Sustainability Report 2018

MANAGEMENT’S REVIEW FINANCIAL STATEMENTS
1. January - 31 December 2018 WE DISCOVER POTENTIAL
SUSTAINABILITY TRIFR Whistle-blower cases
REPORT
2018 3.0 65
Down from 3.2 Up from 51
Women Managers Tonnes of carbon
10.4% 60,341
Down from 10.5% Down from 64,267
1 Sustainability report 2018

CONTENTS
FLSmidth at a glance 3
FLSmidth in the world 4
Strategy and business model 5
Organisational structure and employees 6
Letter from the CEO 7
Our role in the world 8
More business at less cost to the environment 9
Contribution to the global agenda 10
Challenges in mining 11
Challenges in cement 14
Financing accelerates sustainability 17
Stakeholder engagement 18
9 More business at less cost 17 Financing accelerates Governing sustainability 21
to the environment 15 sustainability
Financing sustainability
Safety
People
22
24
Compliance 26
Environment 28
ABOUT THIS REPORT Supply chain 30
The 2018 Sustainability Report describes the non-financial performance of FLSmidth & Human rights 32
Co. A/S, listed on NASDAQ OMX Copenhagenand, based in Copenhagen, Denmark. Sustainable customer solutions 34
Performance summary 35
The 2018 Sustainability Report supplements the 2018 Annual Report and Corporate GRI Requirements 37
Governance Report. It has been published every consecutive year since 2010. It has
been prepared in accordance with the GRI Standards: Core option, and is compliant
with section 99a of the Danish Financial Statements Act. To access previous years’
reports, visit www.flsmidth.com/sustainability
For inquiries, please contact sustainability@flsmidth.com
2 Sustainability Report 2018

FLSMIDTH AT A GLANCE
FLSMIDTH AT A GLANCE
FLSmidth is a leading supplier of

productivity enhancing solutions to the
global cement and mining industries.
Through our unique combination of
engineering, products and services, we
help our customers increase their
production output, decrease operating
We are
A supplier of everything from
60+
costs and reduce environmental impact. single machinery to complete Countries
cement and minerals processing A truly global company with local
plants, including services before, presence in more than 60 countries and
We are the market leader in the premium during and after the construction operations in more than 100 countries
segment of the cement industry. We have
the most complete offering and the
strongest brand. In mining, we are
amongst the market leaders with one of
the strongest trends and broadest
offerings. We have a proven track record
of quality and reliability.
11,368 Our vision

We drive success through
Employees sustainable productivity
Our in-house resources are primarily enhancement
engineers who develop, plan, design,
install and service equipment, Our brand promise
with most of the manufacturing We discover potential
being outsourced

FLSMIDTH IN THE WORLD
FLSMIDTH IN THE WORLD

STRATEGY AND BUSINESS MODEL
STRATEGY AND BUSINESS MODEL
BUSINESS MODEL
A UNIQUE COMBINATION
OF PROJECTS, PRODUCTS
AND SERVICES

ORGANISATIONAL STRUCTURE AND EMPLOYEES
ORGANISATIONAL STRUCTURE AND EMPLOYEES
The reason we can take pride in 136 years of successful Mining - supported by sales and service activities in Changing the way that we work has necessarily resulted
business performance is that we have always been able seven Regions with a central digital organisation. With a in a readjustment of our workforce, with 332 fewer
to adapt to changing market conditions and the cyclical simpler structure, we can succeed with a more unified employees and a slightly older workforce with more
developments in our industries. In recent years, we have approach to sustainability and use our joint strength to seniority.
successfully adjusted to the downturn of our markets so take the leading position in the market.
that today, we have a capable workforce, an optimised We are confident that current and future employee
cost structure, a healthy financial situation, and our This new structure means that sustainability can be fully productivity will increase with this new structure.
underlying business is in good shape. embedded in our internal operations, as well as the
industries, who will receive feedback supplied by the
This year, we realigned our organisation to strengthen regions. We are set up to capture market signals and
customer relations, digitalization, productivity, translate this information for our engineers to act on.
sustainability offerings, and to capture growth. We call Understanding where the world is heading and the
this Productivity at Work. Whereas before we had four sustainability challenges in each country will also be
divisions, we now have two industries - Cement and much easier.
AGE DISTRIBUTION LENGTH OF SERVICE GEOGRAPHICAL DISRIBUTION
6% 5%
14%
17%
29% 24%
17%
24%
13%
37%
23% 5%
26%
24% 6% 30%
<30 years 30-39 years 40-49 years <2 years 2-4 years 5-10 years >10 years North America South America
50-59 years >60 years Europe, Russia & North Africa SubSaharan Africa & ME
Asia Subcontinental India
Australia

LETTER FROM THE CEO
LETTER FROM THE CEO
Growing populations and demand to improve living lakes, rivers, and ground water is a risk that we help our
conditions drive the need for increased production in customers minimise. We have developed solutions like
cement and mining. We need new solutions to make this EcoTailsTM that significantly reduce the need for water in
production more sustainable and to deliver more mining and minerals processing. Like our digital solutions,
business at less cost to the environment - safeguarding this is a discovery that we anticipate will have a huge
our planet for future generations. positive impact on the environmental footprint of our
As a leading contributor to cement production and customers – while improving their productivity.
minerals processing, FLSmidth – together with our
customers, suppliers and business partners – share the A common denominator for all our innovative solutions is
responsibility for driving the transition and progress that they must be financially viable and give our
towards a more sustainable tomorrow. customers an opportunity to grow their business while
minimising their impact on the environment. Sustainability
Today, digitalization is one of the main drivers of our and productivity cannot be thought of separately – it's
innovative process. We seize every opportunity to two sides of the same coin, which is reflected in our
connect our customers’ equipment to the internet, gather vision: “We drive success through sustainable
and analyse data, and optimise processes and productivity enhancement.”
performance based on intelligence. This adds new
opportunities for big improvements to the cement and More than ten years ago, FLSmidth joined the United
mining industries. But even smaller ones e.g. in power Nations Global Compact and I am proud to say that we
consumption, downtime or throughput can have have renewed our commitment and moved to the
significant environmental effects. A great example is our advanced level of reporting. We will increasingly focus on
ECS/ProcessExpert control system, which can increase how to improve the environmental footprint of our
production of cement equipment by 3-5%, while suppliers and our customers in a more systematic way.
A common denominator for all our decreasing energy use by 5%. This is significant
considering that cement manufacturing produces 8% of Join us as we make use of our experience and ingrained
innovative solutions is that they must be
all carbon emissions. curiosity to discover new paths towards a sustainable
financially viable and give our customers an tomorrow.
opportunity to grow their business while License to operate is one of the highest risks facing the
minimising their impact on the mining industry. When authorities or local populations Thomas Schulz, Group CEO
environment. obstruct a mine’s license to operate, it's usually because
they are worried about the environment. Pollution of their

OUR ROLE IN THE WORLD
OUR ROLE IN THE WORLD

MORE BUSINESS AT LESS COST
TO THE ENVIRONMENT
MORE BUSINESS AT LESS COST

TO THE ENVIRONMENT
We deliver sustainable productivity to our This calls for new solutions and new ways of working. To industry, we have made great progress and introduced
customers. To reduce emissions and the reduce emissions, we either need to find new sources of solutions that re-use up to 95% of the process water and
consumption of fresh water while meeting energy to keep the equipment and vehicles running, eliminates the need for wet tailings dams, even for large
the growing demand for cement and reduce emissions from the energy we use today, or find mines.
minerals. ways to increase production using the same amount of
energy as today. These solutions help our customers overcome some of
their biggest challenges. It makes it easier to obtain a
Demand for cement has gone up by more than 180 Digitalization lowers emissions license to operate, it reduces operational costs
percent in the past 20 years. As more people have lifted Our innovative engineers work on all three tracks. significantly, it minimises the risk of contaminating ground
themselves out of extreme poverty, the need for proper Through digitalization, we are making big steps forward water, and it eliminates the dire consequences of tailings
housing, roads, ports and airports has gone up. on the latter. By bringing our equipment online and dams failures.
Demand for minerals has surged as well, as smart collecting data in a cloud solution, we can analyse even
phones, computers, electric vehicles, renewable energy the smallest performance details and adjust them to Sustainability and digitalization are the biggest business
solutions and vast numbers of other devices based on perform in the perfect equilibrium of production capacity, opportunities right now. We combine the two to discover
minerals like copper, gold and lithium have become energy consumption and need for maintenance. new solutions that provide our customers with tools to
global necessities. reduce CO2 emissions and the need for fresh water
Customers working with us on our digital platform will without compromising productivity.
Tapping into these growth opportunities for the cement reduce their carbon emissions, reduce their energy costs,
and mining industries is not as simple as it sounds. while remaining at least as effective in their production as
Greater scarcity of resources such as energy, water, and before. This is what we mean by sustainable productivity.
raw materials – along with declining ore grades and
stricter regulations – lead to more complex and costly Save water and remain productive
operations. Water is another issue high on our agenda this year.
Especially in the mining industry, the access to and
A call for new solutions disposal of water is the reason for tensions with local
To stay competitive in this complex market, cement and communities and authorities – tensions that impact the
minerals producers have to minimize the use of license to operate.
resources, while optimising production and maximising
their investment. There is no magic wand to stop the need for water in
mining and minerals processing from one day to the next.
However, through cooperation with partners in the

CONTRIBUTION TO THE GLOBAL AGENDA
CONTRIBUTION TO THE GLOBAL AGENDA

We work actively with Sustainable Development Goals to improve
the environmental and socio-econmic impacts from the cement and mining
industries. Integrating the adequate goals into our business model
drives future revenue and profit – and offers sustainable productivity
to our customers.
SDG 6: Clean Water and Sanitation SDG 8: Decent work and

Water is pivotal for us and for our economic growth
customers. Minerals processing Local hiring and training
requires large quantities of water. contributes to improved
SDG 13: Climate Action
Our solutions reduce the need for economic conditions. Supplier
Some of our equipment can run
fresh water in the process and development programs in
for decades. Any improvement
reduce water-related risks like human and labour rights
we make in the design or
ground water contamination. We are multiply our influence
operation has the potential to be
fully committed to continuing the substantially.
massive in scale, and
innovation of new solutions that will
significantly our customers’
help our customers produce more
productivity. As we deliver more
with less use of water.
efficient offerings, the better it is
SDG 7: Affordable and clean energy for the climate.
Providing energy-efficient technology
to customers around the world means
that the customers do not require as
SDG 9: Industry, Innovation and
much energy to operate. Some of our
Infrastructure
solutions that optimise customers’ fuel
Cement and minerals form the
consumption can even turn household
foundation for infrastructure and
waste and used tyres into energy,
technology in all aspects of life.
substituting fossil fuels.
SDG 17: Partnership for SDG’s Producing them responsibly goes a
We partner with our customers, long way towards promoting
SDG 12: Responsible consump- suppliers, with industry sustainable development.
tion and production associations, civil society and Developing clean and
Developing suppliers and finance institutions to ensure that environmentally-sound
decreasing customers’ emissions we operate responsibly and deliver technologies drives not only our
to air, water and soil are central to the most sustainable solutions. company, but both of our industries
our business model. Furthermore, in the right direction.
being responsible also means
doing business ethically; and to
stem fraud or corruption of any
kind.

