Fortum as a responsible and sustainable investment

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

Fortum strives for balanced management of economic, social and environmental responsibility in the company’s operations, emphasising the following focus areas:

Economic responsibility Social responsibility Environmental responsibility
Economic benefits to our stakeholders Operational and occupational safety Energy and resource efficiency
Long-term value and growth Secure energy supply for customers Reduction of environmental impacts
Sustainable supply chain Personnel wellbeing Climate-benign energy production
Customer satisfaction Business ethics and compliance Solutions for sustainable cities

 

The Group-level sustainability targets are linked to the main sustainability focus areas and emphasise Fortum’s role in society. They measure not only environmental and safety targets, but also Fortum’s reputation, customer satisfaction, employee wellbeing, and the security of power and heat production. Targets are set annually and are based on continuous operational improvement.

The achievement of the sustainability targets is monitored in monthly, quarterly and annual reporting. Fortum publishes a yearly Sustainability Report with additional information on the company’s sustainability performance.

Group sustainability targets and performance

  Target 2017 2016
Reputation index, based on One Fortum Survey 70.7 72.3 72.5
Customer satisfaction index (CSI), based on One Fortum Survey Level "good" 70-74 64-76 67-79
Environmental responsibility      
Specific CO2 emissions from total energy production as a five-year average, g/kWh <200 188 188
Energy-efficiency improvement by 2020, base-line year 2012, GWh/a >1,400 1,502 1,372
Major EHS incidents, no. ≤21 20 22
Social responsibility      
Energy availability of CHP plants, % >95 96.1 97.4
Total recordable injury frequency (TRIF), own personnel ≤2.5 1.8 1.9
Lost workday injury frequency (LWIF), own personnel ≤1.0 1.2 1.0
Lost workday injury frequency (LWIF), contractors ≤3.5 4.2 3.0
Severe occupational accidents, no. ≤5 1 5
Quality of investigation process of occupational accidents, major EHS incidents and near misses Level 1.0 Level 0.75 -
Sickness related absences, % ≤2.3 2.2 1) 2.3 1)
1) Excluding DUON and Hafslund

 

Fortum is listed on the Nasdaq Helsinki exchange and is included in the STOXX Global ESG Leaders, OMX GES Sustainability Finland, ECPI® and Euronext Vigeo Eurozone 120 indices. Fortum is also ranked in category A- in the annual CDP (formerly the Carbon Disclosure Project) rating 2017, and it has received a Prime Status (B-) rating by the German oekom research AG.

Fortum’s sustainability reporting covers all functions under Fortum’s operational control, including subsidiaries in all countries of operation. Sustainability information relating to Hafslund Markets’ and Fortum Oslo Varme’s operations is included in Fortum’s reporting as of August 2017. The figures for power and heat generation, capacities and investments include also figures from Fortum’s share in associated companies and joint ventures that sell their production to the owners on cost basis. The Meri-Pori power plant is included fully in sustainability figures as Fortum has the environmental permit.

Sustainability risks

Fortum’s operations are exposed to risks, which if materialised can have adverse effects on the environment and the safety and security of employees, contractors and neighbouring societies. Key sustainability risks are presented in the Risk management part in the Operating and financial review. Climate change and the need for decarbonisation and resource efficiency is changing energy industry in a profound way and these changes also create new business opportunities for Fortum.

Sustainability governance and policies

Sustainability management at Fortum is strategy-driven and is based on the company’s Values, the Code of Conduct, the Supplier Code of Conduct, the Sustainability Policy and other Group policies and their specifying instructions. As sustainability is an integral part of Fortum’s strategy, the highest decision making of these issues falls on the duties of the Board of Directors, who share joint responsibility on sustainability matters.

Fortum Executive Management decides on the sustainability approach and Group-level sustainability targets that guide annual planning. The targets are ultimately approved by Fortum’s Board of Directors. Fortum’s line management is responsible for the implementation of the Group’s policies and instructions and for day-to-day sustainability management. Realisation of the safety targets is a part of Fortum’s short-term incentive system.

