Sustainability in Short 2023 - FORCIT Group - ENG

2023 SUSTAINABILITY IN SHORT

PREWORDS

CORPORATE SUSTAINABILITY

The focus in sustainability work in Europe has clearly changed from emissions to include softer and social values in 2023 when new legislations were launched. The vast sustainability umbrella ties together, tighter than before, nature, societies, and economical perspectives in a more transparent way. New and upcoming European level regulations, such as Taxonomy, Corporate Sustainability Reporting Directive (CSRD) and Green Claims Directive, aim to improve companies’ communication and data reliability, comparability, and bilateral identification of financial, environmental and social materiality.

The Finnish Innovation Fund (Sitra) forecasts the main trends affecting business and societies in the near future. These include the erosion of trust, the influence of information, the supremacy of technology giants and the deterioration of the dependency ratio. The timing of the new EU regulations is right. The directing power of the European Union drives countries and companies to prepare for these challenges by setting requirements and legislation for e.g. transparency, responsibility, and human rights in their own processes and business relationships. The new directives and regulations follow UN and OECD principles and targets of responsible and sustainable development.

CLAIMS >> PROMISES >> APPROVAL

It is obvious that charity belongs to the past; now is the time for strategic sustainability. Data orientation is increasingly emphasised. In order to achieve profitability, sustainability data must be managed in the same way as financial data. Measurable and reliable numbers support the strategy and take into account the expectations of stakeholders and investors, as well as the need to tackle climate change and biodiversity loss.

At FORCIT, the CSRD reporting capability and data management has been under development and a double materiality assessment will be executed soon ahead of a legal requirement. Assessing and auditing the suppliers’ facilities and sustainability practices and policies were realised 2023, and the work will be continued.

CLIMATE CHANGE, BIODIVERSITY LOSS

The influence of climate change can be seen in the company’s preparation for supply chain disruptions and changes in availability and prices. The importance of circular economy solutions is increasing. The international financial markets are steering production and investments toward lower emissions. This causes a need for changes in the know-how and focus of organisations, which is also the goal of the European Green Deal. These changes can also be translated into business potential. Conditions, demand, guidance, and legislation, thus, support the same goals, i.e. curbing climate change.

High resilience in many fields of business and strategic investment decisions are notable achievements in 2023. FORCIT believes in the future and has organised resources and financial capability to grow the business. The R&D focus is highly related to emissions reductions – which is connected to the company’s long-term strategy. All FORCIT’s policies were updated in 2023, and the company has started to prepare for the upcoming CSRD reporting by educating management and starting to use a dedicated software to collect environmental data.

More detailed information about FORCIT’s sustainability work can be found in this Sustainability InShort report 2023 – happy reading!

TABLE OF CONTENTS

Prewords..............................................................2

Greetings from CEO................................................4

ENVIRONMENT: Decisions Based on Data..................6

Green News from R&D...........................................10

Consulting Business –Involved in Projects That Promote Sustainability........12

Consulting Operations in the Nordics.......................14

Explosives Operations: Finland...............................15

Explosives Operations: Sweden..............................16

Explosives Operations: Norway...............................17

SOCIAL : Improvements in Safety and Resilience........18

GOVERNANCE: The Financial Performance of 2023....24

Focus on Transparency.........................................28

Code of Conduct.................................................30

Market and Business Ethics...................................31

Sustainable Development and Defence Technology...32

Glossary.............................................................33

GREETINGS FROM CEO

OUR ROLE IN SOCIETY IS CLEARER THAN EVER

Our societies are facing unprecedented challenges with the need for a rapid green transition, rising up to a new geopolitical situation and at the same time securing strategic independence when it comes to critical raw materials. European supply of critical raw materials needed both for the green transition and the ever-digitalising world is one key challenge. The intensified geopolitical situation is at the same time imposing an urgent need to build up capabilities to defend our societies and values to secure a safe and sustainable future. FORCIT has a key role to play related to both challenges.

Today, FORCIT is the leading expert in explosives and blasting for Nordic conditions – and present on the global market for digitalisation of mining. We are also a major player within environmental consulting services, as well as a responsible producer of state-of-the-art defence technologies for the global market.

During 2023 our role related to security of supply, being an enabler of the green transition and being a part of the European defence has become ever

more clear. Our expertise, products and solutions are more needed more than ever before to address some of the most pressing challenges our society is facing.

FORCIT NAVIGATING THROUGH CONTINUED TURBULENT TIMES

The overall European economic development has continued to be suppressed, influencing especially the building-sector-related part of our business. Despite an overall challenging business environment, our total turnover remained at a similar level as the year before and our finances remained solid. This enables us to continue to invest heavily in our future.