CHALLENGES IN MINING
Obtaining and retaining a social license to

operate is the number one risk facing the
mining industry in 2019, according to EY.
Many mines are located in remote and arid
areas where water is a scare resource and
the local population, agriculture and other
industries compete for it.
The amount of water needed for processing

and the risks associated with waste water
disposal makes it the main challenge for
responsible mining. Decreasing ore grades
that contain increasing levels of arsenic also
means that it will be more difficult to obtain
environmental permits.

1. Tailling dams 2. Decreasing ore grades

Tailings dams are a liability for the mining Decreasing ore grades make operating
industry. If they break, downstream ecosys- a mine more complex. If not addressed
tems and populations can be greatly affected. properly, it can mean more CO2 emissions
Eliminating the need for them makes it easier 2 and more water consumption.
to obtain a social license to operate.
3. The demand for metals 4. Water

The global consumption of metals such as Mining is a very water intensive process.
copper has increased by approximately 30% Some of the world’s biggest mines use 1
in the past decade. billion m3 of water per day.

Save water with EcoTails™ Rapid Oxidative Leaching

Finding better ways to manage water usage is crucial to The mining industry is facing a challenge as existing ore
the success of mining operations in the future. Together bodies are becoming lower grade over time. Many of the
Access to safe water is indispensable to
with Goldcorp, we have developed EcoTails™, a solution easily accessible deposits have been mined and finding
achieve the global ambitions of poverty that aims to enable large-scale mining operations to new deposits is increasingly complex. This is
reduction, sustainable economic growth and move from wet to dry stack tailings in a financially viable compounded by increasing levels of impurities in the
healthy ecosystems. In the mining and way. Dry stake tailings eliminate the need for tailings remaining ores, such as arsenic. It can make it more
mineral processing industry we are highly dams that are costly in maintenance and devastating in difficult for our customers to obtain environmental
dependent on water, and we must address the event of a breach. permits and improve their environmental performance.
this issue from all possible angles – from pro-
The EcoTails™ process enables recirculation of 90-95% of Rapid Oxidative Leach process (ROL) makes it possible to
active water management plans reducing process water and thus reduces the need for fresh water develop mineral deposits containing arsenic for recovery
water consumption in ongoing operations to intake. The costs saved by the water-recirculation alone of copper, gold, and silver, while complying with stringent
research into new solutions until we can will significantly reduce the total cost of ownership for environmental regulations. Many ore bodies cannot
either fully recycle water and eliminate the many mining operations. currently be processed due to the high level of arsenic,
need for tailings dams or find dry minerals but by using ROL it is possible to do so with a lower
The process blends filtered tailings with waste rock environmental impact. It also allows for recovery from
processing solutions eliminating the water
creating a geotechnically stable product that is stackable, waste streams, and piles containing arsenic can be
use completely. easily conveyable and can be used to re-vegetate the processed on site. This makes it possible to avoid
area. This reduces the environmental impact of the potentially toxic emissions to soils, air and water.
operation and helps obtain the license to operate.
EcoTails™ is a benefit to both the local communities in the
area and to mining operations.
Manfred Schaffer
Group Executive Vice President, Mining Industry

CHALLENGES IN CEMENT
Global consumption of cement has increased

nearly 180% since the turn of the millenium.
As there is no slowing down or substitute
material in sight, producers and legislators
alike are looking for ways to make
production more sustainable.
CO2 emissions from cement production have

a massive environmental impact.
A reason that the cement industry has been

making huge progress on emission reduction
is because energy is becoming increasingly
expensive, and productivity means that we
can reduce their cost base and their
emissions at the same time. It’s a win-win,
and a significant business opportunity for us.
Our innovative engineers attack this

challenge from every possible angle,
including energy efficient equipment,
process optimisation and fuel substitution.

Climate change The demand for cement

To make cement, limestone needs to be Every year the average person consumes
heated to 1450°C, which releases CO2 approximately 600kg of cement.
trapped in the rock. This is why cement
produces 8% of all global CO2 emissions.
Alternative fuels Air emissions

Substituting traditional fossil fuels with The cement manufacturing process
alternative fuels, such as municipal results in undesired air emissions such
solid waste, means less CO2 emissions as sulphur and nitrogen oxides. These
and a more circular economy. can be effectively mitigated using the
right air pollution control technology.

Software reduces energy consumption Burning old tyres reduces emission

Fuel and electricity constitute a high proportion of a Substituting traditional fossil fuels with alternative fuels in
cement plant’s operating costs. This means that the cement manufacturing process has profound
“There is currently no construction material
efficiency gains can lead to significant cost savings and implications for the environment. Not only does it result in
an impressive environmental performance. We’ve used more cost effective operations and much lower that is as functional and versatile as
our deep understanding of cement operations to develop emissions, it also means co-processing waste from other concrete that can be used at the same scale
a control system that allows our customers to reduce industries. This means that less waste is sent to landfills, globally. To provide future generations with
their emissions, cut energy costs and lift profits while also solving a wider host of societal challenges. quality housing and infrastructure as well as
protecting and extending the life of their equipment. access to clean air, we in the industry have
A cement plant in New Zealand has installed FLSmidth’s
a responsibility to make production more
Our ECS/ProcessExpert control system constantly HOTDISC® pyro-processing system, and once the reactor
monitors conditions inside the kiln, crusher or mill and is fully operational, the kiln will consume around 3.1 sustainable. Our research continues, and
makes small but frequent adjustments to ensure million shredded tyres a year. Not only does this replace we will keep on providing our customers
operations are working as efficiently as possible. the need for 15,000 tonnes of coal; according to local with options that push the standards for
media it also reduces CO2 emissions from the plant by sustainable productivity.”
The benefits are typically 3-5% higher production, up to 13,000 tonnes per year. That is the equivalent to the
5% lower fuel or energy consumption, and at least 30% exhaust emissions of 6,000 cars.
lower standard deviation in terms of quality. A medium-
size vertical cement mill is a steel structure that can be 17 The HOTDISC® combustion device is safe, simple and
metres high, producing 170 tonnes per hour and running effective. It has proven to be the best technology
328 days per year. The amount of electricity consumed is available for substituting calciner fuel with coarse
staggering. Any improvement, no matter how small, can alternative fuels and for feeding waste materials into the
have a drastic impact. kiln system. The HOTDISC® solution provides the
flexibility to burn all kinds of solid waste in sizes up to 1.2
This software is an example of how digitaliation drives metres in diameter, from sludge or grains to huge whole
sustainable productivity. truck tyres.
Especially in China, FLSmidth is experiencing a boom in

sales of this device. From two installations annually, we
now forecast significantly more in 2019. This will reduce
the industry’s carbon footprint, lower energy costs for
the plant owner, and help the local community dispose
of its waste.
Jan Kiaersgaard
Group Executive Vice President, Cement Industry

FINANCING ACCELERATES SUSTAINABILITY
FINANCING ACCELERATES SUSTAINABILITY
Factors like environmental, social and facilities, or even when supplying equipment anywhere in “At the first site visit, we encountered about 50
the world, our financial partners expect international sustainability issues that needed to be solved. They
corporate governance are becoming
standards to be met. They also monitor and review ranged from safety gaps with personal protection
increasingly important for securing customer compliance with those standards. This helps us equipment to not having an adequate management
financing for large value contracts in pave the way for sustainable productivity, even though system in place. After we established the right
cement and mining. FLSmidth has strong we only deliver the equipment,” says Tine Bremholm communication channels we felt that they were on the
competences and a long-standing Kokfelt, Department Manager of Global Project & Export path to improve their work culture, behaviour and
Finance at FLSmidth. performance, so all red flags in order for us to release the
cooperation with financial institutions that
funds have been removed,” says Jens Hestbech.
help customers finance their projects, while A financial partner on several projects is Denmark’s
in turn ensuring that the projects make a Export Credit Agency (EKF). At EKF, it is a requirement
positive contribution to sustainability. that all transactions comply not only with all applicable DELIVERING A HIGH VALUE ORDER
national legislation, but also with world-class practises In 2016 we signed a contract with Akij cement in
Issues such as safety, environmental management and such as the Equator principles, the International Finance Bangladesh to supply a complete cement mill
human rights are becoming increasingly important for the Corporation’s performance standards for environmental system, bringing up the capacity to 3 million tons
likelihood of securing financing to build a cement plant or and social sustainability and numerous European per year. This included an OK 39-4 cement mill,
a mine. directives on health, safety and environment. electrical package, storages and cement transport.
This mill uses 5 to 10% less power than other
It has been almost a century since FLSmidth first “We provide attractive financial solutions for many vertical roller mills and 30 to 50% less than a
cooperated with a financial institution to help a customer FLSmidth customers, but we also demand certain conventional ball mill.
secure funding for their project, and countless projects standards. By acting sustainably, these companies not
have materialised due to these well-established only get access to money, it also helps them achieve The project was financed by EKF and the customer
partnerships. In the early days, the risk assessments international standards. This again opens new market followed international sustainability standards,
conducted by the financial institutions only focused on opportunities for them – which secures the investment. In which they did willingly. This included effective
the business case and the customer’s ability to pay back this way, financing has a positive impact on sustainability health and environment management systems, and
the loan. Today, it is a different ball game. and vice versa,” explains Jens Hestbech, Chief a focus on human and labour rights. This project
Underwriter at EKF. will significantly help Bangladesh’s rapid socio-
“In order to secure their investment, our customers need economic development by allowing Akij to fuel the
to look at environmental management, the social impact In 2018, EKF and FLSmidth partnered on a project in a supply of cement for infrastructure development.
on the local community and other sustainable actions . developing country where EKF required a permanent
When we build cement plants or mineral processing change in behaviour on site to release the funds.

