Key highlights

Scope 1 and Scope 2

The Company regularly assesses greenhouse gas emissions (Scope 1 and 2) in accordance with the GHG Protocol methodology. The calculation of GHG emissions for the Group takes into account carbon oxide (CO₂), nitrous oxide (N₂O), and methane (CH₄), with emissions of other greenhouse gases either negligible or non-existent. The quantitative assessment of Scope 1 and Scope 2 GHG emissions also includes the Company’s estimated prospective GHG emissions associated with the implementation of the Sulphur Programme.

Based on the results of 2022, Nornickel’s direct and indirect GHG emissions (Scope 1 and 2) decreased by 0.5 million tonnes of CO₂e y-o-y to a total of 7.7 million tonnes of CO₂e, including emissions not linked to our operations (heat and electricity supply to households) and excluding estimated prospective GHG emissions associated with the implementation of the Sulphur Programme (around 2.2 million tonnes of CO₂e). The Company's direct GHG emissions amounted to 7.2 million tonnes of CO₂e and indirect energy emissions to 0.5 million tonnes of CO₂e. Indirect energy emissions were calculated using the location-based method, taking into account regional coefficients. GRK Bystrinskoye, a key facility in Nornickel's Trans-Baikal Division, entered into a deregulated bilateral power purchase agreement for the supply of 118.3 mln kWh of electricity in order to reduce its climate impact.

The Company received a positive verification statement from the international verifier TÜV AUSTRIA confirming that its 2022 GHG emission calculations are in line with the requirements of ISO 14064-1:2018 “Greenhouse gases. Part 1: Specification with guidance at the organisation level for quantification and reporting of greenhouse gas emissions and removals”.

In 2022, the Group's inventory of equipment that is a source of GHG emissions was also updated to cover an extended range of facilities.

The reduction of GHG emissions (Scope 1 and 2) in 2022 was due to the following reasons:

• optimisation of in-plant operation of the heat and power plants;
• optimisation of hydropower plant load regimes (increasing the share of electricity output from hydropower plants);
• weather conditions – in 2022, the heating period was shorter and the ambient air temperature during the heating period was higher than in 2021.

Actual GHG emissions intensity (Scope 1 and 2) was 6.5 tonnes of CO₂ equivalent per million roubles of consolidated IFRS revenue.

A report on Nornickel’s 2022 GHG emissions was filed with the Russian Ministry of Economic Development with a view to adding relevant data to the registry of GHG emissions (in accordance with Federal Law No. 296-FZ On Limiting Greenhouse Gas Emissions dated 2 July 2021). Only direct GHG emissions are included in the quantitative assessment of emissionsGHG emissions are calculated in accordance with Order No. 371 On Approving Methods for Quantitative Assessment of Greenhouse Gas Emissions and Absorption dated 27 May 2022. According to Federal Law No. 296-FZ On Limiting Greenhouse Gas Emissions dated 2 July 2021, starting from 2023, regulated organisations with annual GHG emissions totalling 150 kt or more of carbon dioxide are required to file annual GHG emission reports before 1 July of the year following the reporting year..

Comparison with major diversified global metals and mining peers

Scope 3

In addition to Scope 1 and 2 GHG emissions, the Group quantitatively assesses Scope 3 indirect emissions which fall outside its direct control. The quantitative assessment of downstream Scope 3 emissions is conducted in line with the globally accepted methodology outlined in the GHG Protocol.

The Group’s Downstream Scope 3 emissions encompass categories 9 (Downstream Transportation and Distribution) and 10 (Processing of Sold Products) emissions from the first use of its products after sale. The selection of these categories was based on industry best practices and their relevance to the Group's operations.

Downstream Scope 3 emissions relate to semi-products (iron ore concentrate, copper and nickel semi-products) and finished metals (nickel, copper, cobalt, platinum group metals, gold) sold by the Group.

