm root among our terminal operations teams, helping to foster the zero-harm safety culture we aspire to.

We also acknowledge the importance of listening to, and acting upon, our regular safety feedback sessions with our employees. In 2020, to improve our safety audits, the Group introduced its unique GP Alarm mobile application, one version of which allows responsible employees to promptly monitor record safety violations, while another version, distributed to all employees, enables all individuals to sound the alarm on safety grounds. The feedback provided by employees using the app during 2021 was invaluable in making improvements to the functionality of the application and driving user engagement.

Our flagship Fatal 5 safety programme, which focuses on five high risk activities, achieved most of its planned activities for the year, delivering further improvement in critical safety processes and risk reduction:

• Working under cranes: working with cranes and other types of lifting equipment creates risks for individuals working underneath. As cranes play an essential role in terminal operations, loading and unloading cargo, it is incumbent on the Group to ensure the safety of those working in the vicinity of crane operators. Objects falling from height are one of the most common threats, as falling loads can cause serious injuries and fatalities. To avoid such events, we introduced a number of technical solutions to delimit work zones under cranes. Where these were difficult to implement, we introduced greater surveillance, appointing crane supervisors and introducing safety zones
• Working at height: many of the activities carried out in our ports could lead to a fall from height. These activities may be during routine operations or during one-off maintenance activities. To reduce the risks involved in working at height, we introduced a number of improvements to help keep colleagues working at height safely. We tested and upgraded the safety of the equipment used for working at height and at the same time introduced a number of additional features. For instance, in July 2021, we installed sophisticated video systems at all six ship-to-shore (STS) cranes operating at the Petrolesport terminal, enabling crane operators to monitor cargo movement far more effectively, making loading and offloading operations far safer as well as more efficient
• Working with hazardous cargo: we established a single protocol across all our terminals for the handling of hazardous materials, modelled on APM Terminals’ guidelines and the requirements laid down in the International Maritime Dangerous Goods Code (IMDG). We introduced training for employees involved in handling hazardous materials, based on the new requirements, alongside further controls and more audits
• Working with contractors: at Global Ports our safety culture extends to all visitors to our terminals, including those working for other companies at our terminals. Our safety management system aims to protect all individuals on our premises so that everyone can return home safely. Contractor safety was a priority focus in 2021, as contractors are an important stakeholder group and a key part of Global Ports’ overall safety management system. To address the issue of contractor safety, the Health & Safety Security Environment Office of the Management Committee took an in-depth look at how we protect our contractors. As a result, we introduced a new safety regulation specifically for contractors. This is an important step in the Group’s drive to meet its target of zero harm, as the directive establishes a uniform set of safety requirement and procedures for companies performing tasks at terminals and facilities owned by Global Ports, and these stipulations now form part of the Group’s standard contractual terms for contractors. The Group has now begun the formal process of working with contractors and their employees on the new contractor safety regime, and that work will continue
• Speed awareness: traffic incidents represent a serious risk in marine terminals, as they operate 24 hours a day, in all weathers, with multiple types of vehicles in use. The Group has traffic-safety programmes designed to reduce the risk of traffic incidents, including those caused by speeding. In 2021, a series of measures were introduced to ensure that speed limits are observed at the terminals. Alongside the annual traffic maintenance and renewal programmes, the Group installed speed sign boards that display live speeds of vehicles, and radar-activated speed traps to detect and deter persistent violators. These actions have significantly increased traffic safety across our container terminals

The Group also increased its commitment to improving and expanding its emergency response programme. The number and variety of emergency drills increased over 2021, to include emergency simulation events including dealing with hazardous cargo spills, warehouse fires, individuals falling into water, and fires at height including on cranes. Training staff in how to respond to emergency incidents is an important part of building an awareness of risk and eliminating accidents among employees. In conjunction, our terminal employees attend regular safety seminars to discuss safety issues and receive updates including on rule changes, new legislation, safety incidents and general safety progress. Alongside increasing the time allocated to safety training, last year the Group upgraded the emergency facilities at its terminals, establishing round the clock emergency medical support stations and equipping each with defibrillators.

Our People

We are focused on building our reputation as a responsible employer. Across our seven terminals, we employ over 2,900 employees, who are critical to the long term success of the Group and the creation of sustainable value for all our stakeholders. We are committed to investing in our people to help them fulfil their ambitions, to keeping them safe, to recruiting the right people by offering rewarding career opportunities and to creating a work culture which is inclusive and where every individual feels respected and supported.