STAKEHOLDER ENGAGEMENT
We seek to identify and understand all major EcoTails project. For more information, please see the
sustainability impacts, opportunities and risks throughout section on “Challenges in mining”.
our value chain. This relies on engagement with all INVESTORS
relevant stakeholders, through transparency, open Some of the most important issues that we discuss with In 2018, FLSMIDTH & CO. A/S received a rating of
communication channels and meaningful dialogue. As a our customers are safety, people development, water AA (on a scale of AAA-CCC) in the MSCI ESG
company whose values are competence, cooperation usage, energy efficiency and emissions, amongst others. Ratings assessment. Our behaviour and
and responsibility, this is of great importance to us. We Our ability to effectively solve their challenges is our performance are strong on issues such as safety
need to get insight into their advice, inputs, and unique selling point so they are constantly addressed. and corruption, while having a very robust
expectations so that we can continuously improve. When we are involved in their sustainable procurement governance structure in place. This score means
programme, we complete their requirements in full on that investors can trust that we are a responsible
In 2017, we mapped the general stakeholder groups for time, meeting their qualifications. company and that we have the policies and
our latest materiality assessment. Throughout the course processes in place to assess and evaluate
of the assessment, we spoke with dozens of the top Financial institutions: performance across the company. With strong
sustainability influencers in the company. We asked them We work alongside customers on a continuous basis to management attention and our internal reporting
which external stakeholders they spoke to, with what secure financing for projects around the world. Numerous in place, we are aware of what we are doing well,
frequency and regarding which specific topics. At the end financial institutions require customers to adopt world and where we have room for improvement.
we had a full picture of how we interact with the outside class standards related to the environment, society and
world, and here is a view of some of the most important the economy. We work hand-in-hand with both We also discussed the outcome of our
ones for 2018: customers and financial institutions to ensure that assessment related to the Task Force on Climate
projects adhere to the standards required. Related Financial Disclosures framework with
Customers investors. Please review the section on
Customer satisfaction is what makes our business run Please review the section on “Financing accelerates “Environment” to learn more.
and it’s only by delivering on our promises that we can sustainability” to learn more.
succeed. Close collaboration with our front line is
essential, as well as understanding market trends. This is
paramount for understanding the complexity required to
solve the greatest sustainability challenges in the
industry. We fully understand that sustainability issues
cannot be solved alone and that’s where partnerships
even the odds of success. This year we continued our
cooperation with customers such as Goldcorp on our

Outsourcing partners Universities As the mining industry has compliance risks that span its
Our ability to deliver premium projects, products and Collaboration and interaction with academia is important value chain, we are a founding member of the
services depends very much on our suppliers, who for ensuring a consistent knowledge flow and innovation Compliance in Mining Network. This is a cooperation
provide more than 80% of our manufacturing. If we are to in the company. Having close collaboration with between mining companies, mining equipment producers
deliver products, projects and services to our customers, universities, specifically engineering programs and and EPC providers in the mining industry, working to
this must be done in a partnership with people who we projects, as well as doctoral studies, helps attract top improve compliance standards in the global industry.
can rely on to achieve our goals. By having close contact talent, acquire new knowledge and develop innovative
with our suppliers, in all categories, our supplier ideas within the company. It is a crucial investment in the Please review the section “Compliance” to learn more.
relationship management is a real driver for results. future of the business.
These are strong partnerships, we very much realise the International organisations
importance of having common long-term focus while This year, we partnered with another Danish company, Our company has a vast amount of world-class expertise
navigating mutually beneficial agreements. the ROCKWOOL Group, and the Technical University of in mining and cement production. Within our industries,
Denmark to develop process technologies for stakeholders look to us for state-of-the-art technology
To be able to deliver the best customer service in the sustainable building material production that aims to and services. That’s why they can rely on us to help set
industry our solutions need to have optimal lead times, reduce CO2 and other emissions. The project received a the standards in our industries when it comes to
delivery in full on time while meeting our strict safety DKK20m grant from the Innovation Fund Denmark. We sustainability. It’s important for us that we use this
culture. We therefore have contracted labour on many of will be looking at innovative ways to optimise high- knowledge to shape how all stakeholders are considered
our projects, especially at production sites and for temperature processes throughout the entire production and what the total effect of production is on the
maintenance contracts. Many of our customers have chain. environment, society and economy.
stringent requirements for labour rights and safety for
anyone who enters their sites. We manage a flexible Civil society This year, we contributed to the hearing process to
workforce while maintaining some of the best standards This stakeholder group consists of communities, mass develop the International Finance Corporations’
in the industry. This means that our customers can rely on communication, non-governmental organisations and environmental guidelines for cement and lime
us to manage peak workloads, for example kiln charities, as well as trade unions and staff associations. manufacturing. Most of our customers require that we
shutdowns, without compromising how we treat our follow the guidelines when asking us for technical
contractors. One of our main interactions this year on sustainability solutions/supplies to their plants/projects, even though
was through the Confederation of Danish Industry they do not seek international financing. This makes them
Please review the section “Supply chain” to gain insight programme – from philanthropy to business. The a very important industry standard.
into how these partners are engaged on sustainability purpose of this partnership is to look at the future of the
matters. company and to develop a long-term plan on how to
solve global challenges. The programme will run until the
end of 2020 and is run by the Group Sustainability
programme.

In mining, tailings dam failures need to be completely FLSmidth Donation Fund annually donates up to DKK
eliminated, and we are working on solutions that will 400,000 to worthy causes including humanitarian work,
support this agenda. To this end, we participated in a environmental projects and education and training.
United Nations Environment Program workshop on
developing a roadmap for their Rapid Response FLSmidth contributes to PanIIT Alumni Reach for India
Assessment Report – Mine Tailings Storage: Safety is No Foundation, Rural Skill Gurukuls for the underprivileged.
Accident. Along with universities, civil society The objective of this non-governmental organisation is to
organisations and mining companies, we are collectively implement and scale self-sustainable models that
working towards developing and implementing best enhance incomes of the under-privileged. Through its
practices in overcoming the challenge of zero unique model, the organisation provides training for skills
catastrophic incidents. development of school drop-outs from various rural
areas, including the Naxal (radical far-left Maoists)
Public Sector affected districts of India, resulting in social uplift through
Transparency is a driver for everything we do, including livelihood enhancement. It is also proposed to utilise their
tax, employment and business activities. FLSmidth values trainees at our project/manufacturing sites. Former Army
open and collaborative dialogue with tax authorities in officers head the training centres and more than 80% of
each of its countries of operation to ensure compliance candidates have been sourced from Naxal-affected
to national laws. areas.
Community development As part of the Broad-Based Black Economic

For us, it’s essential that added value be provided to the Empowerment (BBEEE), our South Africa offices
local community where operations are based. We contributed to projects including day cares, driver’s
accomplish this by listening to the local expectations on education and welding courses for unemployed youth.
matters such as local employment and paying taxes.
Dialogues are a main driver in overcoming potential
resistance and they create a trustworthy relationship with
local communities.

GOVERNING SUSTAINABILITY
GOVERNING SUSTAINABILITY
To continually improve our sustainability impacts over

time, we need to understand what the impacts, risks and The Sustainability Board agreed at the end of
opportunities are, where they occur, and which 2018 to restructure, such that the Group Executive
stakeholders are affected. Management will now steer the programme. This
is to introduce a more commercial aspect of
In 2017, we conducted an extensive internal materiality sustainability in our value chain and we expect it
assessment to map the social and environmental topics to significantly drive the sustainability enhancing
that matter the most throughout the entire value chain. solutions we offer our customers.
This allows us to grasp likelihoods and impacts and risks
on our business, as well as improving our own operations
and how we can support customers and suppliers to be
more sustainable. This was further supported through a sustainability strategy, goals and incentive structures to
desk review of customers’, peers’ and suppliers’ be aligned between the functions. Coordination between
sustainability disclosures, with input from some investors. them is clearer and we can identify where they
The materiality assessment and desk review showed that complement each other and where there may be trade-
these are the main topics that matter in our value chain: offs. It also means that we can communicate our policies
very effectively to relevant business partners.
■ Health and safety
■ Compliance Driving results in the different topics requires a strong
■ Environment governance framework to support decision making at the
■ Supply chain highest levels. By setting the tone from the top, the Board
■ Human rights of Directors establishes the mandate for the sustainability
■ People, including gender and diversity programme and receives quarterly updates. They also
approve the Sustainability Report, ensuring that it is
Each of these is assigned to a relevant corporate function aligned with the long-term strategy of the company.
that is responsible for continual improvement, with a focal
point for policy implementation. To makes sure that there On an execution level, the Sustainability Board convenes
are no conflicts between the functions, we updated our on a quarterly basis to review progress and to steer the
policy framework in 2018. Now, each function has a clear programme. They approve the indicators that each topic
commitment, with an umbrella sustainability policy that will be measured against, the short and long-term targets
covers them all. This allows for the corporate for each, as well as ensuring the necessary resources.

SAFETY
SAFETY
POLICY We have safety in mind and we use our influence to aligned and supports our strategy, business model and
We have a policy that commits us to achieve zero harm to ensure that injuries are avoided throughout the value operational needs.
our people. It is part of our culture, and we see it as a chain. This means that it is included in our sustainable
precondition for providing sustainable productivity supply chain program for our suppliers. When designing Lagging indicators, such as Lost Time Injury Frequency
enhancement. We believe that injuries and occupational our equipment, our employees also take safety into Rate (LTIFR) and Total Recordable Injury Frequency Rates
illnesses can be prevented and that travel risks can be consideration so that our customers can avoid injuries. (TRIFR), have been in use for decades and serve as a
managed. This includes anyone working under our standard metric to measure safety performance. It has
instruction and supervision, where sub-contractors at our In 2018 a new safety culture program was launched become evident that looking at historic incidents,
sites are considered employees and they are selected during our annual Safety Week. The aim of the culture accidents and near misses are not the best enablers of
with safety as part of the criteria. We ensure that program is to build a much stronger commitment at all future improvements. Therefore, our new Safety strategy
everyone under our control lives our values. They must organisational levels. This years’ theme was “A personal will be built on leading indicators.
have the competencies to work safely and to cooperate commitment – A united responsibility”. This was kicked-
and share best practices. They are responsible for off using a series of videos from our top management RESULTS
promoting safety at work, to follow all applicable laws, group about what drives a strong Safety culture, the The results for LTIFR, TRIFR , calculated per million
and to periodically review and improve management importance of taking personal responsibility. Employees working hours, cover our employees, and contractors
systems. globally were engaged in physical activities, trainings and under our control operating on our sites. There were no
a quiz. At all levels they wrote down personal Safety fatalities.
POLICY IN ACTION related commitments for the year ahead and tied them to
By strengthening cooperation with the Region Heads of a “tree”. More than 10.000 personal commitments to This year we surveyed all of our employees on safety to
Health, Safety and Environment, we create a strong team health, safety and environment were noted during the understand how the safety culture is now and to identify
committed to achieve zero harm and focusing on building Safety Week. what changes are required to improve it. We had more
the right culture mindset. This also means that every than 7,500 responses, meaning a 66% response rate for
employee has a contact point to raise issues, to ask for We also extended the programme at a customer site all employees. We set the point where we can agree that
advice or to access health and safety services. They must where we performed joint site inspections, awareness- the culture is “excellent” when we reach 90%
feel safe in speaking their mind, to point out potential raising of 200 of their employees, safety-related performance in all areas. We set the current baseline so
hazardous and to stop work without fear of reprisals. Our examples which 35 leaders reviewed and discussed. that any score above 60% was given an “acceptable”
injury, fatality and near-miss safety reporting system is rating, against which we will compare in the future.
used to systemically identify hazards and to address Our Health, Safety and Environmental strategy and
them, continually improving over time. organisation has been reviewed. As a result, a more
comprehensive approach was developed to ensure it is