Emissions in the Downstream Transportation and Distribution category include those generated during the transportation of products sold by the Group in the reporting year, from production sites to customers, utilising rail, maritime, road, and air transport. The calculation of GHG emissions is based on a methodology that reflects the transportation distance (time), cargo weight, and the type of transport used. Relevant information is sourced from academic or industry publications, online maps and calculators, and reference data on vehicle properties.

Emissions in the Processing of Sold Products category include those generated during post-sale stages, when the sold products are utilised by Nornickel's customers for manufacturing their own products. These GHG emissions are assessed based on data related to fuel and energy consumption during these stages or emission factors associated with the use of Nornickel's products to manufacture other products. Relevant information is obtained from publications of industry associations (World Stainless Association, World Steel Association, Nickel Institute, and others), standards and reference guides on best available technologies, scientific literature, publicly available customer information, and reference data sources.

The primary source of the Company's Downstream Scope 3 emissions is iron ore concentrate, which is produced by GRK Bystrinskoye and serves as a semi-product for subsequent highly carbon-intensive steel making. The processing of other Nornickel products, which mainly comprise finished metals, is associated with significantly lower volumes of GHG emissions. The volume of our Downstream Scope 3 emissions is relatively small compared to global metals and mining peers, reflecting the structure and size of the Group's product portfolio, in particular the low production volumes of bulk raw materials.

In 2022, the Group’s Downstream Scope 3 emissions totalled 3.9 million tonnes of CO₂e, down 3% y-o-y. The main drivers of the reduction were lower sales volumes and changes to the geographical and sectoral structure of sales.

Comparison with major diversified global metals and mining peers

In 2022, the Company made its first public disclosure of a quantitative estimate of Upstream Scope 3 GHG emissions, covering all emission categories required by the GHG Protocol. The bulk of the emissions are related to the purchase of goods and equipment from third-party suppliers and to energy and fuel consumption (to the extent not included in Scope 1 and 2).

Nornickel measures the carbon footprint of its entire product portfolio on an annual basis. It is calculated in accordance with ISO 14067:2018, ISO 14040:2006, ISO 14044:2006, ISO 14064-1:2018, GHG Protocol Product Life Cycle Accounting and Reporting Standard methodology, and the LME passport guidance by the Nickel Institute providing the methodology to calculate GHG emissions for nickel producers.

In 2022, the Company took steps to harmonise its corporate methodology for product carbon footprint calculation to align it with an industry model.

In the medium term, Nornickel plans to deploy an end-to-end automated system for calculating GHG-related indicators based on a unified methodology using a dedicated IT platform. This solution will enable more efficient and accurate carbon accounting of all material flows, process stages, and resources across the Group. In addition, the automated process will make it easier to provide information on products’ carbon footprint to all stakeholders in a timely manner.

In 2022, Nornickel started developing the internal carbon price – a new management tool enabling the Company to consider climate-related risks as part of strategic planning. By incorporating the internal carbon price into investment and operational decision-making, Nornickel follows the recommendations of leading international climate change standards, including TCFD recommendations.

To design an effective methodology for calculating the internal carbon price, the Company carefully reviewed comparable practices employed by its mining and metals peers. Several approaches to the carbon price use and calculation were identified and evaluated to ensure their relevance for Nornickel based on the nature of its operations.

The Company selected shadow carbon pricing as the testing approach that best fits its purposes. It involves calculating theoretical or assumed costs of carbon emissions when making investment decisions. Shadow carbon pricing helps companies measure the economic impact of GHG emissions, new investments, net present value and economic feasibility of their projects, evaluate business models, and design business strategies. It is instrumental to the achievement of Nornickel’s key strategic sustainability goals.

While testing carbon price sensitivities, the Company calculates the cost of carbon emissions based on tax obligations (current and future) related to GHG emissions from its operations. For the year 2023, a shadow carbon price of USD 47 per tonne of CO₂ equivalent has been set.

Nornickel intends to continue testing the methodology to determine an optimal approach to incorporating cost evaluations of GHG emissions into investment project decision-making.