Outokumpu and society
Outokumpu’s operations have economic impacts on the local, national and global communities in which the Group operates. Outokumpu contributes to the community's well-being through paying taxes, through direct and indirect employment, and other means of community involvement.
Outokumpu operates in a competitive industry where demand and supply meet in global markets. On the other hand, our production sites are often located in relatively small cities or towns. This means that Outokumpu is significant to the economies of the small local communities, and often one of very few private-sector employers in the area. Finding a balance between global market trends and responsibility towards communities is sometimes difficult, especially in economic downturns.
Decisions might have a major impact on communities, Outokumpu personnel and their families, and local goods suppliers and service providers as well.
Outokumpu has surveyed its stakeholders view on what are material issues in sustainability. Read more about focus on the material issues.
Being a global leader in stainless steel means that a larger share of the global stainless steel demand is satisfied by Outokumpu. Therefore, because of our sustainability practices, the global society benefits overall. Our main areas of direct economic impact are our financial interactions with customers, suppliers, employees, the public sector, creditors and shareholders. Outokumpu contributes to the well-being of local, national and international communities through tax payments, through direct and indirect employment and by participating in other societal activities. The impact of taxes on societal well-being is both direct and indirect.
Employee benefit expenses decreased to EUR 713 million (2015: EUR 762 million). Total wages and salaries decreased to EUR 562 million in 2016 (2015: EUR 585 million), and indirect employee benefit expenses totaled EUR 151 million in 2016 (2015: EUR 177 million).
The Group taxes totaled EUR 12 million for 2016 (2015: EUR 35 million). In 2015, most significant items relate to the withholding taxes from disposals. The 2015 amount presented for Germany includes EUR 20 million of withholding tax expenses, where the beneficiary is the Chinese Government. The 2015 amount presented for other Europe includes EUR 6 million of withholding tax expenses.
In 2016, Outokumpu received some EUR 0.9 million (2015: EUR 0.9 million), thereof EUR 0.5 million from Finland and EUR 0.3 million from Germany, from the public sector to support Group research and development of new technologies, products and applications.
Outokumpu UK tax strategy
Taxes by country
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Outokumpu has a strong global base of customers spread across every continent and balanced over a range of industries. Continuous feedback and interaction with customers help us to improve our understanding of customer needs, the challenges they face and the business environment our customers operate in. Customer orientation is one of the main themes on our way to the vision 2020. In order to set direction for the customer satisfaction targets 2017-2020, we did the baseline measurement in the fourth quarter of 2016.
In 2016, Outokumpu reorganized its commercial operations to better correspond to the market demand. A new customer relationship management tool was also taken into use. Also the customer satisfaction measurement was renewed to provide a deeper insight on the satisfaction drivers and issues.
We continued collecting feedback from our customers. Around 2,400 customers participated in the customer surveys in 2016. Customers’ feedback helps us to achieve our growth targets and is used to enable continuous improvement of our performance, at both strategic and operational levels. The overall aim is to have a mutually beneficial process that helps us improve the three basic building blocks of customer satisfaction: customer support, delivery performance and product quality. Overall, Outokumpu’s customer satisfaction continued at the same level as in 2015. Customer feedback shows that while we have been scoring well on customer support and product quality, we have been inconsistent in our delivery performance. We benchmark our customer satisfaction performance against a group of industrial companies and continuously work on scoring among the top performers.
Outokumpu’s purchasing decisions are made solely based on Outokumpu Group’s best interests, taking into account the environmental, economic and social aspects of its Corporate Responsibility Policy. Suppliers will win Outokumpu’s business based on best value in use of product or service offered. Value in use means the total amount spent on a particular commitment, including, among other things, the initial contract price, life cycle cost of investment, effect on Outokumpu’s production efficiency and quality, commission fees, handling as well as other transaction costs and taxes.
The Outokumpu Code of Conduct is a tool for Outokumpu employees offering assistance in evaluating suppliers in different situations by setting examples and giving practical guidance. Outokumpu evaluates its suppliers against Outokumpu Supplier Requirements. Supplier requirements set forth the minimum criteria that are required from all Outokumpu suppliers and subcontractors regarding safety and sustainability, ethical standards, quality management, supply and production control, and product liability and control. Outokumpu expects its suppliers to become familiar and comply with its Code of Conduct, policy on sustainable development and corporate responsibility, and the Outokumpu supplier requirements.
