Management of sustainable development

VKG has been implementing an integral policy of social responsibility and sustainable development for more than 15 years by now. In both short-term and long-term perspective, the Group’s strategy accounts for Sustainable Development Goals in a period of changes in the energy market and the interests of society.

In strategic planning, we take into account risks and opportunities related to climate change and the transition to low carbon emission energy production, including the European Union’s Green Deal and the ‘Fit for 55’ package.

Considering the Sustainable Development Goals, the Group’s strategy has been designed to be resilient to different scenarios. In strategic planning, we take into account risks and opportunities related to climate change and the uncertainty of the regulative and investment environment.

Our activity management system

Our activity management system offers a uniform framework which ensures safe and reliable activities in accordance with requirements. This also includes environmental and social requirements related to sustainability.

Our principles of activity and internal policies establish expectations and objectives with regard to how we manage the environmental and social areas before, during and after our activities. These documents contain environmental and social area requirements on which our sustainability goals are largely based.

While continuing integrating the principles of sustainability into the Group’s management vertical, we review and update our internal policies and activity and management practices to ensure that these correspond to our sustainability framework and goals. Due to the effect of global changes, we also adapt and update the Group’s environmental and social practices which include investment decisions, projects and activities.

Our aim is to further integrate sustainability into our management, investment and risk management processes, relying on the best world practices and our own long-standing comprehensive work experience.

The Group implemented organisational changes and is now fully focused on the implementation of the strategy and the underlying objectives, including sustainability. The responsible use and effective enrichment of natural resources is an integral part of our sustainability strategy. We are aware that the extraction and production of any mineral resources has an effect on the surrounding environment and therefore we always strive to do more than prescribed by laws or regulations.

While focusing on VKG’s core activity – the production of shale oil – we also continue developing circular economy, renewable energy farms and bioproduction projects. New business verticals support the principles of sustainability and are aimed at alleviating and solving various green challenges.

In September 2015, the world’s countries signed the 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals at the UN General Assembly.

Viru Keemia Grupp has selected eight high-priority areas on which we focus and to which we consistently contribute. These are: ‘Good Health and Well-being’, ‘Quality Education’, ‘Affordable and Clean Energy’, ‘Decent Work and Economic Growth’, ‘Industry, Innovation and Infrastructure’, ‘Responsible Consumption and Production’, and ‘Climate Action’.

VKG is working towards contributing to the achievement of the established goals not only within the framework of its core activities, but also by supporting and participating in regional projects and initiatives aimed at improving the quality of life and developing science and education, culture and environmental protection.

Sustainable development priorities

Increasing the efficiency of the core activities

production and occupational safety;
minimising the environmental impact;
energy efficiency and saving;
development of employee potential;
supporting regional development.

Supporting initiatives and membership in associations

we share the principles of the United Nations Global Compact;
our sustainable development goals and areas of activity are related to the UN Sustainable Development Goals;
we support the implementation of the Paris Agreement and the efforts towards achieving climate neutrality in the European Union by 2050;
participation in associations:

Our guiding principles

openness and transparency;
honesty and correctness;
acting responsibly;
compliance with international standards.

Organisation culture

For a large industrial enterprise, the integration of organisation culture with the principles of sustainable business is of critical importance. VKG’s organisation culture supports the Group’s values and strategic objectives.

We believe that organisation culture is important from the viewpoint of a company’s success and sustainability and helps create a safe and inspiring working environment.

We consistently contribute to a strong organisation culture, because it:

emphasises ethical conduct and honesty in all activities and relationships with employees, partners and stakeholder groups;
encourages cooperation and teamwork, promoting open communication, knowledge sharing and collective responsibility;
supports employee development and learning, offering training, mentoring and career opportunities;
creates a positive working environment where employees feel motivated and included, encouraging them to think along and provide honest feedback;
encourages flexibility and increases adaptability, allowing the company to promptly respond to changing market conditions and the clients’ needs.

VKG’s values – openness, commitment, development – are an integral part of our business activities and consolidate the interests of the Group and its employees. The values guide decision-making, shape our reputation and determine our work principles.

We have a bronze badge!

In 2022 and 2024, Viru Keemia Grupp earned the bronze badge of the Corporate Social Responsibility Forum, which was even more valuable this year due to stricter assessment criteria!

A total of nearly 60 enterprises started completing the assessment form, 48 submitted it and 36 earned a badge. All these enterprises care about the surrounding living environment to a greater or lesser degree and wish to contribute to society more than actually required by law. These 36 enterprises and their managers have understood that the scope of impact of the decisions they make may reach significantly farther, out of their enterprise.

For VKG, responsibility is not a separate objective or plan. Above all, it is a natural output of our work and from year to year we have integrated this way of thinking into our strategy and everyday activities. We strive to do and contribute even a little more than required of us, because this way we ensure our own sustainability in the constantly evolving and changing business environment.

The Corporate Social Responsibility Forum (Vastutustundliku Ettevõtluse Foorum) is an organisation founded in 2005 and it unites enterprises that practice responsible entrepreneurship. The role of the Forum is to promote the way of thinking that business should in addition to earning a profit also be socially responsible in order to ensure the sustainability of the enterprise, society, and the state. Since 2007, the Forum organises responsibility assessments: the Responsible Business Index.