Security of supply has made its way into an integral part of the overall sustainability framework. In March 2023, the EU commission proposed a set of actions in the form of a European Critical Raw Materials Act (CRMA) to ensure the EU’s access to a secure, diversified, affordable and sustainable supply of critical raw materials. The related list of 34 critical raw materials, of which 17 strategic, are of critical importance for our society and for the

green transition to stop climate change. On the list are, e.g., minerals and metals required for the manufacturing of electrical vehicle batteries, wind turbines, solar panels and digital technology. The critical raw materials are not only necessary for our society to work and as enablers for the green transition, but the demand for these materials is expected to increase exponentially in the coming years. Many of these materials, and most of the volume, is, furthermore, currently extracted and processed outside of EU, implying very clear risks of delivery disturbances and making the EU vulnerable to political or economic extortion. The CRMA has the goal of increasing and diversifying the EU’s critical raw materials supply, strengthening circularity as well as supporting research and innovation on resource efficiency and the development of substitutes. Among the quantitative targets is that at least 10 percent of the EU’s annual consumption in 2030 should come from EU extraction compared to the current level of below 3. Reaching these targets is putting a lot of pressure on the mining industry, but foremost on the legislators to enable the change that is needed to reach these ambitious and important targets.

The Nordic countries are mining nations and pioneers in sustainability. The Nordic mining industry and the broader mining cluster is considered among, if not the most sustainable in the world, thanks to efficient and innovative production methods, lower emissions than the industry on average and a good working environment. At FORCIT we feel pride of being an important cog in the large wheel of an industry that is and will be in an absolute key position for a resilient, clean and green Europe.

As we passed the sad mark of two years since Russia launched the full-scale invasion of Ukraine, the European defence industry is under pressure to support the re-building of a European credible defence and deterrence. After decades of under-investment, fragmentation, lack of supply of critical raw materials, and a lack of manufacturing capability this is a tremendous undertaking. In an environment of rising geopolitics and warnings of direct military threats to Europe we at FORCIT have taken our role seriously in building up new capabilities and capacity for the defence of Europe and the values it represents.

The interest in our defence technology has continued to increase during the past year. As many countries are raising their defence budgets, the demand for our technologies continues to grow at a rapid pace. We expect the growth within this segment to continue for many years as Europe rebuilds its defence capabilities.

Safety is and will always be our key priority. In 2023, we continued our journey towards zero accidents and the accident frequency, LTIF, decreased to 3.1 from 3.3 in 2022. We also raised the focus on non-absence related safety incidents where we see room of improvement. Furthermore, the focus on preventing large scale accidents has been further sharpened with growing operations. During 2023 we have also taken several actions and increased resources within the important domain of cyber and physical security.

OUR ROADMAP TO REACH CARBON NEUTRALITY BY 2035

Being part of the bigger industry enabling the green transition through the supply of sustainably mined metals and minerals, as well as building up

the infrastructure needed for a more sustainable tomorrow, we have a responsibility to also make sure our own operations develop towards a smaller environmental footprint. Our strong commitment to be a part of the solution in the global fight against climate change is well-reflected in our goal to be carbon neutral in our operations by 2035.

In 2023, we continued our determined path towards carbon neutrality and a lower environmental footprint. The recycling of our production waste increased significantly and so did the share of carbon-free electricity in our operations, reaching 92%. Continuous improvement is heavily dependent on measuring and knowing where one is. In 2023, FORCIT implemented a new dedicated software to monitor our performance and track development related to our environmental footprint.

In this report you will have the opportunity to read about some of the many initiatives within FORCIT to make our contribution within the sustainability domain.

Joakim Westerlund, CEO FORCIT Group

ENVIRONMENT: DECISIONS BASED ON DATA

In previous years, we have mapped and analysed our company’s impact on the environment and society, and calculated product-specific Environmental Product Declarations (EPDs). This work helped to clarify the big picture of our status in ESG matters in general as a background for FORCIT’s strategy update. 2023 was the year of rolling up the sleeves and start making investments and other visible and tangible actions to reduce our environmental impact. Thus, at the beginning of 2023 several technical sustainability projects started and necessary resources were secured.

Persistent work with operations and operative personnel is seen in the low number of environmental incidents and leakages. There were only a few minor leakages with no harm to the environment due to preparedness for managing incidents. Several internal environmental audits were executed. A Best Available Technology (BAT) assessment for nitrogen gases was performed in Hanko factory.

ENVIRONMENT STATISTICS

In 2023, FORCIT invested in dozens of heat pumps to improve energy efficiency and replace fossil oil usage. Heat pumps and energy controllers were seen as a reliable and tested technology to reduce energy consumption at most of the sites. In addition, two other important investments were made: one in solar technology and one in fossil oil heating technology removal and updating. There is not yet a

full year’s data on the energy and fuel savings that we have achieved through these investments.

Throughout the year, we implemented the software system, Tofuture, where all environmental data and KPIs will be collected, analysed, and reported. Data on emissions and consumption are collected today more comprehensively and, thus, a direct comparison with previous years is not possible. The share of fossil energy was decreasing – in accordance with our carbon neutrality road map.

TOFUTURE AND CO2

In every company, a software for collecting sustainability data is a necessity for mapping emissions and sustainability KPI’s used as business drivers. In a company like FORCIT, with dozens of locations and operations all over the Nordics, data management has been a challenging task. Well before the CSRD reporting demands, we applied the Tofuture software where we collect the data and roll out monthly KPIs and calculate the CO2 emissions. This new practice improves the accuracy of data, when emission sources are allocated to their actual location, making them easier to check and analyse.