The Code of Conduct states that Outokumpu condemns all forms of corruption and complies with the anti-corruption treaties and laws of the countries in which it does business. Outokumpu expects its suppliers and contractors to act in accordance with the law and recommends and also that they perform according to Outokumpu’s policies. Outokumpu is committed to marketing communication laws, standards and voluntary codes in communication with suppliers. In 2016 Outokumpu started regular compliance screenings of its suppliers for its significant location of operations in Europe. The target is to implement regular compliance screenings to cover the majority of Outokumpu's suppliers during 2017.
Raw materials – recycled steel as well as primary materials like ferronickel and ferromolybdenum – are purchased on the open market. Ferrochrome is mainly sourced internally from the Group’s own chrome mine and ferrochrome operations, which employ also external contractors and suppliers.
In 2016 Outokumpu had over 10,000 suppliers in 60 different countries. Vast majority of suppliers are located in those countries in Europe, USA, and Mexico, where Outokumpu has its production units. On the average, the proportion of spending on local suppliers at significant Outokumpu locations of operation was 36% in 2016. There were no significant changes in Outokumpu's supply chain. Some purchase volumes between the raw materials suppliers shifted, but no new major suppliers were introduced. No suppliers were identified to have negative human rights impacts.
Outokumpu plans to harmonize its supplier base and supplier approval and evaluation processes and the related guidelines globally in 2017. This will lead to increased transparency in the supply chain and enable to manage the suppliers depending on their strategic importance and risk.
Current and future employees
Current and future employees are both very important stakeholders for Outokumpu, their engagement and commitment being a fundamental part of the Group’s business. Outokumpu’s employees are the vital element in achieving outstanding performance. Read more about our people in 2016 in the Annual Report.
Alongside a range of safety developments to ensure that all employees go home again safely, there has been an increase in the number of company sites promoting health and wellbeing supported by our occupational health facilities. There are currently no global level wellbeing programs in place but they are currently in planning for future rollout. Read more about safety at Outokumpu.
Outokumpu’s long-term target is to be an employer of choice. Outokumpu aims to provide challenging career opportunities and to offer varied career paths. Outokumpu continues to work on its employer branding. Direct cooperation with key universities and technical colleges in all of the countries that Outokumpu operates in plays a big role in future resourcing. Social media is also considered an important means of talent recruitment.
Outokumpu has a long tradition of offering summer jobs and traineeships in its major production locations in Finland, Germany and Sweden. This provides an opportunity for students to become acquainted with Outokumpu as an employer and experience some of the career opportunities that exist. Outokumpu remains committed to this process to ensure the continued strength and diversity of our talent base. During the summer of 2016, the Group employed some 600 summer workers in Finland, mainly in Tornio, and approximately 170 in Sweden. Traineeships were offered particularly within Group services such as marketing and accounting. In Germany, Outokumpu offered internships to 30 students close to graduation as engineers, as well as 34 technical and commercial apprenticeships in all its locations. Sparking the interest in the next-generation workforce has been a goal of the Calvert, Alabama mill. Every year a select group of ninth graders and their teachers are invited to visit the Calvert mill and learn more about the manufacturing process and related support functions required to operate the integrated stainless mill.
Investors and analysts
Outokumpu continued its regular and active dialogue with investors and analysts in 2016.
Key topics discussed with investors were Outokumpu’s new vision and financial targets for 2020, the improving performance of the Americas business area, the balance sheet, as well as market-related topics. Outokumpu held its Annual General Meeting in Helsinki, Finland, in April. The Capital Markets Day was held in the new headquarters in Helsinki, Finland, in November. Outokumpu arranged 17 roadshows in Europe and in the US during the year. The company also met investors at three industry seminars in New York, Miami and London. In total, over 250 one-on-one meetings and 30 conference calls were held with investors during the year.
Many Outokumpu production sites have long and interesting histories. For example, most of our sites in Finland, Germany, Sweden and in the UK have been in use by the metal industry and integral parts of their local communities for centuries already. It is natural for Outokumpu, as a major employer in several locations, to have a strong presence in local society and activities in many ways.
Significant impacts on communities
As a major employer, Outokumpu’s decisions may have significant impacts on the lives of local communities. Important Outokumpu locations include Avesta and Degerfors in Sweden, the Kemi-Tornio region in Finland, and Dahlerbrück, Dillenburg and Krefeld in Germany. In all these locations, the main impact comes from direct and indirect employment: we are economically important for local society through the incomes and taxes Outokumpu creates in the region. We maintain continuous cooperation with community officials and representatives, other commercial companies, schools and universities. We aim to actively listen to local communities.