Risk management

The Group runs a risk management system which determines a uniform approach to the risk management process and concentrates the standardised tools and methods for analysing risks, including environmental, production safety and social risks.

The risks in the area of sustainable development include risks related to environmental and production safety and the availability of qualified labour. We take appropriate preventive measures in order to prevent the risks from materialising and to protect people, the environment, equipment and technological processes.

We manage risks related to human life and health and the environment by taking the precautionary approach.

The risk management report is reviewed by the risk management team at least once in every two years or as necessary. The last update took place at the end of 2023. The Group’s risk management report addresses risks in different areas and for each risk, the likelihood and impact of its occurrence are assessed and classified accordingly: critical, conditional, low impact, negligible and insignificant. For each risk, a responsible party and a mitigation plan have been assigned.

The precautionary approach has in international documents been formulated as follows: “Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.”

Rio Declaration on Environment and Development, 14 June 1992.

Risk management objectives

to support the adoption of management decisions,
to avoid or reduce damage to the Group’s assets and reputation,
to increase the efficiency of the Group’s activities,
to improve the efficiency of using the Group’s resources (capital, energy);
to reduce the occurrence of unexpected situations and to create action plans for these.

Risk management methodology

The risk management report highlights the risks that are important for Viru Keemia Grupp, their descriptions, ratings and mitigation measures. Risk management is based on the Group’s most important goals which are above all related to VKG’s aim to add maximum value to oil shale and process it in the most efficient way.

The identified risks have been divided into five categories.

Strategic risks
related to the Group’s long-term objectives (changes in the market, competition).
Operating risks
related to the Group’s processes (activities of employees and equipment).
Financial risks
related to direct financial losses (interest rates, exchange rates).
Fraud and theft
related to damages and financial losses.
Compliance risks
related to regulations (laws, guidelines).

Risk assessment process

Assessment of risks

The risk management report highlights risks that need more attention and require a further action plan to mitigate the risk. The risks listed in the risk management report are assessed on a 4-point scale for their likelihood and impact. According to the assessment consensus, risks are ranked on the impact/likelihood scale as follows (the likelihood or impact rating from 1 to 4 is provided in brackets):

Critical risk

when the risk materialises, the Group’s activities (processes) are significantly disrupted and the achievement of the objectives requires significant additional resources (3); or the activities cannot be continued, there is consequential damage, which requires significant additional resources (4). The materialisation of the risk is probable (3); or certain (4).

Conditional risk

the materialisation of the risk will result in a need for significant additional resources (3) or significant damage to assets/reputation (4), but the risk is not critical because the probability of materialisation is low (1); or possible (2).

Low impact risk

the materialisation of the risk is probable (3) or certain (4), but if it materialises, it will cause little disruption to the Group’s activities and require few additional resources (effects 1 and 2).

Negligible risk

the materialisation of the risk is unlikely (1); or possible (2) and will not lead to significant disruption to operations, achievement of objectives, resource needs (effects 1 and 2).

Insignificant risk

mentioned only on the grounds that the risk has been previously mentioned as a significant risk but subsequently assessed as unlikely to materialise (0) and/or its impact as practically negligible (0).

The total risk rating is determined as a product of impact and probability. The risk management report highlights risk with a total rating of 8 and more. Their mitigation measures are reviewed at least once in every two years or when the need arises, by interviewing the management board members responsible for the risk.

Below are just a few examples of the mapped risks.

Strategic market and legal risks

We operate in a volatile global market, where price volatility is influenced by a range of factors at the national, European and global level. Thus, one of the strategic risks we see is a fall in the oil sales price below a critical threshold in the context of a general fall in the price of petroleum. The sale of shale oil makes up 2/3 of the Group’s net turnover, so the risk of changes in the market prices of petroleum and petroleum products is an inevitable part of the Group’s activities. The majority of the sales contracts of VKG Oil AS have been concluded on the condition that the sales price of products is directly linked to the stock market prices of petroleum products. The other part is indirectly dependent on world market prices. The sales price of shale oil may fall as a result of both a drop in the world market price of petroleum and the depreciation of the dollar.

Reasons for the rating of the risk:

The price of petroleum and petroleum products is very volatile, as even a small imbalance in production and consumption causes extensive rises and falls in prices. For instance, the average Brent Front Month price was:

in 2012

112

USD/barrel

in 2016

USD/barrel

in 2018

USD/barrel

in 2020

USD/barrel

in 2022

101

USD/barrel

Another important strategy risk is related to the fall in the volume of free CO₂ quotas after 2025 and the rapid increase in the price of the quotas.

The shale oil industry is a part of the EU’s petroleum refining and carbon leakage sector which is allocated free CO₂ quotas. The fourth greenhouse gas (GHG) trading period of 2021–2030 is divided into two parts: 2021–2025 and 2026–2030. The trading rules and the methods for allocating free CO₂ quotas are currently known until 2025. Decisions to be taken by the European Parliament and the Commission in the course of the Green Transition will play an important role in ensuring the Group’s economic activities and competitiveness, as they could significantly reduce the amount of free CO₂ quotas allocated to shale oil production and increase the purchase price of the quotas.

An extensive increase in the price of CO₂ quotas and/or a reduction of the free quotas will cause a great additional tax burden for oil production, making the production price of oil higher than its market price and thus rendering the business uncompetitive.