The CO2 calculation of 2023 is not comparable with the previous one due to more comprehensive data collected from each operative site. Especially when analysing Scope 3, data sources have been developed since the last footprint calculation. The data

management for Scope 3 is the hardest one and, thus, some categories are excluded. The emissions of commuting are excluded totally, and business travelling and bought services are excluded in Norwegian operations. Even though the analysis does not cover all Scope 3 emissions, we are proud to carry out this development work well beforehand the CSRD demands.

FORCIT compensated CO2 emissions comparable to the amount of business travelling in 2022. To minimise the emissions of commuting and business travelling, FORCIT has updated its internal guidelines related to the company car benefit and invested in recharging facilities at its sites. These practices promote the selection of fully electric cars which has led to fast changes toward low emission work travelling and commuting.

FORCIT GROUP: ENVIRONMENT IN FIGURES 2023

(2022 in parentheses)

Energy 14,200 MWh (14,700 MWh)

t CO2-eq 184,000 (131,000)

8,200 MWh (8,300 MWh)

Heating oil 12,000 l (15,000 l)

Fuel data 1,240,000 l (1,220,000 l)

Total waste 720 tons (620 tons)

Total energy 134 kWh/ton (133 kWh/ton)

Recycled & energy waste 52% (29%)

Product transportations 3,200,000 km* (3,600,000 km)

* Does not include personal cars.

CASE EXAMPLE: O-PITECO IN USE

Rock drilling and blasting have an environmental impact, as they generate emissions like dust and gases. Therefore, understanding and mitigating these emissions is a crucial step toward achieving sustainable practices in mining and construction industries.

Standardised Environmental Product Declaration (EPD) documents provide transparent information and summarise the product’s environmental impacts throughout its life cycle. They play a pivotal role in advancing sustainability initiatives by improving transparency, accountability, and continuous improvement in product

design, manufacturing, and consumption practices. Using EPDs in a digital format is a key element of access to and utilisation of sustainability information in a standardised way which will become more and more of a requirement in the near future.

O-PitEco is a software that integrates EPD data with information from blasting operations, improving the speed of the process of creating environmental impact reports for such activities, even before the blast. The platform simplifies product comparison, data analysis, and emission minimisation, offering a comprehensive solution to promote environmentally responsible practices in drill and blast operations. However, successful usage requires all industries to provide the needed information.

The environmental impacts of mining can be influenced by careful planning and measuring.

CASE EXAMPLE: HOW EPDS ARE USED IN COMPANIES’ CO2 CALCULATIONS

When the end users of explosives evaluate and calculate their CO2 footprint as a part of their path to carbon neutrality, product EPD data is important or even necessary. EPDs contain the product’s CO2 equivalent value, which is divided into 5 categories as seen in the charts 1 and 2. Examples show one cartridge product and one bulk product.

As can be seen from charts 1 and 2, the raw materials and emissions of the production at the FORCIT factory (A1–3) are the main factors. Emissions of the logistics (A4) and end use of the product, the blast fumes (A5–2), also have a considerable impact (A5–2). There is also a separate category allocated to diesel oil or electricity (A5–1) used at the blasting site for pumping the product into a drill hole and sorting the packages to wastes.

Kemix A (gas-sensitised: 040 mm–090 mm)

GWP [kg CO2eq]

Scopes 1–3 for end user Kemix A (gas-sensitised: 040 mm–090 mm)

GWP [kg CO2eq]

Scope 3 for end user (Raw materials and manufacturing)

Scope 3 (Packaging waste)

Scope 1 (Detonation gases)

Charts 3 and 4.

Raw materials, Transport of them, Manufacturing (A1–3)

Transportation from storage to end user (A4)

Installation stage of explosive (A5–1)

Detonation stage of explosive (A5–2)

Charts 1 and 2.

Kemiitti 610 GWP [kg CO2eq]

Scopes 1–3 for end user Kemiitti 610 GWP [kg CO2eq]

Scope 3 for end user (Raw materials and manufacturing)

Scope 1 or 2 depending on whether the charging truck uses fossil fuel (1) or electricity (2)

Scope 1 (Detonation gases)

Raw materials, Transport of them, Manufacturing (A1–3)

Transportation from storage to end user (A4)

Installation stage of explosive (A5–1)

Detonation stage of explosive (A5–2)

The amount of the CO2 equivalent of explosives is divided into different scopes of CO2 calculations by the end user. Traditionally, it has been said that Scopes 1 and 2 describe the emissions from own production – which are normally the first focus of companies. In charts 3 and 4, it is shown how the data from EPD should be allocated in the calculation of CO2.

It is important to understand these principles when creating the analysis of different emission scopes (1–3) and a roadmap to carbon neutrality. What must be remembered is that these represent our view on how the calculation should be executed. The responsibility of making the calculations correctly is always with the executor.

GREEN NEWS FROM R&D

DEVELOPMENT PROJECT: NITROGEN-FREE EMULSION

After successful field tests in the Kemi mine, work toward nitrogen-free emulsion continues. Focus has been on the further development of water in oil emulsion structure which gives a clearly higher resistivity against any reactivity with minerals in the drillhole. In the next phase, moving on to industrial utilisation, a hydrogen peroxide emulsion (HPE)

production module was built. This module enables us to operate without any transport or storage of HPE. Field-scale tests and industrial utilisations will be continued.