Beyond a major impact on Outokumpu personnel and their families, the Group’s operations also affect local communities through creating demand for local goods suppliers and service providers. Over the recent years, investments in our production assets have included EUR 108 million to increase stainless quarto plate production capacity in Degerfors, Sweden, and a further EUR 108 million to modernize the cold-rolling mill in Krefeld, Germany. Moreover, the EUR 410 million investment in the expansion of the ferrochrome production in Tornio resulted in around 120 permanent jobs in the Kemi-Tornio region.
Because of the ongoing restructuring of its industrial operations, Outokumpu has closed down some of its mills over in 2013–2016. In 2016 Outokumpu was able to complete its European restructuring, when the Benrath cold rolling operations were transferred from Düsseldorf to the Krefeld site and closing down the Benrath site was started. The vast majority of the employees will transfer to other positions in our Krefeld site. Based on a local social compensation plan, the remaining employees, some 10%, will move over to a transfer company, who will then arrange for trainings and look for a new employment for them according to a German custom, or retire. There were no compulsory redundancies in Benrath. Last year Outokumpu also completed global job reductions for less costs and fewer layers of management, with 600 white-collar workers leaving the company. In all restructuring and layoffs Outokumpu complied with local legislation, collective bargaining agreements and other applicable regulations.
Earlier, Outokumpu has closed down melt shops in Bochum and Krefeld, Germany in 2015 and 2013 as well as its Kloster operations Hedemora, Sweden in 2014. In Sweden, efforts to find new jobs for the former Kloster mill employees were successful, and vast majority have been given new positions or have retired. In the Bochum and Krefeld closures, all of the affected employees were part of the social plan. Many of the melt shop employees in Bochum and Krefeld were either transferred to other Outokumpu sites in Germany or to other facilities under the conditions of a social plan, while some retired. As the melt shop was situated in an industrial area with many other production companies, the influence on the local, highly populated region and infrastructure was limited.
As a heavy industry company, Outokumpu has at least some local community engagement, impact assessment or development programs in every production location, but typically not in smaller units such as service centers and sales offices. The units with local community engagement cover some 45% of Outokumpu’s global units (including small sales offices), and over 90% of Outokumpu personnel work at these sites.
At the largest production units, such as Tornio, Outokumpu has, in the past, organized social (SIA) and environment impact assessments (EIA) related to the expansion of production. In 2016 there were no such assesments.
Every year, there are numerous local engagement projects or actions at our production units. Typically, units have yearly discussions or information exchanges with neighbors or local community representatives on relevant topics such as employment, the environment, energy or sponsoring of local events. Outokumpu’s employees have given presentations at local schools and universities, and we have worked with local employment agencies to find positions for people within the Group. Schoolchildren and local students have been introduced to Outokumpu’s working environment through tours and discussions with employees, for instance in Avesta. Giving back to the community and attracting local talent has been a long-standing goal for the Calvert, Alabama mill. A partnership with Citronelle High School’s Manufacturing Academy offers local high school students the opportunity to experience the manufacturing environment first-hand with a summer internship program; a program that has resulted in numerous students joining the local Outokumpu team. Additionally, the Calvert team actively participates recruitment programs with the Mobile Area Education Foundation. The Kemi mine collaborated with schools, such as Lapland University of Applied Sciences, in the training of engineers, miners, and supervisors. In Sheffield, UK, apprenticeships have been offered to local colleges, and student placements have been made available in the form of one-year programs.
Typically Outokumpu also organizes open-door events at its production sites for neighbors. Based on feedback and participation, both of these events were successes. The production units received a lot of good and constructive feedback, as well as some helpful ideas on how to reduce environmental impacts on the surrounding community. In Krefeld, Germany, yearly meetings on the Neighbors’ Dialogue took place.
Traffic loads also have an impact on local communities, with the Kemi-Tornio region and Sheffield being good examples. Our Tornio site has participated in the new railway connection project in northern Sweden, called the North Bothnia Line (Norrbotniabanan), which would mean a 270 km extension of the Bothnia Line north of Umeå to Luleå and would provide a new transport route for the Tornio plant. The detailed planning of the project is ongoing. In Sheffield, Outokumpu is located very close to the UK’s M1 motorway, and steps are being taken to ensure that our operations have minimal impact on this primary transportation route.