The CO₂ tax rate has risen over 10 times since 2017 and the proportion of VKG’s taxable emissions has risen to 20% of all the emissions. The entailing CO₂ tax burden has grown to 20 million euros a year. Considering the EU’s green policy, there is a risk that local production may go extinct as a result of carbon taxes. As the rules are in place until 2025 and the price of the quotas has recently been rather stable, the probability of major problems in the nearest two years is rather low than high.

Next, we map the risk of continuity of supply of raw material which would cause a stop in activities and the inability to fulfil contractual obligations.

The risk may materialise in two parts: a lack of crushed stone may halt the operation of the Kiviter plants. The suspension of the operation of the Ojamaa Mine may very strongly disrupt or halt all the production activities of VKG Oil.

We have also mapped the possible risk of damage to reputation which may arise in connection with environmental pollution, low salaries, the establishment of new plants/mines, accidents happening in our territory, violations of standards of ethics, and other such.

Operating risks

Operating risks stem from deficient or ineffective processes and systems as well as the insufficient competences or activities of people in managing the work processes. In order to avoid operating risks, the Group has developed risk management principles, various standards and management systems. We understand operating risks to include technological and IT risks as well as operating risks related to the external environment, such as those related to clients and suppliers.

We pay great attention to risks related to occupational safety and the working environment. All the Group enterprises have implemented respective systems for managing and monitoring activities. We handle occupational safety risks on the principle that prevention is more important than dealing with consequences. The Group implements a system for registering dangerous situations, which is accessible to all the employees, partners and visitors to the production territory. An in-depth analysis of registered dangerous situations and the timely elimination of threats has prevented several potential work accidents.

Under financial risks, we have mapped a currency risk with regard to the euro and dollar rate. The Group’s cost base is in euros, but the entire oil production is sold in dollars, which entails a considerable currency risk:

the higher price of petroleum, the greater the effect of changes in the dollar rate and vice versa, the lower the price of petroleum, the smaller the effect of changes in the dollar rate;
the weakening of the dollar together with a decrease in the price of petroleum deepens the decrease of our revenue.

We also assign a high rating to compliance risks, e.g. failure to obtain or delays in obtaining mining permits, a decrease in the availability of raw material due to changing regulations. The regulation of mining permits is strict and does not keep up with the actual extraction volumes of the market participants. Overbooking resources is not disapproved. The topicality of the Green Deal may cause legislative and public pressure to end mining.

Our special focus is on the management of the risk of fraud. In order to reduce the threat of the risk of fraud and theft materialising and causing damage, we primarily apply preventive measures and increase efficiency. We regularly conduct random inspections and improve the transparency of processes, paying great attention to the speed of detecting fraud and responding to it. Our focus is on everyday work in informing our employees and encouraging them to provide constant feedback for which we have created a number of operative channels.

Management of social and environmental risks

Production and environmental safety risks

Since VKG is a representative of the processing industry and a manufacturer of fuel containing carbon, significant environmental risks accompany VKG’s activities, which manifest themselves both in oil shale extraction and in adding value to it. The goal of VKG is to be a pioneer in its sector, setting an example for others in how it is possible to resolve the environmental risks present in traditional production in a smart way, using modern technologies. Over the past 20 years, the Group has invested more than 100 million euros in various environmental projects in order to reduce its footprint. The main focus of the investments has been on using the resources as efficiently as possible and mitigating the entailing environmental impact.

Risk management measures

Regulation monitoring: the Environmental Department monitors changes in laws and directives on an everyday basis.
Keeping up to date with the industry trends and being represented in decision-making processes: VKG participates in all possible workgroups via the Estonian Chemical Industry Association.
Timely investments.
The engagement of stakeholders and sharing information at the right time.

Risks related to people

The Group’s activities directly depend on its employees. A lack of a sufficient number of qualified employees, particularly in the area of engineering and technology, may cause risks related to labour deficit. employees, particularly in the area of engineering and technology, may cause risks related to labour deficit. Competition in the Estonian labour market may grow tighter, as there is a shortage of qualified specialists. Inability to attract new qualified employees and/or retain the existing qualified employees may have a negative effect on the attractivity of the Group as an employer. The demand for and the expenses incurred on qualified employees are growing as expected, largely reflecting the interest of other industries and state projects in them.

Risk management measures

The Group offers safe jobs and a competitive salary, participation in large-scale projects and interesting work tasks and trains its employees under special programmes. We take additional measures to reduce labour turnover and encourage employees to engage in self-development.
The company identifies the existing key employees and talents and creates a development programme for them in order to ensure the consistency of knowledge. We participate in the development of the study programmes of areas of specialisation of interest to us at TalTech.
Scholarships for TalTech students in order to motivate them to stay at their homeplace.

Risks related to the local community

The risk that the way of thinking in the community becomes increasingly greener and opposes the production of fossil fuels. Social unacceptance may affect the activities and reputation of the company and cause difficulties in implementing investment projects and recruiting employees.

