Social Responsibility
and Sustainable
Development Report

2017

About the report

Introduction, structure and methodology of the report

Chairman’s letter

You are holding Viru Keemia Grupp's sustainable development report, which summarizes the group's achievements in the year 2017.

About the company

Group's values and business philosophy. Structure and fields of activities. Main production indicators and financial results.

Sustainable development strategy

Principles and priorities of social responsibility behaviour. Mutual cooperation with interested parties and directions of supporting actions.

Reduction of environmental effects, efficient use of resources

Environmental policy and management system. Investments and main environmental figures.

Safe development - production safety and employment protection

Industrial safety management and culture. Occupational safety statistics. Safety of chemicals and product liability.

Our people

Main directions of personnel policy. Training and mutual cooperation with partner organisations. Observation of human rights.

Business management

Principles of management, structure and duties. Financial reporting, risk management and internal audit. International management systems and supply chain.

About the report

Viru Keemia Grupp AS is the largest Estonian oil shale processing enterprise, based on private capital. The main field of activities of the Group is producing shale oil and generating heat and electricity, as well as the production and marketing of fine chemicals.

VKG´s mission

Valuing the most essential Estonian natural resource - oil shale.

VKG vision

To maintain the role of the sustainable leader in the Estonian oil shale industry, which has been attained due to the growth in efficiency within the changing situation at the market and be an innovative initiator in terms of opening up the oil shale potential.

VKG´s values

Openness - Commitment - Development

Introduction to the sustainable development report

Hereby we are presenting the report about the activities of the Group in the field of sustainable development in the year 2017. The report represents the approach the Group is using in terms of resolving the issues in the field of sustainable development and social responsibility as well as the main trends and achieved results in this sphere. This is the eighth sustainable development report of Viru Keemia Grupp AS (VKG). The last raport was published in 2017 and presented the period of years 2015 and 2016.

The main parts of the report deal with the efficiency of business activities, the provision of manufacturing safety, staff support and development, and the support the Group is providing to the social and economic development of the area of its activities.

With this report, Viru Keemia Grupp intends to introduce and promote the concept of sustainable development and the basics of responsible entrepreneurship in Ida-Viru County and in Estonia as a whole.

In addition to that, our goals are:

to increase the transparency of the activities of our organisation;
to establish a relationship of trust between the parties interested in the activities of the enterprise, the residents of the region, and the employees of VKG;
informing all interested parties of our work.

VKG's sustainable development report is a public document available at the group's website in Estonian, English and Russian.

The Group sets a high value on regular provision of various types of information to interest groups concerning the aspects of the activities of the Group that are essential for them as well as on obtaining feedback about the report. The report's target audience is a wide range of Viru Keemia Grupp's stakeholders, including specialists, shareholders, investors, residents of Virumaa, social organisations, clients and partners.

The report includes information about VKG (in the report also referred to as VKG, Viru Keemia Grupp, and the Group) and its related companies for the year 2017. The information about the financial status and the output of the Group has been presented, using the consolidated data about Viru Keemia Grupp AS. Unless otherwise has been mentioned in the text, the data concerning labour relations within the Group, the social sphere and environmental activities cover both VKG and its related companies. The report also includes mid- and long-term plans, which are just predictions at this point. The implementation of the plans described in the report also depends on such factors (economic, social, legal) that the Group is not in control of. Therefore the actual outcomes can be different from the expected ones.

The structure and methodology of the report

The group uses principles of reporting laid down in the report of 2008-2009; these principles remain unchanged and are based on the approach described in GRI guidelines. This report presents data on aspects and indicators according to the GRI guideline, including reporting elements considered to be important for businesses in the oil and gas industry.

This report covers the year 2017 and was prepared based on the results of the analysis on the importance of sustainable development, carried out in 2015-2016, according to the approach determined in the fourth version of Global Reporting Initiative's sustainability reporting guidelines (GRI G4 guidelines). The compliance of this publication with the high standards of the disclosure can be found on the last page of the report, where GRI table of contents is located. Previous reports have been prepared in accordance with GRI level G3.

The GRI is a voluntary organisation promoting reporting and gathering enterprises that value sustainable development all over the world. This organisation is considered to be the founder of the concept of sustainable development and it has developed recommended guidelines for sustainable development reports. Read more about the organisation and the guidelines at www.globalreporting.org.

The preparation of the report was also guided by the document “Oil and Gas Industry Guidance on Voluntary Sustainability Reporting” issued in cooperation with the International Petroleum Industry Environmental Conservation Association (IPIECA) and the American Petroleum Institute (API).

The ISO and OHSAS certification materials of the enterprise were also used while preparing the report. The data pertaining to environment protection and occupational safety conform to the requirements prescribed in the relevant standards.

The structure of the report consists of descriptions of the group's operating results in the following areas:

corporate management
management of sustainable development
environmental protection
occupational health and safety

human resource management
risk management
dialogue with the residents of Virumaa
cooperation with interested parties

Limitations related to the report

The preparation of sustainable development reports is voluntary for organisations. Economic data of 2017 has been audited and projections for 2018 collected. Reports from 2014 and earlier reflected unaudited financial statements. For this reason, data in reports from 2014 and earlier may somewhat diverge from data in approved annual reports. The group presents reprorted data on the basis of transparency and good business practice.

Disclosure of information

Main principles of working with the information:

regular, consistent and operative communication;
offering equal, unobstructed and easy access to the information to all persons concerned;
objectivity, credibility, completeness and comparability of the data disclosed;
neutrality of the information; i.e. refraining from preferring to satisfy the interests of one interest group to the interests of another;
retaining a reasonable balance between the openness of the company and its business interests.

Viru Keemia Grupp aims to ensure a high level of openness and transparency. The company will disclose in due course and regularly topical information about its operation, including:

information on the structure of the share capital;
information on the council and board members;
financial statements;
annual reports and reports on sustainable development.

The information published is balanced and objective and thereat negative information concerning the company is not withheld.

Cooperation with mass media is regulated by the Media Relations Procedure.

Procedure for defining the importance and boundaries of aspects

While selecting the topics presented in the report, Viru Keemia Grupp was governed by their topicality both from the point of view of the development of the Group and the interest groups. We are keeping a close watch on the scope of activities of the Group and their effect on economics, social environment and nature, and we also deal with the enquiries submitted by interest groups. We have assessed the significance of the topics covered in the report in the context of the society and from the perspective of the obligations of the company, including the obligations that have been established in Estonian national and international documents. While determining crucial issues and relevant indicators, the Group has taken into consideration the global situation, international and Estonian standards in the field of social responsibility and sustainable development of companies, GRI standards, the research carried out in the field of management of sustainable development and reporting, and the analysis of cooperation with interest groups done by the Group.

The methodology also provides for carrying out internal consultations, starting from the group's highest officials to the specialists of subunits and subsidiaries, who have first-hand information about the situation of specific directions, considering the limitations of possible internal aspects. The source of additional information is the analysis of operational indicators and most important occasions. The impact of various changes regarding corporate management, strategy, composition of aspects, but also content and limitations that are considered important, is being analyzed.

Differences from the report of sustainable development of 2015-2016

The report presents a set of data concerning important changes in comparison to previous periods – virtually all of them are listed and expained in the text. Important changes in the limitation of aspects have not beed added compared to the previous reporting period.

General standard elements of reporting

Themes and aspects	The priorities of internal interested parties	The priorities of external interested parties	Reasoning
ECONOMIC EFFICIENCY
The group's strategy			The development and implementation of a flexible and competitive strategy, taking into account the needs of internal and external interested parties – this is the basis of the stability and persistence of the Group's business activities.
Financial stability			Increasing production efficiency is the most important factor of the group's competitiveness.
Investment projects			Investment projects in the field of oil shale mining and processing – one of the key priorities of the group and an important factor in achieving strategic goals.
Production quality			Improving the quality of production promotes the satisfaction of buyers and stronger market positions.
Innovative actions			Development and introduction of innovation – an important factor in the group's efficiency and competitiveness.
ENVIRONMENTAL SAFETY
Compliance with environmental protection laws according to EU directives			Compliance with environmental protection laws, international standards and EU directives, but also environmental inspection of production is the group's main priority in environmental safety.
Performed environmental inspection
Rational use of natural resources			The group's activity is related to impact on the environment and natural resources: air, water, soil. The company has taken the responsibility to rationally use, restore and protect these resources.
The use and efficiency of energy			Increase of production over the last 7 years requires higher use of energy resources in the group. VKG is working on increasing energy efficiency and optimizing energy resources in order to mimimize the impact of this process.
Exhaust emissions			Oil shale processing is related to the emission of substances, including greenhouse gases, dioxides, sulphur.
PRODUCTION SAFETY AND OCCUPATIONAL HEALTH AND SAFETY
The safety of production processes, preparedness for emergencies			The group's manufacturing operations are related to potential safety risks. Safe production, complete lack of damage to persons, objects and machines – these are the key priorities of Viru Keemia Grupp.
Occupational health and safety, caring for the health of employees
EMPLOYEES
Training and development of employees			Training and development of employees allows the group to supply itself with qualified human resource at the moment and in the future.
Employment relationships and employment rate			The group's performance of obligations to employees and engaging and keeping the best specialists ensures stable operation and helps to achieve strategic goals.
Valuable working environment and social benefits of employees			A competitive work environment and fair wage system with social benefits – the most important factor in engaging and retaining employees.

Chairman’s letter

Dear reader,

Viru Keemia Grupp has always attached great importance to trust between the company, the people interested in the activities of the Group, and the local community. Openness and transparency of the activities of the organisation and its goals lie at the heart of the generation of trust. To provide that, VKG was the first company in Estonia in 2009 having prepared the Social Responsibility and Sustainable Development Report in accordance with globally recognized standards. So far, the majority of Estonian public companies have joined the initiative, and its significance cannot be underestimated.

The most recent report provides an overview of the activities of VKG in 2017 as well as of future challenges. Even though the topics described in the Report have seemingly been the same throughout the years, their content and emphasis are constantly changing.

The permissible impact this branch of industry is having on the environment has been regulated by a number of standards, which are tightening on the ongoing basis, and the countries of the European Union have already agreed to that, which means that the companies have a possibility to proceed from those standards while planning their activities. The era of simple solutions helping to reduce the environmental footprint is coming to an end and more and more often the companies are making investments into development activities, aimed at upgrading technologies. Instead of waste disposal, the focus has shifted towards the development of waste-free production technologies. Yet today the majority of the companies are able to produce energy for themselves and by themselves, and more and more often the companies are handling manufacturing waste as raw material. This particular trend is pushed through both by the pressure in the society and by the manufacturers´ own motivation since the maximum use of raw material and essentially waste-free manufacturing processes guarantee the utmost efficiency.

The environment protection norms, established by regulations, set minimum requirements for the companies and their activities. However, the activities of every single company should also be accepted by the society and the local community. For this to happen, we should make one step further from the existing norms and standards and assess the impact the company has on the living space from a broader perspective. VKG has always attached great importance to supporting children, education, and culture as well as to holding important public events for the local community. In our social activities, we are guided by the principle that Ida-Viru County should, by all means, benefit from the positive effect we are making. Although every year large amounts of money go into the state budget from Ida-Viru County both in the form of oil shale resource and environmental taxes, just a tiny fraction of it returns into the area. We have always been supporting and will continue to support the endeavours that would enable the county to get at least some part from the contributions it makes in the form of taxes back into the area for the purpose of promoting local life.

About 1,750 people work at Viru Keemia Grupp with the aim to boost the value of oil shale. By the skilful implementation of the combination of investments, the knowledge of the employees, and technologies, we are indeed able to create significant added value. No single company is able to force people to develop their skills since fertile ground should be provided for the development of the knowledge. In our personnel policy, we believe that the company should support the commitment of every single employee to professional development. After the national taxation policy has changed, we have once again started to provide the opportunities for doing sport to our employees - a sound mind in a sound body.

In 2017, Viru Keemia Grupp has been awarded with a bronze label as a responsible company. This kind of recognition is very stimulating and inspiring, and it obliges us to strive for perfection in the future.

Ahti Asmann

Chairman of the Board

About the company

Financially and energetically efficient processing of natural resource with minimal environmental impact.

Maximizing the value chain of oil shale and looking into opportunities for expansion.

High-quality raw materials and final products for consumers in Estonia and all over the world.

A high-tech and innovative approach to manufacturing and technological processes.

Introduction of advanced systems for ensuring industrial safety.

Reliable partner to the residents of Virumaa.

VKG´s
mission

Valuing the most essential Estonian natural resource - oil shale.

VKG´s
values

Openness - Commitment - Development

VKG vision

VKG´s business
philosophy

The business philosophy of VKG is to unlock the mineral and organic potential of Estonia’s most valued earth deposit, for the benefit of the traditional Estonian industry and the growth and development of the entire industrial region of Ida-Viru County.

THE FIELDS OF ACTIVITIES OF THE VKG SUBSIDIARIES

The production activities and the services supporting the Group´s main activities are divided between separate subsidiaries, the shares of which are 100% owned by the parent enterprise.

Production

VKG Kaevandused

Mining oil shale as the Group’s main raw material

VKG Oil

Producing shale oil and refined chemicals

VKG Energia

Generating heat and electricity

Services

VKG Soojus

Distributing and selling heat

VKG Elektrivõrgud

Selling and distributing electricity

VKG Transport

(since October 2018 VKG Logistika)
Providing logistics services for road and railway transportation

VIRU RMT

Providing repair and assembly services

GEOGRAPHICAL SALES DISTRIBUTION OF THE PRODUCTS AND SERVICES OF VKG

Estonia
Togo
Germany
Russia
Inglismaa
Belarus
Senegal
Japan
Latvia
Ukraine
Italy
Singapore
Lithuania
Netherlands
Belgium
Saudi Arabia
Poland

VKG´s value chain

VKG's main production indicators in 2017

Oil shale extraction volume

million tonnes of trade oil shale

Oil shale processing volume

million tonnes of trade oil shale

Commercial shale oil production

tons

Production of electricity and heat

GWh

of heat

GWh

of electricity

This makes VKG Energy the second biggest producer of electricity in Estonia.

Key financial results

This chapter presents the consolidated financial results of 2017 that describe the activity of Viru Keemia Grupp. The figures from previous years are for reference. The financial results of the reporting period are based on the audited annual report of 2017.

Revenue and its distribution

Almost three-fourths of the produce of the Group goes for export. In addition to Estonia, VKG sells its products and services in the following countries: Latvia, Lithuania, Sweden, Poland, Togo, Belarus, Ukraine, Netherlands, Germany, Senegal, Italy, Belgium, Russia, Singapore, Japan and Saudi Arabia.

Consolidated income statement

in thousands of euros

	2014	2015	2016	2017
Sales revenue	195 216	166 788	104 270	161 282
Revenue from sales of products	-164 175	-189 159	-106 147	-149 630
Gross profit	31 041	-22 371	-1 877	11 652
Marketing expenditure	-3 769	-3 360	-3 213	-4 046
General administrative expenditure	-12 985	-9 109	-9 471	-9 480
Other business revenue	11 084	9 973	9 827	7 373
Other business expenditure	-2 492	-1 745	-1 892	-1 485
Business profit	22 880	-26 612	-6 626	4 014
Financial revenue and expenditure	-3 101	-5 269	-8 588	-9 776
Profit before income tax	19 779	-31 881	-15 214	-5 762
Unplanned expenditure
Income tax		300
Net profit of financial year	19 779	-32 181	-15 214	-5 762

Consolidated balance sheet

in thousands of euros

	2014	2015	2016	2017
Assets
Current Assets	115 403	71 086	64 649	75 496
Fixed Assets	501 848	485 513	519 104	479 421
Total assets	617 251	556 599	583 753	554 917
Liabilities and equity capital
Short-Term Liabilities	91 368	75 383	52 343	50 093
Long-Term Liabilities	183 261	182 724	234 758	201 373
Total Liabilities	274 629	258 107	287 101	251 466
Equity Capital	342 622	298 493	296 652	303 451
Total liabilities and equity capital	617 251	556 599	583 753	554 917

Throughout 2017, the balance sheet volume of Viru Keemia Grupp decreased by 29 mln EUR and, as of 31.12.2017, it made 554,9 mln EUR. In 2017, the share of equity capital made up 55% of the balance sheet volume.

Investments

in thousands of euros

	2014	2015	2016	2017
Viru Keemia Grupp	70 271	32 955	474	541
VKG Kaevandused	9 127	8 126	7 859	7 801
VKG Oil	55 793	72 418	2 749	11 871
VKG Energia	32 550	26 763	18 757	1 786
VKG Soojus	1 294	146	208	101
Viru RMT	261	42	10	46
VKG Transport	607	28	373	836
VKG Elektrivõrgud	2 887	717	1 023	2 597
VKG Elektriehitus	21	0	4	0
VKG Plokk	105	68	1 499	0
TOTAL	172 916	141 263	32 955	25 579

Loan burden

The Group's current loan burden is visualised by the following figure which shows the outstanding amount of external loans and finance lease agreements.

GROUP’S LOAN BURDEN (IN MILLIONS EUROS)

2012

132

2013

152

2014

207

2015

217

2016

219

2017

197

2018*

158

* Forecast

VKG's strategic goals for the next few years

Ensuring the availability of raw materials

Our number one priority in the upcoming years is to ensure oil shale resource. Not only our future, but the present day depends on the availability of the resource. VKG's current total demand of raw material is 5 million tonnes of oil shale. The maximum extraction volume granted to VKG, with the possibility of retrospective mining, amounts to 4.4 million tonnes of oil shale. We are lacking approximately 0.8 tonnes per year in order to apply maximum production capacity. Thus, one of our main tasks is to constantly look for ways to change this situation.