Local stakeholders are also taken into account in the Group’s emergency planning. In Sheffield, representatives of the local police force, fire and emergency services, and national health organizations have attended health and safety days organized for Outokumpu employees. In Avesta, Sweden, the renovation of our former, centuries-old production site, Koppardalen, received excellent feedback due to its efforts to preserve local cultural history. Yearly, 30,000 visitors visit the old mill building and art exhibition “Avesta Art”.
As part of its community engagement, some Outokumpu sites also continued their dialogue with environmental NGOs related to ongoing permit processes or other environmental issues. The Finnish Network for Sustainable Mining (www.kaivosvastuu.fi) was founded in May 2014. Network is a forum of discussion and co-operation for mining sector and it´s stakeholders. Network developed a new liability standard based on Canadian ”Towards Sustainable Mining”-system. Kemi Mine committed to adopt the reporting system for the next years. [KS4] As a whole, Outokumpu aims to further increase transparency and information related to these and to our products’ sustainability properties.
Public sector and sponsoring
As defined in Outokumpu’s sponsorship policy, our sponsorship decisions are based on clearly defined preconditions of strategic, brand image or sustainability criteria. Outokumpu also makes discretionary donations for the common good as a responsible corporate citizen. These donations are approved by the Leadership Team or by the Board of Directors. Total grants and community support have decreased during the recent economically difficult years. In 2016, these amounted to some EUR 55,000.
Outokumpu does not take part in or otherwise support political activities, whether they are local or national. This is clearly stated in our Code of Conduct, communicated internally and also including training as a part of the Code of Conduct by the global e-learning course for all white-collar employees. Outokumpu did not make any donations to any political parties or groups in any country in 2016, directly or indirectly. However, Outokumpu’s grants, donations or sponsorships are mainly for local events or communities. Typically, we offer scholarships to students, sponsor local sporting or cultural activities or charity work. Organizations that arrange activities for children are also supported. Outokumpu supports research related to its field of industry and maintains close cooperation with educational institutes. Apprenticeships have been offered to local colleges and student placements have been made available in the form of one-year programs, and schoolchildren and local students have been introduced to the Group’s operations. In Germany, Sweden, the UK, Finland and in the US, local cooperation with schools and universities is typical at every production site.
Local social sponsorship by units also continued in 2016: traditionally Outokumpu has been the main sponsor of local football clubs and other sports associations in Avesta and Degerfors in Sweden and in Tornio in Finland. Outokumpu has also sponsored artworks by donating stainless steel and other significant local projects, like new fire station in Degerfors, Sweden. In Avesta, Sweden, Outokumpu sponsors its own art club, Visentkonst.
Outokumpu units are also among the founders of a number of national technology, research or educational funds. These funds support and promote university-level research and teaching and business opportunities. Examples of these type of funds are the Technology Industries of Finland Centennial Foundation and the Fund for the Association of Finnish Steel and Metal Producers.
Associations and federations
Outokumpu is an active and responsible actor in society. As a global stainless steel producer, the Group’s opinion is voiced in many forums. Outokumpu is committed to sustainability and is a signatory to the International Chamber of Commerce (ICC) charter, follows and supports the United Nations Global Compact, and is an active member of the UN Global Compact Nordic Network. To demonstrate the Group’s support for sustainability, Outokumpu has signed the World Steel Association's Sustainable Development Charter and the ISSF’s Sustainable Stainless Charter. Under the conditions of the Group’s publicly available Code of Conduct, participation in these networks is a way to promote sustainable progress throughout the whole business landscape, and outside the Group’s own supply chain as well.
In 2016, Outokumpu’s experts and top management continued to maintain effective contacts with numerous organizations. Top management and the CEO of Outokumpu participated in several stakeholder seminars and events, and highlighted our views on employee issues, megatrends, related to creating a competitive environment and the future of the stainless steel business. Within the Group, comprehension of approaches to social responsibility is expanded through active engagement with a variety of companies and organizations.
Outokumpu is a member of international organizations and confederations, including the World Economic Forum, International Chamber of Commerce (ICC), International Stainless Steel Forum (ISSF), International Chromium Development Association (ICDA), Eurofer, EUROALLIAGES and EUROSLAG. Outokumpu is also an associate member of the World Steel Association (worldsteel). Outokumpu provides relevant information to decision-makers and experts relating to the development of the business environment and legislation. The Group participates in the work of trade organizations.
