Sustainability review
2022
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To enable the green transition, mining and cement must become more sustainable. We are committed to address this challenge, and we have strengthened our core business to reinforce our sustainability agenda and drive value creation.
The importance of minerals and metals to the green transition reaches far and wide. The forecasted growth in electric vehicles and energy storage needs will require more than 300 new nickel, cobalt, copper and lithium mines by 2035. Similarly, cement is essential to new infrastructure and renewable energy projects. We need to extract and process metals and minerals in a responsible manner, and we need to reduce the environmental impact of cement production. As the need to reach net zero by 2050 gains urgency, now is the time to act.
With our technology and solutions – through our MissionZero programme – we can enable mining operators and cement producers to cut their environmental footprint significantly.
Mikko KetoGroup CEO
Solving these crucial challenges is what drives me and my colleagues. It is both an opportunity and a responsibility. With our technology, we can already today enable mining operators and cement producers to cut their environmental footprint significantly. And, as part of our MissionZero programme, we have committed to enabling zero emissions in mining and cement production by 2030.
I am proud of how we are tackling this across our entire value chain, guided by the Science Based Targets initiative, whose methodologies are becoming even more deep-rooted in our operations. But we need to keep innovating. This is why we continue to seek strong collaborations with partners who can help us develop and roll out the technologies to accelerate the transition.
As our commitment to the green transition becomes even more steadfast, we have made several strategic adjustments in the last year that not only strengthen our core business and drive value creation, but also reinforce our sustainability agenda. We are also increasingly focusing on emerging topics relevant to our industries, such as circularity and biodiversity.
Unsurprisingly, much of our work during the year involved closing the acquisition of Mining Technologies from thyssenkrupp and integrating the organisation into our business. The acquisition has given us a wider range of product offerings across the mining flowsheet, which means we can provide further sustainability benefits to our customers.
At the same time, we pay close attention to our own environment, social and governance (ESG) performance. We are committed to the Principles of the UN Global Compact and we are accelerating our ESG efforts across topics material to our business and our stakeholders alike. This means we need to continue to focus on safety; we need greater diversity, equity and inclusion in the workforce; and we need to reduce our environmental footprint. These are the essentials to attracting and retaining the diverse talent needed to modernise the industries. Diversity generates creativity, and creativity drives the innovation that we need in our company and in our industries.
As I reflect on the past year and the opportunities we have ahead of us, it is clear to me that our people and the unique spirit of our organisation are the driving force behind our progress. While we have made some strides, it’s time for us to ramp up our efforts and fully embrace our responsibility to address the critical sustainability challenges facing society. With the collective engagement of each and every one of us, I am confident we can become a leader in sustainability and make a lasting impact on the world.
Mikko Keto
Group CEO
Where we’re going
As we develop strong supplier relationships based on common sustainability ambitions, by 2025, 30% of our supplier spend will be with those that have set decarbonisation targets.
How we’ll get there
Where we’re going
With a diverse, equitable, inclusive workforce across the globe, we aim to be carbon neutral in our own operations by 2030.
How we’ll get there
Where we’re going
With taxonomy-aligned products and our MissionZero technologies, by 2030, we will reduce customer emissions per order intake by 56% from 2019 levels.
How we’ll get there
We measure our sustainability performance with a series of key performance indicators.
Spend with suppliers with science-based targets
% of total supplier spend
We increased our spend with suppliers who have set decarbonisation targets as we work towards our target to achieve 30% spend by 2025. We engage with suppliers to support them in setting emission reduction targets.
tCO2e (market-based)
Return to work after COVID-19 and less use of renewable energy drove up scope 2 emissions, while scope 1 emissions decreased. Despite this, combined emissions were below our 43,622 tCO2e target. Increasing the use of renewable energy will be a key driver towards carbon neutrality by 2030.
tCO2e/DKKm (order intake)
Key factors in economic intensity improvement were lower sales of heavy-CO2-emitting cement products and increased sale of MissionZero products. We measure this target over a multi-year period to accurately understand its long-term trend. KPIs will be added to compensate for the metric’s volatility.
Total recordable injury rate/million working hours
Our total recordable injury rate (TRIR) improved in 2022 from the previous year, but we did not achieve our target of 1.3. We will continue to promote safety at our manufacturing sites, service centres and customer sites and will intensify the focus on safety behaviour in the organisation.
