OECD – Boliden Due Diligence Report 2022

Our vision is to be the most climate friendly and respected metal provider in the world. To achieve this, we must ensure that our value chain is responsible. Boliden expects everyone it conducts business with to comply with all applicable laws, regulations and internationally recognized principles and to act in accordance with high ethical standards and integrity.

To ensure responsible sourcing to our smelters, potential risks are identified under Boliden’s Business Partner Code of Conduct. The Business Partner Code of Conduct addresses issues such as human rights, labor rights, environment and anti-corruption. It is based on the principles of the UN Global Compact, the ILO fundamental conventions, the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, among other international industry standards.

To ensure our Business Partner Code of Conduct is translated into action in our organization, we use a process for ESG Due Diligence and Evaluation of business partners. Roles and responsibilities together with a governance structure for escalation have been determined, as seen in the illustration below. Decisions are taken in the line organization and review and quality assurance is done through the support function.

All Boliden employees that are involved in the risk screening phase undergo training in the process. During 2022, the following trainings were performed:

• ESG Responsible business workshop – one full-day training.
• Training on how to conduct site visits – one half-day training.
• Training on the Evaluate tool for ESG process management – e-learning over the course of eight weeks.
• Capacity building for local Business Unit ESG Coordinators On Due diligence process – 3-hour training.

All prospective business partners with whom Boliden wishes to enter or renew/re-negotiate any contractual arrangements, undergoes a risk assessment to determine the appropriate level of due diligence and risk mitigation activities. To check the supply chain, control systems are in place in the form of:

1) Compliance screening.

2) A KYC-process with questionnaires sent out to business partners.

3) A check for red flags related to anti-bribery and corruption, anti-money laundering, business ethics, environment, serious human rights abuses, and red flags related to the payment of funds.

The follow-up work of the ESG due diligence process is determined based on risks found in the first three steps. If deemed necessary, this will involve a re-risk assessment, which can be followed by ESG dialogue and/or ESG on-site assessments, and an ESG risk management plan when necessary. All information documented throughout the process is used to decide on how to proceed with the business partner. The illustration below clarifies the steps a case goes through based on the risk level. The risk level is determined by parameters such as the size of the business partner and what countries the business is connected to. Furthermore, the lack of policies connected to stakeholder mapping and/or supply chain responsibility are other aspects influencing the outcome of the risk analysis for a specific business partner.

All steering documents connected to the ESG Due diligence process at Boliden Smelters are documented in the Boliden Management System, which is available to all employees. The process is managed in the online Evaluate tool, which documents the compliance screenings and self-assessment questionnaires sent out to suppliers and customers and includes a checklist for the identification of red flags. Checklists for site visits are available in the system as well as a deviation handling step, where requests for corrective actions can be sent out and the supplier or customer can reply in the tool. There is also a module for the documentation of risk management plans to support with planning and documentation.

The Business Partner Code of Conduct is communicated to the counterpart either through the main Boliden contact or through the self-assessment questionnaire. It is also available on Boliden's external website together with the company’s Joint Due Diligence compliance reports as well as LBMA Gold and Silver Compliance reports. Information on due diligence in the downstream supply chain is also done through Due Diligence questionnaires sent by customers.

Boliden publishes its payments to authorities per project in countries where the company has operations in the country-by-country section of the Annual and Sustainability Report. Tax payments are published in the Sustainability Index.

Performance activity – annual update of Business Partner Code of Conduct:

In early 2022, the Business Partner Code of Conduct was updated and approved by the CEO to ensure inclusion of the requirements from the UN Guiding Principles on Business & Human and to ensure that OECD Due Diligence Guidance (DDG) requirements cover all minerals sourced to Boliden’s operations.

• Performance indicators – number of employees who received training in the process and understanding of risks related to the sourcing of minerals: 40
• Performance activity – improvement activities during the year:
  • Update of ESG clauses in standard contracts was performed to be in line with OECD standard requirements.
  • Additional controls to the material control system were established to avoid human error in 2022.
  • A formal communication plan including a system to evaluate the effectiveness of the communication was formalized during 2022.