The risk that the local community does not support the company’s new development projects and the expansion of industrial production. In order to mitigate this risk, we communicate openly with the local residents and hold regular meetings with initiative groups, in the course of which we describe the directions of development and discuss environmental matters We make extensive investments into the improvement of the local living environment, e.g. into the improvement of ambient air quality in the city of Kohtla-Järve. At the same time, it is important to note that the integration of the oil shale industry in socio-economic development and their mutual effect are characteristic features of the Ida-Viru region. The oil shale industry is one of the largest employers in the region – more than 5,000 people are directly employed in the sector, but many times more are indirectly involved. The sector also offers a salary that is above the average in the region. For the people living here, the presence and development of the sector therefore mean a confidence in their future and a stable income which ensures everyday subsistence and a sense of security.

Combating the risk of corruption

Combating corruption has always been important in the VKG Group. VKG has identified three major corruption risks together with the measures used for mitigating the risks:

Giving bribes to achieve the interests of the Group – VKG is a responsible and transparent enterprise which has established zero tolerance towards corruption and bribery.
Accepting bribes in choosing suppliers and cooperation partners – VKG has established a procurement policy the aim of which is to avoid tilted procurements and always choose the most favourable cooperation partner for the Group. Internal audit monitors the implementation of the procurement policy in regular audits.
Conflicts of interest of executive employees in representing the interests of the company – VKG has developed a procedure for the submission of reports of economic interests, pursuant to which executive employees have to report their holdings in and connections to companies outside the Group. It is forbidden for management board members to compete in any area of activity of VKG, unless the supervisory board has granted its prior written consent to that.

Confidential channel

The Group has a special confidential channel (vihje@vkg.ee), through which any employee or third person can report violations related to the activities of the Group, let it be issues related to corporate management, business ethics, compliance with human rights, work organisation, safety, protection at the workplace, quality of goods and services, or any other matters of corruptive nature.

Report processing

Cooperation with stakeholders takes place via feedback channels which allow stakeholders to express their opinion or file complaints. One such channel is the hotline for reporting corruption, fraud and violations of law. The hotline is a tool for exchanging information in the Group and receiving feedback from stakeholders.

Reports may be sent to the hotline by e-mail or phone or via the webpage. The confidentiality of the person making the report is guaranteed in the use of any of these communication channels.

Anyone can use the hotline, also anonymously. All the reports are handled individually and after an objective and comprehensive review a decision is made and feedback is given. The reports are checked by the representatives of our subunits – personnel specialists, lawyers and production safety employees. We are interested in our employees/partners actively using the hotline and being aware of its possibilities.

Internal audit

Internal audit plays a crucial role in enhancing the efficiency of the management of the Group and in financial activities. The Group runs a system which ensures:

risk minimisation;
the continuity of the operations of the Group, the highest possible efficiency and sustainability and opportunities for development, including making timely changes to the operation of the company according to changes in the internal and external environment;
a uniform and systematic methodological approach and high-quality information support and analytical support in making the Group’s management decisions;
resolving any conflicts of interest that emerge in the course of the activities of the company in a timely manner.

Compliance with human rights

VKG builds its activities on compliance with human rights and ensuring equal opportunities and labour law. We strive to create a working environment free of bullying and do not allow discrimination on the basis of nationality, gender, age or any other attributes. We expect our employees to treat each other with courtesy and respect. We do not use child labour or forced labour. The Group respects the employees’ legal right to form voluntary associations to protect their rights and interests, including the right to form trade unions, and to join such associations. In the area of human rights, we responsibly comply with legal requirements and the standards of international law.

The Group’s human rights positions are established in the following documents:

Personnel Policy,
Procedure for Combating Conflicts of Interest,
Industrial and Environmental Safety and Work Protection Policy.

Data security

Our attitude to data security is very serious. The Group has in place a document titled ‘Procedure for Processing Personal Data’. In addition, we also have seven simple principles for responsible data processing, which are available to all employees on our internal website, and we have also covered this topic in the Group’s internal newsletter. Data security is also covered in the Code of Ethics, with specific instructions for employees. The Group’s subsidiaries most involved in the protection of personal data are those providing network services to customers – VKG Soojus and VKG Elektrivõrgud*. These companies also have specialists responsible for personal data protection. In order to ensure data security, the Group has established a secure IT network that meets all the requirements, and has trained data processing personnel.

* In October 2022, the Group sold VKG Soojus to Gren AS, and at the end of 2023, VKG Elektrivõrgud was sold to private capital fund BaltCap

Disclosure of information

An important part of the management system of Viru Keemia Grupp is transparency and the disclosure of information, which is at the same time in balance with the protection of the Group’s trade secrets and other confidential information.

Our objective is to present timely and regular information about our activities to all the persons interested in receiving it.

The main principles of information related to our activities include openness, reliability, promptness, timeliness and availability.

The most important means of transmitting information include the Group’s official webpage and the webpages of the subsidiaries as well as social media channels such as Facebook, Instagram and LinkedIn.

The main information communication channels that have found a wide audience include the Group’s official website, the Annual Report, and the Social Responsibility and Sustainable Development Report. The homepage and the reports provide news and information about important events as well as financial and production indicators.

In order to make information equally accessible to all the stakeholders, we publish information on the Group’s homepage in Estonian, English and Russian (the Annual Report is available in Estonian and English, while the Social Responsibility and Sustainable Development Report is available in three languages).

Cooperation with the media

Viru Keemia Grupp supports active cooperation with the representatives of the media. Cooperation with the media is regulated by the Procedure for Media Relations.