Extraction of maximum energy from oil shale

An indication of the efficiency and sustainability of each production is the energy efficiency of the production process, which shows how much energy entering with the raw material becomes useful products. For example, the energy efficiency of VKG's newest shale oil plant Petroter III is 82%, which is a remarkable result. The high figure is achieved due to the fact that in addition to shale oil, steam, hot water and semi-coke gas with high calorific value are produced, from which VKG Energia produces electricity, steam and district heating water. Our goal is to reduce the unused part by increasing the energy efficiency of production processes.

Adding maximum value to
the final products

The goal of every modern industrial company is to continuously extend the value chain. The greatest potential in current production chain lies in adding value to waste and improving the properties of oil products, which is particularly important for maintaining demand for the products in the world market under increasingly stringent environmental requirements.

Creating an effective organizational culture

Regarding effective organizational culture, we can look at increasing the productivity of assets and labour, the increase in the added value of jobs, and management directed to results and improvements.

Competitive cost price of shale oil

VKG operates on a volatile market, where the price of shale oil can fluctuate to a very large extent over a short period of time. Competitive cost price allows us to achieve high liquidity, which helps to survive periods of crisis and to invest in technology and workforce.

Goals and challenges for the upcoming period

In R&D:

Impact assessment of the changes in MARPOL marine fuel quality requirements, adaptation strategy
Provision of availability of raw material
Separation of the maximum amount of energy from oil shale
Adding maximum value to end products
Competitive cost price of shale oil
New marketing channels to the oil shale products
The effectiveness of business processes

In environmental activities:

methods for depositing and using waste;
waste recycling;
new action plan for air quality and reducing odoriferous substances, which includes the implementation of fire suppression project at the semi-coke landfill;
reducing greenhouse gas emissions;
activities directed at energy efficiency.

Projections for 2018

Oil shale processing

million tonnes

Oil shale mining volume

million tonnes

VKG's share in the state tax revenue

million euros

VKG's number of employees

Main events of the reporting period

January 2017

VKG sells VKG Plokk to the construction materials industry company Aeroc International AS.

The fifty-second Competition of Five Schools takes place, in which the team of high-school students from Ida-Virumaa also takes place with the support of VKG.

April 2017

The traditional VKG community activities day takes place at Kiikla orphanage.

The Ministers of the Environment, chancellors, and advisers from the Baltic States familiarize themselves with Ida-Virumaa and the local industry and visit Ojamaa oil shale mine, which is the most recently opened mine in Europe.

The President of the Estonian Republic Kersti Kaljulaid meets with the Board of VKG. At the meeting, special attention is paid to the environmental aspects with a breakdown by 20 years. In addition to that, during the meeting, the social and economic part played by the oil shale industry in Estonia and Ida-Virumaa is emphasized, and the issues related to the business environment in Estonia are discussed. Kersti Kaljulaid: "The oil shale industry is not a thing of the past". "Today [12.04.] I visited Viru Keemia Grupp in Ida-Virumaa, where the heads of the company told me about how the company had been doing so far as well as about future prospects, and we also discussed the current state of the Estonian economic and business environment in general".

On 28 April, the Global Day of Occupational Health and Safety is celebrated. VKG has also joined this initiative, but with one major difference, i.e. for us, every single day in a year should be "celebrated" as a day of occupational safety. In his annual interview, the Chairman of the Board Ahti Asmann said that the priority for and the special focus of this year are the issues related to reducing the number of risks causing the situations involving occupational safety, as well as potentially dangerous situations.

May 2017

Viru Keemia Grupp is awarded bronze level acknowledgement for responsible entrepreneurship. Regardless of the deep oil crisis in 2016, we are still doing our business in a responsible manner and preserve our values.

June 2017

The production capacity of electric power at VKG Energia for the first time ever reaches the record-breaking value of 76 MW.

Aliide Hindreus, who was working as the Head of the stock record unit at VKG Transport, becomes the new Chief Accountantof the Group.

July 2017

Within the frames of the Estonian Presidency of the Council of the EU, the officials dealing with the industrial policy from 27 member-states of the European Union visit Viru Keemia Grupp. The visitors are familiarized with the challenges that exist in the field of the Estonian oil shale industry and future prospects.

From the beginning of July, 9 life-saving rules come into effect in the Group. Those requirements are meant for paying special attention to the need for observing safety procedures. Occupational safety and the protection of workers are the most important strategic tasks of Viru Keemia Grupp. We must join effort and strive for the ongoing improvement of working environment, while trying to preserve our own life and health and the life and health of our co-workers. Thus the implementation of the 9 life-saving rules is the measure that calls people to pay even more attention to the issues of occupational health and safety. Observing those rules on a daily basis is a significant step towards "zero accident".

Sergei Kulikov leaves the position of the member of the Board. Sergei Kulikov came to the Group in April 2011, and since then he has been responsible for the technical development of the subsidiary company VKG Energia. The member of the Board Marek Tull is now going to head the the subsidiary company VKG Energia, who will provide that the company is functioning in the ordinary and usual course.

August 2017

For the third year in a row the Oil Shale Competence Center of Virumaa College of Tallinn University of Technology, Viru Keemia Grupp, Eesti Energia, and Kiviõli Keemiatööstus issue a Yearbook about the Estonian oil shale industry, which proves that, in spite of the difficult situation at the global market, this branch of industry is still highly competitive.

The traditional "School Bell" event takes place on 18 August. It has been for the 17th time that the Group has congratulated children going to the first grade on the beginning of their first school year. This year, 58 boys and girls, whose parents work at the Group, are going to school for the first time in their lives.

On 27 August, a traditional Miners’ Day takes place in Kohtla-Nõmme, on the territory of the Estonian Mining Museum.

November 2017

On 2 November, the traditional Environment Day takes place at VKG, within the frames of which the topics related to responsible waste management are discussed. The Deputy Secretary General of the Ministry of the Environment Meelis Münt and the Technical Director and the Vice Chairman of the Board of VKG Meelis Eldermann, who gave the opening speech, both emphasized the need for searching for new innovative solutions for reducing the amount of waste and recycling it. According to Eldermann, if no ash was left as the end-product, the oil shale value chain would be perfect. In his opinion, the Group should be looking for new methods of recycling ash or, otherwise, of disposing of it in a responsible and environmentally-friendly way.

Recognition

Estonian Responsible Business 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018 ‒ VKG
Estonian culture-friendly company 2012, 2013, 2014
In October 2012, Viru Keemia Grupp was elected among the best 3 enterprises in Swedish Business Award in the category of „Sustainable growth”.
On 23 February 2012, Nikolai Petrovitš, a member of the VKG board and the head of the best enterprise in Estonia in 2009, VKG Oil AS, received an Order of White Star, IV class from President of Estonia Toomas Hendrik Ilves, for supporting the development of the region.
Viru Keemia Grupp (VKG) received the Environmental Enterprise of the year 2011 Award in environmental management category.
At the beginning of 2010, VKG received the title of Enterprise of the Year in Ida-Viru county.
VKG Oil AS received the grand prize within the framework of the contest Entrepreneurship Award 2009.

OPEN APPROACH

VKG's complete social responsibility and sustainable development policy began in 2009. We are proud that VKG is one of the first promoters and advocates of the concept of social responsibility in Estonia and especially in Virumaa.

VKG was the first Estonian company to disclose all of its resource use and environmental information in accordance with the Global Reporting Standards for Social Responsibility GRI G3. Although the original purpose of the initiative was to raise awareness, evaluate and manage the group's overall impact on the country's economy, social life and environment, today the responsibility is integrated into the company's business strategy, since in VKG's case, it is impossible to distinguish between responsible activities and the company's main activity.

2009 marks the beginning of
VKG's complete social responsibility
and sustainable development policy.

In the year 2010 VKG joined the world’s
most influential social responsibility initiatives:
the GRI and the United Nations Global Compact.

In 2010 the group's first report of
social responsibility and sustainable
development is published, reflecting
the results of 2008 and 2009 according
to global reporting standards for social
responsibility GRI G3.

In October 2011, the principles of
responsible behavior were introduced
in the company.

In December 2011
the group
began to introduce the
principles of responsibility in
everyday life.

In December 2012 we established the Estonian Association of Responsible Entrepreneurship in cooperation with nineteen other Estonian companies.
The association aims to popularize and promote the concept in Estonian entrepreneurship and on a
national level.

From 2012, VKG is a member of the
Responsible Business Forum in Estonia.

In the years 2010 ... 2017 the enterprise
received the title “Responsible Estonian
Enterprise” and Bronze Quality Award.

2009 marks the beginning of
VKG's complete social responsibility
and sustainable development policy.

In the year 2010 VKG joined the world’s
most influential social responsibility initiatives:
the GRI and the United Nations Global Compact.

In October 2011, the principles of
responsible behavior were introduced
in the company.

In December 2011
the group
began to introduce the
principles of responsibility in
everyday life.

From 2012, VKG is a member of the
Responsible Business Forum in Estonia.

In the years 2010 ... 2017 the enterprise
received the title “Responsible Estonian
Enterprise” and Bronze Quality Award.

In our activities, we proceed from the following principles:

Openness and transparency

Social reporting means total disclosure of data on social, economic and environmental impacts in accordance with the Global Reporting Initiative (GRI).

Openness and transparency

Social reporting means total disclosure of data on social, economic and environmental impacts in accordance with the Global Reporting Initiative (GRI).

Honesty and correctness

Public relations standards have been approved by the company that prohibit the submission of incorrect or inaccurate data.

Compliance with international standards

Implementation of the principles of social responsibility approved by international organizations (GRI, UN Global Compact) in the company.

VKG’ PRINCIPLES OF SOCIAL RESPONSIBILITY BEHAVIOUR

VKG identifies and studies the industry’s effect on the environment and if possible then eliminates or minimises it. VKG conducts ongoing environmental monitoring.
VKG develops resource-conservative and environment-friendly fields of technology and implements those into its production processes.
VKG provides the public with regular reports about its activities.
VKG communicates proactively with the media and the public, doesn’t hide information and provides only accurate and truthful data about itself.

VKG ensures a safe and comfortable work environment for its employees.
VKG has initiated motivational and developmental systems for its employees.
VKG supports the trade union in its activities, offers additional benefits for its employees and supports the ongoing dialogue between the management team and the employees.
VKG promotes the idea of everyone accepting responsibility for their work: everything depends on everyone.
VKG employs internationally recognised principles of social responsibility.

VKG pays special attention to regional development, keeping active contact with the local authorities and residents.
VKG supports important regional projects, especially cultural and sports event.
VKG is a trustworthy partner for the state, for local authorities and for its business partners.
VKG promotes the principles of social responsibility and recognises the fact that it cannot be a single actor.

Priorities in the context of sustainable development

The most important priorities of the Group in the field of sustainable development are the provision of the safest manufacturing processes possible, reducing the load on the environment, staff development, doing cooperation in the course of development of the area, and taking the interests of different interest groups into consideration.

Those priorities and the objectives related to them are consistent with the global sustainable development trends and goals, especially with the goals in the field of sustainable development accepted by the UN in 2015

Production safety

OBJECTIVES OF THE GROUP		ACTIVITIES OF THE GROUP
Boosting the level of production safety and work safety, reducing the number of injuries, accidents, and professional diseases;		the ongoing improvement of the methods of provision of production safety;
reducing the technogenic load and preserving the good condition of the environment and the living environment of people;		shaping and developing a safety culture in the Group;
reducing the environmental damage done by business activities;		protecting outdoor air;
rational use of natural resources, their restoration and protection as well as the preservation of biological diversity;		rational use and protection of water resources;
implementation of the best global practices in the field of environmental safety; energy saving and energy efficiency.		waste disposal and using land resources; energy saving and enhancing energy efficiency; implementing the programmes aimed at preserving biological diversity; boosting the level of production safety, preventing emergency situations; updating emergency protection systems; providing safe working conditions; implementing medical prevention programmes, supporting a healthy lifestyle.

Social development

OBJECTIVES OF THE GROUP		ACTIVITIES OF THE GROUP
developing the potential of the staff of the Group;		providing a competitive salary and social packages;
supporting the local community, facilitating social and economic development in the area.		assessing the staff, staff training and development; generating personnel reserve; developing in-house communication and organizational culture; supporting the development of social infrastructure in the area; supporting the growth of social activity; developing cooperation with interest groups.

Cooperation with interest groups

The cooperation of Viru Keemia Grupp with interest groups is aimed at sustainable development and achieving the balance between different interests. The cooperation with interest groups is based on the principles of respecting their interests, regular and constructive cooperation, the transparency of the information pertaining to the activities of the Group, and the performance of our duties.

The Group does cooperation with the main interest groups on a number of the most relevant issues. In order to lay down those issues, the social environment inside and outside of the Group is constantly analysed, with due consideration of strategic trends and the preferences of interest groups.

Main interest groups of the Group:

shareholders;
employees;
institutions;
local communities;
civil groups.

Viru Keemia Grupp is developing a sustainable development strategy and implementing it in active cooperation with the main interest groups. It enables the Group to boost the efficiency of the social and environmental activities of the company and achieve comprehensive and permanent positive changes.

The Group believes that sustainable economic growth and the well-being of a society, being the conditions, under which the Group is operating, are interrelated inseparably. While striving for its strategic goals, Viru Keemia Grupp is trying to create value for interest groups at each stage of its activities and make a contribution to the social and economic development of the state.

Shareholders

Cooperation mechanisms:

a general meeting of shareholders;
monthly meetings of shareholders with the management of the Group;
accountancy and reporting of the company.

Key issues:

strategy implementation;
financial sustainability;
company and risk management;
increasing the efficiency of production and manufacturing safety;
quality of the products;
environmental safety of activities.

The general meeting that approved the annual report of 2017 was held on June 27, 2018, with the participation of 100% of the votes granted by shares. The following decisions were made in the course of the general meeting of shareholders:

To approve the annual report of the financial year 2017;
To pay out dividends in the amount of 238 560 EUR;
The undistributed profit after the distribution of profit has made 250 071 420 EUR.

Cooperation with state and local governments

Cooperation mechanisms:

social and economic partnership;
common workshops, roundtable discussions, meetings;
accountancy and reporting of the company;
participation in committees and conferences.

Key issues:

legislation development and facilitation of the development of the oil shale sector;
strategic development of the Group;
the compliance of the activities of the Group with legal standards;
the role the Group is playing in the development of the area;
production safety;
the effect the production activities of the Group have on the environment;
the quality of the products, manufacturing of the products with better environmental properties.

The cooperation with state institutions and local governments in the field of resolution of tasks related to sustainable development is based on the direct and inclusive dialogue and partnership. The specialists of the Group are involved in different discussions and workshops in the field of development of the legal framework and its improvement.

The Group is actively encouraging the representatives of state institutions and local governments to implement social projects and take part in nature protection and educative events organised by the company.

Cooperation with the employees of the Group

Cooperation mechanisms:

the communication system within the company;
regular information days for key staff;
regular information exchange between the management and the employees;
meetings with employees and the management;
events organised by the company; forums; conferences;
cultural and sports events.

Key issues:

recognition and social support of the employees;
labour relations;
work safety;
training and development of employees;
the participation of the Group in the development of local communities.

The relations of the Group with employees are regulated by personnel policy, internal rules of conduct, and collective labour agreement. Proceeding from the principle of social partnership, the Group is actively cooperating with the trade union that represents the interests of employees.

Viru Keemia Grupp is developing the in-house communication system and looking for new communication media.

To attract new potential employees (highly qualified and motivated specialists), Viru Keemia Grupp as an employer is developing a value proposition and cooperation with universities and secondary schools.

Dialogue with the local community

Cooperation mechanisms:

social projects;
public hearings, roundtable discussions, exchange of ideas;
media channels inside and outside of the company;
accountancy and reporting of the Group.

Key issues:

the contribution of the Group into the social and economic development of the area as well as into the improvement of the quality of life of local people;
manufacturing and environmental safety of the activities of the Group, the measures of environmental protection;
transparency of the activities of the Group and its decisions;
financial sustainability of the Group.

Group is developing constructive cooperation with local communities, which is aimed at the social and economic development of the area and environmental protection.

To boost the efficiency of social programmes, we communicate with the representatives of interest groups, involving them into the implementation of projects. We hold regular meetings with the representatives of state institutions, opinion leaders, non-profit organisations, initiative groups, active members of the society, etc. While implementing projects, the Group is doing active cooperation with local mass media, providing them with the entire scope of necessary information.

Civil groups

Cooperation mechanisms:

conferences, exhibitions;
roundtable discussions;
joint implementation of social projects;
reporting.

Key issues:

production safety in the Group, measures of environmental protection;
participation of the Group in the development of the area;
availability and transparency of the information pertaining to the activities of the Group.

The activities are aimed at the sustainable development of the area and the facilitation of the development of the sector. In addition to that, VKG involves the experts from civil groups into the development and implementation of social and environmental projects as well as into the discussions pertaining to the activities of the Group in the form of roundtables and conferences.