Building a Culture of Engagement

Employee engagement is a strategic priority as our long-term success rests on building a culture where our employees feel engaged and valued. How our employees feel about the Group is of utmost importance to the Group, so proactively consulting with them is a priority, as their feedback is vitally important in shaping the future of the organisation.

We communicate regularly with our people through a range of channels ensuring we maintain effective and consistent engagement with our workforce. These channels include regular briefings, workshops, surveys and feedback sessions. We believe that regular communications help build a strong employee brand and supportive company culture.

We run periodic employee surveys to give our employees an opportunity to say what they think about working at Global Ports and what we can do to make it even better. Our most recent survey showed that high satisfaction levels among our employees. In 2021, we focused on improving working conditions and personal development opportunities.

Attracting and Retaining Talent

In order to recruit and retain the best people, we strive to offer competitive benefits packages that reward success, recognise individual contributions, and incentivise our people to succeed. Our performance management systems are designed to ensure that staff remuneration packages are transparent, simple to understand, and closely tied to corporate performance. Global Ports is working to improve executive remuneration disclosure and ensure alignment with shareholders. In 2021, the Group added sustainability performance indicators linking sustainability performance to bonus incentives for some of the senior management.

As a responsible employer, the Group strives to offer an attractive package of non-financial incentives for its staff and prospective employees. The package of incentives includes: voluntary health insurance, gifts for celebrations, the companies of the group hold corporate events for employees and their children, provide team buildings, reimbursing or financing sports activities. Global Ports terminals can provide bonuses to anniversaries, partial compensation of sanatoriums and children’s camps, material assistance in various life situations.

Training and Development

Training and development are important elements of the Group’s overall people development strategy and considered crucial to the future success of the Group. We value all our employees, and we are committed to providing them with training and development opportunities, both to develop their talents, and ensure we are developing the next generation of leaders. So we invest in a wide selection of training and development opportunities to help individuals develop their careers at Global Ports.

In 2021, over 1,900 employees of the Group underwent advanced training and training in development programmes in format of external and internal training. Particular attention was paid to the wide range of business topics, incl. advanced training of operational staff, risk-oriented approaches, compliance, financial modeling, project management in construction, security of information technologies and networks, features of legal regulation and dispute resolution and business performance management.

Succession planning and developing the next generation of leaders is a priority area for the Group. In 2021, we continued to develop our management development programmes for aspiring fast-track leaders and more experienced managers, with the objective of improving their skillsets. These programmes provide personalised development based on a mix of one-to-one coaching, mentoring, and management courses.

Diversity, Inclusion and Equality

Our people are critical to our success, so it is vital that we create a workplace that is inclusive and increases diversity. By doing so, and creating a work culture that embraces diversity, we can access a wider talent pool and build a more resilient business.

We do not discriminate against employees on the basis of race, religious or political beliefs, marital status, age, gender, sexual orientation or disability. Our approach is enshrined in our Code of Ethics which all employees must observe. All forms of discrimination are prohibited and all allegations of harassment, including sexual and racial harassment are taken seriously and investigated thoroughly.

We continue to promote diversity and equal opportunity through staff communications and training. Traditionally, the logistics industry has employed more men than women, and female representation within the industry has been low.

As at the year-end, 29% of our total workforce was female, including 25% of production staff and 68% of administrative staff. Of our Board of Directors, women accounted for 27% of the membership and two out of the three independent directors.

Human Rights

At Global Ports, we recognise the fundamental civil, political, economic and social human rights and freedoms of every individual and we strive to reflect them in our business activities. Our Code of Ethics incorporates our commitment to human rights which is strictly in accordance with Russian and international human rights laws.

Our Human Rights approach is aligned with the UN Guiding Principles on Business and Human Rights. The policy establishes minimum thresholds with regard to human rights that employees and those who work with the Group must meet.

Our Communities

Global Ports is committed to giving back to society. As a major employer, investor and purchaser of goods and services, we make a significant contribution to the overall economy. And we are proud to be an integral part of the communities where we operate. Our port locations are more than sources of local employment; they are part of the fabric of the community and play an essential role in everyday life. We want to support our employees and their communities and improve their quality of life.

Social Investment

As a Group, we are committed to giving back to society through our social investment programme. Our aim is to bring about positive social change and have a lasting impact on people and communities. Our approach is based around supporting our communities through targeted social investment and staff volunteering.