Procedure for Media Relations.

to provide high-quality and fact-based information about the Group’s activities;
to shape and support the Group’s reputation;
to build an equal and partner-based dialogue with the representatives of mass media, the authorities and the social organisations related to the Group’s area of activity.

VKG’s Public Relations Department operatively responds to enquiries from the representatives of the media, providing thorough and accurate information about the Group’s projects and commenting on important cross-sectoral topics.

International management systems

The companies undergo regular monitoring of the fulfilment of the objectives of the quality management system and hold internal audits as well as external audits by an independent certification body. In the framework of implementing the best practices, new solutions and best practices are also sought in quality management.

The Group’s companies use international ISO management systems.

Company name	ISO certificates (environmental and quality management systems)	ISO certificate (occupational health and safety management system)
VKG	ISO9001, ISO14001	-
VKG Oil	ISO9001, ISO14001, ISO50001	ISO45001
VKG Kaevandused	ISO9001, ISO14001	ISO45001
VKG Energia	ISO9001, ISO14001, ISO50001	ISO45001
VKG Logistika	ISO9001, ISO14001	ISO45001

Recertifications and interim audits that took place in the Group companies during the reporting period

VKG Oil

certification of the energy management system in accordance with standard ISO 50001;
recertification of the quality management system, the environmental management system and occupational health and safety system (in accordance with standards ISO 9001, ISO 14001 and ISO45001);
a regular external audit of VKG Oil’s chemistry laboratory in accordance with standard EVS-EN ISO/IEC 17025:2017.

VKG Kaevandused

ISO 9001 quality management system,
ISO 14001 environmental management system,
ISO 45001 occupational health and safety management system.

VKG Energia

ISO 9001 quality management system,
ISO 14001 k environmental management system,
ISO 50001 energy management system,
ISO 45001 occupational health and safety management system.

VKG Logistika

ISO 9001 quality management system,
ISO 14001 environmental management system,
ISO 45001 occupational health and safety management system.

Supply chain management

The procurement activities taking place in the Group are regulated by the Procedure of Procurement and the main points of conducting the process from the viewpoint of our partners are established in the Code of Ethics and in the Principles of Operation. We also apply the assessment of suppliers, the results of which are also available to all the Group’s employees.

We expect our partners to comply with the applicable laws and internationally recognised human rights (which exclude the use of child labour, non-conformity with environmental requirements, etc.).

The Group’s principles in communicating with suppliers:

transparency,
competition,
equality,
mutual securities,
confidentiality,
openness of information.

The selection of and cooperation with suppliers is based on an integrated management system which is in conformity with standard ISO 9001. In purchasing works, services, materials and equipment, the Group uses competition between suppliers. The Procedure for Purchasing Goods, Works and Services applies at the Group level. It is the basic document in planning and performing purchase procedures and selecting suppliers.

We cooperate with partners who share our endeavours to work with safe methods and adhere to the standards of business ethics and laws. The employees of the Purchase Division regularly check the conformity of the suppliers with our expectations and operating principles.

We expect and verify that our suppliers have environmental standards and principles. This is also one of the assessment criteria in the assessment of suppliers, i.e. we prefer companies that have established environmental management standards. There is a reference on VKG’s homepage to VKG’s environmental policy principles which the Purchase Division complies with in selecting suppliers.

The Purchase Division is responsible for all the purchases made by the Group and its subsidiaries. In order to achieve the necessary level of competition, the Purchase Division may conduct a public pre-qualification procedure to create a database of potential purchase participants which would include companies that are capable of performing works, providing services and supplying goods in accordance with the requirements established for production processes, quality and safety and the results of work and services. Potential participants, whose qualification meets the required level, may be invited to participate in future purchase procurements.

Main requirements for participants in procurement competitions:

conformity with the main requirements for participants, which are specified in the Procedure for Purchasing Goods, Works and Services;
experience, production capacity and the availability of qualified labour for the production (supply) of predefined types of goods, the performance of predefined types of work and the provision of predefined types of services at the necessary quality level;
solvency;
positive corporate financial and reputation value.

The reporting period in figures:

In 2022

486

procurement competitions held

1798

tenders received

130

million euros in purchases

In 2023

500

procurement competitions held

2105

tenders received

122

million euros in purchases

Cooperation with stakeholders

For Viru Keemia Grupp, constant cooperation with stakeholders is a foundation of a sustainable business model.

We strive to be in open dialogue in order to map, analyse and take into account the priorities and expectations of different stakeholder groups. Communicating with and engaging stakeholder groups helps create a trustworthy and positive reputation.

Stakeholders are organisations and individuals for whom the Group’s activities, products or services may have a considerable effect or whose activities may have an effect on the achievement of strategic objectives.

The Group has mapped stakeholder groups whose interests are notably related to our activities and may have a significant effect of the achievement of our strategic objectives. For the purpose of keeping the community up to date, we organise not only public discussions, but also non-formal meetings where we discuss topical matters and gather feedback and opinions on various topics/issues from the representatives of the community.

The principles of cooperation with stakeholders include respect for the parties’ interests, constructive cooperation, the transparency of information concerning the Group’s activities, the regularity of joint activities, and the fulfilment of obligations. We have developed various formats from regular meetings to open-door events for cooperating with stakeholder groups.