Generating value for interest groups

Society	Responsible production - preserving the environment
Shareholders	Long-term growth of the value of the group High dividend yield
Partners	Good availability of oil shale products with very good production and environmental properties and stable supply/provision
Employees	Sustainable workplaces Valuable bonus package Social support Various opportunities for professional development
State	Provision of energy safety and independence Contribution to economic development Taxes Development of technologies in the field of oil shale
Local communities	Contribution into social and economic stability of Ida-Viru county Development of local suppliers and manufacturers Taxes Creating workplaces, environmental protection programmes Improving the quality of life of the local community Facilitating the growth of social activity of the local population, especially children and youth

Holding public discussions on the basis of the results of the planned assessment of the environmental effect of the activities of the company

In 2017, the following public discussions took place:

In March, the public discussion of the report concerning the assessment of the environmental effect of the permission for the excavation of the natural resource at the limestone quarry in Kohtla-Järve took place. The meeting took place in Jõhvi office of Viru area of the Environmental Board, and its goal was to answer the questions of all of the parties and interest groups that had been invited and to listen to their suggestions.

In November, the traditional Environmental Day took place at VKG. This time, the event was focused on the issue of responsible waste management. Within the frames of the event, the experts in their field, as well as the employees of VKG, have provided an overview of the peculiarities of waste management within the oil shale industry, the most topical issues, and a joint discussion concerning the part the oil shale plays in the Estonian circular economy took place.

In addition to that, in November, the unification of the new landfill for hazardous waste that is being built on the territory of the ash landfill of the Northern thermal power station of VKG Energia with the state landfill also took place as well as a public discussion of the programme of the assessment of the environmental effect of the launching of the new solution for the closing of the landfill. Within the frames of this discussion, the suggestions of local residents as well as of all other parties were very welcome as for the range of issues that should be taken into consideration within the process of assessment of the environmental impact the new type of activity has.

Main directions of VKG's supporting actions

Our priority is to support Virumaa and the socially beneficial activities of organisations, people and societies that operate here. The group pays attention to the development of the region, maintaining close liaison with local authorities and residents. VKG supports athletic, cultural and educational initiatives and contributes to the promotion of local life through the voluntary work of its employees.

We are interested in making our own contribution into long-term projects carried out within the community (including in cooperation with other organisations), the goal of which is to develop and promote the local living environment. We are focused on scientific and development projects and researches in the field of the oil shale sector and carried out by scientific and research institutions (events, scientific conferences, etc.), which are intended for looking for innovative solutions and their implementation in production. We also support the implementation of bright ideas.

The assistance and support of the Group can be provided to any non-profit association and/or organisation operating in Estonia, which is interested in improving the life in Ida-Virumaa or in Estonia as a whole. Most of all, we focus our attention on local dance groups, sports clubs, and education institutions. The provision of a direct subsidy to individuals is only considered in exceptional cases if we are dealing with humanitarian needs.

According to the principles of sponsorship of the Group, the following is/are not sponsored:

individual applicants (trips, studies abroad, etc.);
religious organisations;
political organisations;
the activities that can be harmful for people and the environment;
advestising campaighns and activities.

VKG-lt abi taotlemise protseduuri võib iseloomustada järgmiselt:

Our most important initiatives

The Competition of the Five Schools

The initiative of VKG which motivates and promotes engineering education among the youth. The chemical company needs good engineers in different fields, and the Group is interested in providing future specialists with thorough knowledge in sciences at school already. We are very pleased with the fact that, owing to our subsidies, diligent pupils from Ida-Viru County can take an active part in the most reputable competition in sciences in Estonia - the Competition of the Five Schools.

The Miner´s Day

A long-time tradition we restored in 2011. This annual large-scale public event takes place on the last Sunday in August. This event enables the Group to make a deep bow of respect both to the miners and to all the other people living in the area. The last three events have taken place at Estonian Mining Museum's territory and starting from 2016, the event is organized in cooperation with Eesti Energia.

Jõhvi Ballet Festival

Jõhvi Ballet Festival can be referred to as the main cultural event in the area. But, in addition to that, it has so far been the only ballet festival in Estonia, which has built up a fantastic reputation abroad as well. The fact that this festival is held in Ida-Viru County provides us, the inhabitants of Ida-Virumaa, with the chance to enjoy unique and world-known ballet performances close to our homes Virumaa has been referred to as the land of the "brown gold" for a very long time already, while the term the "land of ballet" has been coined after the launching of the Ballet Festival in Jõhvi. We are pleased to be a partner in this event. Successful cooperation between the Group and Jõhvi Concert Hall, which is the organiser of the festival, has been going on for many years.

My beautiful Virumaa

The photo contest "You are beautiful, Virumaa!" is being organised under the aegis of VKG. The best photos submitted for the contest within previous years have been collected, and in 2015, the first photo album "You are beautiful, Virumaa!" was printed. Pages of the book also display quotes related to the beautiful Virumaa by politicians, entrepreneurs and cultural figures. Have a look at it and see for yourself how beautiful Virumaa is: watch the album!

Implementation of charity among the staff

We are creating opportunities for our employees to take part in charity events and involving them into different initiatives. We are a good partner for the local Blood Centre. Within the frames of our cooperation, the Blood Centre pays visits to VKG and its subsidiaries several times a year. We also hold tree-planting and litter-picking (clean-up) events.

Reduction of environmental effects, efficient use of resources

Careful use of natural resources and constant efforts into the improvement of the region's environmental situation is among the main focus of business strategy for VKG. The group has developed a systematic and complete approach to environmental issues, which complies with national and European regulations and requirements. A remarkable development is achieved by using best technology, good cooperation between all the group's companies, a professional team and large-scale investments.

Precautionary Principle

Viru Keemia Grupp regards the reduction of the impact exerted by relevant risks on the environment as well as enhancing occupational safety as one of its main goals with strategic priority. By managing the risks for people´s life and health as well as environmental risks, the Group proceeds from the precautionary principle. *

The implementation of this principle in the Group is exercised on the basis of the following approaches:

provision of safety requirements throughout the entire process of oil shale enrichment and sale of end products
risk management
bringing the environmental effect to a minimum
meeting the requirements in the field of occupational safety as well as the requirements of employees and contracting organisations in the field of healthcare politics.

The company works persistently in order to raise the level of productivity and environmental safety, meet the requirements established in legal acts and related to environmental protection, and consistently and efficiently reduce the negative impact on environment.

Protection of labour and the safety of the employees are of primary importance for Viru Keemia Grupp. Within the term of existence of the Group, it has accumulated extensive experience in the field of responsible operation, and relevant procedures and practices have been implemented. We regard the financing of various programmes in the field of labour protection not so much as expenses, but rather as investments into health and well-being of our employees.

* This principle is laid down in international documents as follows: "Where a serious or inevitable danger exists, insufficient scientific grounds cannot serve as an excuse for pushing away the implementation of efficient measures for the sake of prevention of environmental damage". (RIO DECLARATION ON ENVIROMENT AND DEVELOPMENT, June, 1992).

General environmental policy

Viru Keemia Grupp (VKG) pays close attention to environmental protection.

The main priorities are the prevention or the ultimate reduction of the environmental effect arising from production activities.

VKG has consistently been making investments into increasing the amount of profit arising from the processing of oil shale as raw material for the society.

The goal has been to use up the resources as efficiently as possible as well as to implement the best possible technology to ensure the reduction of the amount of refuse and waste into the environment.

Our vision for the future is to be an open and reliable business that operates on the basis of a common management system in order to preserve a diverse environment and use natural resources in a sustainable way.

The Group has developed a unified environmental policy, based on the following principles:

Acting upon an environmental management system conforming to the international standard ISO 14001.

Identifying the ecological aspects and environmental impact of the enterprise’s production activities and assessing their conformity to the legislation in force and to other applicable requirements.

In our everyday activities, we follow the requirements prescribed in legal acts, conventions and agreements of Estonia and the European Union.

We consider it important to inform the region’s institutions and population about the enterprise’s activities and possible environmental impacts of those activities.

We pay much attention to promoting sustainable development in the enterprise, reusing as many materials and wastes generated from the production process as possible.

We consider it important to have good cooperation with research and development institutions, both for solving environmental issues and for developing new technologies.

We encourage our employees to improve their knowledge about the environment protection and we recognise and encourage practical use of that knowledge.

We work towards unlocking the full potential of oil shale, creating additional value with our oil shale products.

In the following years, the main focus of VKG in the field of environmental activities will remain the same. The investments into the enhancement of production processes will continue. Even though it is already now that all of the production facilities of VKG conform to the requirements pertaining to the best possible technology, we are still searching for new possibilities for optimizing the processes and, thus, reducing the environmental effect.

Environmental management system

Conformity to the ISO standard

A large share of the subsidiaries of Viru Keemia Grupp implements the international standard ISO 14001, in which the requirements pertaining to eco-management are defined. Other standards are also implemented at the companies included in the structure of the Group, such as ISO 9001, ISO 50001, and OHSAS 18001. You can find more detailed information about particular standards implemented in particular companies in the chapter International Management Systems.

Investments into environment protection

In our activities, we are consistently striving for enhancing efficiency. The goal is to add maximum value to oil shale, which means the complete use of its potential. From the environmental aspect, this means less environmental impact per one unit of processed oil shale and more social and economic profit. We consider that to ensure the sustainability of shale oil production, we need to invest in the development of best available technology and environmental protection, participate in the preparation of legislative acts, perform monitoring of production and environment, optimize production and introduce energy efficient solutions.

In recent years, major efforts have been made in the field of environment, and it is only in 2017 that VKG contributed over 10 mln EUR into the projects related to the reduction of the environmental effect. At the same time, the legislation of the European Union and the Republic of Estonia, as well as the ever-increasing production demand, pose new requirements, which are getting stricter, as well as the new environmental goals for the companies of the Group. At present, a number of significant changes are taking place within the space of environmental policies in the European Union and Estonia. Among other things, in 2017, during the Estonian Presidency of the Council of the European Union, the general principles of the Greenhouse Gas Emission Allowance Trading System in the European Union for the subsequent period (2012-2030) were defined. Besides, the analysis of assessment of the monetary value of the external effects of environmental use in Estonia, commissioned by the Ministry of the Environment, on the basis of which the current system of environmental charges in Estonia will be revised, is also being prepared.

The investments into the environment are divided into two categories:

the investments that reduce the effect on the environment directly
the investments that reduce the effect on the environment indirectly

The investments that reduce the effect on the environment directly include such investments which provide an immediate effect on the environment. They include, for example, the so-called end-of-pipe investments (trapping equipment), the renovation of tank fleets, closing the existing sources of pollution, or the investments aimed at the reduction, waste disposal, etc.

The investments that reduce the effect on the environment indirectly include the activities which help to reduce the effect on the environment as a result of the long-term ongoing activities. They include the investments in the BPT, into the development and implementation of new environmentally-friendly and efficient technologies, the technologies that facilitate the rational use of resources, the implementation of relevant measures, etc.

The investments that reduce the effect on the environment directly

VKG has been able to respond to those changes in a timely manner by planning investments in accordance with the new environmental requirements. As an example, the Industrial Emissions Act can be provided as an example. In accordance with the Act, in 2016, the requirements pertaining to large combustion equipment and the number of pollutants contained in flue gas (SO₂, NO₂, hard particles) became much stricter. In order to provide the conformity to the IEA, it was already in 2008 that VKG invested about 9.5 mln EUR into the construction of the first purification unit for removing sulphur dioxide from flue gases at the Northern Thermal Power Plant of VKG Energia. However, three purification units had to be constructed for purifying the entire amount of flue gases. In spite of the crisis that started at the oil market in 2014, due to which the financial situation at VKG was quite difficult, the investment that amounted to about 37 mln EUR in total was brought to completion in 2016. Nowadays the sulphur-trapping unit allows trapping sulphur contained in flue gases released from the Northern thermal power plant, hence significantly reducing the amount of sulphur dioxide as the most critical pollutant in the atmosphere.

The three units are connected to a single system, where flue gas from all boilers of the plant is directed to. This unique solution allows flexible adjustment of the desulphurisation system’s operation.

In 2017, the total amount of direct investments aimed at reducing the environmental effect made up 2.43 mln EUR. The volume of investments has been a little smaller than in the period preceding the crisis.

In recent years, the main goal of the direct investments made by VKG has been the reduction of the environmental effect exerted by depositing waste. From 2016, the innovative depositing technology has been implemented at the landfill of hazardous waste, which prevents the migration of pollution from the landfill into the environment. In 2017, the investments in this field continued. The pipe conveyor for transporting semi-coke to the territory of the landfill was built. The same practices are also in use for oil shale ash. In this manner, it is possible to avoid noise and dust generated to vehicles. The oil shale waste rock extracted while excavating oil shale is recycled by VKG Kaevandus to the fullest extent. The largest part of the oil shale waste rock (in 2017, it made up about 2 mln tons) is used as a filling material, which is produced and sold by VKG Kaevandus as a certified product.

In 2017, at the commission of the Environmental Inspectorate, the research carried out by the Estonian Environmental Research Centre "The Assessment of the Ambient Air Quality, Odour Nuisance, and the Number of Pollutants in Järve District in the Town of Kohtla-Järve" was published. You can read about the results of the research here. On its basis, VKG Oil has ordered additional measurements and the simulation of odoriferous substances on its production territory. Proceeding from the obtained results, the company has prepared a new action plan aimed at reducing the generation of odoriferous substances. It provides the activities of VKG for the following two years with a total value of 1.1 mln EUR.

Investments that reduce the environmental impact directly, mln EUR

(occupational safety, reducing the number of pollution sources, other projects that reduce the environmental impact directly)

2008

19,8

2009

5,7

2010

1,9

2011

2,1

2012

27,5

2013

16,4

2014

8,4

2015

7,9

2016

14,3

2017

2,4

The investments that reduce the effect on the environment indirectly

VKG is constantly investing in developing environmentally-friendly technologies and making sustainable use of resources more efficiently. The planning of new activities considers BAT requirements and constantly tightening environmental standards.

In 2015, indirect investments amounted to 18.29 million euros. In 2016, they dropped by almost 34%, as the share of investments in reducing direct environmental impact increased. The Petroter III plant was built during this period. Using a shale oil production plant that is based on new technology will allow the maximum valuation of oil shale. In addition to that, the industrial wastewater system was modified to maximize the recovery of industrial wastewater from the production, which will help to save the clear water resource.

In 2017, the number of indirect investments was somewhat larger than in the previous year. In the previous year, over 8 mln EUR was invested by VKG into the upgrading of the technologies and the enhancement of production processes. In the middle of the year, large-scale works were carried out in order to upgrade the oil plants operating on the basis of the VKG Oil Petroter technology. Besides, at the end of the year, a new boiler was put into operation at the Northern thermal power plant at VKG Energia. Those investments will allow to boost the production efficiency of the entire Group and, thereby, to obtain maximum productivity from one single unit of oil shale with a minimum amount of emissions.

Investments that reduce the environmental impact indirectly, mln EUR

(investments into the development and launching of the best possible technology, investments into the rational use of natural resources)

2010

2,4

2011

8,3

2012

10,1

2013

51,7

2014

47,3

2015

18,3

2016

6,1

2017

8,7

VKG makes its contribution to the development of innovative solutions aimed at reducing the environmental effect. Below on grapf, you can see changes in the number of expenses related to environmental protection (the number of investments and pollution charges). We can see from the graph that, since 2011, the amount of expenses has increased considerably, and, even though in recent years, due to a difficult economic situation, the company has been forced to cut down on investments, the total amount of investments in the field of environmental protection has still made up 12 mln EUR per year.

Environmental expenditure of the group, MLN EUR

(the graph does not include the commissioning of the sulphur trap, environmental monitoring, environmental research, and other expenses)

2007

15,4

2008

21,4

2009

7,3

2010

6,8

2011

13,7

2012

2013

75,5

2014

65,5

2015

2016

28,1

2017

13,6

The largest completed and ongoing
environmental projects at the Group

The latest projects
Completed projects

Landfills
The action plan aimed at reducing odour
Reduction of air emissions from the thermal power plant
Identification of oil shale bitumen and researching its properties
Heating main between Kohtla-Järve and Ahtme

Landfills

In the year 2007 a new semi-coke solid waste deposit was completed, conforming to all environmental requirements; the depositing technology used excludes any seeping of stormwater into the body of the deposit. The leachate is collected into a separate water-tight pool and is treated in the regional wastewater treatment plant if necessary. Due to special inclines, the time of contact between stormwater and the deposit surface is minimal, thus minimising the pollution of stormwater. In 2012 until summer 2013, the old landfills for hazardous waste were brought into order, in the course of which they have become waterproof. In 2015, the ash storage site of VKG Energia was closed down accordingly. The process of bringing into order of old landfills reduces their environmental effect to a minimum.

Since 2016, the new depositing method has been implemented. The oil shale ash is deposited dampened, in the result of which the cemented monolithic surface emerges at the landfill, which prevents the migration of pollution from the landfill into the surrounding atmosphere. It will help to achieve the waterproof surface of the landfill, which will reduce the generation of leachate. In addition to that, it will also rule out the generation of heating areas at the landfill in the future.

In 2017, the construction of the pipe conveyor at VKG Oil started, in the result of which at the beginning of 2018 the transportation of semi-coke generated within Kiviter production was initiated right to the territory of the landfill via the enclosed system. The system allows reducing the amount of transportation by vehicles, which, in its turn, helps to reduce both the amounts of dust and emission gases considerably.