FORCIT executed blast fume measurements for Kemiitti HPE in co-operation with Swedish Defence Research Agency (FOI), Luleå University of Technology (LTU) and Technical Research Centre of Finland (VTT). The results showed a direction to minimise carbon monoxide (CO) in the fumes but brought up a surprising result that the fumes contained a notable concentration of hydrogen peroxide (HP). Being a company committed to safety, this kind of data must be taken seriously when considering the risk profile of a new technology and this is why we decided to study the material and risks thoroughly before taking a step towards bigger volumes. The next step is the commissioning of the production module and proceeding to field tests if a risk analysis indicates good operative safety. The preliminary EPD for the product will be finished soon.

REUSE OF EMULSION MATERIAL

FORCIT continues to develop a method by which an emulsion explosive side stream classified as 5.1 can be broken down back into an aqueous ammonium nitrate phase and a separate oil phase. In an optimal situation, those phases could be recycled back to FORCIT’s own production.

In the pilot-scale tests, the functionality of the method and the decomposition equipment were tested. The separated ammonium nitrate was successfully recycled into the emulsion production whilst considering all quality aspects. The goal is to transfer the laboratory-scale process to production scale by the end of 2025.

Emulsion breaking test: on the left, the starting point and on the right the result after 24 hours.

GREENER RAW MATERIALS

New recipes are constantly being tested by R&D for both bulk emulsion and packaged products. Our focus in 2023 has been on testing greener raw material alternatives and, thus, reducing the CO2 emissions of our products. We have found some promising candidates made from recycled materials and have even made longer production scale trials with good results. By introducing renewable raw materials such as regenerated oils in our production, FORCIT will be able to introduce greener products on the market.

The sustainability audit process must be executed before new raw materials are accepted into use. You can read about the process on page 28.

CASE EXAMPLE: HOW TO REDUCE EMISSIONS OF BLASTING WORK?

Prior to their World Conference on Explosives and Blasting in Dublin in September 2023, European Federation of Explosives Engineers (EFEE) arranged a pre-conference workshop on the topic “How to reduce emissions of blasting work?” The session was a huge success and sold out.

The session started with introductory presentations from eight international speakers followed by a panel discussion, including the audience. The speakers represented different areas of the in-

dustry, such as explosives suppliers, researchers, ammonia producers, system providers and consultants, giving the audience a peek into the development and solutions from many different viewpoints.

Fábio Barbosa from O-Pitblast was one of the speakers and panellists and he explained how EPD can be integrated with CO2 calculations of blasting work with the O-PitEco software. The session left the audience with a great trust that the industry will meet all emerging emission limits for nitrogen and CO2 – not only by using one solution, but with several.

FORCIT Group was well represented in the event. The arranger and the chairman of the session Jari Honkanen is the former EVP of FORCIT Consulting. There was also a dozen of FORCIT’s employees listening to the session and participating actively in the panel discussion, including Chief Sustainability Officer Saila Savolainen and COO FORCIT Group Tommi Halonen to name but a few.

CONSULTING BUSINESS –INVOLVED

IN PROJECTS THAT PROMOTE SUSTAINABILITY

ENVIRONMENTAL MEASUREMENTS FOR CIRCULATION

OY

Circulation Oy is a company that promotes circular economy by recycling construction and demolition materials as well as natural materials at its six recycling plants across Southern Finland. The company processes the material and furthter transports it to recycling or the recovery of energy from waste. The landfill is always minimised. For instance, concrete and brick waste from demolished apartment buildings is used to make crushed stone which is then circulated to road substructures, enabling the minimisation of virgin raw materials.

COMPREHENSIVE NOISE AND SOUND PRESSURE MEASUREMENTS

Forcit Consulting Oy has been involved in Circulation Oy’s recycling processes, conducting environmental measurements at their recycling plants. Measurements were conducted in compliance with environmental regulations by using the best available equipment and methods, promoting accuracy and reliability. These measurements included a careful planning phase of how and where to conduct the measurements, continuous measurements, and analysis of the results. Both noise and dust emissions from the recycling processes were monitored from nearby residential areas or commercial buildings.

Forcit Consulting Oy conducted environmental measurements at Circulation Oy’s recycling plants. Noise and dust emissions from the recycling processes were monitored both at site and at nearby residential areas.

Noise levels were measured by using two techniques, short-term and long-term. Results showed the daily average decibel level, which was then compared to environmental regulations. Measurements also show the lowest and highest sound pressure levels during the day. During the recycling processes, some of the recycling equipment and operations have been modified and tested to enable informed decision-making in order to enhance air quality management.

DUST MEASUREMENTS PROMOTE PEOPLES’ HEALTH

Dust emissions, mainly breathable particles which are small enough to cause health issues, were monitored continuously with a laser diffractor from surrounding areas or near the source. Measurements provided valuable information about the dispersion of dust particles with different recycling equipment. Dust emissions are regulated with two limit values, daily and yearly average concentration.

Continuous monitoring and analysis of noise and dust emissions enabled Circulation Oy to refine its recycling processes and to minimise environmental effects while advancing towards a more sustainable future.

Measuring dust at Circulation Oy’s recycling plant.