SAFETY
The overall evaluation of our 2018 Safety Culture survey FUTURE EXPECTATIONS
baseline indicates that: To ensure continuous improvements in the LTIFR target
set each year for the Group, per Industry and per Region, RISKS
■ Our management always acts and communicates proactive, leading indicators will be set for: We embed a risk aware culture within the
visible leadership: Acceptable organisation and outline the approach for
■ Our employees feel that they are engaged in Safety: ■ Incident and Injury reduction programs managing risks within our business. This means
Not acceptable ■ Closing rate on mitigating actions visible leadership with adequate resources. Risk
■ Our employees take individual responsibility for their ■ Improvement in Safety Culture Survey management systems must be in place to identify
safety: Acceptable ■ Increase in standardised procedures hazards, using the hierarchy of controls. Action
■ Our employees feel they have open dialogues about ■ Implementation of a new Health, Safety and plans are prioritized and risk registers are
safety: Not acceptable Environmental technology platform maintained. Control measures and action plans are
reviewed at predetermined intervals, after the
ASSESSMENT OF RESULTS occurrence of an incident and before the
Overall performance as measured by the LTIFR reached implementation of any workplace change. A hazard
the target, but did not surpass it. More safety awareness reporting system must be implemented involving
and competence in the working situations could have employees, creating a visible system for correcting
prevented several injuries. Performance measured on the unsafe conditions. Group safety standards must be
TRIFR including contractors showed a small decrease integrated as part of the risk management process
which indicates our total number of incidents has and controls
dropped, bringing it below the target. However, when
excluding contractors the number is higher, showing that Top safety risks include falling from heights, traffic
attention needs to be put on our internal employees’ accidents and slips/trips/falls.
behaviour and performance.
We realise that failures of proper safety protocols
For the safety culture survey, we have seen that there are can occur throughout the value chain and an act or
two areas where our performance is “not acceptable”, an omission on our part can result in the risk of
and we will be working towards achieving an “excellent” complicity. To that extent, the following risks to the
score in all areas. company have been identified through our
materiality assessment:
Impacts
Reputation ● High
2017 2018 2018 Target 2019 target Bottom line ● Low

Lost Time Injury Frequency Rate (including contractors) 1.8 1.3 ≤1.3 ≤1.2
Lost Time Injury Frequency Rate (excluding contractors) 1.3 Morale ● Medium
Total Recorded Injury Frequency Rate (including contractors) 3.2 3.0 ≤3.2 ≤2.7
Share price ● Low
Total Recorded Injury Frequency Rate (excluding contractors) 3.5
Total Training hours 258,036 286,736

PEOPLE
PEOPLE
POLICY different personality types and working styles and feel this monitor our people development going forward. As part of
Our aim to be an employer of choice continues to drive our is an important message in our Inclusion efforts. this, we are now monitoring the share of women applying
people strategy and agenda. Attracting, retaining, and for positions and their progression to the hiring decision.
developing our workforce remains our priority. We seek to To help us achieve our short and long-term targets for This year, our Talent Programme – Flying more Flags
accomplish this by ensuring we have a healthy and gender, our focus will be to achieve a specific number of
engaging work environment that encompasses diverse hires when positions become available.
comprehensive total rewards along with development and
growth opportunities. We also remain committed to In addition to establishing a clear baseline of data, we also
improving diversity and inclusion across our Group which started several Group and Region initiatives. For example, RISKS
has led us to set new targets in this area. Globally we are engaged in Women in Mining and in India As the industries we operate in begin to recover, we
we have focused on attracting newly graduated women. see the competition for talent is increasing. In
POLICY IN ACTION addition, in some parts of the business we see our
In 2018 we focused on understanding and gathering a We have launched our Career Framework globally, expertise is limited or nearing retirement age. Lastly,
baseline of our workforce, conducting research on including a mapping of all positions captured in our new talented individuals coming out of universities who
Diversity to learn more about what works and what HRIS. In combination with improved HR data reporting and are interested in a career within Cement and Mining
doesn’t, evaluating the strength of our pipeline, both analytics functionalities in the new HRIS, this will help our may be low. Therefore, we must focus on our
externally and internally, conducting research on the leaders to make informed, high quality decisions on employer brand and tell a compelling story to attract
gender balance at universities globally, and within the compensation, succession planning and other key HR the talent we need to be competitive.
different degrees of study and finally, conducting research processes which ultimately support the attraction,
on gender diversity among professional workers and development and retention of talent. We have a high digitalization agenda which is also a
comparing to our numbers in FLSmidth. highly competitive market for talent, especially
In the 2018 annual salary review process, all countries diverse talent. To mitigate this we will upgrade the
This has lead us to set new targets for 2019 and long-term were asked to review the salary increases and ensure competences within our own workforce through
targets for 2023. We also expanded our focus on Diversity budgets were distributed in a fair and equitable manner. training and development.
to include Nationality and Age. Teams of diverse cultures Analysis occurred regarding equal pay as the first step in
and nationalities has shown to be a driver of higher understanding if and where pay gaps occur. The Special We know that cognitive bias impacts the way we
business performance. Age is an important factor for us as Grant nomination process in our Long Term Incentive think and act. Working on our culture and
one of our company values is Competence. We believe the Programme has an increased focus on diversity implementing education, systems or processes to
Competence can be demonstrated at any age. We also parameters to support the achievement of our diversity reduce natural cognitive bias will help us mitigate the
see Diversity in a broader perspective that includes targets. In November we launched a new Human natural biases which exist.
Resources Information System, allowing us to better

PEOPLE
consisted of 20.7% women, 10 nationalities, and FUTURE EXPECTATIONS

participants ranging in age from 27 to 41. With our new diversity targets and the initiatives planned
for next year, we expect our performance in this area to
ASSESSMENT OF RESULTS improve. Next year will include an external and internal
In our internal assessment of our diversity numbers, we focus. We will begin efforts to strengthen our employer
decided to increase the focus on white collar women, brand and internally we will have dialogues about why
which is currently 18%. We have an ambition to replace Diversity and Inclusion is good for business, review our
30% of our positions with women to reach our target of current work practices and standards, among many other
23% in 2023. And with a focus to replace 20% of our initiatives. We expect to be moving in the right way and
manager positions with women, we will reach 13% in still aware that not all numbers are easy to move in the
2023. While this target may seem low, turnover in short run – this is about long term focus and gradual
management positions is much lower than the rest of the improvements.
organisation.
We also know that having role models is an important

factor to improve diversity. In our top layer of
management, those reporting within the top two layers,
we have set a target to move from our current population
of 21,7% women to 25% in 2023. This is a small group of
employees with even less turnover yet important to
strengthen our diversity efforts.
And with special focus in these three groups of

employees, we expect our overall gender ratio of women
to men to increase to 18% in 2023.
2017 2018 2018 Target 2019 target 2023 target

% Women total 13.5% 14.0% 14.5% 14.7% 18%
% Women white collar workers 18.5% 19% 23%
% Women blue collar workers 4.4% 4.7% 5.7%
% Women managers 10.5% 10.4% 11.5% 11.0% 13.0%
Employees having undergone corporate development programs 541 1,031 353 806
% employees receiving performance and career development reviews 90.0% 90.3% 92.0% 90.0%

COMPLIANCE
COMPLIANCE
POLICY compliance-related risks we face as a company on a

We’ve has implemented various policies to ensure regular basis, adjusting focus and resources accordingly.
RISKS
compliance with key international anti-corruption
Working in the cement and mining industries
legislation and sanctions. The Code of Business Conduct In 2018, we conducted two main risk exercises– an
implies operating in countries with compliance-
is the primary policy in this area and each employee has assessment of human rights risks and an assessment
related risks. In particular, avoiding fraud, bribery,
received a guidebook explaining it in simplified yet focusing on the giving and receiving of gifts. This is in
corruption, violation of trade sanctions, and
accurate language. A central message is that we are not addition to the broader compliance risk assessment
conflict of interests is high on the agenda. Thus,
interested in business based on improper payments, or surveys and qualitative interviews that were conducted in
there is constant monitoring of the business and
problems solved by illegal means. Furthermore, we ask previous years.
implementing mitigating actions to reduce such
that our employees never compromise their integrity for
risks.
the sake of business. The Group Compliance department at corporate level is
responsible for setting directions and providing the
We realise that failures of compliance can occur
POLICY IN ACTION business with appropriate tools. Our 13 lawyers who work
throughout the value chain and that an act or an
The Group Compliance department is responsible for as Regional Compliance Representatives implement
omission on our part can result in the risk of
four core areas of operation: anti-corruption, export actions across the Group. We have also trained a group
complicity. To that extent, the following risks to
control, human rights and competition law. Dedicated of Finance and HR managers to be responsible for
the company have been identified through the
policies have been established for each of these topics. investigating relevant whistle-blower cases in certain
materiality assessment:
Most recently, we issued a separate Gift Policy, which regions of the world.
details the rules for giving and receiving gifts, and
introduces monetary limits as well as approval Training continues to be one of the top priorities, with in- Impacts
procedures. person training preferred. Approximately 92% of all
Reputation ● High
white-collar employees have now been trained in the
Our key compliance-related activities are organised Code of Business Conduct in-person, and training of key Bottom line ● Medium
roughly according to the six elements of the UK Bribery employees in export control procedures is on-going. The
Act’s Guidance document: risk assessment, policies and training of new employees is in focus. In 2019, we are Morale ● High
organisation (proportionate procedures), top-level looking to introduce a new e-learning course so that we
Share price ● High
commitment, due diligence, communication and training, keep awareness about compliance high with existing
monitoring and review. employees.
Our approach to compliance is very much risk-based. Another major focus area is the third party due diligence
This means that we conduct assessments of the processes. All business partners have been screened for

COMPLIANCE
trade sanctions for many years, and since 2015 we have we have seen a relatively high number of reports ASSESSMENT OF RESULTS
conducted in-depth due diligence screenings of an submitted, and that more people chose to use the formal We’ve established a solid compliance set-up in terms of
increasing number of third parties. Close to 100% of sales hotline rather than through email or similar channels. The policy and organisation and have a highly committed
agents have gone through a rigorous due diligence whistle-blower policy protects reporters against Executive Management team and Board of Directors.
screening and approval procedure. retaliation. The investigation is guided by an internal
Investigation Manual prepared by colleagues properly Some outstanding achievements have been
This year, we focused our efforts on other types of third trained in conducting internal investigation. accomplished in terms of conducting in-person training of
parties, in particular customers and suppliers. We are more than 90% of our employees and screening more
currently introducing a new third party management and The FLSmidth Board of Directors and Executive than 500 third parties. In addition, the internal set-up for
due diligence screening software tool based on artificial Management are highly engaged in the compliance dealing with internal investigations and whistle-blower
intelligence, which should increase the capacity even programme. In 2017, their direct involvement was hotline allegations has been strengthened, broadening
further. In the field of sanctions, we have also put in place expanded, as well as the level of reporting. Group the scope of employees trained in conducting internal
a new screening tool, which allows for semi-automatic Compliance reports on a regular basis to the Audit investigations and raising the general awareness of
classification of products and end users. We have Committee, the Board of Directors, the Group CEO and procedures in this regard.
extended the scope of our screenings, to include Group Executive Management. The issue is also
research on e.g. human rights issues and Environment addressed in the quarterly sustainability board meetings. FUTURE EXPECTATIONS
Impact Assessments. One key element in 2019 will be digitalisation and the
RESULTS introduction of increasingly automated processes in our
Our whistle-blower hotline, in place since 2014, is a tool The organisation's anti-corruption policies and compliance work. For example, we will be introducing
for employees to report concerns in a confidential procedures have been communicated to 100% of new due diligence software, which is based on an
manner. The hotline is being regularly re-launched or employees and governance body members. All of artificial intelligence solution, allowing us to produce high
promoted in order to ensure a steady flow of reports. This executive management and governance board members quality due diligence reports quicker and more efficiently.
includes communication and promotional campaigns, as has received in-person training on anti-corruption. Data One reason for this move is that we are seeing a need to
well as an expansion of the report to function as a coverage is 100%. Descimination cases were handled at spend more time and resources on formulating and
grievance mechanism for human rights this year. So far, local level with the Human Resource formalising mitigation actions based on findings from due
diligence reports.
In addition, we will be introducing new e-learning courses