%
We did not achieve our 15.7% target for women managers in 2022 and saw no improvement from 2021. Through active recruitment, career development and leadership training, we aim to achieve our diversity target of having 25% women managers by 2030.
Number
Supplier assessments help us to encourage environmental action across our supply chain. Continuing our progress with supplier engagement, we exceeded our target of 600 suppliers assessed in 2022.
In 2022 we increased our eligible revenue, OPEX and CAPEX. Furthermore, we reported our first alignment numbers against the EU Taxonomy. We are committed to achieving the objectives of the European Green Deal and EU taxonomy as we support our customers’ transition to net zero operations.
Footnotes:
1) Scope 1, 2 and 3 data related to our science-based targets does not include data from Mining Technologies’ operations.
2) Reported lifetime greenhouse gas emissions for 2021 have been recalculated by 631 tonnes CO2e due to two orders moved from 2021 to 2022 to align with the effective order intake date.
Making sustainability the heart of our products through a full life cycle approach.
With our MissionZero programme, we aim to enable zero emissions in mining and cement.
Downstream scope 3 emissions are addressed through our economic intensity target, which links our business growth with more energy-efficient, less CO2-intensive products. In 2022, our economic intensity decreased by 49% from 2021. This is significant given our science-based target of a 56% reduction by 2030. A key contributing factor was the large decrease in sales of heavy-CO2-emitting products in the cement business.
In addition, we saw an increase in revenue from MissionZero flagship products, which are more energy-efficient and less CO2-intensive, also translating into a higher taxonomy-eligible revenue percentage. While we are pleased with this progress, it reflects the volatility of our current economic intensity measurement. This is caused by a highly diverse product portfolio, where there is significant variation in energy consumption and product lifetimes.
tCO2e/DKKm (order intake)
In 2022, we saw more progress towards our MissionZero ambition, including:
Our research and development (R&D) efforts are central to our ability to meet our economic intensity target. Key innovations released include the Alumina Gas Suspension Calciner and the Indirect Cooler for lithium processing. In 2022, our sustainability-linked R&D spend accounted for 56% of our total R&D budget – reflecting our R&D activities related to solutions for water, energy and CO improvements.
R&D spend
Technical partnerships with customers, universities and other organisations are essential to our MissionZero programme, enabling us to accelerate innovation and go-to-market. In 2022, we launched the CO2Valorize consortium, which aims to develop carbonation technologies, and the ECoClay consortium, which will develop the electrical activation of clay. Through the FlotSim collaboration, we stepped up research into improving flotation recovery rates in mining.
6.3, 6.4 | 7.2, 7.3 |
12.2, 12.4, 12.5 | 13.2 |
We want to help miners produce more with fewer resources and to create a smaller footprint. Our vision of the mine of the future is captured in the MissionZero Mine, which illustrates how we can support miners with innovative technologies and digital solutions. The MissionZero Mine brings our MissionZero ambition to life, exploring how we can already help customers to reduce their environmental impact and operating costs, as well as looking ahead to future technologies that can be industry game changers.
We want to help cement plant operators reduce their carbon footprint and increase productivity. Our Green Cement Plant concept enables this, bringing together the solutions needed to enable zero-emission cement production by 2030. It guides our work in the coming decade – both in terms of where we will focus our innovation efforts and in terms of creating partnerships with our customers, technology specialists and others who can drive the change to more sustainable operations.
Making sustainability the heart of our products through a full life cycle approach.
As our customers increasingly adopt science-based targets to guide their GHG emissions reductions, we are striving to improve how we measure and disclose the environmental performance of our products. This involves embedding a full life cycle approach to developing, selling and implementing our products. In 2022, we continued to build our in-house life cycle assessment (LCA) capabilities in compliance with relevant standards, including ISO 14040/44:2006.
Our R&D teams are working on making our products more readily recyclable. For example, for composite liner parts, we are assessing various processes for dismantling and recycling components.
Product upgrades provide another circularity opportunity. Through our product upgrade offerings, we aim to extend a product’s lifetime while improving its performance. One example is our cyclone rebuild programme, which restores equipment and identifies wear patterns.
We are committed to providing our customers with quality products that meet their expectations, contract specifications, industry standards and relevant statutory requirements. Furthermore, we have established a baseline for product safety requirements that is aligned with relevant EU product directives and applies to all product deliveries. We take this into account in the design, construction, erection, commissioning, servicing and disposal of our products.
