Fortum as a responsible and sustainable investment

Fortum as a responsible and sustainable investment

Fortum is an energy company highly committed to sustainability. We strive to respond to the needs of our customers by generating and selling low-carbon electricity and heat and by offering energy-sector expert services.

Fortum strives for balanced management of economic, social and environmental responsibility in the company’s operations. Fortum's sustainability targets consist both of Group-level key indicators and division-level indicators.

The Group-level sustainability targets emphasise Fortum's role in society and measure not only environmental and safety targets, but also Fortum's reputation, customer satisfaction, employee wellbeing, and the security of production of power and heat. At the beginning of 2016, the Group-level target-setting was changed by taking work well-being, measured as a percentage of sickness-related absences, as a new Group target. In terms of specific carbon dioxide emissions (gCO2/kWh), Fortum focuses on measuring Group-level specific emissions from total energy production. 62% of the total electricity Fortum produced in 2016 was carbon dioxide-free.
 
The achievement of the sustainability targets is monitored in monthly, quarterly and annual reporting. Sustainability target-setting and follow-up, as well as the approval of Fortum's Sustainability Policy, and the review of Fortum's Sustainability Reporting, are included in the working order of the Board of Directors. Complete data on Fortum's sustainability performance is published in Fortum's Sustainability Report.
 
The company is listed on the Nasdaq Helsinki exchange and is included in the STOXX Global ESG Leaders, OMX GES Sustainability Finland, and ECPI® indices. Fortum is also ranked in category A- and as the top Nordic company in the utilities sector in the annual CDP (formerly the Carbon Disclosure Project) rating 2016, and it has received a Prime Status (B-) rating by the German oekom research AG.
 

Economic responsibility

For Fortum, economic responsibility means competitiveness, performance excellence and market-driven production, which create long-term value for our stakeholders and enable profitable growth. Satisfied customers are key to Fortum's success. Fortum aims to manage its supply chain in a responsible manner.

Fortum's goal is to achieve excellent financial performance in strategically selected core areas through strong competence and responsible ways of operating. Fortum measures financial performance with return on capital employed (target: 10%) and capital structure (target: comparable net debt/EBITDA around 2.5). In addition, Fortum has used the applicable Global Reporting Initiative (GRI) G4 indicators for reporting economic responsibility as of 1 January 2014.
 

Environmental responsibility

Fortum’s aim is to provide its customers with environmentally benign products and services. Circular economy, resource and energy efficiency, and maximising the added value of waste and biomass are key priorities in Fortum's environmental approach. In addition, climate change mitigation, and the reduction of environmental impacts are emphasised in Fortum's environmental responsibility. The company's know-how in CO2-free hydro and nuclear power production and in energy-efficient combined heat and power production, investments in solar and wind power, as well as solutions for sustainable cities play a key role in this.

Fortum’s Group-level environmental targets are related to CO2 emissions, energy efficiency, and major environmental, health and safety (EHS) incidents. At the end of 2016, 99.9% of Fortum's power and heat production worldwide had ISO 14001 certification.

Fortum’s climate target over the next five years is for total specific CO2 emissions from both electricity and heat production in all countries to be below 200 g/kWh. The target is calculated as a five-year average. At the end of 2016, the total specific CO2 emissions from energy production were at 188 (191) g/kWh, which is better than the target level.
 
Fortum's total CO2 emissions in 2016 amounted to 18.6 (19.2) million tonnes (Mt), of which 2.7 (2.1) Mt were within the EU's emissions trading scheme (ETS). The estimate for Fortum's free emissions allowances in 2016 is 1.0 Mt.
 
By 2020, Fortum's target is to achieve an energy savings of more than 1,400 GWh annually, compared to 2012. At the end of 2016, about 1,372 GWh had been achieved. Among the projects executed in 2016 were nuclear plant refurbishments in Finland, hydropower plant refurbishments in Finland and Sweden, and gas turbine plant refurbishments in Russia.
 
Fortum's target was fewer than 23 major EHS incidents annually. In 2016, 22 (18) major EHS incidents took place in Fortum's operations: the incidents included 11 non-compliances with environmental permits, seven fires, one leak and three explosions. These incidents did not have significant environmental or financial impacts.
 

Social responsibility

Fortum’s social responsibility emphasises the secure supply of electricity and heat, creating solutions for sustainable cities, operational and occupational safety, employee wellbeing, as well as ethical business operations and compliance with regulations. At the end of 2016, OHSAS 18001 certification covered 99.9% of Fortum's power and heat production worldwide.

The average energy availability of Fortum's CHP plants in 2016 was 97.4% (96.4%), clearly above the annual target level of 95%.

Sustainability targets affect every Fortum employee

Sustainability targets affect every Fortum employee and are part of Fortum’s short-term incentive scheme. In addition to the Grouplevel targets, divisions have their own targets. Fortum’s Board of Directors annually decides on the sustainability targets to be included in the incentive scheme. In 2016, the incentive scheme included the injury frequency for Fortum employees and for contractors and the number of serious occupational accidents. The injury frequency for Fortum employees and for contractors will be included in the 2017 incentive scheme. The weight of the sustainability target in the incentive scheme is 10% (2016: 10%).

The total recordable injury frequency (TRIF) for Fortum employees in 2016 was 1.9 (1.6) per one million working hours, which is better than the Group-level frequency target (≤ 2.5). Fortum’s target for the lost-workday injury frequency (LWIF) for own personnel was 1.0 and it was achieved (1.1). The lost-workday injury frequency for contractors was 3.0 (2.7), which is at the set target level. The number of serious occupational accidents was 13 (14).

Implementation of the agreed actions to improve contractor safety will continue with a specific focus on contractor safety and the integration of the Ekokem and Duon operations. As of 1 January 2017, Fortum has changed the definition of the severity of work-related accidents and is now focusing on the consequences or potential consequences of an accident rather than the length of the sick-leave. The Group target for 2017 is ≤ 5 severe accidents. By 2020, our target is to reduce severe accidents to zero. The percentage of sickness-related absences in 2016 was 2.3 (2.4), which is below the target level.

Our targets for 2017

Our sustainability targets are based on continuous operational improvement. In our target-setting for 2017 we have taken into consideration the potential occupational safety impacts of Fortum’s growth strategy and business acquisitions. It is likely that, until Fortum’s occupational safety practices have been integrated in the new functions, the acquisitions will temporarily weaken Fortum’s current good level of occupational safety.

There are still too many serious injuries occurring in our operations. Starting in 2017 the focus of our monitoring is on accidents that have serious consequences, rather than on the length of the sick-leave. These include accidents leading to a fatality or permanent disability and accidents that could have caused serious consequences.

A new indicator we will track in 2017 is the quality of the investigations of occupational accidents, serious EHS incidents, and near misses. The goal is that the investigation of each incident is done in accordance with guidelines, and more than 90% of the corrective actions are implemented on schedule (target level 1.0). By 2020, the goal is for 100% of the corrective actions to be implemented on schedule, the investigations to use experts from across division boundaries and the lessons learned from the incidents to be actively shared (target level 1.5).

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3/27/2017