2017 2018 2018 Target 2019 target
in 2019, in particular because we are seeing a need to
Total number of whistle-blower reports submitted 51 65
ensure continued high awareness levels also amongst
…of which admissible 48 63
the employees who have already completed formal
Number of operations assessed for risks related to corruption. 30 32 34
training sessions in the Code of Business Conduct.
Total number and percentage of in-person training for white-collar 8,173 / 88.0% 8,514 / 92.0% 8,823 / 95.0% 9,102/98.0%
employees that have received training on anti-corruption
…of which managers or senior managers 1,361 1,375 1,551 1,600 Finally, we will continue our commitment to the
Number of legal actions pending or completed during the 1 1 Compliance in Mining Network, which is a cooperation
reporting period regarding anti-competitive behaviour and between mining companies, mining equipment producers
violations of anti-trust and monopoly legislation in which the and EPC providers in the mining industry, working to
organisation has been identified as a participant.
improve compliance standards in the global industry.
Numbers of in-depth due diligence screenings conducted 398 535 430 750
Incidents of discrimination and corrective actions taken 0 2

ENVIRONMENT
ENVIRONMENT
POLICY electricity, district heating, steam and cooling, water and RESULTS
Our environmental commitment remains strong and we ozone depleting substances. Biogenic CO2 emissions We calculate CO2 emissions from activities within our
have made no changes to our HSE policy. We are still are not relevant in our business operations. All locations financial control. Data coverage is 98% with respect to
striving to minimise the environmental impact of our within our financial control are part of our reporting cost of goods sold, which is an indication of on-site
activities and to provide sustainable productivity structure for environmental performance. activity, but not intensity, which is measured by revenue.
enhancement to our customers. Our focus is to mitigate
climate change, prevent pollution and utilise resources in We also recognise that our impact extends beyond the Scope 1: Emissions from primary fuels, refrigerants &
a sustainable manner. boundaries of our direct control. This is why we have other gases. Data are from invoices or meter readings.
stepped up our focus on our impact from a life-cycle Emission factors are derived from the Department for
POLICY IN ACTION perspective. We have begun working on accounting for Environment, Food & Rural Affairs, UK.
At end of 2017, the Group defined a target of reducing its CO2 equivalents (CO2e) from global downstream
CO2 emissions by 10% by 2023 using 2017 as the transportation and global procurement of steel in the Scope 2: Emissions from purchased electricity, heat and
baseline. Likewise, for our use of fresh water the target quarterly measurements of our environmental impact. steam. Data are from invoices or meter readings.
was set to reduce it by 10% by 2023 with 2017 as the Emission factors are derived from the International
baseline. This baseline was chosen as 2017 marked the Internal stakeholder engagement is essential for Energy Agency and use the market based methodology.
year when a more comprehensive reporting system was addressing behavioral change that leads to better
put in place. These reduction targets were set because environmental performance. This year, we established Scope 3: For 2018, this included business air travel with
our main impacts on the environment are to climate two-way dialogue/reflection among employees, and estimated 70% coverage.
change and water use. Data on energy used are triggering a strong focus and awareness. All employees
consolidated in the CO2 figures when reporting. around the globe were invited to special dialogue
workshops during our HSEQ week, at which people ASSESSMENT OF RESULTS
In 2018, we decided to normalise the reduction targets reflected on how they could have a proactive impact on The reductions we’ve seen in our water and carbon
according to revenue. This was to ensure that the efforts their local environment and make suggestions for footprints are in line with the targets for 2018 and the
and investments made to reduce our environmental improvement at FLSmidth. overall reduction target for 2023. The initiatives in the
impact will be reflected even if business activity regions have been diverse local actions developed with a
increases. As part of the sustainable procurement program, we focus on their most significant environmental impacts.
have also established minimum standards related to the Examples of initiatives that have supported the group
To improve transparency and quality of data, we have environment. Please see the supply chain section to environmental objectives are training in eco-driving,
implemented accounting policies for the environmental learn more. moving to more energy efficient fleets, energy audits,
KPIs. Accounting policies have been implemented for LED lightning, awareness communication, facility
fuels, refrigerants and other greenhouse gasses, optimizations and certified green electricity. For water,

ENVIRONMENT
we completed initiatives to control leakages, installation

of sensors, awareness communication, and rainwater RISKS
tanks for toilets and truck washing.
A risk assessment we conducted in relation to Task Regarding the risk associated with large-scale acute
FUTURE EXPECTATIONS Force on Climate-related Financial Disclosures environmental incidents at a customer site, we run the
In 2019, we will focus on further developing our scope 3 showed that our company has far more opportunities risk of being affected through association, even
measurements so we can strengthen how we improve than it does risk. We are an asset-light company, and though it is not our operation and whether or not we
our environmental impacts in a Life Cycle Perspective. so are highly resilient to extreme weather events or a were actively involved. To that extent, and
We expect to increase the alignment of environmental rise in sea levels. Our regional procurement set-up considering the precautionary principle, we have
procedures as an outcome of the reorganisation means that we are agile with a low risk of supply identified the following risks to the company through
implemented in 2018. We will also work towards chain disruption due to climate change. Furthermore, the materiality assessment:
reporting on more environmental KPIs as our program the categories we source from have a low risk of
develops further. prices changing due to climate change. In terms of Impacts
future revenue, we project that our industries will
have a greater need for energy-efficient equipment, Reputation ● High
which we supply. Therefore, if stricter carbon
regulations or carbon taxation were to be introduced, Bottom line ● Medium
it would increase our customers’ demand for our Morale ● High
services.
Share price ● High
2017 2018 2018 Target 2023 Target

Scope 1 (in tonnes) 27,236 29,875 26,691 24,512
Scope 2 (in tonnes) 37,031 30,556 36,290 33,328
Scope 3 (in tonnes) 33,268 33,505
Carbon intensity (Scope 1 & 2/Revenue) 3,570 3,223
Fresh water use (m3) 241,651 227,272 236,818 217,486

SUPPLY CHAIN
SUPPLY CHAIN
POLICY We launched a revised supplier sustainability screening

In order to build strong business ties and long-standing programme in 2018. Anyone in procurement or the
relationships, FLSmidth expects its suppliers to have high supply chain department who visits a supplier must RISKS
standards of responsible business conduct. Crucial to this perform a mandatory on-site audit. On average, our Supply chain sustainability risks include losing a
is the FLSmidth Supplier Code of Conduct, which clarifies people visit more than 1,000 different supplier sites stable market position due to effects on our
what we expect of our suppliers. Group Procurement is each year. customers, loss of reputation, damaged public
responsible for the policy, which has been in place since image, legal action and compromising
2012, updated in 2018. This supplier sustainability programme aims to uncover compliance, business ethics and values. They
potential risk in the supply chain and support the especially include risks that would result in harm
The main points of the FLSmidth Supplier Code of development of our suppliers within the area of to human health, increased environmental impact
Conduct oblige our suppliers to: sustainability. Furthermore, the programme has proven to and violation of human or labour rights.. These
increase internal awareness on sustainability and is risks are mitigated by having all on-site audit
■ Be in legal compliance with all applicable laws in all driving a behavioral change in our procurement and information centralised in Group Strategic
jurisdictions in which they operate supply chain organisation. Procurement, who can act upon areas requiring
■ Provide a safe and healthy working environment for all special attention.
employees Using an online feedback tool, our staff screens suppliers
■ Comply with basic human rights with 23 yes/no questions covering: Risks related to supply chain complicity are taken
■ Meet all applicable environmental laws, industry seriously, with specific material sustainability risks
standards and norms ■ Health & Safety System & Policies addressed in separate chapters of this report.
■ Work-related Accidents
POLICY IN ACTION ■ PPE & Machine Guards
All suppliers, defined as organisations that we source ■ Electrical Hazards
from, are now obliged to sign the FLSmidth Supplier The screening feedback is transferred to a database and
■ General Emergency Preparedness
Code of Conduct, which is aligned with the four main suppliers are given an overall score based on response
■ Ethical Equality
focus areas of the UN Global Compact. Furthermore, and criticality. If a potential non-compliance is revealed
■ Minimum Age
because it follows the Cement Sustainability Initiative’s during a screening, immediate action is taken with the
■ Environmental System & Policies
“Sustainable Supply Chain Principles for the Cement supplier. In severe cases this may cause an immediate
■ Environmental Hazards & Counter Measures
Sector”, we can deliver tier 2 visibility into the supply stop to all activities with the supplier. In most cases, the
chain of our customers. In the case of a supplier not supplier will be asked to provide a mitigation plan and
agreeing to the Supplier Code of Conduct, we will refuse initiate actions within one week.
to cooperate with this Supplier.

SUPPLY CHAIN
A number of our suppliers have been identified as high- Areas where FLSmidth has seen significant improvement FUTURE EXPECTATIONS
risk suppliers. This is based on operational category, area during 2018: We intend to continue to develop our Supplier
and historic performance. These suppliers undergo a Sustainable Programme over the coming years. In 2019,
systematic screening process ensuring needed actions ■ Increased coverage and improved identification of we expect to see:
are taken. Thus we can support the development of cases of potential non-compliance
suppliers to the high standards expected by us. ■ Increased focus of high risk suppliers ■ Introduction of a dynamic screening setup.
■ Improved response to the FLSmidth Supplier Code of ■ Considering a supplier’s risk category and previous
ASSESSMENT OF RESULTS Conduct upon identification of a potential non- screening feedback.
The revised supplier sustainability screening programme compliance ■ Improved collaboration with strategic suppliers
was launched in Q3 2018 to improve screening quality ■ Increased awareness internally in the organisation ■ Supplier self-assessments for low risk suppliers
and streamline follow-up procedures.
Furthermore, efforts to consolidate suppliers and reduce
the supplier base will result in reduced risk and enable
FLSmidth to increase focus and resources on high-
priority suppliers.
2017 2018 2019 Target 2023 Target

Proportion of spending on local suppliers 57.0% 57.0%
% of new suppliers that were screened using environmental criteria** 1.0% (23/2,045) 0
Number of suppliers assessed for environmental impacts 113 195 300 300
Number of suppliers identified as having significant actual and potential negative environmental impacts 122 100 <10
Significant actual and potential negative environmental impacts identified in the supply chain 10 20 <5
% of suppliers identified as having significant actual and potential negative environmental impacts with 5.0% <2.0%
which improvements were agreed upon as a result of assessment
% of suppliers identified as having significant actual and potential negative environmental impacts with 0 0
which relationships were terminated as a result of assessment, and why
% of new suppliers that were screened using social criteria 1.0% (23/2,045) 0
Number of suppliers assessed for social impacts 113 195 300 300
Number of suppliers identified as having significant actual and potential negative social impacts. 174 150 <10
Significant actual and potential negative social impacts identified in the supply chain. 0 0
% of suppliers identified as having significant actual and potential negative social impacts with which 0 0
improvements were agreed upon as a result of assessment.
% of suppliers identified as having significant actual and potential negative social impacts with which 0 0
relationships were terminated as a result of assessment, and why.