As digital solutions are becoming an essential element of our product portfolio, we build our solutions to ensure protection against cyber attacks.
Products and project deliveries undergo safety assessments according to applicable legal requirements and, as a minimum, our product safety baseline. In 2022, we continued performing risk assessments in our TÜV-certified CE marking software.
We aim to be carbon neutral by 2030 and continually reduce the environmental impact of our own operations.
Scope 1 and 2 greenhouse gas emissions
tCO2e (market-based)
We continued to work on reducing our scope 1 and 2 greenhouse gas (GHG) emissions. Our emissions in 2022 amounted to 36,767 tCO2e (market-based, excluding Mining Technologies operations), which is a 5.8% increase from 2021. The increase was driven by higher scope 2 emissions, which grew by 12% from 2021, as more people returned to work at our offices following the easing of COVID-related restrictions. Scope 2 emissions were also impacted by the loss of renewable energy certificates at two of our sites. Our scope 1 emissions decreased by 8%.
However, since our scope 1 and 2 emissions are 16% lower than the year’s target of 43,622 tCO2e, we are satisfied that we are on the right trajectory towards our goal of becoming carbon neutral by 2030.
We are determined to reinforce our reduction programmes for emissions, water and waste. We reviewed and refined our reduction roadmaps to ensure proper alignment with our current targets. This will help us identify high-potential areas and initiatives and refine policies and procedures that will create a bigger impact at our sites.
With the addition of new waste reduction KPIs, 2022 was the first full year of reporting on these parameters. This reflects our commitment to improving waste management by reducing the amount of waste generated, increasing reuse and recycling, and minimising the amount of waste disposed to landfill. Waste is reported per type of waste and disposal means. Based on EU standards, reporting is categorised as hazardous and non-hazardous waste and recycled, reused incinerated or landfill waste.
Embracing diversity, equity and inclusion, we provide the opportunity to grow in an international working environment.
Women managers
%
Women total
%
We achieved our 2022 targets for women employed and women in blue- and white-collar positions. However, we did not achieve our target – and we saw little to no improvement – in women managers. This performance is unsatisfactory, and through active recruitment, career development and leadership training, we are committed to improving our diversity performance in 2023.
We continued our efforts to align living wages within our local regions. This is an ongoing task, particularly at a time of high inflation. Similarly, as we continue to address gender pay disparity, we have reduced gender pay gaps considerably since 2021. In 2022, we started aligning benefits and employment packages. In Denmark, we offer equal paid parental leave to both parents. Further improvements are planned in all countries.
A new leadership development programme, “Leading in FLSmidth”, helps current leaders grow leadership capabilities according to a framework that we refer to as our “leadership compass”. This includes improving personal proficiency, setting team direction, accelerating continuous improvements, evolving people and enhancing collaboration across the organisation.
Significant effort went into “Day One” of the Mining Technologies acquisition and onboarding our new colleagues. In addition to holding celebrations in locations around the world on 1 September, we launched information-sharing sessions and provided immediate access to online onboarding programmes. We also offered training courses and buddy systems.
At the end of the year, consolidation of business areas resulted in redundancies and the discontinuation of selected product lines and services. Knowing that such programmes cause discontent to those directly affected, we aimed to communicate decisions in a personal, timely and clear fashion.
5.5
Building a culture of health and safety across our own sites and at our customers is core to our Zero Harm 2030 ambition.
Total recordable injury rate (TRIR)
Total recordable injury rate/million working hours
We did not achieve our overall targets for total recordable injury rate (LRIR) and lost time injury frequency rate (LTIF) in 2022. This was despite intensifying our focus on shop-floor safety at our manufacturing sites, service centres and customer sites.
In our incident and injury reduction programme, each region focuses on identifying risks and creating mitigation actions to prevent them from becoming safety incidents. Approximately 70 initiatives for reducing incidents were identified in 2022, of which 38 were closed. Our near-miss programme also focuses on identifying potential risks. In 2022, 100 were identified, of which 86 were closed within 30 days.
Focusing on safety behaviour is key to achieving our Zero Harm goal. Well-established procedures such as safety shares and the new Safety Bot, as well as leaders consistently encouraging good safety practices in their teams, are moving us in the right direction. Building on this, we reignited discussions on how safety can be further integrated into our daily culture.
With such initiatives, we aim to improve our company-wide performance to ensure we meet our safety targets in 2023.