Outokumpu does not pressure decision-makers. Due to limited resources, our public affairs practice is to communicate via industrial associations like Eurofer and EUROALLIAGES. In these organizations, Outokumpu participates in different working groups whose aim is to provide expertise to help decision-makers. In these forums, members share best practices and obtain benchmark data relating to, among other things, the environment, R&D, product life cycles, product and chemical safety, and occupational safety. Members also contribute their own data for use in official industry or authority reports, such as the World Steel Association’s sustainability reporting.
In Europe, Outokumpu is a member of industrial federations and associations in Germany, Sweden, Finland, France, Italy, the Netherlands, and the UK. National cooperation organizations advance industry views and contribute to legislation in Europe through national representatives in EU governing bodies.
Outokumpu is also a member of business associations in North America and Australia. Eurofer and EUROSLAG are collaborative organizations within the European iron and steel industry. Outokumpu contributes to Eurofer’s commercial and trade issues at the presidency level, in committees that handle statistics, research, climate and the environment, and in working groups that focus on subjects such as air quality, water, and waste. Eurofer conveys opinions to EU governing bodies and promotes measures related to different legislation areas like the environment, chemicals, emissions trading, energy and products. EUROSLAG performs a similar role in issues related to slag and by-products.
Outokumpu is also active in corporate responsibility networks. To develop our expertise in corporate responsibility and improve Group performance, Outokumpu belongs to both the Finnish Business & Society company network and CSR Europe. To combat corruption and bribery, the Group participates in Transparency Finland, a national chapter of Transparency International.
Outokumpu is strongly committed to legal compliance and an ethical way of conducting business. Outokumpu’s Code of Conduct sets out these ethical standards and provides guidelines for a common way of working with the aim of ensuring that all Outokumpu employees live up to Outokumpu’s ethical standards. The objective of Outokumpu’s compliance program is to ensure that Outokumpu and its employees comply with laws, regulations as well as Outokumpu’s internal policies and instructions. The program also aims to globally mitigate compliance risks for the corporation as well as for each individual employee by a set of preventive and supervisory measures. Raising awareness of and training on the Code of Conduct and its topics are central elements of the program. Anti-corruption and competition law compliance are important parts of this. Outokumpu’s Code of Conduct sets zero tolerance for corrupt practices and requires compliance with antitrust and competition laws. Outokumpu has also issued an Anti-Corruption Instruction providing more detailed guidance on responsible business practices. It was implemented in 2015 with an e-learning campaign and further enhanced in 2016 through internal communication. In 2016 Outokumpu revised inter alia its Approval Policy and Dawn Raid Instructions.
To ensure compliance, Outokumpu regularly internally communicates on compliance related topics and trains its employees both through e-learnings and face-to-face trainings. Compliance training sessions carried out during 2016 included targeted trainings in competition law compliance and trade compliance. Compliance communication in 2016 entailed quarterly Compliance infoshots in various compliance topics, such as raising concerns, gifts and hospitality and fair competition practices. Outokumpu constantly develops its compliance program with special efforts in the defined key focus areas: competition law compliance, anti-corruption, trade compliance, and internal control and corporate governance. In 2016, within the area of trade compliance, Outokumpu developed its business partner screening processes.
Compliance risks, including risks related to corruption, are assessed and reviewed annually and described in the Corporate Governance statement 2016 (p. 19). In 2016, Outokumpu’s subsidiary in Germany was included into an ongoing investigation by the German Federal Cartel Office of possible infringements of antitrust laws in the past. Following an internal investigation, Outokumpu’s view is that the official investigation on it is without merit. More information of this legal action is included in the Annual report 2016.
Outokumpu has a Helpline, a confidential contact channel through which employees or third parties can report suspected misconduct confidentially and anonymously by e-mail, mail or fax, or they can phone directly to Internal Audit. The Helpline is available on the company intranet and also on the company website at www.outokumpu.com. In 2015, Outokumpu issued a Reporting Misconduct Instruction, which is for company internal use only. The instruction describes the main principles and policy followed by Outokumpu in relation to reporting and investigating alleged breaches of Outokumpu’s Code of Conduct. The top management and the Board Audit Committee receive regular updates on potential misconduct cases of specific importance. In 2016, there were 6 reports and subsequent investigations of alleged misconduct, fraud and/or theft of material or other assets.