CONSULTING OPERATIONS IN THE NORDICS

2023 CONSULTING IN FIGURES

(2022 in parentheses)

pcs (65,000 pcs)

HELSINKI

driven 1,200,000 km (1,600,000 km)

pcs (273,000 pcs)

EXPLOSIVES OPERATIONS: FINLAND

2023 FINLAND IN FIGURES (2022 in parentheses)

KEVITSA

KEMI

TUUSULA

EXPLOSIVES OPERATIONS: SWEDEN

2023 SWEDEN IN FIGURES (2022 in parentheses)

99 (88)

km)

(4.5%)

(136) KARLSKOGA

Safety observation

no TRI

(64%)

(28%)

(7%) TRI

(0%)

Energy total 2,100 MWh (1,900 MWh)

PAJALA AITIK

EXPLOSIVES OPERATIONS: NORWAY

GEVINGÅSEN

RODSKJÆR

driven 1,000,000 km (700,000 km)

2023 NORWAY IN FIGURES (2022 in parentheses)

CO2-eq all Scopes 15,000

ForSafe reports 113 (144)

Safety observation 82% (86%)

Near Miss 9% (10%)

Accident no TRI 7% (3%)

TRI 2% (0%)

Authority notice 0% (1%)

Energy total 1,000 MWh (970 MWh) Total fuel 230,000 l (230,000 l)

electricity 100% (100%) Heating oil 5,200 l

BERGEN

SVELGEN HARTMANN

AUSTVIKA

JELSA

SOCIAL : IMPROVEMENTS IN SAFETY AND RESILIENCE

SAFETY STATISTICS

Safety outcome 2023 was both encouraging and indicating areas of improvement. We succeeded in keeping safety reporting activity, work safety and occupational safety at a very good level and the numbers even improved when compared to the previous year (LTIF). Yet there still was potential for incidents, as shown by the increased TRIF value, and unfortunately one incident caused personal injury.

When working with explosives and heavy vehicles, there is always a risk for a large-scale accident. Therefore, a great focus is on large-scale accident prevention and risk analysis. In 2023, there were two incidents and a few near-misses related to traffic and process equipment, which we can learn from.

INTERNAL RESCUE DRILLS

When an accident takes place, there are several internal and external rules that one must follow to minimise injuries, leakages and property damage. The prevention of injuries to outsiders and an escalation of the accident to larger areas is important. Many organisational levels and support functions must be activated in accident situations. Eight different scenarios were trained and tested at different sites in 2023. It is a statistical fact that training facilitates operating in accordance with rescue plan and helps to ensure performance capabilities in real accident situations. One target was to support emergency service teams and practice communication and giving correct information about the accident situation and facilities.

Most of the rescue drills were executed together with stakeholders, varying from mining company rescue departments to police special forces. As a result, we found topics to improve at all organisational levels, stakeholders learned about us, and we gained new insights for operative instructions.

During the year, many rescue drills were organised together with rescue departments.

MODERN THREATS AND TRADITIONAL FIRES

Management and communication functions must be capable of making decisions in complex situations in order to protect employees, stakeholders, and business continuity. The need to communicate fast via different communication channels is one of the challenges in major accident situations. Threats through the web and towards the company’s data are, of course, also possible and they were trained in previously mentioned drills.

Sabotage is a phenomenon that needs to be given more attention in the future, as well as intrusions to our sites with criminal intentions. The biggest risk in our operations is still related to fires, which can be caused by many factors. The risk of wildfire has increased due to drier summer periods in the Nordics.

CASE EXAMPLE: ROBOT/AUTOMATED CHARGING

FORCIT is actively involved in a project related to automated robot charging. The project is a co-development project between ABB, Kimit, Forcit and the mining operators Boliden and LKAB. The goal of the project is to make the working environment in the mines safer by automating one of the few manual processes left in the mining operation: loading the blast holes with explosives. In 2023, a new milestone was reached in the project when several tests and simulations were conducted in the Garpenberg underground mine.

The joint development initiative is about a fully automated charging process and mechanisms. It guarantees the efficiency by integrating the robot loader with a transport vehicle. These units communicate with the ammonium nitrate bulk emulsion charging unit and vision systems and work in co-operation with a second robotic arm to assemble the primer and detonator.

The results so far show significant progress and provide the opportunity to reduce the need for human operators in a small, undisturbed area close to the tunnel face. The following stage is to have a fullscale test period at the LKAB mine in Kiruna, which will drive the project further into the next development phase.

The technology includes vision systems and automation solutions to communicate with the charging unit, crane, and ABB’s industrial robotic arm.

At FORCIT, cyber security is a top priority and more resources have been added in 2023 to ensure it remains a top priority. Efficient co-operation with our partners also contributed to successful cyber defence mechanisms. Hence there were no cyber incidents during 2023. As in every organisation today, there were numerous phishing attempts throughout the year.

Although there were no cyber incidents, we will continue to improve processes and procedures and keep vigilant.

FORCIT GROUP: SOCIAL IN FIGURES 2023

(2022 in parentheses)

575 (533)

Total amount of employees 18.4% / 81.6% (17.6% / 82.4%)

LTIF* 3.1 (3.3)

structure:

TRIF** 20.7 (13.1) ForSafe reports 721 (768)

Sick leave 8.1 (8.2) days/employee

* LTIF, Lost time injuries, includes all on-the-job injuries that require a person to stay away from work more than 24 hours or which result in death or permanent disability. LTIF number shows how many of lost time injuries occur in a workplace per 1 million hours worked.