The main mechanisms of cooperation with stakeholders

business contacts, cooperation contracts, and agreements;
work-related meetings and presentations;
the Group’s communication system;
public discussions;
joint workgroups;
surveying and studying the opinions of employees and clients;
membership in social and expert associations;
conferences and roundtables;
reporting.

The main stakeholder groups mapped by the Group

shareholders;
employees;
clients;
suppliers and partners;
the state and local government institutions;
the local community;
NGOs and civic associations;
professional unions.

Mechanisms of cooperation with stakeholder groups

Shareholders

Main expectations and interests

Openness of information
Adherence to shareholders’ rights

Cooperation mechanisms

Regular monthly meetings of shareholders
The general meeting of shareholders
Corporate reporting

Employees

Main expectations and interests

Safe working conditions
Professional development opportunities
A decent benefit package
Social support

Cooperation mechanisms

Internal communication system
Meetings with the management of the enterprise to discuss topical matters
Joint healthcare committees
Meetings with the participation of trade union representatives
Survey on psychological factors
Forums, conferences, cultural and sports events

Clients

Main expectations and interests

Production quality, its technical and ecological aspects
Turunduskanalite ja müügiosakonna tõhusus ja paindlikkus
Transparent pricing
Business ethics

Cooperation mechanisms

Contracts
A feedback and proposal handling system
Mass media tools
An external communication system
Business meetings, including outing meetings
Conferences and forums
Corporate reporting

Suppliers and partners

Main expectations and interests

Fulfilment of mutual obligations
Transparency, openness and competition in choosing suppliers
Compliance with business ethics and fight against corruption

Cooperation mechanisms

Contracts and agreements
An objective assessment system
Business meetings
Corporate reporting

The state and local government institutions

Main expectations and interests

Ensuring energy independence
Receipt of taxes
Technological development of the oil shale sector
Minimisation of negative environmental effects
Conformity of activities with legal norms

Cooperation mechanisms

Joint workgroups, roundtables and meetings
Corporate reporting
Participation in committees and conferences

The local community

Main expectations and interests

Creation of jobs in the region
Supporting the growth of social activity and social entrepreneurship
Receipt of taxes to the local budget
Production and environmental safety
Competitive salaries
Supporting initiatives and cultural, sports and educational projects in the region

Cooperation mechanisms

Projects that support social development, education, healthcare, culture and sports
Public discussions, roundtables and dialogues
Internal and external corporate communication
Corporate reporting

NGOs and civic associations

Main expectations and interests

The Group’s production safety, nature protection measures
The Group’s participation in local and sectoral development
Openness of information and transparency of activities

Cooperation mechanisms

Conferences and exhibitions
Roundtables
Joint implementation of social projects
Corporate reporting

Professional unions

Main expectations and interests

Participation in the development of the sector of the economy
Corporate responsibility
Compliance with human rights and production and environmental safety standards
Exchange of information and knowledge

Cooperation mechanisms

Participation in professional and cross-sectoral events
Participation in the committees of professional organisations
Joint projects
Corporate reporting

Developing together with the local community

We consider the engagement of the local community particularly important in the case of development projects and especially in the assessment of environmental and social impacts. We see from our practice that the engagement of stakeholder groups brings forth different viewpoints and information which helps make better and more contemplated decisions. This may improve strategic planning and reduce uncertainty. Engaging stakeholder groups at an early stage of development helps us to better understand and prevent potential concerns, reduce risks and avoid conflicts which may later become an insurmountable problem and even cause us to abandon the development of the project. Engaging stakeholder groups and holding a dialogue with them in the Group’s core area of production helps gather feedback and input and the generally diverse symbiosis of opinions and viewpoints contributes to innovation, corporate development and good partnership.

Conducting public discussions

Assessment of the environmental impact of the Uus-Kiviõli oil shale mines

On 16 June 2022, a public discussion was held on the environmental impact assessment (EIA) programme of the Uus-Kiviõli oil shale mines. According to the programme, the effects of increasing the allowed annual extraction rates stipulated with the environmental permits of Uus-Kiviõli issued to Enefit Power and Uus-Kiviõli II issued to VKG Kaevandused will be jointly assessed. More specifically with regard to the Uus-Kiviõli II mine, the programme – approved by the Environmental Board as conforming to requirements in 2022 – prescribes the assessment of increasing the annual maximum amount of oil shale allowed under the environmental permit to 5 million tonnes and the related entry of special water and waste parts to the environmental permit. The Environmental Board initiated the EIA of the planned activities on 9 April 2021.

Assessment of the environmental impact of the extension of the Ojamaa oil shale mine

The public discussion of the EIA programme of the application for the extension of the Ojamaa oil shale mine was held on 15 July 2022 and the public discussion of the EIA report was held on 20 April 2023. The Environmental Board initiated the EIA on 22 April 2021.

VKG Kaevandused is applying for the extension of the Ojamaa Mine to the Aidu and Kohtla mining fields, as a result of which the area of the mining claim would grow by 279.16 hectares. As a result of the requested extension, the active proved reserves of oil shale related to the mining claim would grow by 10 million tonnes. VKG Kaevandused is also applying for the water permit, waste permit and air pollution permit issued to the Ojamaa oil shale mine to be merged into a joint environmental permit No. KMIN-055.