Our local HSEQA team in Brazil created an emotionally charged video for a hand injury campaign titled “It’s in your hands”. It’s easy to take our hands for granted, forgetting how important they are at work and in everyday life. In the video, employees are asked not just to imagine being without their hands, but to try working without them by wrapping them up in bandages. They talk about their experience of being immobilised and reflect on the risk of hand injuries.
8.8
Safeguarding human rights requires a detailed understanding of risk, remedy and the issues to be addressed across our value chain.
Human rights reviews conducted
We have taken significant steps to strengthen our work within human rights. This included reviewing our human rights programme, led by a newly appointed Human Rights Specialist, and updating our Human Rights Policy. To understand our current practices and identify our priorities, we conducted a gap analysis and a high-level risk assessment based on the OECD guidelines and the UN Guiding Principles framework. Risks identified included access to water, labour rights and access to remedy.
Some of our plans for 2022 were delayed by changing priorities, mainly due to the war in Ukraine. We did not achieve our target for conducting human rights reviews and e-learning. However, we have reviewed our procedures to ensure we have a more efficient process for achieving high-quality reviews. In 2023, we will review our e-learning material and we aim to improve course completion.
At two of our sites in South Africa, we conducted onsite human rights assessments in 2022. The purpose was to establish whether our onsite practices meet our human rights commitments at a local level. The site visits included high-level risk analyses and a comprehensive assessment of working conditions. We assessed policies and management systems by reviewing documents and interviewing employees. We also engaged with colleagues in the local markets to understand the local trends and challenges.
In 2022, we trained more than 200 sales and procurement employees across our global locations – in-person where possible and otherwise online. This training is an important means to building internal capacity and an essential element of our stakeholder engagement plan. It demonstrates our commitment to the requirements of the UK Modern Slavery Act 2015.
Improving our human rights performance involves many different people, hence our focus on stakeholder engagement and capacity building. Key to this is providing training and visiting regional sites. In 2023, we will prepare a broad stakeholder engagement strategy and form a human rights working group that will bring together representatives from different functions and regions to identify trends and salient issues.
8.7
Collaborating with the humanitarian relief organisation ForAfrika, we provided donations towards the renovation of two schools in the Phola township in Mpumalanga, South Africa.
For the past nine years, FLSmidth South Africa has helped to fund maths and science educators at the Kingsway Christian School, Randpark Ridge, Johannesburg. In 2022, we doubled our contribution to the school, helping to also provide daily nutritious meals to students.
In-depth due diligence screenings conducted
In 2022, our business was heavily influenced by the war in Ukraine. Trade compliance became more complex and comprehensive due to the continually expanding scope of sanctions on Russian and Belarussian companies. We screened all customers in Russia, Belarus and other countries with links to Russia, and all shipments remaining from before the war were subjected to full compliance checks, including screening for dual-use and prohibited items. We ceased new contracts and new orders on existing contracts.
We conducted 400 in-depth due diligence screenings, significantly above the target for the year. The speed at which these were completed resulted in improved processes, allowing us to scale up quickly to manage a large volume efficiently and rapidly.
We continued training in our compliance framework. We did not achieve our goal of delivering this training to every employee due to organisational restructuring and a greater workload in trade compliance and due diligence.
Our internal investigations work developed significantly in 2022. We received more reports than in previous years, but also closed more investigations, including harassment and conflict of interest cases, which have often been difficult to close.
In 2022, 37 discrimination or harassment incidents were reported, which is more than average. We will continue to focus on creating a workplace environment where no individual is subject to harassment.
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10.3 | 16.5 |
Working with science-based targets, we encourage environmental action across our supply chain.
Spend with suppliers with science-based targets
% of total supplier spend
Our commitment to the Science Based Targets initiative guides our work within the supply chain in relation to climate action. We aim to achieve 30% of our supplier spend with suppliers who have set their own science-based targets by 2025. In 2022, our spend with these suppliers was 7.7%.
We expanded our efforts to share our commitments with suppliers by engaging with them more actively, for example by sharing knowledge on how to set climate targets. We took steps to improve our supplier due diligence processes, based on the OECD Due Diligence Guidance for Responsible Business Conduct. This set the direction for our revision of the Supplier Code of Conduct in 2022 and our ongoing work to improve supplier assessments.
In 2022, we achieved our three targets: suppliers screened for sustainability, screenings resulting in findings, and findings where we have improvement plans agreed upon with suppliers.