We are a significant employer in our communities and our employees are encouraged to volunteer and support our social investment schemes. In 2021, the Group contributed to its social and community initiatives, which are focused around the themes of health, education, welfare and culture. Our welfare and education support is directed toward supporting community-based projects. We support a number of cultural projects including those focused on heritage restoration, and we also fund a number of community-based sports programmes as part of our work to deliver better health outcomes.

VSC’s Atmosphere Foundation contributed a total of RUB 20 million for medical, sports, environmental, social, and cultural projects for the residents of the Nakhodka urban district. The Foundation continued its ongoing support of a kindergarten No. 65 in the Wrangel neighbourhood. The Foundation gave over RUB 4.5 million to support various public events including the annual City Day, and a further RUB 3.5 million was donated to supply sound and lighting equipment to a youth centre, where the Nakhodka’s Rampa theatre group is based.

GovernancePlease also see Corporate Governance section of this Annual Report.

In 2021, we continued to make improvements to ensure the Group continues to meet high standards of governance.

Business Ethics

Good governance and ethical behaviour are the cornerstones of our operations and the foundation of our licence to operate. As a business, we are committed to complying with all relevant laws and regulations while upholding the highest standards of ethics. We expect everyone who works with us, from our employees to contractors and suppliers, to share our values and behave in an ethical and responsible way as a matter of course.

Our Code of Ethics establishes the governance framework for how we conduct business. The principles laid out in the Code are further detailed in individual policy documents that address specific aspects of our business ethics including anti-corruption, whistleblowing, human rights, and supplier relations.

The purpose of The Code is to clearly articulate our ethical standards and provide employees with a guide to what is expected of them in their behaviour and business activities. It provides information on how they can get help, and also guidance on their responsibility to report issues if they identify a problem. The Code provides guidance to ensure employees are aware of, and understand, their ethical and legal responsibilities, and covers issues relating to employees, customers, shareholders and the community. On joining, new employees are required to read the Code and then sign to demonstrate that they have read and understood it. All employees are kept up to date with the Group’s governance policies and we provide ongoing training to cover any policy changes.

Anti-Bribery & Corruption

We are committed to upholding the highest ethical standards and operate a zero tolerance approach to bribery and corruption in any form; our approach is reflected in the Group’s Code of Ethics, which sets out the standards of conduct expected.

Our Anti-Bribery and Corruption Policy ensures that all our business is conducted in an honest and ethical manner and in compliance with the law. The policy applies to all employees of Global Ports, as well as those working on our behalf in any capacity.

Whistleblowing

Global Ports encourages its employees, clients and other stakeholders to report any potentially unethical, unlawful or suspicious conduct or practices. The Group operates a 24/7 confidential whistle blower service that offers a variety of routes to report concerns:

• Via a dedicated e-mail address
• Via a free confidential telephone number
• Face-to-face with a senior member of Group Internal Audit Department responsible for managing the whistleblowing service

Details of the service are available on the Group’s intranet as well as on information boards located throughout the offices and prominently displayed at the Group’s terminals.

The service is run by the Internal Audit Department which operates independently of management and reports directly to the Audit & Risk Committee of the Board. Calls to the hotline service are treated in confidence, and investigated thoroughly and without bias.

In 2021, 20 reports were submitted to the confidential whistle blower service, 70% came via email, with the remainder reported via the telephone hotline. Out of the 20 reports submitted, 15 required full investigation and follow-up actions and five did not as these did not meet the threshold required. There was just one allegation relating to fraud, which on further investigation was not upheld.

Responsible Procurement

We aim to develop strong supplier relationships, working together to maintain the highest ethical standards. This is an important part of our approach to sustainability and important to how we manage risk in our business. We expect suppliers to comply with the Group’s high ethical standards and behaviours which are set out in the Group’s Code of Ethics.

The Group’s Procurement Policy sets out the guidelines for suppliers. The Procurement Department of Global Ports Management LLC has purchasing responsibility for the terminals of the Group based on the following principles:

• Full compliance with the legislation of the Russian Federation
• Competitiveness and transparency
• Supplier selection based on price, quality and timeliness
• Total cost of ownership

All procurement information is placed on www.etprf.ru and www.fabrikant.ru electronic marketplaces. All necessary information is also shared on the EIS (Electronic Information System) website.

All tender requests are published on the websites stated above to ensure fairness and transparency in the tendering process.

The Group conducts periodic reviews and audits of its suppliers to ensure compliance. And the procurement department continues to monitor the development of responsible procurement practices.