Responsible sourcing

ERG has a number of processes in place to ensure that our supply chain is responsibly managed and that downstream value chain actors can source minerals from us with confidence.

In 2020, we implemented our new Group Supplier Code of Conduct, which all suppliers have to comply with as a condition of doing business with ERG. Furthermore, suppliers are required to ensure their subcontractors also agree to abide by its terms. The Code of Conduct is in line with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. As part of the Code, suppliers must provide workers with a safe and healthy environment and ensure they are having a positive impact on the areas they operate in, including a zero-tolerance policy towards corruption, child labour and any other human rights abuses.

In 2020, ERG conducted more than 14,000 Counter-Party Due Diligence reviews to ensure compliance with the Code of Conduct before concluding or reviewing contracts. The reviews cover sanctions violations, conflicts of interest, money laundering, bribery and corruption, data leakage, the infringement of human rights and other reputational issues.

To deliver value chain assurance around our cobalt production, ERG has also implemented a Clean Cobalt and Cobalt Framework at Metalkol RTR in the DRC, which independently verifies our seven goals of responsible production, including conformance with the OECD Due Diligence Guidance.

Suppliers in the regions where we operate often have higher than average risk profiles, for example, companies in the DRC, South Africa and Zambia. Given the local context, we want to work constructively with these suppliers to ensure that they meet our requirements, which are laid out in the Group Supplier Code of Conduct. If any issue is identified with a supplier, the first step will be to attempt to engage with them and try to remediate this issue. If this fails, we will terminate the contract in line with the terms of the Group Supplier Code of Conduct.

The processes we have in place to mitigate any risk in our supply chains are vital to reducing our Environmental, Social and Governance impact. Engaging with and supporting the development of our suppliers is an important factor in responsibly sourcing our materials.

As a raw materials producer, responsible sourcing is at the heart of everything we do at ERG. This is reflected in our values of Safety, Unity, Efficiency, Development and Responsibility. Whilst we are guided by internationally accepted standards, such as the OECD Due Diligence Guidance for Responsible Sourcing from Conflict-Affected and High-Risk Areas and the UN Guiding Principles on Business and Human Rights, ERG strives to go above and beyond in our efforts to make our value chains as transparent and sustainable as possible.

To ensure we continue to make responsible sourcing a priority, we have set out commitments in internal initiatives such as the Clean Cobalt and Copper Framework and the Responsible Aluminium Framework. Externally, we also aim to drive change throughout the whole industry through active participation in a number of collaborations and initiatives, including the Global Battery Alliance, of which ERG is a founding member, the Re|Source consortium, the Sustainable Markets Initiative and the United Nations Global Compact.

Aluminium is a key material in the global energy transition, needed to help reduce the weight of road vehicles and to support wind generation, solar power and the development of lithium-ion batteries. ERG’s Kazakhstan Aluminium Smelter JSC is the first and only producer of high-grade primary aluminium in Kazakhstan. As such, we are committed to eliminating potential risks in the aluminium value chain including but not limited to potential human and labour rights abuses as well as environmental damage. In this context, we have developed the ERG Responsible Aluminium Framework, which allows us to ensure that any risks are effectively managed in line with internationally accepted standards on business ethics, environment and health and safety.

The Framework focuses on metal production at ERG’s Aluminium of Kazakhstan and Kazakhstan Aluminium Smelter. It has a three-element approach, which includes:

1. A robust policy framework – e.g. compliance management system and Code of Conduct; Supplier Code of Conduct; stakeholder engagement and other policies and guidelines
2. Risk assessment and management – e.g. ERG’s risk management framework; risk mitigation and reporting; a grievance mechanism and analysis of Conflict-Affected and High-Risk Areas (CAHRAs) and red flags
3. Supplier engagement and development – e.g. industry engagement and collaboration; capability building and performance review and supplier onboarding

These three elements combine to form an overarching system that considers the production and sourcing of metals and minerals as well as the procurement of goods and services. It commits to zero tolerance on human rights abuses and pursues an enhanced environment and sustainability leadership across the entire aluminium value chain. The procedures involved are aligned with OECD Guidelines as well as LME Responsible Sourcing requirements.

At ERG, we have full oversight and control of the origins of the ore in our aluminium supply chain. We do not purchase alumina from external sources, which further reduces the risks in our supply chain.

Kazchrome, ERG’s subsidiary in Kazakhstan, is the world’s largest ferrochrome producer by chrome content, meaning we have a responsibility to make sure that our production of chromium is responsible and sustainable. Our efforts in this regard have been recognised by the International Chromium Development Association ‘Responsible Chromium’ Label which shows that Kazchrome has gone above and beyond the standard requirement needed to responsibly source chromium.

The label was achieved following an evaluation by the independent CSR agency Ecovadis. Kazchrome received 69 points and was ranked in the top 10% of companies rated by EcoVadis in the Manufacture of basic iron and steel industry. The award demonstrates ERG’s adherence to values including following safe processes and best practices, the ethical treatment of people and communities, abolishing child labour and modern slavery, the mitigation of environmental impact and the fight against corruption.

The Group’s commitment to the sustainable production of chromium is further highlighted by the tailings beneficiation currently being developed at Kazchrome. This facility is one of the world’s most advanced in terms of technology and automation, reducing the environmental impact of its tailings. Other projects also include constructing a ferroalloy gas recycling power plant, recycling waste in our production activities including through briquetting gas purification dusts, and processing slags and sludge into more than 20 types of commercial products through ERG Recycling, as part of our efforts to advance a circular economy.