Fortum is a participant of the UN Global Compact initiative and the UN Caring for Climate initiative. Fortum respects and supports the International Bill of Human Rights, the United Nations Convention on the Rights of the Child, and the core conventions of the International Labour Organisation (ILO). Additionally, Fortum recognises in its operations the UN Guiding Principles on Business and Human Rights, the statutes of the OECD Guidelines for Multinational Enterprises, the International Chamber of Commerce’s anti-bribery and anti-corruption guidelines, and the Bettercoal initiative’s Code on responsible coal mining.

Business ethics

The Fortum Code of Conduct and Fortum Supplier Code of Conduct define how we treat others, engage in business, safeguard corporate assets, and how Fortum expects suppliers and business partners to operate. Fortum’s Board of Directors is responsible for the company’s mission and Values and has approved the Fortum Code of Conduct. Fortum has zero tolerance for corruption and fraud and does not award donations to political parties or political activities, religious organisations, authorities, municipalities or local administrations.

In addition to internal reporting channels, Fortum employees and partners can report suspicions of misconduct confidentially to the Fortum Head of Internal Audit via the “raise-a-concern channel” on Fortum’s internal and external web pages.

Suspected misconduct and measures related to ethical business practices and compliance with regulations are regularly reported to the Audit and Risk Committee.

No cases of suspected corruption or bribery related to Fortum’s operations were reported in 2017.

Economic responsibility

Fortum’s goal is to achieve excellent financial performance in strategically selected core areas through strong competence
and responsible ways of operating. Fortum measures financial performance with return on capital employed (target: at least 10%) and capital structure (target: comparable net debt/EBITDA around 2.5).

Fortum is a significant economic actor in its operating countries. The most significant direct monetary flows of Fortum’s
operations come from revenue from customers, procurements of goods and services from suppliers, compensation to lenders, dividends to shareholders, growth and maintenance investments, employee wages and salaries, and taxes paid. In 2017, investments in CO2-free production were EUR 375 (270) million.

Fortum supports social development and wellbeing in its operating countries by e.g. paying taxes. The tax benefits Fortum
produces to society include not only corporate income taxes but also several other taxes. In 2017, Fortum’s taxes borne were EUR 445 (365) million. Fortum publishes its tax footprint annually.

Targets for reputation and customer satisfaction are monitored annually. In the One Fortum Survey in 2017 company reputation among key stakeholders was 72.3 (72.5) points (on a scale of 1–100) and exceeded the target of 70.7 points. The stakeholder groups selected for the One Fortum Survey differ between the years 2016 and 2017. The reference value for the 2017 target-setting (70.7) is the reputation index (69.7) given by the same stakeholder groups in 2016. The Group target (70–74 points) for customer satisfaction was achieved among all business areas, but not in retail electricity sales.
The Recycling and Waste Solutions unit was not part of the One Fortum survey in 2017.

Fortum’s total purchasing volume in 2017 was EUR 3.2 (2.5) billion and Fortum had about 16,000 suppliers of goods and
services. Fortum expects its business partners to act responsibly and to comply with the Fortum Code of Conduct and the Fortum Supplier Code of Conduct. Fortum assesses the performance of its business partners with supplier qualification and supplier audits. In 2017, Fortum audited a total of 11 (13) suppliers in China, India, Russia, Slovenia, Estonia and Finland. Most of the non-compliances identified in the audits in 2017 were related to occupational safety, working hours and remuneration.

Environmental responsibility

Fortum’s Group-level environmental targets are related to CO2 emissions, energy efficiency, and major environmental, health and safety (EHS) incidents.

The Group Sustainability Policy together with the Minimum Requirements for EHS Management steer Fortum’s  environmental management. Investments, acquisitions and divestments are assessed based on the sustainability assessment criteria defined in the Group’s Investment Manual. Operational-level activities follow the requirements set forth in the ISO 14001 environmental management standard, and 99.8% (99.9%) of Fortum’s power and heat production worldwide has ISO 14001 certification.

Circular economy

Fortum’s aim is to promote resource efficiency improvements and the transition towards a more extensive circular economy. Resource efficiency and maximising the added value of waste and biomass are key priorities in the environmental approach, as defined in the Group Sustainability Policy.

In 2017, Fortum received a total of 1.2 million tonnes of nonhazardous waste and 640,000 tonnes of hazardous waste from
customers. As much of the waste stream as possible is recycled, recovered or reused. Waste that is unsuitable for recycling or reuse as a material is incinerated in Fortum’s waste-to-energy plants in the Nordic countries and Lithuania.