Sick leave 3.2% (3.2%)

** TRIF, Total recordable injuries, is a measure that encompasses all fatalities, lost time injury, cases of substitute work due to injury and medical treatment cases by medical professionals. TRIF does not include any first aid injuries. TRIF number shows how many injuries occur in a workplace per 1 million hours worked.

CASE EXAMPLE: INTERNATIONAL WORK TOWARDS BETTER SAFETY IN THE EXPLOSIVES INDUSTRY

FORCIT actively cooperates on safety issues on several levels. We partner globally with SAFEX, in Europe with FEEM, and in the Nordics with KCEM as well as with the national authorities. FORCIT’s role in the explosives communities is significant.

SAFEX is a registered not-for-profit association established and registered in Switzerland. SAFEX is concerned with the harmful impacts of explosives throughout their life cycle: design, development, manufacture, storage, distribution, use and disposal or recycling. SAFEX exists to globally eliminate the harmful effects of explosives on people, property and the environment by encouraging its members to learn from each other’s experiences. SAFEX actively promotes competences by publishing and sharing information of accidents, good practices, and research data related explosives via several communication channels and conferences. FORCIT is committed to work according to the SAFEX principles and share the learnings via conferences and accident reporting.

The Federation of European Explosives Manufacturers (FEEM) is a non-governmental organisation created in 1976 by European industrial explosives manufacturers. The objective of the Federation is to advance the commercial explosives industry in the widest sense, particularly regarding safety, quality, security and legal matters. The FEEM is a forum for debating questions, problems, facts and topics arising prior to and during the manufacture, storage, transport, use and disposal of explosives as well as any other subject relative to its interests. FORCIT’s representatives participate in different SAFEX working groups, e.g. HSE, blasting, and transportation working groups.

KCEM is owned and operated by the non-profit organisation Kompetenscentrum Energetiska Materials (IKEM), where the common denominator for members is usually that they manufacture energetic materials and explosives products in the field of mining, automotive, chemical, aerospace and defence industries. KCEM’s most important task is to develop and maintain relevant skills among members, which is primarily done by providing training and conferences at various levels. KCEM also focuses on monitoring, influencing, and informing of regulation changes in Nordics.

FORCIT is an active member of KCEM and has a seat on the board and is a member of the education council. FORCIT is also a part of the FEX and Allex training courses, aimed at developing attendees’ competences in the explosives field, where participants visit both the FORCIT plant in Aitik, Sweden and the dynamite production in Hanko, Finland.

HUMAN RESOURCES

In the personnel survey conducted in autumn 2023, employee satisfaction remained at a good level (eNPS 40). FORCIT Group is known for long careers, and this also shows in the results of the survey. The personnel are motivated and committed to their work and feel that they are being treated equally and rightfully.

In autumn 2023, the entire personnel were provided with mobile phones. According to the personnel survey, an area that could be improved is communications, and distributing mobile phones to all employees guarantees equal access to the company’s communications channels. However, the main reason behind the decision was safety and security: When everyone has a mobile phone at their disposal, the employees can be reached more easily and reliably, and it is also more effortless to make safety observation reports via mobile phone.

In 2023, the number of FORCIT employees increased by 32 people. The share of women increased by 0.8%, which is a small step in the right direction, and our ambition is to continue strive for more diversity at all organisational levels. White-collar positions seem to be more equal when it comes to gender distribution. When comparing sick leave rates, FORCIT’s numbers are on a very low level –being a few percent lower than national statistics in general.

GOVERNANCE: THE FINANCIAL PERFORMANCE OF 2023

The financial development of the company in 2023 was broadly in line with the previous year. The overall European economic development and the challenging construction market in our core geographical areas of operation resulted in a demanding business environment.

The partial normalisation of key raw material prices after the high peak in 2022, combined with the devaluation of the Swedish and Norwegian currencies versus the euro, implied a decrease in the company’s reported turnover.

TURNOVER

FORCIT Group’s operations in 2023 developed overall positively in line with 2022, although the group’s turnover decreased by 6% to EUR 214.3 million (228.3). In 2023 FORCIT Defence business unit’s turnover grew significantly, while FORCIT Explosives and Consulting business units’ turnover decreased compared to last year’s level.

OPERATING PROFIT

FORCIT Group’s EBIT and EBITDA slightly decreased compared to 2022, EBIT -1% and EBITDA -2%. Although the turnover decreased the profitability remained at previous year’s level mainly due to a more favourable business area mix.

SUSTAINABLE PROFITABLE GROWTH

Financial sustainability is based upon long-term financial targets and perspective on financial decisions and actions. The targets address profitable growth and sustainable capital structure, resulting in stable economic value for our owners.

INVESTMENTS FOR A MORE SUSTAINABLE FUTURE

In 2023, FORCIT invested heavily in increasing production capacity. To put FORCIT’s carbon neutrality roadmap into practice, investments to decrease scope 2 emissions were done. In addition to that, some of investments enable us to decrease the usage of fossil fuel in scopes 1 and 3. The share of green investments was 2.8%, which seems a low number, but in previous years a similar level of invested money would have made up 5.4%.