In 2016, the project of the technical solution aimed at dampening heating areas at the landfill at VKG Oil was completed, and in 2017, the preparatory works related to the implementation of the project were launched. After those works are completed, in the future odour nuisance at the landfill will be reduced, while the quality of the ambient air is going to improv

The action plan aimed at reducing odour

In 2017, VKG Oil prepared and submitted to the Environmental Board the new action plan aimed at reducing odour. In order to develop it and map the level of odour emission at the plant, the odoriferous substances were measured and simulated within the company. Based on the research and the knowledge of the technical personnel in the given field, the measures for reducing the number of odoriferous substances were determined and the action plan was prepared with the total value of 1.1 mln EUR. In 2017, the implementation of the project aimed at dampening heating areas was initiated. It will enable to reduce odour nuisance at the landfill in the future as well as improve the quality of the ambient air. The action plan aimed at reducing odour contains 5 important measures, and the company will be dealing with its implementation in 2018 and 2019.

Reduction of air emissions from the thermal power plant

In 2017, VKG Energia got back to operating at the speed equal to the one before the crisis, obtaining much more gas both from Petroter oil plants and from Kiviter oil factories as a by-product, as compared with the previous year, which is burnt down in a boiler for energy generation. In the same year, the construction of a steam boiler operating on gas fuel with the nominal capacity of 100 MW was completed at VKG Energia. As compared to boilers that use solid fuel, the new steam-generating unit has higher operating efficiency, i.e. while the old boilers had 86%, the new one has 91%. Owing to a more efficient combustion mode, the exhaust gas released from the boiler has a lower content of pollutants.

Identification of oil shale bitumen and researching its properties

With the help of the Environmental Investment Centre (KIK), VKG Oil implemented the project "Identification of Oil Shale Bitumen and Researching Its Properties". The aim of the project is to obtain more detailed information about the composition of oil shale bitumen and, on its basis, to research its properties and a possible effect on people´s health and the environment. The project will facilitate the development of more relevant and adequate risk management measures, the implementation of which will help to manage and prevent the risks arising from using the oil shale bitumen. The project also has additional value, since its implementation will help to extend the chain of using of oil shale, in addition to the immediate produce (shale oil), also in the form of additional materials.

Heating main between Kohtla-Järve and Ahtme

In 2017, VKG Soojus was actively dealing with the reconstruction of heating mains. With the help of the Environmental Investment Centre, several projects are being implemented, in the frames of which about 10 km of damped heating pipelines will be renovated. As a result, the thermal losses within the district heating system in the area under renovation will be reduced. A smaller amount of thermal losses means that the amount of fuel to be burnt down as well as the burden on the environment will also be reduced.

The new heating main, which conforms to all of the requirements of the best possible technology and, in addition to Järve district, also heats up Ahtme district of Kohtla-Järve town and the town of Jõhvi, was completed at the beginning of 2013. Owing to the heating main, it became possible to increase the efficiency of co-generation of heat and electricity at VKG Energia considerably, and all of the residue heat generated in the course of oil shale processing is now used up in the most efficient manner. Besides, the construction of the new heating main also allowed to close the old heat and power plant in Ahtme, which did not conform to the new environmental requirements. In 2016, additional investments were made to renovate heat pipelines.

Põhja thermal power plant desulphurization system
Conveyor solutions in the logistics of raw material and waste
Petroter oil plants
Shale oils filtration plant
Reconstruction of tank farms and trapping units
Reconstruction of the oil separation unit
Filter cake instead of liquid waste

Shale oils filtration plant

VKG Oil completed a shale oils filtration plant. The implementation of the relevant process allows to eliminate several sources of atmospheric pollution and reduce emissions and production losses. As a result of implementing the new technological scheme, no hazardous liquid wastes of oil shale pitch –- are generated anymore, and instead fine-dispersed solid fuel – filter cake - is produced.

Reconstruction of tank farms and trapping units

Tank farms are used for depositing the liquid shale oil products on the production territory. On the total, there are 23 tanks, the total capacity of which exceeds 30,000 m³. The logic of depositing fuels is simple, i.e. the more airproof the tank is, the fewer emissions there are. VKG completed the construction of the tank farm ten years ago. In the course of construction, trapping By the end of the year 2009, an absorber for the tank fleet of shale oils was completed; this unit binds up to 70% of volatile organic compounds. Since the beginning of the year 2013, emissions of organic volatiles from the absorber of the distillation unit’s tank fleet are fully eliminated. As a result, the emission of hydrocarbons and phenols decreased considerably. In addition to the measures listed above, the thermocatalytic purification unit was installed on the absorber of the tanks at the warehouse for commercial oils, which allows reducing the number of hydrocarbons released from the tanks even more efficiently. We have also reconstructed the tank farms at other pieces of equipment, too, and made the trapping units more efficient. Investments into the construction and enhancement of tank farms exceeded 3.1 mln EUR.

Petroter oil plants

In the year 2009, the first Petroter oil plant was completed, allowing the use of fine oil shale for oil production. This plant has several devices for environment protection. Its chimney-stack has a continuous monitoring device for flue gases; it allows us to monitor the concentration of pollutants emitted into the atmosphere and to react immediately if any of the limits are exceeded. The plant also has a utilisation boiler for using up the waste gases and the heat resulting from those gases. The solid wastes resulting from the processing of oil shale in that plant are also more environment-friendly because the organics content of the generated ash is significantly lower and thus conforms to the requirements prescribed in the legislation.

Petroter II and III plants have already been successfully launched by 2015, the new lines are similar to Petroter I in terms of the underlying process, but they have been complemented with several measures following the principles of sustainable use of resources and environmental protection:

improvements have been made to a boiler-utilizer, allowing for even more efficient use of the organic content and carbon dioxide in the fuel gases;
equipment is being improved (utilisation boiler, ash heat exchanger, flash furnace), is being enhanced as well, allowing for more efficient use of heat generated from the production process, producing steam and heating water;
the process of shale oil manufacturing was improved with a mixing unit of fine-dispersed fuel with high ash content (residue of oil shale cleaning) and circulation oil, which makes it possible to direct the residue from cleaning oil shale back to the process, thus reducing the need of its transportation and temporary storage. Processing in an enclosed system, therefore, reduces the environmental impact of transport

As a summary, it is worth noting that more than one hundred big and small changes were made in the Petroter II and III plants, all for the main goal of ensuring more efficient and environment-friendly functioning of the process. The whole process allows now higher production volume with less raw material used and, therefore, fewer emissions. Besides, the changes also allow for the maximum use of heat energy generated in the process and for reduction of regular maintenance and standstill periods. Thus, the changes ensure the stability of the process, rendering it more effective and environment-friendly.

In 2017, a large-scale reconstruction of the recovery boiler at Petroter I took place. The implemented changes have been intended for achieving the goal of maximum efficiency.

Filter cake instead of liquid waste

Owing to the launching of the unit intended for filtering shale oils, several sources of air emissions were eliminated, and the emissions itself, as well as produce losses, were reduced. In the result of the implementation of the new technological scheme, no more hazardous liquid waste is generated, such as fuses, and in the course of the process we now obtain a finely dispersed solid fuel - filter cake.

Reconstruction of the oil separation unit

More than 2.5 mln EUR was spent on the reconstruction of the oil separation unit, which cleanses the water on the territory from the oil shale processing waste. The new floatation devices allow pre-treating of the industrial wastewater and ensure the required water quality on exit from the oil removal unit. The enhancements that have been carried out have allowed removing several sources of air emissions, in the result of which unpleasant odour diminished.

In order to improve the efficiency of the logistics chain of the production process, we have developed and introduced several innovative conveyor systems. Highlighting conveyors as an example of process innovation is due to the fact that the calorific value of oil shale is low, therefore the sustainability of the oil shale industry requires highly efficient logistics of material. Conveyor transport is definitely one of the most environmentally friendly ways of transporting both raw materials and waste, as there is no negative impact and no damage to the roads.

Ojamaa conveyor

A significant environmental project is the belt conveyor for oil shale, constructed by VKG Kaevandused in the years 2010-2012 to run from the Ojamaa mine to the Kohtla-Järve industrial territory. 12.5 km – a lenght of the ground conveyor that transports raw material from Ojamaa mine to Petroter and Kiviter shale oil plants. Read detailed information here.

Ash removal conveyor

Considering the composition of oil shale (40% of minerals), the production of shale oil using Petroter technology generates a considerable amount of ash in addition to the steam-gas mixture as a result of the pyrolysis in the reactor. Shale ash generated as waste is deposited to a landfill at VKG's production territory. In 2015, together with the third Petroter shale oil factory, we also opened the complex of ash disposal conveyors with the follow-up dampening unit, and the total amount of investments exceeded 10 mln EUR. The conveyor brings oil shale ash from the three Petroter plants right down to the depositing site. The conveyor helps to reduce the environmental burden exerted by vehicles considerably. Read detailed information here.

Põhja thermal power plant desulphurization system

In October 2016, the third sulphur trapping device was finished at VKG Energia's Põhja thermal power plant. The three units are connected to a single system, where flue gas from all boilers of the plant is directed to. This unique solution allows flexible adjustment of the desulphurisation system’s operation and ensures flue gas cleaning in the event of malfunction of one trapping device. As a result, we can see that in 2016, the quality of the ambient air in Kohtla-Järve improved significantly, and the total amount of the emissions of SO₂ decreased by about 70% as compared with the previous year.

The strategic vision of reducing the impact of the industry

The main directions of environmental activities for the years 2012– 2018 include reducing atmospheric emissions, especially pertaining to sulphur dioxide and the sources of pollution causing unpleasant odours.

Also, increased attention will be paid to improving the quality of storm and waste waters and to enhancing of treatment technologies. Issues regarding depositing of oil shale ash and bottom ash and the closing of the wet deposit are also planned to be solved. Besides, the measures aimed at an increase in energy efficiency are also being sought.

The main environmental goals for the next five years are the following:

Reducing the sources of air pollutants and emissions of aliphatic hydrocarbons and hydrosulphide;
More efficient and complex monitoring of the Group’s air pollution and precise forecast modelling of the effect of expansion;
Reduction of sulphur emissions and concentration; Reducing the quantities and concentrations of sulphur dioxide emission, by installing two additional sulphur scrubbers;
Closing and tidying old hazardous waste deposits, thus reducing the pollution load of soil water and groundwater;
More efficient treatment of storm and wastewaters;
More conservative resource use, by way of developing energy efficiency (with the energy audit) and conserving natural resources (research on using mining water as coolant water, lime production plant), boosting the efficiency of co-production
development of oil shale processing BAT and improvement of existing production.

The following studies were conducted in 2017:

Updating the project of Kiviter's permitted emissions;
Updating the project of Petroter's production's permitted emissions;
Updating the project of VKG Energia's permitted emissions;
Environmental impact assessment of Sonda mine, which assesses the impact of the planned mine on the surrounding territory;
Verification of CO₂ emissions produced in the group and improvement of the system;
Bakeapple ecosystem monitoring;
Monitoring groundwater and surface water at the Ojamaa mine;
Monitoring groundwater at the ash storage site at Ahtme thermal power plant;
Measuring and simulating odoriferous substances from the source of pollution at Viru Keemia Grupp.

Handling production waste

Viru Keemia Grupp is developing the system of management of industrial waste, which is aimed at the optimization of the movement of waste flows, reduction of environmental footprint and relevant expenses, and using up as much waste as possible.

Hazardous wastes

In the years 2015 and 2016, the increase in the amount of hazardous waste was 0.26 million tonnes compared to 2014. This is mainly due to the launch of VKG Oil's Petroter III plant and Petroter II's operation at maximum capacity throughout the year. Prior to that, Petroter II had only been in use for six months. Oil shale ash is produced as a waste in the operation of these plants.

In 2017, the amount of semi-coke reached the before-crisis level, since units 4 GGJ and 5 GGJ, operating on the basis of Kiviter technology, were launched. The amount of oil shale ash reached 76,000 tons, which was caused by an increase in the oil shale processing capacity at the three Petroter plants.

In that year, a new type of waste emerged - the gas purification waste containing hazardous substances (waste code 10 01 18*). Since in 2017 the Northern thermal power plant refused from using solid fuel, the waste generated in the result of sulphur separation is no longer classified as oil shale ash. Thus the main waste type generated at the Northern thermal power plant is the gas purification waste containing hazardous substances generated in the result of the sulphur separation process.

Generation of hazardous waste in the Group, MLN TONNES	2012	2013	2014	2015	2016	2017
Hazardous wastes	1,71	1,88	1,95	2,16	1,97	2,67
incl. the residues generated while cleaning the tanks (t)	365,49	122,28	330,92	509,6	27,74	5,0
incl. oil shale ash (t)	423 776,99	477 773,92	621 598,75	1 231 395,59	1 575 593,95	1 651 832,94
incl. semi-coke (t)	868 884,58	972 801,34	934 985,73	627 827,95	232 483,89	635 492,91
incl. gas purification waste (t)	0	0	0	0	0	54 742,10

Generation of hazardous waste at VKG Oil AS per production unit, TONNES/TONNES

2010

4,03

2011

4,09

2012

4,52

2013

4,68

2014

4,6

2015

4,8

2016

4,26

2017

4,10

During the period 2011-2015, the ratio of hazardous waste generated per one tonne of production has increased. This is caused by the increase in using Petroter technology (fine-grained oil shale with lower calorific value and higher mineral content is being processed) and transition to Ojamaa oil shale, which also has higher mineral content. Since Petroter uses fine-grained oil shale with lower calorific value in its production process, the output of oil is lower in this process. This, in turn, leads to the aforementioned ratio being higher. However, Petroter technology provides energy-efficient production with an energy efficiency of about 80%. This allows using the potential of fine-grained oil shale more efficiently than just burning it to generate electricity. Years 2016 and 2017 show a decrease in the ratio. Consequently, as compared with the year 2015, in spite of growth in production, the amount of waste decreased, which is due to the fact that VKG Oil made an investment, which reduced the generation of phenol waters in the result of using the Petroter technology.

Deposited quantities of solid wastes, TONNES

2010

2011

2012

2013

2014

2015

2016

2017

1 000 000

2 000 000

3 000 000

Semi-coke (GGJ)

Oil shale ash (Energia)

NID (Energia)

Oil shale ash (Petroter)

977,283 tonnes of solid waste were deposited in 2015, which is about 13% more than in the previous year. 1,846,710.52 tonnes were deposited in 2016, which is almost 49% more than previously. In the last two years, more ash was produced due to the addition of Petroter II and Petroter III plants.

In 2017, the total number of deposited sold waste made up 2,342,062.17 tons, which is 27% higher than in the previous year. An increase in the amount in that year was caused by an increase in the amount of semi-coke to the pre-crisis level, since units 4 GGJ and 5 GGJ, operating on the basis of Kiviter technology, were launched.

Solid wastes depositing fees, EUR

2010

2011

2012

2013

2014

2015

2016

2017

2 000 000

4 000 000

6 000 000

8 000 000

Semi-coke (GGJ)

Oil shale ash + NID (Energia)

Oil shale ash (Petroter)

Solid waste disposal charges in 2015 amounted to around 2,902,000 euros and 5,503,000 euros in 2016. About 47% higher than a year ago. In 2017, the charge for depositing waste increased by 1,476,000 EUR, i.e. the amount of charges increased by 27% per year.

A direct link between production output and the increase in the volume of waste can be seen on graph. However, it is important to note that the ratio of hazardous waste generated per one tonne of production has still decreased in the last two year.

Non-hazardous wastes

As for non-hazardous waste, the largest share at VKG is made up of the oil shale waste rock, generated in mines (it was 2,054,000 tons in 2017). VKG sends these substances for recycling in full extent. The largest share of the oil shale waste rock (about 2 mln tons in 2017) is used as a filling material, which is produced and sold by the Ojamaa mine as a certified product.

If we rule out the oil shale waste rock, in 2017, 1580.1 tons of non-hazardous waste was generated within the Group. As compared with the previous year, this indicator decreased by 10,000 tons, since at the beginning of 2017, VKG sold its subsidiary VKG Plokk, which generated ca 10,000 tons of concrete waste, the majority of which was forwarded back into the production process and recycled.

Non-hazardous wastes generated at the Group, TONNES	2011	2012	2013	2014	2015	2016	2017
Non-hazardous wastes	15 340	739 653	582 464	1 408 028	1 656 319	1 059 735,5	2 055 444
incl. construction and demolition wastes	662,5	433,5	318	749	560	351	459
incl. common wastes	219	229	382	365	228,5	263,5	284
incl. calcium-based reaction wastes from sulphur trapping	14 459	17 758	0	0	0	0	0

incl. mining scrap	0	714 914	570 241	1 384 224	1 644 949	1 047 581,5	2 053 864
incl. old metal				11 290	6 283	1 486	763

Reusable wastes

In 2015, the amount of waste sent for recycling by the Group increased by about 4% as compared with the previous year. The increase comes mainly from oil shale ash. This type of waste was used in 2015 within the project of reclamation of VKG Energia's ash landfill. In 2016, recycling within the group decreased by 43% as recycling activities at VKG Energia's ash landfill were completed. Most of the recycling consisted of purifying phenolic water from Petroter process.

In 2017, the rate of recycling increased by 64% as compared with the previous year, which is due to the fact that phenol waters generated within the Petroter process were purified in the full extent, and also, in spite of an increase in the amount of the oil shale waste rock, 99% of it was used as a filling material.

Reuse of wastes, TONNES	2012	2013	2014	2015	2016	2017
Reusable wastes	2 025,3	2 044,8	2 452,1	2 558,4	1 444,2	2 381,5
incl. construction wastes	0	8 000	0	0	0	0
incl. phenol water	419 599	423 931	392 058	292 111	112 439	327 675
incl. fusses	0	0	0	509,6	0	0
incl. old oil	0	0	0	1,135	0	0
incl. semi-coke	694 211	775 240	445 912	421 894	0	0
incl. oil shale ash	192 135	266 726	245 170	473 445	0	0
incl. mining scrap	714 914	570 241	1 369 000	1 369 999	1 322 531	2 053 864

Välisõhu kaitse

In 2017, the Group was paying even more attention to resolving one of its main tasks in the field of environmental protection, i.e. the reduction of emission of pollutants into the atmosphere.

