Fuels and procurement

Fortum is a significant purchaser of goods and services, the annual purchasing volume being approximately EUR 2–3 billion depending on the investment volume. Beyond investments, a significant part of the purchasing volume is related to purchasing of fuels, while the rest comes from purchasing of various goods and services. Sustainability is an integral part of Fortum’s supply chain management. Our goods and service providers as well as contractors play an important role in our efforts towards sustainability. 

Responsible supply chain management

Fortum wants to conduct business with viable companies that act responsibly and comply with Fortum Code of Conduct and Supplier Code of Conduct. While Fortum Code of Conduct provides the basis for ethical business conduct, Fortum Supplier Code of Conduct sets the basic sustainability requirements on what is expected from suppliers of services and goods. It is based on the ten principles of the United Nations Global Compact and is divided into four sections: business practices, human rights, labour standards and the environment. Monitoring of suppliers that was started with revised methodology in 2011 will help Fortum to identify potential risk suppliers and thus recognise and focus the need for further actions.

Responsible fuel purchasing

Fortum purchases fuels from international and local suppliers. In 2011, fuel purchases represented 35% of the total purchasing volume out of which roughly half originated from risk countries. 

Sustainability of fuel procurement and especially sourcing of fossil fuels and biomass has become a topic of concern. Industry wide dialogue is required to address issues systematically. 

Uranium

The fuel assemblies of the existing power plant units in Loviisa are both Russian and British. The uranium used in the assemblies of both manufacturers originates from Russia. The zirconium material manufacturing plant and the plant responsible for manufacturing uranium oxide pellets and fuel assemblies, are certified in accordance with the ISO 14001 environmental management standard.

Fortum carries out regular reviews of the quality, environmental and health and safety management systems of its nuclear fuel suppliers. Fortum also controls regularly the manufacture of nuclear fuel assemblies. In 2011, Fortum’s nuclear and sustainability experts visited both the nuclear fuel assembly and the conversion unit in Russia. In summer 2012, a similar visit is scheduled to take place in one of the uranium mines operated by Fortum’s Russian supplier.

Natural gas 

Natural gas used in Fortum’s operations in 2011 in Russia, the Baltic countries, Poland and Finland originated from Russia. In Russia gas is purchased from several suppliers. In the UK, Fortum purchases natural gas from the national supplier and it originates mostly from the UK and Norwegian gas fields in the North Sea.

All the natural gas consumed in Finland is imported from the Western-Siberian natural gas fields of Yamburg and Urengoy in Russia, some 3,300 km from the Finnish-Russian border.

Coal

In 2011, the majority (88%) of the coal used by Fortum in Finland and Sweden originated from Russia, but there were also small purchases from Columbia. Coal used in Polish power plants originated from Poland and Russia, and Fortum’s Russian power plants used coal from Russia and Kazakhstan. 

In Russia coal is transported in open cars by railway from a coal strip mine to a power plant. Coal to other Fortum’s operating countries is transported by sea. In early 2012, Fortum decided to join Bettercoal initiative to promote the principles of  sustainable development in coal mining.

Biofuels

In 2011, the majority (70%) of the biofuels used consisted of wood pellets, wood chips and industrial wood residues, and they originated mainly from Sweden, Finland and Germany. Other types of biofuels were also acquired for example from the United States, Spain and Malaysia. Fortum recognises the challenges related to the origin of biofuels and thus cannot be absolutely confident about the country of origin. Fortum’s position and actions for the sustainable utilisation of bioenergy approved in late 2011 will contribute to improved traceability.

In Finland, biomasses consumed were forest chips, by-products from forest industry, black liquor, recycled wood from industry and construction and a minor amount of wood pellets, reed canary grass and biogas. Additionally, solid refined recovered waste fuel was used in one power plant. The biofuels used originate mainly from Finland, only minor volumes of Russian wood were consumed. Aim is to increase the use of solid biofuels originating from certified sources in the coming years and also to report the share of this biofuel. 

ORIGIN OF FUELS USED IN 2011 ¹)
   
Fuel Country of origin
Biofuel Sweden, Finland, Germany and other countries
Coal Russia, Poland, Columbia, Kazakstan
Natural gas Russia, UK, Norway
Uranium Russia
Oil Mainly Russia
Peat Finland, Estonia
   
¹) The biggest countries of origin based on the purchasing volumes in 2011
MATERIALS AND SERVICES PURCHASED 2009–2011, EUR MILLION ¹)
       
  2011 2010 2009
Nordic countries 1,753 1,982 1,508
Russia 584 546  
Poland 128 113 89
Estonia 64 58 43
Other countries 37 147 15
Total 2,566 2,846 2,027
       
¹) Based on the income statement
FUEL USE BY COUNTRY IN 2011, GWh
               
  Biofuels Waste fuel Natural gas Coal Peat Uranium fuel Other fuels
Estonia 1,061   393   1,111   63
Finland 1,922 381 5,091 12,716 2,695 24,300 901
Poland 253   166 3,222     6
Russia     65,516 4,104     17
Sweden 2,887 2,140 113 1,752     440
UK     4,002       86
Other countries 40   319       23

Sustainable bioenergy procurement

The sustainable production and use of bioenergy is an increasingly topical issue worldwide. The European Union has defined the sustainability criteria for biofuels and bioliquids in transport and is considering enlarging the scope of criteria into solid biomass in energy production.

Bioenergy is an important energy source for Fortum. In 2011, Fortum compiled position and actions for the sustainable utilisation of bioenergy in electricity and heat production. The position and actions contribute to improved traceability of biomass fuels and responsible management of fuel purchases. Actions include, for example, the pre-selection and audit of suppliers, certification of the wood biomass chain, risk analyses and participation in international initiatives on sustainable bioenergy. Position and actions were approved in December 2011 and their implementation will start in 2012.