Sustainable energy production

Fortum’s energy production is primarily based on carbon dioxidefree hydropower and nuclear power and on energy-efficient combined heat and power (CHP). In line with the strategy, Fortum is targeting a gigawatt-scale solar and wind portfolio.

In 2017, Fortum’s power generation was 73.2 (73.1) TWh and heat production 28.6 (27.8) TWh. 61% (62%) of the total power
generation was CO2-free. In the EU area, 96% (96%) of the power generation was CO2-free. In 2017, Fortum built and acquired 294 MW of renewable, carbon-free production.

The main fuels that Fortum uses to produce electricity and heat are natural gas, nuclear fuel, coal, waste-derived fuels and biomass fuels. The most significant fuel was natural gas, which accounted for 62% (62%) of the total fuel consumption. The next highest fuel use was uranium 21% (23%). Coal accounted for 10% (10%) of the total fuel use, and waste-derived fuels and biomass fuels 3% (2%) and 3% (3%), respectively. Russia accounted for 99% of the use of natural gas and 51% of the use of coal.

Climate change mitigation

Fortum expects the concern about climate change to increase the demand for low-carbon production and energy-efficient
solutions and products. Fortum aims to mitigate climate change by investing in CO2-free energy production and by improving energy and resource efficiency. Fortum is also adapting its operations to climate change in production planning and in the assessment of growth projects and investments.

In 2017, Fortum’s direct CO2 emissions were 18.3 (18.6) Mt. 84% (83%) of CO2 emissions originated from Russian power plants. Direct CO2 emissions decreased due to the reduction in condensing power production. Of the total CO2 emissions, 2.3 (2.7) Mt were within the EU’s emissions trading scheme (ETS). The estimate for Fortum’s free emission allowances is 1.0 (1.0) Mt.

Fortum’s specific carbon dioxide emissions from total energy production remained at the same level and were 184 (184) g/kWh. The specific CO2 emissions from total energy production as a five-year average were at 188 (188) g/kWh, which is better than Fortum’s Group target of 200 g/kWh.

Fortum has had a Group target to achieve annual energy improvements of more than 1,400 GWh by 2020 compared to 2012. This target was reached (1,502 GWh/a) by the end of 2017.

Decreasing environmental impact

Emissions into air Fortum’s activities cause various emissions to air. In addition to carbon dioxide (CO2) emissions, these include flue-gas emissions such as sulphur dioxide (SO2), nitrogen oxide (NOx) and particle emissions. All power plants operate in compliance with their air emission limits.

Water withdrawal

Fortum uses large volumes of water at various types of power plants and in district heat networks. In most cases, power plants do not consume water – the water is discharged back to the same water system from where it was withdrawn. Fortum withdrew a total of 2,100 (2,100) million m3 of water in power and heat production; 94% of this amount was used as cooling water.

Radioactive waste

In 2017, 23.4 (19.6) tonnes of spent nuclear fuel was removed from Loviisa power plant’s reactors in Finland. High-level radioactive spent fuel is stored in an interim storage at the Loviisa power plant site. The final disposal of the high-level radioactive waste is scheduled to begin at Olkiluoto in Eurajoki in the first half of the 2020s.

Biodiversity

Fortum’s main impacts on biodiversity are related to hydropower production. Fuel procurement and flue-gas emissions may also have a negative impact on biodiversity. On the other hand, increasing CO2-free production mitigates the biodiversity loss caused by climate change. Fortum’s Biodiversity Manual, revised in 2017, defines the company’s approach in biodiversity management.

Environmental incidents

Fortum’s target is fewer than 21 major EHS incidents annually. Major EHS incidents are monitored, reported and investigated, and corrective actions are implemented. In 2017, there were 20 (22) major EHS (environmental, health and safety) incidents in Fortum’s operations. There were 10 (11) environmental incidents, out of which eight were spills. Fortum paid fines totalling RUB 8,000 (EUR 121) for the permit violation involving exceeding the wastewater emission limit in Russia. The major EHS incidents did not have significant environmental impacts.