CO₂ emissions

In 2017, the amount of CO₂ emissions was 1,239,915 tons, i.e. this indicator increased by 17% per year. An increase in the number of emissions is due to the fact that the companies within the Group have increased their production volumes. For example, the amount of produce at VKG Energia increased by 7% and at VKG Oil by 41% respectively.

In 2016, the total CO₂ emissions of the group's subsidiaries amounted to 1,052,700 tonnes and in 2015 983,530 tonnes. In two years, emissions have increased by about 30%. Distribution of the emissions between the subsidiaries shows that the increase comes from VKG Oil's Petroter plants. This is caused by the fact that the third Petroter plant was launched in 2015.

CO₂ emissions, TONNES

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

500 000

1 000 000

1 500 000

VKG Energia

VKG Oil (Old plant)

VKG Oil (Petroter)

VKG Soojus

Although the increase of production output was accompanied by an increase of CO₂ emissions from Petroter plants, it is reflected in graph that specific emissions of said pollutant per one production unit (MWh) have reduced in 2015 and in 2016 and 2017 remained at a similar level. This figure was worse in 2014 due to difficulties in achieving a stable operating mode upon the launch of Petroter II plant. This issue was solved in 2015 and the efficiency of Petroter equipment has improved by about 4% in comparison to 2013. In the case of Petroter III, the stable operating mode was achieved faster, and CO₂ emissions did not skyrocket upon its launch, however, the figure is slightly higher in 2016 compared to 2015.
The number of special emissions of CO₂ in the course of oil production was the lowest within the last five years.

Specific emissions of CO₂ per one production unit of Petroter plants, TONNES CO₂/MWh

2012

0,146

2013

0,118

2014

0,156

2015

0,114

2016

0,123

2017

0,112

SO₂ emissions

In 2015, the total emissions of SO₂ at the subsidiaries of the Group made up 7,791 tons, while in 2016 it was 2,473 tons, and in 2017, 3,567.63 tons. As compared with the years 2015 and 2016, in 2016, the number of emissions decreased by about 68%. This is due to the fact that investments were made into the construction of the systems of trapping units at the Northern thermal power plant at VKG Energia. In 2017, the number of emissions of SO₂ was two times smaller than in 2015. A major part of SO₂ emissions (about 85% of the total amount of emissions in the Group) was released in the process of combustion of generator gas generated in the course of thermal processing of oil shale at VKG Energia, semi-coke gas, and oil shale and filter coke. At VKG Oil, emissions were generated mainly in the process of combustion of gases generated as by-products in the course of production of shale oil (generator gas, semi-coke gas, separator gas) at the distillatory unit for shale oils as well as at the unit for the production of electrode coke and in the course of operation of Petroter plants.

SO₂ EMISSIONS AND ALLOWED QUANTITIES (TONNES)

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2 500

5 000

7 500

10 000

VKG Energia

Allowed quantity (VKG Energia)

VKG Oil (Old plant)

Allowed quantity (VKG Oil, Old plant)

VKG Oil (Petroter)

Allowed quantity (Petroter)

VKG Soojus

Allowed quantity (VKG Soojus)

In 2015, VKG Energia achieved a 22% reduction of SO₂ specific emissions. In 2016, the result improved further. During this period, two new sulphur trapping devices have been launched, which has reduced the atmospheric emissions of SO₂. In graph you can see that in 2017 the number of special emissions increased, but, as compared with the year 2015, it still decreased almost by three times. In 2015 and 2017, production facilities were mainly similar, hence a significant decrease in the amount of SO₂. Three times lower emission in comparison to 2015.

Emissions of SO₂ per the production volume of VKG Energia, TONNES/MWh

2012

0,0134

2013

0,0099

2014

0,0127

2015

0,0098

2016

0,0024

2017

0,0033

As for the number of special emissions of SO₂ at the production facility of VKG Oil per one unit of oil production, within the years 2014-2017 there was a stable downward trend. As compared with the year 2014, it becomes evident that in 2015, the number of special emissions decreased by about 4%, in 2016, by about 12%, and in 2017, by 16%. The result can be attributed to the growth in the share of new Petroter plants in production volumes.

Emissions of SO₂ per the production volume of VKG Oil, TONNES/TONNES

2012

0,0026

2013

0,0023

2014

0,0025

2015

0,0024

2016

0,0022

2017

0,0021

Air pollution fees

Since 2010, there has been a rising trend in air pollution charges. This was mainly due to the rise of pollution charge rates and the increase in production volumes. From 2015, charges have started to decrease. In 2016, the air pollution charge amounted to 0.64 million euros, which is 3.2 times lower than the amount paid in 2015. This is connected to the reduction of SO₂ emissions due to the launch of a new sulphur trapping system at VKG Energia's Põhja thermal power plant. Also, Lõuna thermal power plant was closed, which was an important source of SO₂. The amendment to the Environmental Charges Act also made its impact, according to which the area-based coefficient of 1.5 was removed from the calculation of charges.

In 2017, pollution charges increased by 27% as compared with the previous year. The latter is due to the increase in the number of emissions of SO₂, which accompanied an increase in production volumes.

Air pollution fees in the Group, EUR

2007

790 428

2008

658 701

2009

659 915

2010

779 441

2011

966 244

2012

1 171 754

2013

1 637 181

2014

1 917 761

2015

2 070 021

2016

646 327

2017

824 140

RESOURCE USE

Energy consumption and energy efficiency

Increasing use of energy resources in recent years has been related to the consistent growth of the production rate within the Group. Since we are aware of the anthropogenic effect of those processes, we are increasing the energy efficiency of production and doing our best for the sake of reduction of the use of energy resources.

Main objectives in the field of energy saving and energy efficiency:

increasing the energy efficiency of the activities of the companies of the Group, preserving or enhancing reliability, safety, and productive capacity;
reduction of negative environmental effects;
reduction of consumption of non-renewable energy resources.

Electricity consumption

In 2015, the rate of electricity consumption at the Group made up 176,534 MWh, in 2016, it was 163,481 MWh, and in 2017, it was 199,572.34 MWh. In 2016, the electricity consumption at the Group decreased by about 7%, since Kiviter plants were brought to a standstill.

In 2017, the in-house needs of the Group increased significantly, since two of the Kiviter plants were re-commissioned. At the same time, it should be pointed out that the consumption of electricity by Petroter plants decreased, in spite of an increase in production volumes. There was a significant increase in the in-house needs at VKG Energia, which is obviously related to the construction of a new boiler and a turbine.

VKG´s electricity sales and consumption balance, MWh

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

200 000

400 000

600 000

Produced by VKG Energia

Purchased from Eesti Energia

Electricity consumption in the Group, MWh

2013

2014

2015

2016

2017

200 000

400 000

600 000

Electricity sales to enterprises outside the Group

Sales to VKG Elektrivõrgud

Sales to BES and Eesti Energia

Losses

VKG own cosumption

Own consumption of VKG Energia

In 2015 and 2016, the share of Petroter plants in VKG Oil's electricity consumption has increased significantly. This figure was 38% until 2014, increased to 53% of VKG Oil's total electricity consumption in 2015 and reached 82% in 2016. This is due to the fact that Petroter II and Petroter III plants have reached their standard mode. Although the increase in production output was accompanied by higher electricity consumption, the specific electricity consumption (kW/tonne) per one unit of produced shale oil remained at the same level compared to the previous year. The level of production efficiency is thus still ensured.

In 2017, the consumption of electricity at VKG Oil increased to a certain extent. However, the specific consumption of electricity (kW per ton) per one unit of the manufactured shale oil decreased by 24%. Consequently, in 2017, the production volume of shale oil was much higher, but, at the same time, electricity was used in a very thrifty way.

Electricity consumption by Kiviter and Petroter technologies at VKG Oil, kWh/a

2009

2010

2011

2012

2013

2014

2015

2016

2017

25 000

50 000

75 000

100 000

Electricity for Kiviter

Electricity for Petroter

VKG Energia consumed 41,204 MWh of electricity in 2015 and 44,869 MWh of electricity in 2016. 311,232 MWh and 351,822 MWh of electricity were generated respectively. In comparison to 2014, the share of electricity has increased, and the share of heat and steam reduced in VKG Energia's energy production. The output of heat and steam production is determined by market demand. The company has been able to react to the market situation and direct the outstanding resource into electricity generation.

In 2017, VKG Energia used 49,631 MWh of electricity for its own needs, which reaches the levels of the years 2014 and 2015. The latter is obviously due to the fact that in 2017, a new boiler and a turbine were built and launched at the Northern thermal power plant. Similarly, in 2016, growth in the share of electricity from energy yield continued, and as compared with the two previous years, it increased by 18%.

Electricity and heat produced by VKG Energia, MWh

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

200 000

400 000

600 000

800 000

Heat and steam for VKG own cosumption

Heat and steam to external consumers

Produced electricity

In 2015 and 2016, VKG Energia has started to consume significantly more of Petroter gas. This gas accounted for almost 29% of the total fuel consumption in 2014, increased to 50% in 2015 and reached 70% in 2016. This is due to the launch of Petroter II and III plants, resulting in more Petroter gas, which is then directed to VKG Energia for the production of heat and electricity. For the same reason, the amount of steam from Petroter has also increased. However, the input of generator gas has decreased due to changes in the production output of VKG Oil's Kiviter plants.

As for the input in the field of thermal and electricity production, in 2017, the largest share was still occupied by semi-coke gas, which was at the same level as in 2016. At the same time, as compared with the previous year, the amount of generator gas increased three times, which is due to the launching of the factories operating on the basis of the Kiviter technology.

Fuel consumed by VKG Energia, TKT

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

100 000

200 000

300 000

Filter cake

Petroter gas

Retort gas

Natural gas

Oil shale

Unrefined shale oil

Steam from Petroter, 34 bar

Limestone gravel

Consumption of water resources

While using water resources, the Group is striving to reduce water consumption and improve the environmental properties of wastewater by reducing the content of pollutants in it. The Group is exercising regular monitoring over surface water, spring water, and wastewater in the areas of water protection and evaluates the condition of the bodies of water in the area of its activities.

Water consumption

The group's total water consumption in 2015 amounted to 4,926,000 m³, 55,100 of which was groundwater, 4,819,000 lake water and 51,800 mining water. In 2015, the consumption increased by 1,163,000 m³ compared to 2014. The increase took place at the expense of lake and mining water. The demand for lake water was increased due to the addition of Petroter III plant and Petroter II's operation at full capacity since the process of these plants requires water. However, the rise in mining water consumption was related to the increased mining volume of VKG Kaevandused.

In 2016, the water consumption was about 4,550,000 m³, which is 375,000 m³ less than in the previous year. The decrease was due to the introduction of a new method of ash depositing which allows the replacement of lake water with wastewater from the production process.

In 2017, water consumption in the entire Group made up about 4,957,000 m³, reaching the level of the year 2015. This particular growth in water consumption was due to the restoration of production capacity (launching of the factories operating on the basis of the Kiviter technology). Wastewater released in the course of the production process was used for depositing ash, which, in accordance with the methodology, allows using lake water more efficiently.

Water consumption at the Group, m³

2010

2011

2012

2013

2014

2015

2016

2017

150 000

300 000

450 000

600 000

Lake water

Ground water

Mine water

Water emissions

The group's emission into the water in 2015 was 15 420 000 m³. There were no significant changes in wastewater and rainwater compared to the previous year, while there was a decrease of about 10% in the effluent streams from the mines. As a result of a dry period (low rainfall and lots of evaporation), less water from the sedimentary basins of the mine was directed to the environment.

The group's total water discharge in 2016 was 14 970 000 m³. About 80% (ca 13 million m³) of this resulted from the mines. Rainfall increased and the number of effluent streams at the territory of VKG Oil also increased (rainfall was 115% according to Jõhvi Meteorological Station data). At the same time, the amount of mining water decreased by 16% and wastewater by 12%.

In 2017, the total amount of water waste at the Group was 20,190,000 m³, and an increase of 40% was due to an increase in the amount of water waste at VKG Kaevandused. At VKG Kaevandused, mine water is generated in the course of mining operations at the Ojamaa and the Sompa mines, which is released into the environment. Mine water is not wastewater, and the water released from the sedimentation basin into the environment conforms to environmental requirements. In addition to that, the amount of wastewater on the territory of VKG Oil increased. The two latter were obviously related to the fact that for the second year in a row the amount of precipitation was above the norm (according to the data provided by Jõhvi weather station, the amount of precipitation was 106%). Besides, an increase in the amount of mine water was also caused by an expansion of the underground system of passages in the mines.

Water emissions from the Group, THOUSAND m³

2010

2011

2012

2013

2014

2015

2016

2017

5 000 000

10 000 000

15 000 000

20 000 000

Waste water

Storm water

Effluent from the mine (sediment pool)

Water pollution charges

The group's water pollution charges decreased by nearly 3.5% in 2015 and by 4.7% in 2016 võrra. This is primarily due to a decrease in the volume of effluent streams from VKG Kaevandused compared to previous years. 2017. aastal tõusis vee keskkonnatasu ligi 30%, mis on peamiselt põhjustatud VKG Kaevanduste vajadusest pumbata välja vett allmaa kaevanduse laienemisel.

Charge for the special use of water and effluent pollution charge, EUR

2010

2011

2012

2013

2014

2015

2016

2017

500 000

1 000 000

1 500 000

VKG Energia

VKG Oil

VKG Kaevandused

VKG Soojus

Safe development - production safety and employment protection

The life and health of the employees are of the highest priority for Viru Keemia Grupp. The production and environmental safety strategy are focused on achieving the so-called zero target.

As of 2017, six out of seven VKG subsidiaries hold certificates confirming their compliance with the international OHSAS 18001 standard, which allows developing the entire system of management of labour protection and occupational safety integrated with all of the business processes.

Management

To achieve zero target, Viru Keemia Grupp is improving risk management in the field of production safety, investing money into advanced technologies, enhancing the reliability of its equipment, and promoting safety culture.

In the Group, there are five main courses of action aimed at achieving the zero target. Within the frames of those actions, every single manager has undertaken a number of personal obligations aimed at increasing production safety. Those obligations are reflected in performance indicators set for the managers as targets.

The main goals determined in the principles of occupational safety are the following:

reducing the number of occupational injuries, professional diseases, accidents, and harmful environmental effects;
organising safe production by means of comprehensive analytics and the management and minimization of production risks;
implementing the best global practices in the field.

Strategic goals of the company in the field of labour protection and occupational safety:

an absence of work-related deaths;
an absence of major accidents;
introduction of the corporate integrated management system of occupational safety and health issues in accordance with international standards in all companies of the group;
introduction of trauma prevention system;
regular briefings for employees;
implementation of the BBS system or Task Safety Audit system.

Production safety management structure

Review of the results of the implementation of the production safety strategy
Review of the analyses of accidents and emergency situations
Analysis of the best practices of safety provision

Determination of the principles, strategy and goals in the field of production safety
Determination of development trends of the highest priority
General management and control of the system of production safety in the Group
Performance of operating objectives
Cooperation with third parties in this field

Immediate actions in the field of production safety

Cooperation with local communities

VKG is a large production facility, which creates many workplaces for local people. As of the end of the reporting year, about 1,800 people were employed in the segment of oil shale extraction and processing, mainly from among locals. Our oil shale processing sites are located within the city, which is why the safety of the residents and our employees is our priority. We implement industrial safety and occupational health and safety programs in an effort to minimize the risk of accidents in production. We attach an important role in this process of improving the culture of occupational safety.

Safety culture

To develop a safety culture, the Group is implementing a number of different measures: step-by-step compulsory training as well as in-service training, knowledge assessment, notification of employees and subcontractors as well as awareness-raising activities, strengthening the commitment of managers to safety values.

A number of projects have been implemented in the Group, which include safety audits in specific fields, the establishment of development opportunities, and the development of action plans, using advanced methods.

There is a system of training in the field of production safety that is implemented in the Group for the purpose of development of safety culture, which is based on the requirements established by legal acts, company standards, and the best practices.

Currently, there are several options for registering near-miss situations.

For the purposes of promotion of safety culture, the "Report danger!" initiative has been set up. The system of registration of near miss situations was launched in 2017. Every employee can report about dangerous situations occurring at work in a fast and convenient manner. The system of reporting about dangerous situations enables the Group to prevent accidents at workplaces in a timely manner by responding to arising problems fast enough. By implementing and using this system, we will be able to involve all of the employees into the enhancement of the working environment. Currently, there are several options for registering dangerous situations.

The simplest method that is available for all of the employees and subcontractors of the Group is via the www.vkg.ee webpage. In 2017, over 80 near miss situations were registered in the system, the timely resolution of which has helped to prevent accidents.

Employees are also involved in the promotion of occupational safety by means of openness and communication. All employees can apply to become working environment representatives and take part in the work of the council of working environment representatives. Working environment representatives are selected by the employees, and they take part in the work of the council of working environment representatives together with the representatives of the employer.

Occupational safety in 2017 in numbers

In 2017, 19 accidents at work were registered at Viru Keemia Grupp. There were no accidents leading to the death of any of the employees.