Designated spatial plan of the bioproducts production complex

The public display and discussions of draft decision on the preselection of the location of the designated spatial plan of VKG’s bioproducts production complex (BPC) in the rural municipality of Lüganuse and the report on the 1st stage of the strategic assessment of environmental impact took place on 6 June 2023. Considering the results of the public display and the discussions, the Lüganuse Rural Municipality Council approved the most suitable location for the erection of the planned bioproducts production complex (the so-called Põhja area).

The complex would start producing key components for manufacturing environmentally friendly retail products and the production volume would be up to 500,000 tonnes a year. The planned product range would include cellulose, soluble cellulose and tall oil. Demand for products made from such environmentally friendly materials is growing rapidly in the world market. Green energy solutions would be one output of the planned production complex. The bioproducts complex would produce 730 GWh of renewable electricity a year and provide green heat energy for supplying the cities of Kohtla-Järve and Jõhvi. The planned complex would use the most modern and flexible KRAFT technology, which involves the chemical processing of wood and is today the best available technology for producing cellulose, using both coniferous and non-coniferous wood.

After the most suitable location for the BPC was approved, work started on the preparation of a detailed solution for the designated spatial plan which will determine the building right of the planned production complex and solve other relevant tasks specified in the Planning Act (detailed spatial plan tasks). In preparing the detailed solution, more specific assessments will be given on the effects of operating the production complex and the necessary information will be obtained for outlining the preferred development scenario. The implementation of various in-depth surveys also continues. The earliest launch date for the complex is 2028.

Estonia’s own bioproduction

The strategic assessment of the environmental impact of and the preparation of a designated spatial plan for the bioproducts production complex (BPC) is taking place in the village of AA in the rural municipality of Lüganuse. According to the time schedule, the process will be completed at the end of 2024.

On 29 June 2023, the Lüganuse Rural Municipality Council approved the report on the 1st stage of the designated spatial plan, with which it also made the preselection of the location for assessing the environmental impact. The designated spatial plan process has progressed exactly according to the time schedule and without any setbacks. During the reporting period, we held several meetings with local people, in the course of which we gave an overview of the progress of the project. Being open and answering the questions of local people is extremely important in this process in order to prevent needless suspicions.

We are now feeling that changes are happening in society this year due to which public support to the BPC project has grown. One the one hand, the turnovers of the Estonian timber industry enterprises have dropped by nearly a third this year and the export demand for paper wood has decreased, which is why the sellers of wood strongly support the BPC project as a stable facility that would add value to local paper wood and wood chips in Estonia. In the previous months, we have met with the largest potential suppliers of wood and confirmed the will to cooperate. Secondly, specifications that have been obtained in the meantime have shown that the BPC has the potential to produce 0.9 TWh electricity (0.6 TWh for sales), which is 12% of Estonia’s electricity consumption and the advantages of which include environmental friendliness and stability (and independence of weather conditions). Thirdly, Estonia is suffering from an economic recession which has increased society’s support to companies that create new jobs and add value in the so-called green industry sector.

We have closely communicated with technology suppliers in 2023, specifying the inputs of industrial criteria (technical, environmental, etc.), and received preliminary feedback.

As a billion-euro project is a first in Estonia, the related additional preconditions are currently being agreed. In conclusion we can say that we are moving according to the schedule, which would allow us to launch the complex in 2028, but the more serious stage of the project – from preparing the business plan to making the final investment decision – is still ahead of us.

Lauri Raid

VKG Bioproducts Development Manager

VKG’s Environmental Day 2022:

Regarding the potential and prospects of adding value to Estonian forests

In 2022, VKG’s Environmental Day was dedicated to our new area of development – to adding value to wood. We are convinced that the bioproducts production complex planned in the rural municipality of Lüganuse is a very necessary step in order to end the dependence on exporting and burning the unused wood resource in Estonia, allow the replacement of fossil raw materials and bring new economic activity and jobs to the region.

On the Environmental Day, scientists, environmental experts, policy-makers and politicians discussed the opportunities of adding value to wood which is one of the greatest natural resources in Estonia.

The raw material need of the planned production complex would be 2 to 2.3 million cubic metres of pine, fir and birch paper wood a year. For comparison: tree-cutting in Estonia generates more than 5 million cubic metres of raw material suitable for the cellulose industry, which is being exported as raw material or burnt together with energy wood adding no or very little value to it. VKG’s primary interest is to develop the further processing of soluble cellulose, the end products of which are used in the textile and biochemistry industries as well as in the paint, food and pharmaceutical industries. The largest user group is viscose fabric, but the spectre of needs and possibilities is wide and the replacement of fossil raw materials with biochemistry is being developed practically in every sector. The complex would also produce 730 GWh renewable energy, over a half of which would be fed to the network, thus supporting Estonia’s energy security. The planning phase of the production complex takes place in 2021–2024, the expected construction of the complex will take place in 2025–2026 and the complex will be launched in 2027.

Designated spatial plan of the industrial waste landfill

On 5 June and additionally on 1 August 2023, public discussions of the results of the public displays of the draft decision on the preselection of the location of the designated spatial plan of VKG’s industrial waste landfill in the rural municipality of Lüganuse and the report on the 1st stage of the strategic environmental impact assessment were held. The aim of the designated spatial plan being applied for is to make the selection of the best possible location for a building of significant spatial impact in the 1st stage and to develop a detailed solution (including constructional matters) for establishing the landfill in the 2nd stage.