HUMAN RIGHTS
HUMAN RIGHTS
POLICY Code of Conduct sets out our standards for corporate The process of conducting human rights due diligence
Respect for international human rights is enshrined in integrity, anti-corruption and transparency. has also established greater clarity around implementing
several FLSmidth policies including the Diversity and responsibility for human rights within the business, a
Inclusion policy, the Health, Safety and Environment POLICY IN ACTION priority for 2018. In 2019, we aim to develop and expand
policy, as well as the Human Resources policy. In 2018, The Group Compliance department is responsible for on this work through the investigation and remediation of
we also introduced a Human Rights Policy, reiterating this carrying out human rights due diligence on our own human rights grievances and complaints submitted
commitment. The policy lists the external frameworks to operations as well as those of our business partners. through our Human Rights Grievance Mechanism,
which we adhere and outlines our approach to human Human rights due diligence in FLSmidth is undertaken in launched December 2018.
rights grievance remediation. accordance with the UN Framework on Business and
Human Rights, and its Guiding Principles for ASSESSMENT OF RESULTS
As announced in this report in 2017, the Group Human implementation. In 2018, we reported publicly on In 2018, FLSmidth grew and consolidated its approach to
Rights Policy builds on previous commitments. We have progress in conformance with the Global Reporting human rights due diligence within the organisation.
sought to incorporate the views and concerns of rights- Initiative and the UK Modern Slavery Act.
holders through both internal and, to a lesser extent, A redrafted Supplier Code of Conduct containing more
external consultation. It respects all rights enshrined in Where adverse human rights violations are found, they explicit human rights commitments was implemented,
the United Nation’s Universal Declaration of Human are addressed according to their irremediability, severity, following extensive stakeholder consultation.
Rights, the International Covenant on Civil and Political scope and scale. In 2018, we carried out human rights
Rights, the International Covenant on Economic, Social impact assessment of country operations in India and A Human Rights Policy was adopted, also following
and Cultural Rights and the International Labour South Africa. This process enabled greater clarity as to consultation leading to increased awareness of our
Organisation’s Declaration on Fundamental Principles the business’ current and potential impacts on the human rights commitments internally within the business.
and Rights at Work enjoyment of human rights where we operate. It has also
allowed us to identify and work to address specific Human rights impact assessment of country operations
Our Supplier Code Conduct, also rewritten in 2018, violations in which our business and business partners allowed for targeted remediation of identified violations,
addresses human rights concerns as they relate to actors are involved. valuable data to inform internal trainings and review and
in the supply chain. The 2018 version of this policy places a platform for prevention of possible, future violations.
specific emphasis on remediation and requires suppliers Positive impacts on rights enjoyment were also identified
involved in forced labour, including the worst forms of and may on this basis be augmented in 2019.
child labour, to work in collaboration with our
Procurement and Compliance teams to offer redress to
victims of violations to our code. Finally, the Business

HUMAN RIGHTS
FUTURE EXPECTATIONS
In 2019, we expect to complete an additional four human RISKS
rights impact assessments of country operations. The
scope of these assessments will be determined based on We recognise that the industries to which we provide Failures of compliance can occur throughout the
a risk to rights-holders in compliance with the UN Guiding engineering, technology and services constitute high- value chain and an act or an omission on our part can
Principles for Business and Human Rights and our Human risk sectors. The mining and cement industries both result in the risk of complicity. To that extent, the
Rights Policy. have large environmental footprints and may cause following risks to the company have been identified
displacement where available mineral reserves are through the materiality assessment:
Another key focus of 2019 will be the implementation and situated near populated areas. We evaluate these
development of our Human Rights Complaints and and other social, environmental and governance Impacts
Grievance Mechanism through which we will seek to factors of the projects to which we supply primary
offer redress and remediation to any rights-holders equipment, services, spare parts and manpower. Reputation ● High
impacted by our business or that of our business This review process, whereby project ESG risks are
partners. We aim to use the Mechanism as a risk examined, was initiated in 2017 and further developed Bottom line ● Low
mitigation tool but also a source of continuous learning and augmented in 2018. Morale ● High
about the impacts of our operations and those of the
projects to which we supply products and services. Share price ● Medium
Finally, we aim to consolidate and expand our

sustainability outreach with our supplier network. This will
include the collection of more human rights data as well
as ensuring timely and rights-compliant follow-up action
on any non-conformities with our Supplier Code of
Conduct and Human Rights Policy.
2017 2018 2019 Target 2023 Target

Operations subject to human rights reviews or impact assessments 20/10 50/15 100/30
(off-site/on-site)
Employee training on human rights policies or procedures 100 300
On-line training of all managers 1,500 1,500

SUSTAINABLE CUSTOMER SOLUTIONS
SUSTAINABLE CUSTOMER SOLUTIONS
POLICY solutions that help the industry overcome such issues is

The environmental, social and economic impacts of our growing. We have therefore committed to driving our RISKS
operations do not end at the legal boundary of our business towards the opportunities of providing these Not addressing sustainability challenges of our
company. The greatest sustainability issues occur at solutions, utilising our vision and business model to take customers may affect our competitiveness.
customer sites when they use the equipment, which can full advantage of them. This means accelerating our
be for several decades in certain cases. During this time, efforts to deliver sustainable productivity, and to search
the amounts of energy and water consumed in for new ways to help the industries improve global
In 2019, our engineers in Research and Development,
production are some of the highest for any industry. sustainability.
alongside our Group Product Line Managers, will work to
Sustainability impacts also comprise the suppliers and
determine where the technical opportunities lie in the
contractors who deliver services to us – enabling us in This year the Sustainability Board gave the mandate for
long-term, which will then be communicated to the
turn to deliver productivity to our customers. customer sustainability to be integrated into the
organisation. Afterwards, we begin the process of
sustainability program. We call this sustainable customer
integrating this into the existing productivity agenda of
This year, we broadened the scope of our sustainability solutions. The purpose is to steer our company over the
the entire company.
programme to fully recognise the effect we have on the medium to long-term towards customer-centric solutions
value chain. As a starting point, we published a new that improve sustainability impacts and lower risks
FUTURE EXPECTATIONS
sustainability policy that emphasises our commitment to a throughout the value chain.
The governance structure of sustainability will be
life-cycle approach of our operations, from cradle to
adjusted in 2019 to support the commercialisation of
grave. Not only do we manage the impacts from our own To reap the benefits of this new addition to the
sustainability.
activities, we also take advantage of the business sustainability programme, we will in 2019 develop 2030
opportunities to reduce the impacts on the value chain goals for FLSmidth. We understand that the world needs ■ As the Board of Directors are responsible for overall
resulting from our customers’ use of our projects, breakthrough technology to overcome humanity’s
managerial issues of a strategic nature, sustainability
products and services. Where we have direct control, we greatest challenges. An incremental approach alone will
will be incorporated into its structure where
set targets in order to continuously improve over time. not get us there; we need to utilise the capabilities and
appropriate, including into the committees.
Where we have influence, such as suppliers, resources within our organisation effectively to drive and ■ As Group Executive Management is responsible for
partnerships, joint ventures and customers, we strive to benefit from the sustainability agenda. To do this, we’ve
day-to-day operations, they will become the
promote our values and commitment to sustainability to partnered with the Confederation of Danish Industry as a
Sustainability Board
the greatest extent possible. member of their “From Philanthropy to Business”
programme. This network helps us understand global
We will develop a set of KPIs across both industries, with
POLICY IN ACTION best practices when developing a long-term sustainability
the purpose of being able to determine how close we are
With global environmental, social and economic issues goal, and how to follow through with implementation.
to achieving transformational change.
becoming more acute over time, the demand for

PERFORMANCE SUMMARY
PERFORMANCE SUMMARY
2017 2018 2018 Target 2019 Target 2023 Target

SAFETY
Lost Time Injury Frequency Rate (including contractors) 1.8 1.3 ≤1.3 ≤1.2
Lost Time Injury Frequency Rate (excluding contractors) 1.3
Total Recorded Injury Frequency Rate (including contractors) 3.2 3,0 ≤3.2 ≤2.7
Total Recorded Injury Frequency Rate (excluding contractors) 3.5
Total Training hours 258.036 286.736
PEOPLE
% Women total 13.5% 14,0% 14.5% 14.7% 18%
% Women white collar workers 18.5% 19% 23%
% Women blue collar workers 4.4% 4.7% 5.7%
% Women managers 10.5% 10.4% 11.5% 11.0% 13.0%
Employees having undergone corporate development programs 541 1,031 353 806
% employees receiving performance and career development reviews 90% 90.3% 92.0% 90.0%
COMPLIANCE
Total number of whistle-blower reports submitted 51 65
…of which admissible 48 63
Number of operations assessed for risks related to corruption. 30 32 34
Total number and percentage of in-person training for white-collar employees that have
8,173 / 88% 8,514 / 92% 8,823 / 95% 9,102/98%
received training on anti-corruption
…of which managers or senior managers 1,361 1,375 1,551 1,600
Number of legal actions pending or completed during the reporting period regarding anti-
competitive behaviour and violations of anti-trust and monopoly legislation in which the 1 1
organisation has been identified as a participant.
Numbers of in-depth due diligence screenings conducted 398 535 430 750
Incidents of discrimination and corrective actions taken 0 2
ENVIRONMENT
Scope 1 (in tonnes) 27,236 29,875 26,691 24,512
Scope 2 (in tonnes) 37,031 30,556 36,290 33,328
Scope 3 (in tonnes) 33,268 33,505
Carbon intensity (Scope 1 & 2/Revenue) 3,570 3,223
Fresh water use (m3) 241,651 227,272 236,818 217,486

PERFORMANCE SUMMARY
2017 2018 2018 Target 2019 Target 2023 Target

SUPPLY CHAIN
Proportion of spending on local suppliers 57.0% 57.0%
% of new suppliers that were screened using environmental criteria** 1.0% (23/2,045) 0
Number of suppliers assessed for environmental impacts 113 195 300 300
Number of suppliers identified as having significant actual and potential negative
122 100 <10
environmental impacts
Significant actual and potential negative environmental impacts identified in the supply chain 10 20 <5
% of suppliers identified as having significant actual and potential negative environmental