Broken down by the level of severity of the damage done to health, in 2017, there were 7 accidents leading to serious injuries and 12 accidents with minor injuries. Compared with 2016, the number of accidents with serious injuries decreased by 1, and the number of accidents with minor injuries decreased by 6.

Serious accidents took place in the following subsidiaries:
Viru RMT – 1
VKG Oil – 4
VKG Transport - 1
VKG Kaevandused – 1

In 2017, the main reasons for accidents at work were the following:

Violation of occupation safety requirements by an employee;
Negligence;
Valed töömeetmed;
Wrong methods of doing the work;
Non-conformity of work tools to safety requirements.

Number of accidents at work by years with the indication of the number of employees

1000

2000

3000

2008

1213

2009

1268

2010

1446

2011

1704

2012

1941

2013

2076

2014

2116

2015

1994

2016

1785

2017

1788

Minor accident

Severe accident

Number of employees

The number of accidents at work per employee in 2008-2017	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Number of employees	1414	1358	1507	1769	2002	2150	2152	1995	1786	1788
Number of accidents	8	9	16	12	16	11	13	14	26	19
Number of accidents per an employee	0,006	0,007	0,0011	0,007	0,008	0,005	0,006	0,007	0,015	0,11

The total number of accidents at work (both serious and minor): most accidents in 2008-2017 took place at VKG Oil – 46, Viru RMT – 28, and VKG Kaevandused – 25. The high number of occupational accidents in the abovementioned companies is due to the dangerous nature of work and from the number of employees. (underground mining, handling of hazardous chemicals, repair and service of technological equipment).

The most important measures for improving the working environment in 2018:

The implementation of the system of registration of dangerous situations and their resolution at the Group.
A profound analysis of the reasons for accidents that have taken place in the Group.
Raising awareness among the employees concerning occupational safety and developing a safe working culture.

2015-2017 TRIR average figures	2015	2016	2017
Viru RMT	5,3	11,2	12
VKG OIL	0,67	11,0	6,4
VKG Energia	3,6	8,9	0
VKG Transport	9,7	3,9	9,1
VKG Elektrivõrgud	0	10,02	0
VKG Kaevandused	2,2	4,1	5,2
VKG Soojus	0	0	0
Average in the Group	3,2	7,9	6,0

TRIR shows the number of employment injuries per million hours worked.

Safety of chemicals and product liability

GPS is a voluntary initiative managed by ICCA, which, together with the RC Global Charter, is the foundation for the contribution made by the chemical industry into the Strategic Approach to International Chemicals Management (SAICM), implemented by the United Nations. For the chemical industry all over Europe, GPS will allow to boost the results and to expand the range of use of REACH as well as to raise the level of trust displayed by the public in terms of safe handling of chemical substances. While the REACH subject files are very thick, specific, complex, and detailed, the GPS files are summaries of the safety information (GPS Product Safety Summary), which contain risk analysis and the information concerning risk management in a clear format that can be forwarded to employees, sub users, and other interested parties. Those summaries contain the information about dangers and exposure, recommendations for risk management, and the description of benefits this or that chemical substance can bring to society.

In Estonia, the application of GPS is coordinated by FECI, but it is implemented by companies themselves, and in our particular case, VKG has become an active proponent of this initiative at the level of the Estonian chemical industry. In 2013, the main efforts were spent on getting ready for the project: mapping essential activities, clarifying the needs, planning resources, etc. The first tangible results will be achieved this year, i.e. in 2015, when the first summaries of the safety information will be uploaded to the GPS portal, and the completion of the project is connected with the last REACH registration deadline in 2018, by which the safety information summaries about all of the substances present on the market must be made available for the public.

The main goals of GPS:

a wide distribution of knowledge about hazardous substances;
promotion of product liability and provision of adequate handling and use of chemical substances within the entire value chain, regardless of the geographical position (the minimization of differences between developing and industrial countries), offering relevant and reliable information;
increase in transparency; helping the companies to offer to the interested groups the information about chemical substances on sale easily and in a clear format: GPS safety information in the form of a summary;
in 2018, the product safety information about all the substances on the market will be available for the public.

Recording and reporting hazardous chemical substances

The important principles of the Responsible Care initiative are the provision of assistance to other companies and taking responsibility for the company´s own products within the entire value chain. In addition to ordinary customers, those principles should also be applied within the Group, which is why the principles of recording and reporting hazardous chemical substances are being harmonized and improved at VKG as a whole at all levels. The priority of the Group in this field is cooperation and synergy between subsidiaries as well as learning from each other. The preliminary works that prepare the company for harmonization of the principles of recording and reporting had started earlier, but in 2013, the first tangible and comparable results were achieved. The aim of subsequent years shall be the advancement of the system and the ongoing increase in the quality of information to be collected through the distribution of the best practices among subsidiaries.

Our people

Women 444

As of 31 December 2017, Viru Keemia Group had altogether

employees

Men 1333

Members of the Board in the companies within the Group

Employees that have children younger than age 18

The youngest employee

The oldest employee

The longest time in employment at the company

The number of years VKG employees have been connected with the company, on the average

Average age

The number of employees with higher education, %

We value

We are convinced of the fact that the success of our business solely depends on the people that are working here. Therefore one of the main priorities of staff policy at VKG is enhancing the work efficiency as well as increasing the personal interest of the employees of the company against the activities and achievements of the Group. The peculiarity of the oil shale industry necessitates the use of male work exclusively in some departments. Therefore there is no sexual discrimination in the Group, i.e. we have women working in the fields and divisions, where it is permitted by law. There is also a significant share of women among high-level personnel. As for employees with higher education, the distribution is almost equal, i.e. 59% of men and 41% of women.

Within recent years, the composition of employees has been stable, it corresponds to the sphere of activities of the company and the goals that have been set, i.e. to increase the volumes of extraction and processing of oil shale and develop the sale of oil shale chemical products. We have achieved success at combining the energy of young employees with the experience of the reputable older ones.

The main structure of our company is well-developed. Each employee knows his or her role in the company and understands what his or her tasks are both today, tomorrow, and in the long-term perspective. However, it is self-evident that we want to attract new professionals in the field to our company, in order to make good use of their best knowledge and experience, acquired by them in other companies.

- Tea Allikmäe, HR director

WE PROMOTE AND DEVELOP THE AFTERGROWTH

Fast modern technological development assumes the skilful and strategic management of the staff. Viru Keemia Group pays a lot of attention to developing the aftergrowth of its employees.

In 2017, almost 100 Group key persons participated in training courses, which were aimed at developing managerial skills and managing changes

We are pleased with the fact that our people are interested in further development of their professional skills and knowledge, and they study actively. Many of them obtain higher education alongside with working at the Group and develop their professional knowledge both in degree studies and in higher and vocational schools.

Our development system is focused on:

high-quality feedback and targeted evaluations that support growth and professional development;
access to the general training program which corresponds to the group's structure of professions and achieving its strategic goals;
true and meaningful opportunities to learn during training.

One of the main priorities of our staff policy is the provision of large-scale training and development opportunities for our employees. To strengthen our competitive advantages and use them more efficiently, we need a system that would enable our employees to manage, preserve, distribute, and develop their competences further.

To develop the professional competencies of our employees, we hold different continuing professional training courses for them:

professional training courses in the form of open learning
specialised training courses at the company
training courses aimed at the development of teamwork skills and management competencies
In 2017, about 200,000 EUR were invested in the development of training programmes. About 800 employees from different levels took part in training courses.

ACKNOWLEDGEMENT

Every year, the awards of "Best Chemist" (VKG OIl), "Honorary Miner" (VKG Kaevandused), and "Employee of the Year" are granted in the Group and in its subsidiaries to the best employees for the most outstanding achievements and contribution into the development of VKG. Those awards are the highest rewards in the Group, which facilitate the strengthening of common values and organisational culture, inspire employees for further professional development, strengthen solidarity and corporate spirit, and enable every single member of the team to feel that he or she has made an important contribution to the success story of the Group. As a rule, the ceremonies of presenting awards take place during professional celebrations - on a Chemists’ Day and a Miners’ Day.

We highly value the loyalty and commitment of our employees. The average duration of job tenure at the Group is 17 years. We would especially like to thank our employees with the longest experience, and to do that, four times a year the Board organises a special reception for labour anniversary celebrants, whose job tenure at the Group is 20 years or more. In 2017, 60 employees were honoured, nine of whom have worked at the company for 35 years, three for 40, and one for 45 years.

WE ARE CREATING SAFE WORKING ENVIRONMENT

The motto of the company in the field of occupational health and safety is that the life of every human being is invaluable, and people’s safety is above all. 9 life-saving rules have been developed and implemented at VKG, the adherence to which is of vital importance for all employees.

We are doing our best to provide all our employees with safe working conditions and a healthy working environment, high-quality tools and uniform, professional support and a pleasant environment for everyday activities.

For us, both the mental health and well-being of our employees is extremely important. In addition to regular medical examinations, whenever needed, we offer psychological support to our employees, for example, in the event of an accident at the workplace. We support and promote a healthy lifestyle and urge our employees to take part in sports activities, providing financial support via the SportID system. VKG employees play football actively. There are several football teams in the Group, which take part in both regional and national tournaments and achieve success.

WE SUPPORT TEAM SPIRIT

We believe that the key to success in any kind of undertaking lies in a professional team that is functioning as a whole.

This is why we see as our important task to develop managerial and teamwork skills among our employees. To improve them, we hold special training courses, using role plays, which help participants to step out of their customary frames of thinking and make non-standard decisions even in usual situations.

VKG as an employer

The year 2017 was very busy at VKG. The growing global economy and stabilized prices for oil products at the global market have enabled us to focus on the development of the company and on enhancing OTS competitive capacity. There have been no significant fluctuations in the composition of personnel in the reporting year. The number of employees has been within the range of 1,800 people.

The average gross salary of VKG employees was 1,325 euros in 2017, which exceeds the average gross salary in Ida-Virumaa with more than one thirds. Employees get a bonus payment for working in the evenings and at nights, benefits for the term of employment, for a birth of a child, anniversary benefits as well as death (funeral) allowance on the saddest occasions. Mothers with small children are allowed to take an additional paid holiday.

Our employees can benefit from the availability of the healthcare station service, where they can get help from qualified medical staff. We also offer vaccination against flu.

We value our employees through traditions: Chemists’ Days and Miners’ Days, Christmas parties, appreciation events for jubilees, a party for children starting school and their parents, where the children are given backpacks equipped with school supplies.

Training

Internal training

To retain and pass on knowledge in the group and to shape efficient, high-quality training conditions, an internal training resource is being established in the group. The current system has been successfully implemented in a number of the Group's subsidiaries but requires improvement at the group's common level. We see great potential in the development of internal training resource and bringing it to a new level of better quality. Several measures are planned for this, particularly training and practices for future internal trainers and coaches.

Training the staff for the purposes of strategic development projects

Among the training that took place in 2017, the most important were the ones aimed at preparing the employees in the context of the priorities of the long-term development strategy. They include:

in-service training for executive employees - the development of managers and HR staff members;
training in the field of control and management of changes;
special in-house training for the key staff of the company as well as the programmes meant for middle-ranking production managers;
further professional training (refresher courses) for employees;
training aimed at the promotion of safety culture;
training aimed at enhancing energy efficiency.

Staff training in the field of cybersecurity

Extremely fast computerisation, the involvement of people and business in the global web, dependency on computer networks - all of those require digital literacy from employees. In order to boost the competence of the employees of the Group in this field, a number of training on cybersecurity have taken place in the Group, and a number of measures aimed at enhancing network safety have been developed.

Preparations for the implementation of GDPR

In 2017, the companies of the Group started preparing for the implementation of the General Data Protection Regulation, GDPR, the goal of which is to increase and unify the protection of personal data of natural persons in the European Union. Proceeding from the rules pertaining to the collection, processing, storage, and transfer of personal data, which came into effect in May 2018, relevant training was held for the employees, whose job tasks include data processing. All of the principles are described in the Procedure for Processing and Protection of Personal Data, which is valid for all of the companies in the Group.

Work with young specialists

Active work with young specialists is one of the main priorities of VKG's human resources policy. This work is aimed at ensuring the group's employees' compliance with requirements, preparing highly qualified young specialists among the best graduates of educational institutions and their fast and efficient adaptation at the company.

52 young people interned at VKG's companies from vocational schools and higher education institutions in 2017. To speed up the adaptation of recent graduates, councils of young specialists work at community groups and mentors are appointed. Training and professional growth of young specialists take place in accordance with development plans. Experienced colleagues will instruct first-time employees and interns and remuneration is provided for this effort.

Cooperation with educational institutions

VKG has been providing scholarships via TTÜ Development Fund since 2006. From 2006 until today we have granted scholarships in the total amount of more than 90,000 euros.

VKG's bachelor’s degree scholarships are provided for up to two successful bachelor’s students of electrical engineering, mechatronics, earth sciences and geotechnology, environmental and chemical technology or thermal engineering at Tallinn University of Technology's School of Engineering. One scholarship is 1,300 euros.

VKG master’s degree scholarships are provided for one successful master’s student of environmental and chemical technology, fuel chemistry and technology, thermal engineering and electrical engineering at Tallinn University of Technology. One scholarship is 1,400 euros.

VKG's professional higher education scholarships are provided for up to four successful professional higher education students of fuel technology, industrial automation, machine building engineering, energy technology, chemistry technology, energy technology processes control and telematics and smart systems of Tallinn University of Technology's Virumaa College. One scholarship is 1,000 euros.

VKG scholarships support the students' motivation to acquire professions necessary in the Group and send a clear signal that we expect young professionals to join us.

Cooperation with trade unions

The Trade Union of Chemists of Kohtla-Järve also operates in the Group, and we have long-term partner relations with it. At the end of 2017, a new collective contract was entered into for the term of two years. The new collective contract does not only contain all of the previous social benefits and compensations but also provides for a higher rate of all of the existing monetary payments. Another important innovation is that in the new collective contract, we have expanded the circle of employees with benefits in case of redundancy. Additional benefits provided for by the collective agreement shall extend to all workers, regardless of whether the employee is a member of the trade union or not.

The improvements in the field of working and production discipline are of the highest priority for both parties. Consequently, within the frames of the new contract, the authorised representatives of the trade union have much more rights in the issues pertaining to healthcare and occupational safety. We believe that by means of cooperation, we will be able to make our working environment much safer and enjoyable.

Trustees of the trade union who represent employees` interests have regular meetings with the management team members of VKG’s enterprises, delivering to them questions and requests of employees and discussing employee-related problems and their possible solutions. The meetings usually take place once a month. The specific members of the supervision or management team are selected for the meeting by the trade union.

The chemical workers trade union activity in VKG includes the Group’s subsidiaries and also other chemical industries of the city. The trade union includes the employees of VKG, VKG Oil, Viru RMT, VKG Energia, VKG Transport, VKG Soojus, VKG Kaevandused and also Novotrade Invest. The professional association of employees of chemical enterprises has been active since the year 1948 when the first collective agreement was signed.

Observation of Human Rights

VKG observes human rights with full compliance and does not allow discrimination on the grounds of nationality, gender, origin, age, or any other characteristic, recognises the right of workers to form collective associations and organisations and guarantees observation of the rights of indigenous peoples and national minorities while arranging manufacturing operations in the areas they inhabit.

The company’s principles on observing human rights are set out in the following documents:

principles of production and environmental safety and occupational safety;
principles of human resource management;
the procedure for using personal data.

The realisation of these principles by the company is ensured by practical measures, such as:

taking the obligation to observe human rights and including these rights in the documentation of the company;
co-operation with interested groups on issues involving human rights;
developing return channels to allow interested groups to express their opinions or lodge complaints about this sphere;
supervising the observation of human rights by the company’s personnel and subcontractors.

Good practices of corporate governance

VKG follows the good practices of corporate governance in its activities. The good practices of corporate governance are intended to be followed primarily by enterprises having their shares traded in the Estonian regulated market, but they are also recommended for other enterprises subject to public interest. The objective of VKG is to follow the good practices of corporate governance and to present the activities of the enterprise in a transparent manner; thus the sustainable development report includes a chapter dedicated to the description of the good practices of corporate governance.

Shares and share capital

As of 01.01.2017, the nominal value of the share capital of VKG was 6,391,164.21 euros. There were no changes in the share capital in the years 2008– 2017. VKG’s shares are not noted on the securities market.

The Group has four shareholders with the following holdings as of 01.01.2017:

OÜ Tristen Trade 38,91%
OÜ Alvekor 25,49%
Ants Laos 19,53%
OÜ Sergos Invest 16,07%

General meeting. The exercise of the shareholders' rights

The highest management body of Viru Keemia Grupp is the general meeting of shareholders. General meetings can be regular and extraordinary. The competence of the general meeting is prescribed in the Commercial Code of Estonia and in the Articles of Association of VKG.

General meetings are summoned by the Management Board of VKG. The notice of summoning a regular general meeting of shareholders is sent to the shareholders at least 3 weeks before the date of holding the general meeting; the notice of summoning an extraordinary general meeting is sent at least 1 week before the date of holding the meeting. Annual reports are available to shareholders at least 2 weeks before the date of holding the general meeting.

A general meeting of shareholders is competent to make decisions if more than 50% of the votes granted by shares are represented at the meeting.

The meeting that approved the annual report of 2017 was held on June 27, 2018 with the participation of 100% of the votes granted by shares. The following decisions were made in the course of the general meeting of shareholders:

to approve the annual report of the financial year 2017;
the numberof dividends payable for 2017 was 238,560 EUR
the undistributed profit after the distribution of profit has made 250,071,420 EUR.