Building capacity within our own organisation helps us achieve our sustainability goals. Our objective is to enable more procurement colleagues to advise suppliers on matters relevant to sustainability. This in turn will help us understand the supplier’s level of sustainability engagement and help facilitate meaningful, ongoing dialogue between our teams and our suppliers.
We have joined the Responsible Minerals Initiative of the Responsible Business Alliance, which helps set the direction for implementing our Conflict Minerals Policy. Having joined the Copper Mark in 2021, we participate in working groups in order to adhere to responsible production practices in the copper industry. This work will continue in 2023 as we aim to map the use of copper in our supply chain and set appropriate targets.
12.6
Learn more at flsmidth.com/supplychain |
We prepared new strategies for our mining and cement businesses towards the end of 2022. Reflecting sustainability’s growing importance for the company, we designated it as a key focus area, and we updated our governance model accordingly.
Key to our governance structure are targets and corresponding KPIs that are cascaded throughout the business. Our policies define how we operate according to internal and international standards, and we have incentive schemes to drive performance. Group Executive Management sits on the Sustainability Board and has the ultimate responsibility for our sustainability performance.
In 2021, we introduced a new set of sustainability targets that we aim to achieve by 2030. Addressing areas material to our business and stakeholders, these targets are linked to our wider sustainability approach and contribute directly to the success of our MissionZero programme. Our emission targets cover our scope 1, 2 and 3 GHG emissions across the value chain and are approved by the Science Based Targets initiative (SBTi).
Other sustainability targets, including safety, diversity and responsibility in the supply chain, have both long-term (2030) and intermediate (year-on-year and three-year) time horizons. These targets are cascaded to the relevant business functions but require company-wide commitments and prioritisation. We regularly review our KPIs to ensure that we monitor material subjects and gather data relevant to improving our sustainability performance.
We expect our new corporate strategies to drive further developments during 2023 – including aligning our MissionZero and ESG efforts and how we will work with emerging topics, such as circularity, biodiversity and sourcing standards. We will also evaluate how these developments will influence our contribution to the UN Sustainable Development Goals (SDGs).
Accountability for the direction, progress and focus of our sustainability work rests with Group Executive Management, which acts as the company’s Sustainability Board. The Board of Directors receives sustainability updates every quarter and holds an annual sustainability workshop.
In 2022, we introduced a new KPI in our long-term incentive plan connecting the remuneration of FLSmidth’s senior management with progress in “economic intensity” – one of our scope 3 science-based targets. We also increased the weighting of the sustainability KPI in the long-term incentive plan for Group Executive Management from 10% to 20%. All employees, including those participating in the company’s short-term incentive plan, can have a sustainability-based performance objective as part of their development plans. To drive further progress in our MissionZero programme and reduce economic intensity, sustainability is included in the bonus programme for employees working in sales functions.
Women accounted for 33% of the shareholder-elected Board members at the end of 2022, fulfilling the target that at least 25% of the members elected at the Annual General Meeting should be women.
We engage with various external stakeholders relevant to our MissionZero ambition and ESG goals. The success of MissionZero requires more than technological solutions. To create systematic change and accelerate the deployment of sustainable solutions, we need strong collaboration across the value chain, a supportive policy environment and active involvement from civil society.
We apply technology and innovation to enable the production of sustainable minerals, metals and cement, and we partner with our customers to support a regulatory environment that stimulates demand for these greener products.
Our relationships with financial institutions have been instrumental in helping customers finance projects and ensuring they make a positive contribution to sustainability.
We are members of, or engage with, industry associations and advocacy groups to promote policy frameworks and regulations that help accelerate the green transition.
Building strong strategic relationships with suppliers strengthens our MissionZero programme, as it creates opportunities to co-develop innovative technologies adding to our existing portfolio.
In 2022, we continued our engagement within the Leadership Group for Industry Transition, we joined the IRENA Alliance for Industry Decarbonisation and we took part in the United Nations Climate Change Conference (COP27).
We partner with Technische Universität Dresden to develop flotation technologies and with the Technical University of Denmark and others to research the electrification of clay carbonation.
We initiated a collaboration with ABB to assess solutions that will de-risk mining operations and lower operating costs while reducing emissions, energy use and waste.
Similarly, we signed an agreement with Microsoft aimed at accelerating our digital journey, co-innovating and improving existing offerings.
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