Social responsibility

Fortum’s social responsibility targets are related to the secure supply of electricity and heat for customers, operational and
occupational safety as well as employee wellbeing.

Employees

The Group Human Resources Policy is based on the company’s Values, Leadership Principles and Code of Conduct. The HR Policy guides the daily work in the company, and the implementation of the policy is followed up regularly through the employee engagement survey, the annual performance and development discussions, as well as other feedback practices.

Fortum’s operations are mainly based in the Nordic countries, Russia, Poland and the Baltic Rim area. The total number of
employees at the end of 2017 was 8,785 (8,108). The number of employees increased mainly due to the acquisition of Hafslund.

Occupational safety

For Fortum, excellence in safety is the foundation of the company’s business and an absolute prerequisite for efficient and interruption-free production. Fortum strives to be a safe workplace for the employees and for the contractors and service providers who work for the company. The Group Sustainability Policy, the Minimum Requirements for EHS Management and more detailed Group-level EHS manuals steer the work. A certified OHSAS 18001 safety management system covers 98.4% (99.9%) of Fortum’s power and heat production worldwide.

2017 was a challenging year in terms of occupational safety. Only the total recordable incident frequency (TRIF) for own employees and the number of severe accidents met the set target level.

The TRIF for Fortum employees was 1.8 (1.9) per one million working hours, which is better than the target (≤ 2.5). The lost-workday injury frequency (LWIF) for own personnel was 1.2 (1.0), which did not meet the set target level (≤1.0).

The lost workday injury frequency (LWIF) for contractors continues to be Fortum’s main challenge. The LWIF for contractors per million working hours was 4.2 (3.0), and Fortum did not achieve the target of ≤3.5. The same challenge applies to the combined LWIF (own employees and contractors): the result was 2.4 (1.8), exceeding the target of 1.9.

In 2018, Fortum will implement new tools to assess contractor safety performance as part of the supplier qualification process and will also evaluate their safety practices in a more systematic manner during work. Fortum will also introduce external safety training for both the management level and key individuals leading safety work as well as the most  challenging business areas.

In 2017, as in 2016, there were no accidents leading to a fatality in the company’s operations.

Open leadership, personnel development and wellbeing

In late 2017, Fortum launched the company’s revised Values and new Leadership Principles. The Open Leadership framework supports cooperation across units and aims to create an environment that fosters innovation, flexibility and agility.

ForCare, Fortum’s programme for overall wellbeing at work, aims to promote health, safety, employee work capacity and work community functionality. As part of ForCare, the Energise Your Day wellbeing programme was launched in several new operating countries in 2017. The percentage of sickness-related absences excluding DUON and Hafslund was 2.2 (2.3), which is better than the target level of ≤2.3. The percentage of sickness-related absences for Hafslund was 3.0.

Respect for human rights

Fortum’s goal is to operate in accordance with the UN Guiding Principles on Business and Human Rights, and to apply these principles in own operations as well as in country and partner risk assessments and supplier audits.

A sustainability assessment, including a human rights evaluation, is carried out for investment projects – especially in new
operating areas – and also for new countries where Fortum plans to expand the sales of products and services. In 2017, 15 (28) of these assessments were made.

In 2017, there were no grievances related to human rights filed through Fortum’s formal grievance channels, nor were there any grievances carried over from the previous year.

Society

An uninterrupted and reliable energy supply is critical for society to function. With planned preventive maintenance and condition monitoring, Fortum ensures that the power plants operate reliably to produce the electricity and heat customers need. The energy availability of the company’s CHP plants in 2017 was, on average, 96.1%; the target was above 95%.

Fortum’s operations impact the local communities where the power plants are located, and the company engages in many kinds of collaboration with local stakeholders. Fortum’s Policy for Sponsoring and Donations was revised in late 2017. According to the policy Fortum’s sponsoring will focus on wellbeing of children and youth, renewable energy projects, R&D and innovations supporting Fortum’s strategy, recycling, recovery and reutilization. The company also does significant collaboration with different research and development projects, particularly with Nordic universities. In 2017, Fortum’s support for activities promoting the common good totalled about EUR 4.9 (2.9) million. The grants awarded by Fortum Foundation were about EUR 696,000 (675,000). Fortum Foundation is not part of Fortum Group.