Organisational changes at VKG in 2017

Three changes took place in the Group in the reporting year.

January 2017

Changes in the composition of the Group

VKG Elektriehitus AS was united with Viru RMT, in the result of which 31 employees from VKG Elektriehituse started working at Viru RMT from 1 January.

On 16 January Viru Keemia Grupp sold VKG Plokk to Aeroc International AS.

June 2017

Changes in accounting

From June, the Chef Accountant of the Group has been Aliide Hindreus, who was working as a head of the accounting group at VKG Transport before.

July 2017

Changes in the Management Board of VKG Energia

The member of the Board of VKG Energia Sergei Kulikov resigned, and the new head of the company became the member of the Board Marek Tull.

Management Board. Staff, duties and remuneration

The Management of the parent enterprise

The Management Board of Viru Keemia Grupp AS consists of five members: Chair of the Management Board, Deputy Chair of the Management Board and Technical Director, Financial Director, Management Board Member of VKG Kaevandused and Management Board Member of VKG Oil.

Three Management Board Members – Ahti Asmann, Meelis Eldermann and Jaanis Sepp – manage the activities of the Group as a whole and are also Supervisory Board Members of subsidiaries.

Two Management Board Members – Margus Kottise and Nikolai Petrovitš – are the Managers of the strategically most important subsidiaries of the Group.

The duties of the Management Board include everyday management of VKG’s economic activities and representing the business association.

In all legal procedures of the Group, an enterprise is always represented by two Management Board Members together, whereas one of them must be the Chair or Deputy Chair of the Management Board.

Start times of terms of office of Management Board Members

Ahti Asmann

Chair of the Management Board – 21.09.2015

Meelis Eldermann

Deputy Chair of the Management Board and Technical Director – 06.03.2008

Jaanis Sepp

Management Board Member, Financial Director – 15.04.2016

Margus Kottise

Management Board Member – 09.05.2000

Nikolai Petrovitš

Management Board Member – 16.11.1999

The Management Board Members are paid a monthly remuneration consisting of the pay for performing the duties of a Management Board Member and the pay for keeping business secrets and for respecting the competition prohibition. The duties of the Management Board Members are stated in service contracts signed with the Management Board Members. According to the service contracts, the Management Board Members can get additional monetary remuneration which is paid according to the relevant decisions of the Supervisory Board.

Supervision over the Management Board’s activities

Supervision over the activities of the parent enterprise’s Management Board is done by the Supervisory Board, consisting of six Members, since 1st of February 2012. The Meetings of the Supervisory Board take place once per month, on the last Wednesday of every month. Urgent matters requiring the approval of the Supervisory Board are constructively decided using electronic means of communication.

Pursuant to the Authorised Public Accountants Act of the Republic of Estonia, VKG is considered to be an entity subject to public interest and is thus required to have an Audit Committee.

The members of the Audit Committee of VKG are Ants Laos (Chair of the Committee), Priit Piilmann, Margus Kangro and Elar Sarapuu. According to the Statutes, the Audit Committee is an advisory body for the Supervisory Board of VKG in the fields of accountancy, auditing, risk management, internal audits, supervision and budgeting and also the legality of activities.

The staff of the Management Boards and Supervisory Boards of the parent enterprise and subsidiaries of the Group (April 2018) is presented in the following table.

Commercial name	Management Board Member	Supervisory Board Members
Viru Keemia Grupp AS	Ahti Asmann (Chairman) Meelis Eldermann (Deputy Chair) Jaanis Sepp Nikolai Petrovitš Margus Kottise	Toomas Tamme (Chairman) Jaan Mihkel Uustalu Priit Piilmann Margus Kangro Ants Laos Elar Sarapuu
VKG Oil AS	Nikolai Petrovitš Priit Pärn	Ahti Asmann (Chairman) Meelis Eldermann Jaanis Sepp Marti Viirmäe Diana Revjako
VKG Transport AS (alates 1.10.2018 tegutseb uue nime all VKG Logistika OÜ)	Anton Nõomaa	Ahti Asmann (Chairman) Jaanis Sepp Andres Liivas (since 10.04.2018)
Viru RMT OÜ	Andry Pärnpuu	Meelis Eldermann (Chairman) Ahti Asmann Jaanis Sepp
VKG Kaevandused OÜ	Margus Kottise Margus Loko	Ahti Asmann (Deputy Chair) Jaanis Sepp Meelis Eldermann Diana Revjako
VKG Elektrivõrgud OÜ	Tarmo Tiits (since 26.03. 2018 Ivo Järvala)	Jaanis Sepp (Chairman) Jaano Uibo Meelis Eldermann Andres Liivas (since 10.04.2018)
VKG Energia OÜ	Marek Tull	Meelis Eldermann (Chairman) Ahti Asmann Jaanis Sepp Marti Viirmäe Diana Revjako
VKG Soojus AS	Aleksandr Šablinski (since 19.03.2018 Andres Klaasmägi)	Jaanis Sepp (Chairman) Ahti Asmann Meelis Eldermann Andres Liivas (since 10.04.2018)

Cooperation between the Management Board and the Supervisory Board

Cooperation between the Management Board and the Supervisory Board takes place in a constructive manner. In addition to regular monthly meetings of the Supervisory Board, any urgent matters requiring the approval of the Supervisory Board are decided without summoning a meeting. Consultations are provided as well.

Supervisory Board. Staff and duties.

The Supervisory Board plans the activities of the Group, organises its managing and exercises supervision over the Management Board; according to the Articles of Association the Supervisory Board has three to seven members.

Members of the Supervisory Board:

Toomas Tamme (Chairman)
Priit Piilmann
Margus Kangro
Ants Laos
Elar Sarapuu
Jaan-Mihkel Uustalu
Jens Haug (Advisor of the Supervisory Board)

The Articles of Association of the Group state that transactions and activities on behalf of the Group require the consent of the Supervisory Board if they bring up the following:

Acquiring and terminating holdings in other associations;
Acquiring, transferring or terminating an enterprise;
Acquiring, transferring and encumbering immovable property;
Acquiring, transferring and encumbering constructions;
Establishing and closing foreign subsidiaries;
Making investments which exceed the investment funds allocated from the budget for the current financial year;

Taking loans and assuming debt obligations in amounts exceeding the relevant allocations in the year’s budget or under terms differing from those approved by the Supervisory Board;
Granting loans, if outside the scope of everyday activities;
Securing debt obligations;
Waiving hopeless debts;
Signing any employment contracts with employees, if those contracts grant pension and/or benefits after the end of the employment relation;
Approving the annual budget of the Group;
Establishing and terminating subsidiaries.

Conflicts of interest

Management Board Members are prohibited from competing with Viru Keemia Grupp AS in its field of activities, unless having the prior consent of the Supervisory Board.

In 2017 no Management Board Member notified about own actual or intended direct or indirect participation in entrepreneurship in the field of activities of Viru Keemia Grupp AS.

In order to avoid conflicts of interest, all Management Board Members and middle-level managers of the business associations belonging to the Group are required to submit upon any changes a declaration in the approved format, stating their holdings in legal entities and/or membership in management bodies of legal entities and/or activities as self-employed persons.

Financial reporting and auditing

The Management Board of Viru Keemia Grupp AS has the duty of preparing financial reports. The accounting principles and methods of presenting information, utilised in accountancy of all VKG’s subsidiaries, conform to the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and to the relevant issued interpretations. Decisions about VKG’s largest transactions and about its strategic financial targets are made by the Management Board of the Group at its weekly meetings.

The Financial Division of the Group manages and plans the everyday cash flows, i.e. prepares the budgets of the Group and its subsidiaries, exercises supervision over the respecting of those budgets, prepares business projects, and communicates with sources of financing. The Financial Division of the Group is aided in this by Financial Divisions of subsidiaries, which have the duty of analysing the economic activities of the relevant subsidiary. All technical financial transactions are performed by the centralised Accountancy Department of the Group. The Accountancy Department makes the necessary payouts, accounts the salaries, makes the payments of vacation pay and sick pay, and prepares the annual balance sheet of the financial year. An accounting entity is required to ensure the availability of relevant, significant, objective and comparable information about its financial state, economic results and cash flows. If the internal regulations don’t describe an event occurring in the accountancy of VKG, then the event is accounted according to the International Financial Reporting Standards (IFRS), the Accounting Act of the Republic of Estonia, the guidelines issued by the Estonian Accounting Standards Board (EASB), and other legal acts.

The accounting period is a financial year with a length of 12 months. The financial year begins on January 1 and ends on December 31.

VKG has the right and obligation to keep independent accounts on the basis of the internal regulations of accountancy approved according to the procedure prescribed in the Articles of Association of the Group. The internal regulations of accountancy are replaced and amended with the approval of the owners of VKG, if necessitated by economic considerations, reorganisation of the activities of the Group, amendments of the accounting principles on the basis of the contents of the International Financial Reporting Standards (IFRS) and the guidelines and recommended methods issued by the Estonian Accounting Standards Board (EASB) or on the basis of amendments of the national tax laws and tax guidelines, or by other reasons.

The enterprise is required to document all its economic transactions and to register those transactions in its accounting ledgers. Economic transactions are carried on debit accounts and credit accounts according to the double entry method.

Economic transactions are recorded in chronological and systematic accounting registries at the moment they take place or immediately after. An accounting registry is a database used in accountancy. An accounting registry is formed in chronological order (ledger) and as accounts (turnover balance). All reports and registries of accounts are prepared on the basis of the accounting software in use. Reports and registries of accounts are preserved on computer disks, servers and/or as paper printouts. Since 1 January 2001, the software Baan has been used for planning the resources of the company and managing finances (ERP) in accounting. In 2018, the preparation for the transfer to the new ERP software will be initiated. The auditor of Viru Keemia Grupp AS is assigned with a decision of the general meeting of shareholders. The Management Board organises a competition to find an auditor, with the goal of finding the auditor for the next financial year. The latest competition to find an auditor took place in the year 2015. Auditing service is provided by KPMG Baltics OÜ.

Internal audit and risk management

Internal audit

VKG has established the Internal Auditing Department for that function; the Department is a structural unit that operates independently from VKG and monitors the activities of the Group, its subsidiaries and their subsidiaries, and other business associations belonging to the consolidated group of VKG, in order to make sure that those activities conform to the laws of the Republic of Estonia and to other legal acts, the Articles of Association of VKG, decisions of general meetings of shareholders, decisions of the Supervisory Board and the Management Board, and internal regulations and action guidelines of the Group and its subsidiaries. The central task of the Group’s Internal Auditing Department is to study and assess the economic activities of the Group on the basis of trustworthiness and efficiency of internal auditing.

The central task of the Group’s Internal Auditing Department is to study and assess the economic activities of the Group on the basis of trustworthiness and efficiency of internal auditing.

The task of internal auditing is to identify possible shortcomings in the activities of the employees of the Group and its subsidiaries, their possible work errors and cases of abandoning of duties and exceeding of authorisations, to draw attention to those, and to make suggestions for avoiding those in the future.

The internal auditor prepares an act or a report of internal auditing and presents it to the audited entity for reviewing and feedback. The Internal Auditing Department prepares reports on the discovered shortcomings together with assessments, conclusions and suggestions, consolidates data about the activities of the Group and its subsidiaries, and prepares overviews and analyses thereof for presenting to the Executive Managers and Management Board Members of the Group and/ or its subsidiaries depending on their importance and level of generalisation.

The company has an internal control system, which ensures:

risk minimisation;
development, deployment, correct compliance, supervision and improvement of control procedures on all levels of business activity and management;
continuity of operations of the company, highest possible efficiency and sustainability and opportunities for development, including making adjustments in the operation of the company in due course according to the changes in the internal and external environment;
a uniform and systematic methodological approach and quality information and analytical support on management decision-making;
resolving conflicts of interests emerging during the operation of the company in due course.

Combating corruption

The company has zero tolerance for corruption and fraud. This means implementing vital measures in all lines of business to reduce the risk of corruption. Binding anti-corruption rules and regulations have been established for all workers of the company.

Deputy director general for safety assumes responsibility for the fight against fraud and corruption.

The fight against corruption includes several measures on all levels of management of the company:

implementation of due diligence while choosing suppliers;
background checks on existing and new employees to discover involvement with other commercial enterprises and possible conflicts of interests;
internal investigation on detected cases of abuse of office and holding the offenders liable.

Risk management system

The Management Board of the Group has the duty of shaping the risk management policy and affecting the risk management of Viru Keemia Grupp.

The goals of risk management of Viru Keemia Grupp are as follows:

to support the making of management decisions;
to avoid or diminish any damages to the Group’s assets and reputation;
to increase the effectiveness of the Group’s activities;
to increase the efficiency of using the Group’s resources (capital, energy);
to reduce occurrences of unexpected situations and to prepare action plans and risk scenarios for such situations.

The base document for risk management is the one on which the risk management system is based. The document provides descriptions of significant risks of the Group, assessments of those risks, and opportunities to hedge them. The risks are determined on the basis of the Group’s most important targets, related to VKG’s striving to value oil shale as much as possible and to process it as efficiently as possible.

The methodology of risk management

The management of the Group has prepared a detailed list of risks that can affect the sustainability of the company. All of the risks in the list have been divided into four groups:

strategic risks ‒ related to the Group's long-term goals (changes in the market and competition);
operational risks ‒ related to the Group's processes (operations of employees and equipment);
financial risks ‒ related to direct financial loss (interest rates, exchange rates);
compliance risks ‒ related to regulations (laws, guidelines).

In connection with every type of risk, the assessment has been provided as for the likelihood of its occurrence and the scale of potential effect. Proceeding from that, the risks of critical importance have been selected, the likelihood of the occurrence of which is high, and the effect is significant. Such risks are described in the Risk Management Report of the Group, they have been assessed, a member of the Board responsible for each risk has been assigned, and the action plan aimed at the reduction of risk has been agreed upon.

The three most important risks are listed below.

Risks related to the availability of raw materials

Since the main goal of VKG is adding value to oil shale, the most critical factor in terms of the continuation of the activities of the company has been the provision of the oil shale resource. In 2012, the VKG Ojamaa mine was opened, in the result of which the risk related to the availability of oil shale has been significantly reduced. The Ojamaa mine will cover about 85% of the need for oil shale at VKG until 2030. The missing 15% is provided by long-term supply contracts with other oil shale extractors or at the expense of the existing warehouse stock. If it is not possible to purchase oil shale from the market under suitable conditions, and the warehouse stock runs out, the load at the plants is decreased, and they operate with a partial load.

In order to provide the consistent availability of oil shale after 2030, the Group is actively working on obtaining new extraction permits. Considering the factors related to environmental protection and economic situation, the most suitable would be the permit for extraction oil shale from Uus-Kiviõli extraction field, which is located nearby the Ojamaa extraction field. The plan is within the next two years to provide the availability of oil shale until the year 2045.

Risks related to world market prices of crude oil

Since the main product obtained in the course of adding extra value to oil shale is shale oil, the economic success and stability of the Group are directly dependant on the price the global energy market would be ready to pay for shale oil. The reference product of shale oils is the fuel oil containing 1% of sulphur, which price is in its turn dependent on the price of crude oil. Since the price of crude oil can fluctuate significantly due to differences between supply and demand, even minor ones, the revenue obtained in the result of the sale of shale oils can also be extremely volatile. Out of the entire amount of revenue obtained by VKG, the sale of shale oils can make 50-90%, depending on the price of the oils at the global market.

VKG is actively dealing with the minimisation of risks related to the prices for crude oil at the global market. In the event of a sudden decrease in sales revenue, the Group has two mutually reinforcing measures at hand which will provide the sustainability of the company:
1. Fixing the sales price of shale oils by means of future transactions.
2. Accumulation of liquidity buffer.

In accordance with the existing policy, VKG grounds the price of the reference product for shale oils by 25-65% from the expected production volume in the next 18 months. In the event of an increase in the liquidity buffer, the share of future transactions from the total amount of sales can decrease. In 2017, 65% of oil produce was grounded by future transactions.

Environmental risks

Being a representative of the processing industry and a manufacturer of the type of fuel containing carbon, the activities of VKG are accompanied by significant environmental risks, which manifest themselves both in the extraction of oil shale, adding value to it, and selling the products. The goal of VKG is to become a pathfinder in its sector, setting an example for everyone else as to how it is possible to resolve the risks existing in the traditional production environment in a smart way, using modern technologies. Within the past 15 years, the Group has invested 87 mln EUR into different environmental projects in order to reduce its environmental footprint. The main focus of investments has been the utmost efficient use of resources and reducing the environmental effect. This work is done consistently and is definitely going to continue in the future, and in the long-term perspective it will pay off.

In addition to reducing the environmental risks that accompany production activities, it is equally important to talk about risks publicly and involve different interest groups into the discussion about how to improve the situation even more. In order to achieve that goal, VKG holds the Environmental Day every year. In 2017, Environmental Day was focused on recycling of oil shale ash and environmentally-friendly methods of its depositing.

Risk management scheme at the company

International management systems

International management systems like ISO and OHSAS have separate procedures for risk hedging in quality management, environmental management and occupational safety management. Those internationally recognised systems are in effect in VKG as well. The table below lists the management systems in use in the Group’s subsidiaries.