The planned landfill would hold 63 million m3 of industrial waste and its expected useful life would be 25 years with the current quantity of waste being deposited. In the course of the preselection of the most suitable location conducted in 2023, the Tuhavälja cadastral unit where soil was prepared for the establishment of a landfill decades ago turned out to be the best location where it is possible to ensure the continuation of VKG’s production activities in such a way that the adverse effect on the natural environment and people is as small as possible.

A new, more environmentally friendly landfill

In order to continue VKG’s production activities, an additional place for depositing industrial waste is presumably needed in 2026. The location suitable for establishing a landfill proved to be the most preferable by most of the criteria. The new landfill is planned to be established on the border of the rural municipality of Lüganuse and the city of Kohtla-Järve, to the west of the existing landfill. The main advantage of the location is its proximity to an area already influenced by industry. The existing industrial waste landfill is a residual contamination site and upon creating the new landfill near the existing one the area added to the high-risk region is smaller. In addition, preparatory work has been done in the area for establishing a landfill during the Soviet era and it has already been influenced by human activity. It is also the nearest area to the production complex where the existing conveyor can partly be used for access, with no need to establish a transport corridor that would fragment the green network and forest area.

The location of the landfill was finally approved on 24 August 2023, when the Lüganuse Rural Municipality Council approved the report on the 1st stage of the preselection of the location of the local government designated spatial plan of the industrial waste landfill of Viru Keemia Grupp in the rural municipality of Lüganuse and the strategic assessment of environmental impact. That decision ended the first stage of the designated spatial plan and work continues on a detailed solution for the designated spatial plan until the designated spatial plan enters into force.

The detailed solution for the designated spatial plan and the environmental assessment report have been completed by the time of disclosure of this report (May 2024) and presented to the rural municipality of Lüganuse for initial review. The next stages are the approval and disclosure of the designated spatial plan and discussions and, as the last stage, the entry into force of the plan by the Lüganuse Rural Municipality Council. According to the time schedule, the entry into force of the designated spatial plan will take place in September 2024. The designated spatial plan will be the basis for preparing the construction design for the landfill, and the landfill will be completed in 2026

Tiit Lukas

Hazardous waste landfill project manager

The Climate Act

In September 2023, the Ministry of Climate initiated the preparation of the Climate Act. This should be a so-to-say framework act which stipulates climate neutrality by 2050 at the level of a law together with the necessary interim goals for different sectors.

VKG made the proposal to prepare a climate act as early as in 2021 in order to launch a wider discussion in Estonia about climate goals achievable for us and to acknowledge the effects, opportunities and risks entailed. To do this, a balanced and reasoned social discussion has to be created, where in addition to establishing goals, the parties would also analyse the possibility of achieving the goals, the availability of the necessary technologies, the related costs and impacts on the environment on a broader scale than just the one-dimensional CO2 emissions. The first discussions showed that the state does not have a clear vision of what it wants to achieve with the Climate Act other than establishing national greenhouse gas reduction goals until reaching climate neutrality in 2050. VKG is therefore rather sceptical towards this process. The preparation of the Climate Act should be completed in 2024 and the Act should enter into force in 2025.

On 12 September, the Environmental Day took place at the Arvo Pärt Centre, organised by Viru Keemia Grupp, focusing on the necessity of creating the Climate Act in Estonia. During the day, various prominent experts presented their vision of the Climate Act and the impact of the Green Transition. The opening speech was given by the Minister of Climate Kristen Michal, who presented the political view of the Climate Act to the audience.

The presentations and videos can be found here:

www.vkg.ee/en/environment/

A reliable partner in promoting local life

The Group is a good partner to local organisations that help to promote the region’s cultural, sports and educational life. Our main focus is on local youth.

During the reporting period, we supported nearly 70 initiatives and projects with a total amount of more than 500,000 euros. The Group has a number of initiatives of its own aimed at promoting life in the region: the Five Schools Competition, the Jõhvi Ballet Festival (in cooperation with the Jõhvi Concert Hall), educational projects, e.g. STEM, and the celebration of the Day of Miners and the Day of Chemists.

For years now, we have been supporting the maternity and paediatric wards of the Ida-Viru Central Hospital instead of making business presents. Twice a year, we hold city clean-up days under the Let’s Do It! and the World Clean-up Day initiatives with the participation of our employees, their family members and the upper-secondary schools of the region. The Group is a long-term partner to blood centres and we hold a donor day in our production territory four times a year.

We also have various projects at the local government level, particularly with the City of Kohtla-Järve and the rural municipality of Lüganuse.

In the two years, VKG’s employees gave more than 140 litres of donor blood. We also promote an active lifestyle among our employees and allocated 50,000 euros to it.

The assistance and support of Viru Keemia Grupp can be provided to any non-profit association and/or organisation operating in Estonia, which is interested in improving the life in Ida-Virumaa or in Estonia as a whole. Most of all, we focus our attention on local children’s groups, sports clubs, and education institutions. The provision of a direct subsidy to individuals is only considered in exceptional cases if we are dealing with humanitarian needs.