5.0% <2.0%
impacts with which improvements were agreed upon as a result of assessment
% of suppliers identified as having significant actual and potential negative environmental
0 0
impacts with which relationships were terminated as a result of assessment, and why
% of new suppliers that were screened using social criteria 1.0% (23/2,045) 0
Number of suppliers assessed for social impacts 113 195 300 300
Number of suppliers identified as having significant actual and potential negative social
174 150 <10
impacts.
Significant actual and potential negative social impacts identified in the supply chain. 0 0
% of suppliers identified as having significant actual and potential negative social impacts with
0 0
which improvements were agreed upon as a result of assessment.
% of suppliers identified as having significant actual and potential negative social impacts with
0 0
which relationships were terminated as a result of assessment, and why.
HUMAN RIGHTS
Operations subject to human rights reviews or impact assessments (off-site/on-site) 20/10 50/15 100/30
Employee training on human rights policies or procedures 100 300
On-line training of all managers 1,500 1,500

GRI REQUIREMENTS
GRI REQUIREMENTS
MANAGEMENT APPROACH: SAFETY
GRI Management Approach Indicator 403-9 GRI Management Approach Indicator 403-9
Why is the topic material? We operate in industries with high Occupational health and safety management
403-1
safety risks system
Hazard identification, risk assessment, and incident pg. 23
The boundary All people under our control, with 403-2 investigation
influence on suppliers and
103-1 customers 403-3 Occupational health services Health issues are dealt with at a
Where does it occur? Throughout the value chain local level. At Group level they are
addressed through Safety week as
described on pg. 22
Involvement (caused, contributed to, through We take actions on our sites to
business relationships) improve safety Worker participation, consultation, and pg. 22
404-4 communication on occupational health and safety
How do we manage the topic? 22, safety management system
404-5 Worker training on occupational health and safety pg. 22-23
The purpose of the approach? Stop injuries, incidences,
established way of doing things Promotion of worker health Health issues are dealt with at a
local level. At Group level they are
Policies Pg. 22 addressed through Safety week as
404-6 described on pg. 22
Commitments Pg. 22
103-2 Goals and targets pg. 25
Responsibilities pg. 21, 22, 23 Prevention and mitigation of occupational health pg. 30
404-7 and safety impacts directly linked by business
Resources pg. 21 relationships
Grievance mechanisms pg. 22, 27
Specific actions: processes, projects, programs pg. 22
How we evaluate the approach pg.23, management reviews of

safety performance
Mechanisms for evaluating effectiveness of MDA Management review of
performance
103-3
Results of the evaluation Integrated into the next years' plan
Adjustments to MDA Made in action plan and put in next

year

GRI REQUIREMENTS
MANAGEMENT APPROACH: PEOPLE MANAGEMENT APPROACH: COMPLIANCE
Indicators: Indicators:
GRI Management Approach 404-3, 405-1 GRI Management Approach 205-1, 206-1, 406-1
Why is the topic material? pg. 24 Why is the topic material? Risks for non-compliance may occur
throughout our value chain
The boundary Those on our payroll
103-1 Where does it occur? Those on our payroll
The boundary Internal and business relationships
Involvement (caused, contributed to, through Caused 103-1
business relationships)
Where does it occur? Internal and business relationships
How do we manage the topic? pg. 24
The purpose of the approach? pg. 24 Involvement (caused, contributed to, through Caused, contributed to
business relationships)
Policies pg. 24 How do we manage the topic? Training, investigate and corrective
Commitments pg. 24 actions
The purpose of the approach? Risk mitigation
Policies pg. 26
Responsibilities pg. 21, 24, 25
Commitments pg. 26
Resources pg. 21
Grievance mechanisms pg. 27
Responsibilities pg. 21, pg. 26-27
Specific actions: processes, projects, programs pg. 24, 25
Resources pg. 21, pg. 26-27
How we evaluate the approach pg. 25, incentive scheme
Mechanisms for evaluating effectiveness of MDA Data based, performance against
targets Specific actions: processes, projects, programs pg. 26-27
103-3 How we evaluate the approach General council reviews, company

Results of the evaluation Governance structure, incentive survey
scheme'
Adjustments to MDA Corrective actions e.g. change in Mechanisms for evaluating effectiveness of MDA General council reviews, company
behaviour, change processes survey
103-3 Results of the evaluation Adjust policies when required with

input from general council and
Audit Committee
Adjustments to MDA Adjust policies when required with
input from general council and
Audit Committee

GRI REQUIREMENTS
MANAGEMENT APPROACH: ENVIRONMENT MANAGEMENT APPROACH: SUPPLY CHAIN
Indicators: Indicators:
GRI Management Approach 201-2, 305-1,2 GRI Management Approach 308-1,2 and 414-1,2
Why is the topic material? pg. 12-16, 28-29 Why is the topic material? pg. 19
The boundary Suppliers, internal and customers The boundary Outsourcing partners
103-1 Where does it occur? In the supply chain
103-1 Where does it occur? Suppliers, internal and customers
Involvement (caused, contributed to, through Caused and through business
Involvement (caused, contributed to, through Caused, contributed to business relationships) relationships
business relationships) How do we manage the topic? Supplier sustainability program
How do we manage the topic? Pg. 28-31, 34
The purpose of the approach? Risk reduction
The purpose of the approach? pg. 28-31, 34
Policies pg. 30
Policies pg. 28, 30
Commitments pg. 30-31
Commitments pg. 28, 34
Responsibilities pg. 21, 30-31
Responsibilities pg. 21, 28-29
Resources pg. 21
Resources pg. 21
Specific actions: processes, projects, programs pg. 30-31
How we evaluate the approach pg. 21, Monthly data review
How we evaluate the approach pg. 28-29, environmental
management system
Mechanisms for evaluating effectiveness of MDA Performance management
Mechanisms for evaluating effectiveness of MDA Management review of
performance 103-3
103-3 Results of the evaluation Integrated into the next years' plan
Results of the evaluation Integrated into the next years' plan
Adjustments to MDA Made in action plan and put in
Adjustments to MDA Made in action plan and put in next year
next year

GRI REQUIREMENTS
MANAGEMENT APPROACH: HUMAN RIGHTS

Indicator:
GRI Management Approach 412-1
Why is the topic material? Reputational,
operational, legal risk
The boundary Supply chain and
Internal
103-1
Where does it occur? Throughout the value
chain
Involvement (caused, contributed to, through business Caused, contributed to
relationships)
How do we manage the topic? Conduct review in
accordance to guiding
principles
The purpose of the approach? Avoid, mitigate
remediate, enhance for
positive impacts
Policies pg. 33-34
Commitments pg. 33-34

103-2
Goals and targets pg. 33-34
Responsibilities pg. 33-34
Resources pg. 33-34
How we evaluate the approach Building baseline using

operational tool
Mechanisms for evaluating effectiveness of MDA Guiding principles
framework, grievance
mechanism for
continuous feedback
103-3
Results of the evaluation Continuous human
rights due diligence
Adjustments to MDA Human rights due
diligence methodology
adjusted if needed, so
far not needed

GRI REQUIREMENTS
GRI CONTENT INDEX

GRI STANDARD DISCLOSURE TITLE LOCATION OMITTED COMMENT, OR REASON FOR OMISSIONS
General disclosures
102-1: General disclosures Name of the organisation 1
102-2: General disclosures Activities, brands, products, and services 3, 4
102-3: General disclosures Location of headquarters 2
102-4: General disclosures Location of operations 4
102-5: General disclosures Ownership and legal form 2½½
102-6: General disclosures Markets served 3,4
102-7: General disclosures Scale of the organisation 3
102-8: General disclosures Information on employees and other workers 6
102-9: General disclosures Supply chain 30, 31
102-10: General disclosures Significant changes to the organisation and its supply chain 6
102-11: General disclosures Precautionary principle or approach 29
102-12: General disclosures External initiatives 18, 19, 27
102-13: General disclosures Membership of associations 18, 19, 27
102-14: General disclosures Statement from senior decision-maker 7
102-15: General disclosures Key impacts, risks, and opportunities 21 - 33
102-16: General disclosures Values, principles, standards, and norms of behaviour 26
102-17: General disclosures Mechanisms for advice and concerns about ethics 26, 27
102-18: General disclosures Governance structure 21, AR 50-53
102-19: General disclosures Delegating authority 21
102-20: General disclosures Executive-level responsibility for economic, environmental, and social topics 21
102-21: General disclosures Consulting stakeholders on economic, environmental, and social topics 18-20
102-22: General disclosures Composition of the highest governance body and its committees AR 51
102-23: General disclosures Chair of the highest governance body AR 51
102-24: General disclosures Nominating and selecting the highest governance body AR 50, CGS 7,13
102-25: General disclosures Conflicts of interest AR 50
102-26: General disclosures Role of highest governance body in setting purpose, values, and strategy 21
102-27: General disclosures Collective knowledge of highest governance body AR 51
102-28: General disclosures Evaluating the highest governance body’s performance AR 51 - 52
102-29: General disclosures Identifying and managing economic, environmental, and social impacts 21, 26-27, AR 50-52
102-30: General disclosures Effectiveness of risk management processes CGS 5, 12, 19
102-31: General disclosures Review of economic, environmental, and social topics 21
102-32: General disclosures Highest governance body’s role in sustainability reporting 21, CGS 3,5
102-33: General disclosures Communicating critical concerns 21
102-34: General disclosures Nature and total number of critical concerns Yes Confidential
102-35: General disclosures Remuneration policies AR 54-55, CGS 14,16,18
102-36: General disclosures Process for determining remuneration AR 54-55, CGS 11, 13-16