ENERGY INVESTMENTS

In summer 2023, new heat pumps were installed in several facilities at Kemi’s matrix factory and Kemiitti station, which was done to decrease the emissions caused by the heating of the facilities. Heat pumps replace the former heating system based on electricity and oil. It is yet to be seen what the effect of the new pumps on the total energy consumption will be and whether the technology is sufficient in cold winters.

At the Lapua site, the former oil heating system was replaced by water-air heat pump technology. This technology update will reduce fossil oil usage remarkably at FORCIT.

To reduce our reliance on fossil fuels, we assess the feasibility of installing solar panels at our facilities, particularly at our warehouses and storage locations. This initiative not only lowers our carbon emissions but it also promotes self-sufficiency in electricity production.

FOCUS ON TRANSPARENCY

SOCIAL RESPONSIBILITY

Sustainability is ingrained in our core values and business practices. We recognise the urgent need to address environmental challenges, uphold social responsibility, and maintain standards of corporate governance. In line with the requirements of the Norwegian Transparency Act, EU regulations and OECD guidelines, each European company must be aware of and analyse risk factors, audit the supply chain regularly and report the results. Almost all of our raw material volumes are from European companies and/or produced in Europe. Purchases from Russia have been completely stopped.

FORCIT executed a comprehensive desktop risk assessment of the supply chain for each supplier based on material hazards, volumes, the country of origin (Global Rights Index), and the transportation method. Based on that assessment, we began to carry out on-site sustainability audits of major raw material suppliers. The audit team consisted of professionals from sustainability, procurement, R&D, and production. The target was to assess environmental, social, and governance (ESG) performance, ensuring transparency and accountability in our operations.

Furthermore, with the aid of external partners, the transport of raw materials and its impact on the overall CO2 footprint was mapped. During this process many suppliers have submitted EPD and Product Category Rules (PCR) documentation, which aids in the correct calculation of our total carbon footprint.

SUSTAINABILITY AUDIT PROCESS

The first step in our sustainability audit process is to clearly define the objectives and scope of the audit.

This involves identifying key ESG metrics, setting targets aligned with international standards and best practices, and ensuring stakeholder engagement. We gather relevant documentation, including policies, procedures, and performance data, to assess current sustainability practices and identify areas for improvement. A multidisciplinary audit team comprised of experts from the relevant business areas is assembled to conduct the audit. This team ensures that diverse perspectives and expertise are brought to the assessment process.

During the on-site audit, comprehensive data collection is conducted across all relevant aspects of the supplier’s production operations, including but not limited to energy consumption, greenhouse gas emissions and waste management. Observations regarding health and occupational safety, supply chain practices, business ethics and company policies are best to verify on site. These aspects of ESG also include human rights, equality, employee welfare, and community engagement.

Based on the findings of the sustainability audit, we develop action plans with specific goals, targets, and timelines to address areas of improvement and focus on opportunities. Sustainability considerations are integrated into our overall business strategy, decision-making processes, and performance management systems to drive continuous improvement and value creation. The transparent sustainability audit is mandatory and agreed on in the supply contract between FORCIT and suppliers. This practice enhances transparency, accountability, and stakeholders’ engagement. FORCIT has not detected any abuses in the audits. Our procurement activities and the contracts we make comply with FORCIT’s Code of Conduct.

CODE OF CONDUCT

Our policy is to conduct all our business in an honest and ethical way, as well as to implement transparency and traceability in business operations and practices. The FORCIT Code of Conduct addresses market and business ethics issues and obligates employees, partners and suppliers to respect this policy. The Code of Conduct is important to follow in FORCIT generally, but especially important for the Defence business unit and all their business transactions and relationships.

In all our operations, we comply with current legislation. Applicable legislation includes use of labour and employment contracts, occupational safety, environmental protection, anti-corruption and bribery, competition, and product safety, as well as laws related to chemical and explosives safety.

In addition to the regulations of licensing authorities, FORCIT has implemented internal guidelines and assesses each potential export case thoroughly. FORCIT is committed to observing and respecting universal human rights as defined in the United Nations (UN) Universal Declaration of Human Rights and other international human rights agreements, and to promoting the realisation of universal human rights.

FORCIT CODE OF CONDUCT

• Non-discriminatory treatment of employees

• Occupational safety and health

• Respecting human rights

• Anti-corruption and bribery

• Trade restrictions

• Avoiding conflicts of interest

• Competition law

• Confidentiality

NOTIFICATION CHANNEL

FORCIT has a notification channel where it is possible to report any suspicion of a crime, misconduct, or other activity contrary to our company values. The notification can be submitted anonymously and also discussed anonymously with the notification handler.

The channel can be found at https://forcitgroup.ilmoituskanava.

fi/#/?lang=en.

There have not been any notifications since the system was started in 2021.

MARKET AND BUSINESS ETHICS

HUMAN RIGHTS AND ETHICAL STANDARDS

The commitment to human rights and ethical labour practices is unwavering within the FORCIT Group. The Norwegian Transparency Act and EU laws underscore our dedication to fostering a work environment where fundamental human rights are respected, and decent working conditions are upheld across all our operations and supply chains.