To identify risks, we first look at indicators related to country, compliance, sanctions ownership, previous wrongdoings, the business partners’ awareness of relevant standard and their own management systems. The risks in our supply chain are mainly related to deliveries from higher risk countries.

The identified risks are then assessed. Internal Boliden experts that have worked within the area of mining and metals for several years assess the risks related to environmental issues in mining. We also regularly appoint external expertise for human rights, governance and compliance issues. The final risk methodology is based on a Boliden risk matrix where likelihood and consequence are assessed based on predetermined criteria, rated from 1 – Insignificant risk to 5 – Severe risk, for the consequence and similar for likelihood, rated from 1 – Rare to 5 – Almost certain. Likelihood and consequence are multiplied giving a critical risk from 20–25 and high risk from 12–19.

During the risk assessment process, we identify business partners that are subject to an escalation. An escalation may include additional assessments, dialogue with the business partner and ESG on-site assessments.

• Performance activity – improvements during the year:
  • A risk assessment instruction was developed to ensure risks are managed in accordance with Boliden’s standards.
  • A formal procedure for on-the-ground risk assessments was formalized.

The procedure for the on-the-ground risk assessment includes the specification of triggers for an assessment to be made. For example, Boliden shall conduct ESG on-site assessments where data gaps result in a lack of sufficient and credible information to determine the presence of Business Partner Code of Conduct risks and adherence to national laws and other relevant legal instruments. It also states that the on-site assessment must be performed before any transactions occur or a maximum of six months after the business relationship commencing. The instruction addresses the need for the collected data to be verified and up to date. The instruction also demands competence for the assessment team, such as that the team collectively needs to have knowledge of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas as well as audit/assessment principles, procedures and techniques.

• Performance activity – number of ESG dialogues and engagement with suppliers: 10
• Performance indicator – Corrective Actions Requests:
  Out of 40 CARs sent out, 38% responded and have been closed and another 25% have responded and are still under review and have not yet been closed.

ESG dialogue is considered an important tool both for the identification and mitigation of risk. During 2022, dialogue meetings were held with both new and active suppliers – including both primary and secondary raw material suppliers. We also saw positive developments from our engagement with suppliers during the year. As an example, following ESG dialogue in 2021 and 2022, a secondary raw material supplier that is delivering material to Boliden has implemented the Boliden Business partner Code of Conduct and have started to perform supplier visits in their value chain. In this case the dialogue will continue to support the supplier in their steps to strengthen the evaluation of their supply chain even further.

For new high to critical risk business partners, a risk management plan must be established. This includes corrective actions for the most important risks, regular dialogues with the business partner to follow-up on important topics, as well as contract clauses requiring action in the event of a serious breach of the Business Partner Code of Conduct.

• Performance indicator: Cases of enhanced risk ­assessment and risk management during the year: 17

Site visits are conducted with new suppliers deemed as high or critical risk and during 2022 several visits were completed. This included a follow up visit to a mine delivering concentrate to Boliden Harjavalta. Risks found during the visit were managed and several good examples were found, especially within social topics, such as health and safety and community engagement. To continue to learn from each other and monitor any changes in the risk connected to the operation, quarterly meetings are held and ESG site assessments are conducted every three to five years. We also have an ongoing case with a mine under development by a supplier where we have had the opportunity to conduct a site visit and develop a good ESG dialogue with the supplier and contribute with our knowledge and experience from an early stage.

During the year, a high-risk case was escalated for a decision by the Smelters Management Team. The decision was taken to enter into an agreement with the supplier, with the prerequisite that an ESG on-site assessment is performed before any material is delivered to Boliden.

An independent third-party audit found that Boliden has implemented an effective management system. The latest assessment reports for Boliden’s assurance against the Joint Due Diligence Standard for Copper, Lead, Nickel and Zinc can be found on the Copper Mark website.