ETTEVÕTTE NIMI	ISO SERTIFIKAADID (keskkonna- ja kvaliteedijuhtimis-süsteemid)	OHSAS SERTIFIKAAT (töötervishoiu ja –ohutuse juhtimissüsteem)
VKG	ISO9001, ISO14001	-
VKG Oil	ISO9001, ISO14001	OHSAS18001
VKG Kaevandused	ISO9001, ISO14001	OHSAS18001
VKG Energia	ISO9001, ISO14001, ISO 50001	OHSAS 18001
Viru RMT	ISO9001	-
VKG Soojus	ISO9001, ISO14001	OHSAS 18001
VKG Elektrivõrgud	ISO9001	OHSAS 18001

Supply chain

The Group is developing cooperation with subcontractors, placing special emphasis on the openness of the market, the price formation arising from market conditions, and mutual long-term and well-structured relations. VKG is trying to develop long-term sub-contracting relations, various means for motivating subcontractors, and flexible price-formation mechanisms.

The goals of purchasing activities at VKG:

to provide the maximum economic feasibility and efficiency of purchases;
to involve the best possible selection of potential participants into the proceedings being conducted;
to provide objective, justified, and unbiased process of selection of winners within different proceedings;
to provide the openness of the proceedings being conducted;
in cooperation with key purchasers, to provide the consistent development of competitive ability and the technological basis for both parties.

The process of selection of subcontractors and cooperation with them takes place within the frames of the integrated management system. The selection of the suppliers of goods, task performers and service providers take place on a uniform basis, on the basis of the results of procurement processes organised for finding suppliers.

The main criteria when selecting suppliers are price, quality, the terms of preparation and supply as well as of the execution of work and provision of services, the availability of relevant technical and human resources as well as of relevant experience in the field required for work execution and service provision. One of the main selection criteria is the adherence to the rules of production safety, established in the Group, on the part of suppliers.

Among privately owned production companies in Estonia, the purchasing activities of the Group have the largest share of participation in public procurements. In 2017, we organised 734 public procurements (vs. 458 procurements in 2016, the annual growth +54%).

Annexes

Pursuant to GRI guideline in version G4, reporting is particularly focused on the issues that are the most important for the company and its stakeholders and have been determined in the process of assessing importance.

GRI register

Strategy and analysis

G4-1 Statement from the most senior decisionmaker in the organization about the relevance of sustainability to the organisation

G4-2 Description of key impacts, risks and opportunities

Organizational Profile

G4-3 Name of the organization

G4-4 Primary brands, products, and/or services.

G4-5 Operational structure of the organization, including main divisions, operating companies, subsidiaries, and joint ventures

G4-6 Number of countries where the organization operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report

G4-7 Nature of ownership and legal form.

G4-8 Markets served (including geographic breakdown, sectors served, and types of customers/beneficiaries).

G4-9 Scale of the reporting organization

G4-10 Number of employee

G4-11 Percentage of total employees covered by collective bargaining agreements

G4-12 Organization’s supply chain

G4-13 Significant changes during the reporting period regarding size, structure, or ownership

Commitments to external initiatives

G4-14 Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement

G4-15 Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or endorses

G4-16 Memberships in associations

Identified Material Aspects and Boundaries

G4-17 Entities included in the organization’s consolidated financial statements or equivalent documents

G4-18 Process for defining report content, including determining materiality

G4-19 All aspects identified in the report content

G4-20 Aspects within the organisation

G4-21 Aspects outside the organisation

G4-22 Explanation of whether and how the precautionary approach or principle is addressed by the organization

G4-23 Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report

Stakeholder Engagement

G4-24 List of stakeholder groups engaged by the organization.

G4-25 Basis for identification and selection of stakeholders with whom to engage.

G4-26 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group.

G4-27 Key topics and concerns that have been raised through stakeholder engagement

Report Profile

G4-28 Reporting period (e.g., fiscal/calendar year) for information provided

G4-29 Date of most recent previous report

G4-30 Reporting cycle (annual, biennial, etc)

G4-31 Contact point for questions regarding the report or its contents

GRI content index

G4-32 Report the GRI Content Index for the chosen option

G4-33 Policy and current practice with regard to seeking external assurance for the report

Governance

G4-34 Governance structure of the organization, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organizational oversight

G4-35 Process for delegating authority for economic, environmental and social topics from the highest governance body to senior executives and other employees

G4-36 Appointed an executive-level position or positions with responsibility for economic, environmental and social topics

G4-38 Composition of the highest governance body and its committees

G4-39 Indicate whether the Chair of the highest governance body is also an executive officer

G4-40 The nomination and selection processes for the highest governance body and its committees, and the criteria used for nominating and selecting highest governance body members

G4-41 Processes in place for the highest governance body to ensure conflicts of interest are avoided

G4-42 Role of the members of the highest governance body for guiding the organisation’s strategy on economic, environmental, and social topics

G4-44 Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, environmental, and social performance

Highest governance body’s role in risk managemenr and performance evaluation

G4-45 The highest governance body’s role in the identification and management of economic, environmental and social impacts, risks, and opportunities

G4-46 The highest governance body’s role in reviewing the effectiveness of the organization’s risk management processes for economic, environmental and social topics

G4-47 The frequency of the highest governance body’s review of economic, environmental and social impacts, risks, and opportunities

Remuneration and incentives

G4-51 Linkage between compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organization’s performance (including social and environmental performance)

Ethics and Integrity

G4-56 Organization’s values, principles, standards and norms of behavior such as codes of conduct and codes of ethics

G4-57 Internal and external mechanisms for seeking advice on ethical and lawful behavior, and mattes related to organizational integrity, such as helplines or advice lines

G4-58 The internal and external mechanisms for reporting concerns about unethical or unlawful behavior, and matters related to organizational integrity

SPECIFIC STANDARD DISCLOSURES

Economic

Aspect: Economic Performance

G4-EC1 Direct economic value generated and distributed

G4-EC2 Financial implications and other risks and opportunities for the organization’s activities due to climate change

G4-EC3 Coverage of the organization’s defined benefit plan obligations - Kontserni töötajate pensionitoetus on ette nähtud kohustusliku riikliku pensionikindlustussüsteemi raames.

G4-EC4 Financial assistance received from government - Aruandeperioodi jooksul on kontsern saanud ühel korral toetuse läbi Keskkonnainvesteeringute Keskuse. VKG Soojus AS, projekt „Jõhvi linna magistraaltorustike renoveerimine“

Aspect: Market Presence

G4-EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation - Viru Keemia Grupi tegevuspiirkonnaks on Ida-Virumaa. Seadusega kehtestatud minimaalne brutopalga alammäär oli 470 eurot kuus.

G4-EC6 Proportion of senior management hired from the local community at significant locations of operation – Not applicable

Aspect: Indirect Economic Impacts

G4-EC7 Development and impact of infrastructure investments and services supported

G4-EC8 Significant indirect economic impacts, including the extent of impacts

Environmental

Aspect: Materials

G4-EN1 Materials used by weight or volume

G4-EN2 Percentage of materials used that are recycled input materials

Aspect: Energy

G4-EN3 Energy consumption within the organization

G4-EN4 Energy consumption outside the organization

G4-EN5 Energy intensity

G4-EN6 Reduction of energy consumption

G4-EN7 Reductions in energy requirements of products and services

Aspect: Water

G4-EN8 Total water withdrawal by source

G4-EN9 Water sources significantly affected by withdrawal of water

G4-EN10 Percentage and total volume of water recycled and reused

Aspect: Biodiversity

G4-EN11 Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas – Not applicable

G4-EN12 Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas – Not applicable

G4-EN13 Habitats protected or restored – Ojamaa kaevanduse piirkonna uurimist ja jälgimist alustati veel enne kaevanduse avamist - aastast 2004 teostatakse pinnavee ja aastast 2005 põhjavee seiret. Lisaks seiratakse 2007. aastast kaevanduse aladel tegutsevate metsiste arvukust ning 2015. aastast ka Muraka soo seisundit.

G4-EN14 Total number of iucn red list species and national conservation list species with habitats in areas affected by operations, by level of extinction risk:

Animal species of the I category of protection: Flying squirrel Pteromys volans, Sonda extraction field (at present, the company is not operating in this area, i.e. there is no impact)
Vertebrate animals of the II category of protection: Wood grouse Tetrao urogallus, Ojamaa extraction field (protection zone has been established in its habitat, numeration monitoring has been held)

Aspect: Emissions

G4-EN15 DIRECT GREENHOUSE GAS (GHG) EMISSIONS (SCOPE 1)

G4-EN16 ENERGY INDIRECT GREENHOUSE GAS (GHG) EMISSIONS (SCOPE 2)

G4-EN17 OTHER INDIRECT GREENHOUSE GAS (GHG) EMISSIONS (SCOPE 3)

G4-EN18 GREENHOUSE GAS (GHG) EMISSIONS INTENSITY

G4-EN19 REDUCTION OF GREENHOUSE GAS (GHG) EMISSIONS

G4-EN21 NOX, SOX, AND OTHER SIGNIFICANT AIR EMISSIONS

Aspect: Effluents and Waste

G4-EN22 Total water discharge by quality and destination

G4-EN23 Total weight of waste by type and disposal method

G4-EN24 Total number and volume of significant spills – Not applicable

G4-EN25 Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the basel convention 2 annex i, ii, iii, and viii, and percentage of transported waste shipped internationally – Not applicable

Aspect: Products and Services

G4-EN27 Extent of impact mitigation of environmental impacts of products and services

Aspect: Compliance

G4-EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations. VKG Oil AS - sai trahvi tööstusheite seaduse §162 lg 2 alusel summas 8 000 eurot. VKG Kaevandused OÜ – sai trahvi Kiirgusseaduse § 117 lg 2 alusel summas 300 eurot.

Aspect: Transport

G3-EN30 Significant environmental impacts of transporting products and other goods and materials for the organization’s operations, and transporting members of the workforce

Aspect: Overall

G4-EN31 Total environmental protection expenditures and investments by type

Environmental

Labor practices and decent work

Aspect: Employment

G4-LA1 Total number and rates of new employee hires and employee turnover by age group, gender and region

G4-LA2 Benefits provided to full-time employees that are not provided to temporary or parttime employees, by significant locations of operation

Aspect: Occupational Health and Safety

G4-LA6 Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender

G4-LA8 Health and safety topics covered in formal agreements with trade unions

Aspect: Training and Education

G4-LA9 Average hours of training per year per employee by gender, and by employee category

G4-LA10 Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings

Aspect: Diversity and Equal Opportunity

G4-LA12 Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and ohter indicators of diversity

Society

Aspect: Local Communities

G4-SO1 Percentage of operations with implemented local community engagement, impact assessments, and development programs

Aspect: Anti-corruption

G4-SO5 Confirmed incidents of corruption and actions taken. 2017. aasta juulis fikseeriti kontsernis korruptsioonijuhtum, mille tulemusena peeti kinni kaks kontserni töötajat. Mõlemale isikule esitati kahtlustus korruptsiooni kuriteo toimepanemises altkäemaksu võtmise näol. Kontsern peab korruptsioonikuritegevuse lubamatuks ning suhtub taolistesse õigusvastastesse tegevustesse nulltolerantsusega. Ennetamismeetmetena viidi läbi täiendavad kontrollreidid ning panustati töötajate korruptsioonivastase tegevuse teadlikkuse tõstmisesse selgitustöö ning infomaterjalide jagamise abil.

Aspect: Public Policy

G4-SO6 Total value of political contributions by country and recipient/beneficiary – Not applicable

Aspect: Anti-competitive Behavior

G4-SO7 Total number of legal actions for anti-competitive behavior, anti-trust, and monopoly practices and their outcomes – Not applicable

Aspect: Compliance

G4-SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations – Not applicable

Product responsibility

Aspect: Customer Health and Safety

G4-PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning the health and safety impacts of products and services during their life cycle, by type of outcomes – Not applicable

Aspect: Product and Service Labeling

G4-PR3 Type of product and service information required by the organization’s procedures for product and service information and labeling, and percentage of significant product and service categories subject to such information requirements – Information can be found from VKG homepage

G4-PR4 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, by type of outcomes – Not applicable

Aspect: Marketing Communications

G4-PR6 Sale of banned or disputed products – Not applicable

G4-PR7 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship, by type of outcomes – Not applicable

Aspect: Customer Privacy

G4-PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data – Not applicable

Aspect: Compliance

G4-PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services – Not applicable

Definitions and approximations of key terms

VKG	Viru Keemia Grupp
MLN EUR	million euros
TH EUR	thousand euros
HPP	heat and power plant
tfe	tonne of fuel equivalent (indicator for expressing any gaseous or solid fuels as tonnes)
EU	European Union
GRI	Global Reporting Initiative

Participation in unions

VKG's and its subsidiary companies' participation in unions
as of September 2018

Responsible Business Forum

Viru Keemia Grupp AS – Irina Bojenko

Estonian Union of Chemical Industry

Meelis Eldermann - the Chairman of the Management Board of the Union

Estonian Association of Engineers (EIL)

Viru Keemia Grupp AS

Meelis Eldermann

Responsible Care

Viru Keemia Grupp AS

Erika Sulg

Estonian Public Relations Association (EPRA)

Viru Keemia Grupp AS

VKG represented by Irina Bojenko

UN Nations Global Compact

Viru Keemia Grupp AS

VKG represented by Irina Bojenko

Global Reporting Initiative

Viru Keemia Grupp AS

VKG represented by Irina Bojenko

Estonian Electronics Industries Association (ETL)

VKG Energia OÜ

Marek Tull

Ahti Asmann – Board Member

Estonian Power and Heat Association (EJKÜ)

Marek Tull – Board Member

VKG Energia OÜ; VKG Elektrivõrgud OÜ;

VKG Soojus AS

EJKÜ's Council of Electricity Companies

Marek Tull - Chairman of the Council

Elering's Electricity Market Advisory Committee

Marek Tull, Andres Lab

Elering's Power Network Development Advisory Board

Marek Tull

Estonian Chamber of Commerce and Industry

Viru Keemia Grupp AS; VKG Oil AS;

VKG Energia OÜ; Viru RMT AS;

VKG Elektrivõrgud OÜ

The International Chamber Of Commerce (ICC Estonia)

VKG Oil AS - Priit Pärn

Crisis management committees of Sillamäe and Narva

VKG Elektrivõrgud OÜ

Erik Raal, Technical Director

Balance manager at Nord Pool Scener OÜ, the power exchange in the Nordic countries

VKG Energia OÜ

Estonian Association of Electrical Enterprises (EETEL) - Section of External Networks Construction of the same association

Viru RMT AS

participant in the work of the section

NGO Estonian Mining Society

Viru Keemia Grupp AS

Margus Kottise

Margus Loko - Member of the Management Board

Estonian Association Of Mining Enterprises (EMTEL)

Erik Mõttus representing VKG Kaevandused OÜ

Eesti Maksumaksjate Liit

VKG Soojus AS

Energy Council of the Ministry of Economic Affairs and Communications

Ahti Asmann

The technical committee of oil shale industry standardisation - Oil Shale Competence Center

Meelis Eldermann

KKM – Workgroup for studying the best available technology (BAT) of the energetic use of Estonian oil shale

Erika Sulg substitute Marti Viirmäe

Estonian Centre for Standardisation, expert workgroup

Marti Viirmäe

Ida-Virumaa Vocational Education Center, professional committee

Tea Allikmäe

CONTACT INFORMATION

Viru Keemia Grupp AS

Chairman of the Board Ahti Asmann
Vice Chairman of the Board Meelis Eldermann
Registration number 10490531
Järveküla tee 14
30328 Kohtla-Järve

Phone: +372 334 2700
Fax: +372 337 5044
E-mail: info@vkg.ee
www.vkg.ee

VKG Oil AS

Members of the Board Nikolai Petrovitš,
Priit Pärn
Järveküla tee 14
30328 Kohtla-Järve

Phone: +372 334 2727
Fax: +372 334 2717
E-mail: vkgoil@vkg.ee

VKG Kaevandused OÜ

Members of the Board Margus Kottise,
Margus Loko
Järveküla tee 14
30328 Kohtla-Järve

Phone: +372 334 2782
Fax: +372 337 5044
E-mail: vkgkaevandused@vkg.ee

VKG Energia OÜ

Member of the Board Marek Tull
Järveküla tee 14
30328 Kohtla-Järve

Phone: +372 334 2852
Fax: +372 332 7620
E-mail: vkgenergia@vkg.ee

VKG Soojus AS

Member of the Board Aleksandr Šablinski
from 30.03.2018 Andres Klaasmägi
Puru tee 79
31023 Kohtla-Järve

Phone: +372 334 2408
Fax: +372 715 6400
E-mail: vkgsoojus@vkg.ee
www.vkgsoojus.ee

VKG Elektrivõrgud OÜ

Member of the Board Tarmo Tiits
from 26.03.2018 Ivo Järvala
Paul Kerese 11
20309 Narva

Phone: +372 716 6601
Fax: +372 716 6600
E-mail: vkgev@vkg.ee
www.vkgev.ee

VKG Transport AS

(since 1.10.2018 VKG Logistika OÜ)

Member of the Board Anton Nõomaa
Järveküla tee 14
30328 Kohtla-Järve

Phone: +372 334 2535
Fax: +372 334 2719
E-mail: transport@vkg.ee

Viru RMT OÜ

Member of the Board Andry Pärnpuu
Järveküla tee 14
30328 Kohtla-Järve

Phone: +372 334 2573
Fax: +372 334 2545
E-mail: viru.rmt@vkg.ee
www.virurmt.com

Photos

Oliver Oberg
Kaupo Kikkas
Kaupo Kalda
Sven Zacek
Ken Oja

Web solution

2ood / Oliver Oberg
gotoAndPlay

Aruande koostaja

Viru Keemia Grupp AS