On a group level, we have a centralised purchasing function which oversees contracts for key raw materials and strategic products utilised across our operations. Approximately 95% of our raw materials originate from the European countries. The largest raw material supplier outside the EU was audited without remarks in 2023 by the group sustainability and sourcing teams.

We have seamlessly integrated the requirements of the Transparency Act into our management framework, embedding them within our ethical standards, Code of Conduct, and Health, Safety, and Environment (HSE) policy. These provisions serve as foundational principles guiding all our endeavours and are reflected in our interactions with employees and business partners alike.

DUE DILIGENCE ASSESSMENTS

Regular risk assessments are conducted by the group, encompassing evaluations of suppliers, product characteristics, and geographical considerations. Over the past year, FORCIT Group engaged with a total of 1559 suppliers including all services and goods, predominantly sourced from the Nordic countries, through established frameworks with reputable suppliers who have affirmed their commitment to compliance with relevant laws and regulations. CO2 emissions of the raw material and product supply and delivery chain have been calculated and reported as a part of privilege sustainability reporting.

CONTINUOUS MONITORING

Our adherence to the provisions of the Transparency Act is unwavering, extending to all contractual agreements and procurement processes. Suppliers are obligated to certify their compliance with the Act upon request, with rigorous monitoring mechanisms in place to ensure adherence. Any identified breaches prompt immediate action, with direct engagement with the concerned supplier or partner to rectify non-compliance in alignment with national laws and international agreements.

SUSTAINABLE DEVELOPMENT AND DEFENCE TECHNOLOGY

FORCIT Defence is a global supplier operating as a prime contractor for its own systems and as a partner for other international system providers within defence technology. FORCIT Defence is one of the leading suppliers of insensitive munition defence systems and its market area mainly consists of NATO and EU countries. All defence export is subject to export control and the approval of the Finnish government.

The product portfolio ranges from land and naval systems to breaching and demolition solutions and warheads design, development and manufacturing.

Interest in FORCIT Defence’s technologies has increased during recent years as a result of the general deterioration of the geopolitical environment. This development is expected to continue due to the current European security situation.

Our philosophy within Defence is focused on developing insensitive munitions technology, which ensures that the systems are as safe as possible to operate, transport and store during the whole life cycle of the systems, minimising the risk of accidents and third-party damage. All issues related to defence technology are subject to strict national and international legislation and regulations. In order to maintain our position as a trusted partner within the defence field, it is necessary to conduct our business in strict accordance with current export control laws, regulations, international standards and authorisations.

National and international legislation and decisions therefore form the basis for all our activities regarding export and defence technology. We will always, without exception, comply with export control laws and regulations applicable to our business. In addition to complying with all applicable laws and regulations of the countries or territories where we operate, our defence products are fully compliant with international regulations and treaties (e.g., Ottawa, Geneva).

The operations of the Defence business unit are managed from FORCIT’s head office in Hanko, Finland.

GLOSSARY

Best Available Technology (BAT) Cutting-edge and proven techniques for the prevention and control of industrial emissions.

Carbon Dioxide CO2 In normal conditions an odourless, colourless, not poisonous quite inert gas, which is formed, for example, when using fossil fuels.

Corporate Sustainability Reporting Directive (CSRD) EU rules on reporting on the social and environmental risks faced by the company, and on how their activities impact people and the environment. This will help investors and other stakeholders have access to the information on number of sustainability issues and to assess financial risks and opportunities. FORCIT will report according to it in 2025.

EBIT (Earnings Before Interest and Taxes) and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) Tells about company’s operative profitability, what the company has earned before these items.

Environmental Product Declaration (EPD) Third-party-verified report that is based on life-cycle assessment (LCA). Done according to standard EN 15804 on the product’s effects on environment during its life cycle.

Environmental, Social and Governance (ESG) Matters that belong to these areas and their development. Often referred as sustainability.

European Green Deal Aim for the European Union to become the world’s first “climate-neutral bloc” by 2050. Launched by the European Commission, including a package of policy initiatives to many different sectors.

Green Claims Directive Requires companies to prove the voluntary green claims they make in business-to-consumer commercial practices.

Greenhouse Gas Protocol (GHG) Globally used standardised way to calculate cardon footprint and report emissions.

Green Transition Change towards ecologically sustainable economic system and growth that does not rest on overconsumption of natural resources and fossil fuels.

Hydrogen Peroxide (HP) H2O2 Chemical compound that in concentrated form decomposes explosively when heated.

Hydrogen Peroxide Emulsion (HPE) As a replacement of nitrogen containing explosives, hydrogen peroxide, also in emulsion form, is being experimented with.

Key Performance Indicator (KPI) Quantitative indicators that give an easily decoded and comparable data about the condition of company’s state.

Life-Cycle Assessment Methodology of evaluating the whole environmental impact of a product in its life cycle from raw materials to waste.

Product Category Rules (PCR) documentation Instructions on how the life-cycle assessment (LCA) should be performed.

Scopes Name comes from the Greenhouse Gas Protocol and divides company’s emissions to three categories. Scope 1 is direct emissions that are owned/controlled by a company, scope 2 and 3 are indirect emissions from activities of the company that come from sources not owned/controlled by it.

Taxonomy EU-wide classification system for sustainable activities to help make sustainable finance decisions.