GRI REQUIREMENTS
102-37: General disclosures Stakeholders’ involvement in remuneration CGS 14
102-38: General disclosures Annual total compensation ratio Yes Not relevant: differences between salaries across 60+ countries makes it
irrelevant to make a baseline comparison across the Group
102-39: General disclosures Percentage increase in annual total compensation ratio Yes Not relevant: differences between salaries across 60+ countries makes it
irrelevant to make a baseline comparison across the Group
102-40: General disclosures List of stakeholder groups 18-20
102-41: General disclosures Collective bargaining agreements Yes Not applicable
102-42: General disclosures Identifying and selecting stakeholders 18-20
102-43: General disclosures Approach to stakeholder engagement 18
102-44: General disclosures Key topics and concerns raised 18-20
102-45: General disclosures Entities included in the consolidated financial statements AR 32-33
102-46: General disclosures Defining report content and topic Boundaries 35-
102-47: General disclosures List of material topics 21
102-48: General disclosures Restatements of information Yes Not applicable
102-49: General disclosures Changes in reporting Yes Not applicable
102-50: General disclosures Reporting period 1
102-51: General disclosures Date of most recent report 40 February 7th, 2018
102-52: General disclosures Reporting cycle 2
102-53: General disclosures Contact point for questions regarding the report 2
102-54: General disclosures Claims of reporting in accordance with the GRI Standards 2
102-55: General disclosures GRI content index 35
102-56: General disclosures External assurance Yes Planned in 2019
Economic disclosures
201-1: Economic performance Direct economic value generated and distributed Yes Information unavailable: financial disclosures do not meet specific requirements
201-2: Economic performance Financial implications and other risks and opportunities due to climate change pg.29
201-3: Economic Performance Defined benefit plan obligations and other retirement plans Yes Information unavailable: managed at local level
201-4: Economic performance Financial assistance received from government Yes Not applicable
202-1: Market presence Ratios of standard entry level wage by gender compared to local minimum wage Yes Information unavailable: managed at local level
202-2: Market presence Proportion of senior management hired from the local community Yes Not applicable: Hiring based on business requirements
203-1: Indirect economic impact Infrastructure investments and services supported Yes Not applicable
203-2: Indirect economic impact Significant indirect economic impacts Yes Information unavailable: no comprehensive breakdown of indirect economic
impact has been conducted.
204-1: Procurement practices Proportion of spending on local suppliers 31 Information unavailable: Local spend identified and measured, however there is
no commitment to improvement
205-1: Anti-corruption Operations assessed for risks related to corruption 26-27
205-2: Anti-corruption Communication and training about anti-corruption policies and procedures Yes Information unavailable: Not broken down by employee category and region
205-3: Anti-corruption Confirmed incidents of corruption and actions taken Yes Confidentiality constraints
206-1: Anti-competitive behaviour Legal actions for anti-competitive behaviour, anti-trust, and monopoly practices 27

Environmental disclosures
301-1: Materials Materials used by weight or volume Yes Information unavailable: impact is optimised at local levels through their location
specific environmental management system
301-2: Materials Recycled input materials used Yes Information unavailable: impact is optimised at local levels through their location
301-3: Materials Reclaimed products and their packaging materials Yes Not applicable: Consolidated into carbon footprint
302-1: Energy Energy consumption within the organisation Yes Not applicable: Consolidated into carbon footprint
302-2: Energy Energy consumption outside of the organisation Yes Not applicable: Consolidated into carbon footprint
302-3: Energy Energy intensity Yes Not applicable: Consolidated into carbon footprint
302-4: Energy Reduction of energy consumption Yes Information unavailable: impact is optimised at local levels through their location
302-5: Energy Reductions in energy requirements of products and services Yes Information unavailable: planned for upcoming years
303-3: Water Water withdrawal Yes Information unavailable: impact is optimised at local levels through their location
303-4: Water Water discharge Yes Information unavailable: impact is optimised at local levels through their location
303-5: Water Water consumption Yes Not applicable: freshwater included only
304-1: Biodiversity Operational sites owned, leased, managed in, or adjacent to, protected areas and Yes Not applicable due to the locations of our operations
areas of high biodiversity value outside protected areas
304-2: Biodiversity Significant impacts of activities, products, and services on biodiversity Yes Not applicable due to the locations of our operations
304-3: Biodiversity Habitats protected or restored Yes Not applicable due to the locations of our operations
304-4: Biodiversity IUCN Red List species and national conservation list species with habitats in areas Yes Not applicable due to the locations of our operations
affected by operations
305-1: Emissions Direct (Scope 1) Carbon emissions 1, 29
305-2: Emissions Energy indirect (Scope 2) Carbon emissions 29
305-3: Emissions Other indirect (Scope 3) Carbon emissions Yes Information unavailable: currently only business travel is calculated, increased
305-4: Emissions Carbon emissions intensity 29
305-5: Emissions Reduction of Carbon emissions Yes Information unavailable: impact is optimised at local levels through their location
305-6: Emissions Emissions of ozone-depleting substances (ODS) Yes Information unavailable: basic data collected but not adherent to GRI standard.
Impact is optimised at local levels through their location specific environmental
management system
305-7: Emissions Nitrogen oxides (NOX), sulphur oxides (SOX), and other significant air emissions Yes Information unavailable: impact is optimised at local levels through their location
306-1: Effluents and waste Water discharge by quality and destination Yes
306-2: Effluents and waste Waste by type and disposal method Yes Information unavailable: impact is optimised at local levels through their location
306-3: Effluents and waste Significant spills Yes Information unavailable: impact is optimised at local levels through their location
306-4: Effluents and waste Transport of hazardous waste Yes Information unavailable: impact is optimised at local levels through their location
306-5: Effluents and waste Water bodies affected by water discharges and/or runoff Yes Information unavailable: impact is optimised at local levels through their location

307-1: Environmental compliance Non-compliance with environmental laws and regulations Yes Information unavailable: impact is optimised at local levels through their location
308-1: Supplier environmental New suppliers that were screened using environmental criteria 27
assessment
308-2: Supplier environmental Negative environmental impacts in the supply chain and actions taken 27
assessment
Social disclosures
401-1: Employment New employee hires and employee turnover Yes Information unavailable: Anticipated in 2019
401-2: Employment Benefits provided to full-time employees that are not provided to temporary or part- Yes Information unavailable: handled at local level according to local regulations
time employees
401-3: Employment Parental leave Yes Information unavailable: handled at local level according to local regulations
402-1: Labour/Management Minimum notice periods regarding operational changes Yes Information unavailable: handled at local level according to local regulations
Relations
403-8: OH&S Workers covered by an occupational health and safety management system Yes Information unavailable: handled at local level according to local regulations
403-9: OH&S Work related injuries 23
403-10: OH&S Work-related ill health Yes Information unavailable: handled at local level according to local regulations
404-1: Training and education Average hours of training per year per employee Yes Information unavailable: negotiated between employees and direct managers for
both internal and external training
404-2: Training and education Programs for upgrading employee skills and transition assistance programs Yes Not relevant: training performed by function and need, not gender
404-3: Training and education Percentage of employees receiving regular performance and career development 25
reviews
405-1: Diversity and Equal Diversity of governance bodies and employees AR 56-58
Opportunity
405-2: Diversity and Equal Ratio of basic salary and remuneration of women to men Information unavailable: different in each country and not aggregated
Opportunity
406-1: Non-discrimination Incidents of discrimination and corrective actions taken 27

407-1: Freedom of association and Operations and suppliers in which the right to freedom of association and collective Yes Information unavailable: differs according to country, therefore not aggregated
collective bargaining bargaining may be at risk
408-1: Child labour Operations and suppliers at significant risk for incidents of child labour Yes Not available - Anticipated in 2019
409-1: Forced or compulsory labour Operations and suppliers at significant risk for incidents of forced or compulsory labour Yes Not available - Anticipated in 2019
410-1: Security Practices Security personnel trained in human rights policies or procedures Yes Information unavailable: security conditions managed by each location
411-1: Rights of indigenous people Incidents of violations involving rights of indigenous peoples Yes Information unavailable: beyond boundary of reporting scope
412-1: Human rights assessment Operations that have been subject to human rights reviews or impact assessments 32-33
412-2: Human rights assessment Employee training on human rights policies or procedures Yes Information unavailable: Anticipated in 2019
412-3: Human rights assessment Significant investment agreements and contracts that include human rights clauses or Yes Not applicable
that underwent human rights screening
413-1: Local communities Operations with local community engagement, impact assessments, and development Yes Information unavailable: managed at local level, not aggregated
programs
413-2: Local communities Operations with significant actual and potential negative impacts on local communities Yes Information unavailable: managed at local level, not aggregated
414-1: Supplier social assessment New suppliers that were screened using social criteria 30-31
414-2: Supplier social assessment Negative social impacts in the supply chain and actions taken 30-32
415-1: Public policy Political contributions Yes Not applicable: politically neutral
416-1: Customer health & safety Assessment of the health and safety impacts of product and service categories Yes Information unavailable: beyond boundary of reporting scope
416-2: Customer health & safety Incidents of non-compliance concerning the health and safety impacts of products and Yes Information unavailable: beyond boundary of reporting scope
services
417-1: Marketing and labelling Requirements for product and service information and labelling Yes Information unavailable: beyond boundary of reporting scope
417-2: Marketing and labelling Incidents of non-compliance concerning product and service information and labelling Yes Not applicable
417-3: Marketing and labelling Incidents of non-compliance concerning marketing communications Yes Not applicable
418-1: Customer privacy Substantiated complaints concerning breaches of customer privacy and losses of Yes Not applicable
customer data
419-1: Socioeconomic compliance Non-compliance with laws and regulations in the social and economic area Yes Information unavailable: handled at local level according to local regulations

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MANAGEMENT’S REVIEW FINANCIAL STATEMENTS

1. January - 31 December 2018 WE DISCOVER POTENTIAL

SUSTAINABILITY TRIFR Whistle-blower cases

Women Managers Tonnes of carbon

1 Sustainability report 2018

For inquiries, please contact sustainability@flsmidth.com

2 Sustainability Report 2018

FLSmidth is a leading supplier of

11,368 Our vision

3 Sustainability Report 2018

FLSMIDTH IN THE WORLD

4 Sustainability Report 2018

STRATEGY AND BUSINESS MODEL

5 Sustainability Report 2018

ORGANISATIONAL STRUCTURE AND EMPLOYEES

AGE DISTRIBUTION LENGTH OF SERVICE GEOGRAPHICAL DISRIBUTION

6 Sustainability Report 2018

LETTER FROM THE CEO

7 Sustainability Report 2018

OUR ROLE IN THE WORLD

8 Sustainability Report 2018

MORE BUSINESS AT LESS COST

9 Sustainability Report 2018

CONTRIBUTION TO THE GLOBAL AGENDA

SDG 6: Clean Water and Sanitation SDG 8: Decent work and

10 Sustainability Report 2018

Obtaining and retaining a social license to

The amount of water needed for processing

11 Sustainability Report 2018

1. Tailling dams 2. Decreasing ore grades

3. The demand for metals 4. Water

12 Sustainability Report 2018

Save water with EcoTails™ Rapid Oxidative Leaching

13 Sustainability Report 2018

Global consumption of cement has increased

CO2 emissions from cement production have

A reason that the cement industry has been

Our innovative engineers attack this

14 Sustainability Report 2018

Climate change The demand for cement

Alternative fuels Air emissions

15 Sustainability Report 2018

Software reduces energy consumption Burning old tyres reduces emission

Especially in China, FLSmidth is experiencing a boom in

16 Sustainability Report 2018

FINANCING ACCELERATES SUSTAINABILITY

17 Sustainability Report 2018

18 Sustainability Report 2018

19 Sustainability Report 2018

Community development As part of the Broad-Based Black Economic

20 Sustainability Report 2018

To continually improve our sustainability impacts over

21 Sustainability Report 2018

22 Sustainability Report 2018

2017 2018 2018 Target 2019 target Bottom line ● Low

23 Sustainability Report 2018

24 Sustainability Report 2018

consisted of 20.7% women, 10 nationalities, and FUTURE EXPECTATIONS

We also know that having role models is an important

And with special focus in these three groups of