Business model

JSW Group's strategy for developing the innovation area (R+D+I) constitutes a response to the changing market, technological and regulatory conditions in which a modern extractive-industry enterprise operates. In view of the globalisation of trade in coking coal and coke, being the EU leader in their production does not protect JSW Group against challenges brought on by the market environment, rather forcing us to become a company that sets development directions for the entire industry. The sector's key challenges include production cost reduction by improving operational efficiency, continuous improvements in product quality and incorporating challenges related to safety, environmental protection and social responsibility in all aspects of the business. JSW Group pursues these objectives through a number of projects with a measurable objective of improving its market position and enhancing its operating efficiency. R+D+I activities, as support for the core activity presented in the business model, seamlessly support projects in the coking and coal segments. Research and development expenditures in this area provide a number of measurable benefits in the form of lower operating costs.

Operating in a volatile economic environment means that in order to stay competitive on the market one must build awareness of own financial moves. Issues related to the capital structure are becoming vitally important in the context of both reducing costs and enhancing competitiveness. The Group's business is highly susceptible to economic conditions, capital-intensive and features long periods of return on investment. When the coal market is doing well, the Group generates strong positive cash flows, but when the market is down, it needs financing for negative free cash flows (FCF). Securing financing for operating and investing activities ensures development and makes it possible to build competitive advantage. Being part of a group is beneficial because each company can raise external financing, which brings additional benefits to the entire Group and unlocks a variety of synergies.

Given the nature of JSW Group's core business, the IT area - aside from the traditional definition also involves industrial IT that supports coal mining and processing and reaches out into other areas in the business model. Changing the approach to this area results from the business needs outlined in JSW Group's strategy, which explicitly defines the role of IT and industrial IT in increasing the efficiency of coal mining and processing and in other business processes. The IT area constitutes an integral part of JSW Group's business processes, having direct impact on growth in the organisation's value.

JSW Group's operations are centred around JSW - the parent company. Its subsidiaries perform specialised functions throughout the organisation, providing services to the Group and externally. All activities are aligned with JSW Group's ISO-based Integrated Management System. JSW Group's Code outlines how all Group entities are integrated. The Group operates and builds its market position based on respect for the rule of law, good commercial practices and the highest ethics standards. The Group's market position is the effect of consistently applying these concepts in operations at home and abroad. Protecting and strengthening the Group in this area constitute some of its top priority objectives and are expressed in the regulatory solutions being implemented. In 2019, a complete compliance system was rolled out at the Group, which is intended to counteract and reduce the impact of legal sanctions related to any potential irregularities.

Special care for the local surroundings is a hallmark of JSW Group's approach to sustainability. The local community has been at the centre of JSW's attention for years, with activities focused on it in the form of extensive community engagement programs.

For many years, JSW Group has been consistently emphasising support for kids and youth. It tries to support interesting, innovative and effective solutions in domains such as education, health, ecology, culture and sports, JSW supports those most in need in the region by implementing projects focused on the needs and expectations of a particular community, environmental activities, social campaigns, or programs for employees, promoting an active lifestyle or volunteering. JSW is also involved in promoting sports among children and youth, local communities and promotes fair and ethical competition.

JSW Group's most valuable asset is people, their knowledge, skills and competences, which is why fostering optimal conditions for professional development is an important element in JSW Group's business model and strategy. Given the nature of our operations, workplace safety is of fundamental importance. It is ensured by employing the highest and latest standards in protection against threats and by having technically advanced mines. We make every effort to ensure that all employees understand how important their roles are at JSW Group and so that through the development of skills they can represent a high level of motivation, efficiency, and they can maximise their potential so that their work supports our business objectives not just today but also in the future.

Every organisation operating on a market is focused on gaining and retaining a competitive advantage. Our investing activities are one of the many areas thanks to which we can achieve this objective. Expenditures on our core business are the main driver of cash streams for the Group. The vision of developing the Group's assets determines the size of investment expenditures because numerous investment projects are grouped into Portfolios or Programmes, covering and integrating several industries and areas. The business model in place assigns the top investment priority to projects with the highest rates of return and potential.

CSR is not just an initiative, but an important part of any business strategy, which permeates all the processes taking place at a company. It is an important factor supporting the management of every business, which is why at the beginning of February 2021 JSW S.A.’s Management Board adopted a new Sustainability Strategy for JSW Group for 2021-2030. The new Strategy sees the Group transforming towards a low-carbon economy. A stronger emphasis is placed on reducing the carbon footprint by capturing methane, the possibility of hydrogen production, but it also assumes the phase-out of thermal coal production. The newly adopted strategy also focuses on activities diversifying the Group's product portfolio, including potentially innovative and advanced products that at the same time fit into the concept of circular economy, as well as the development of employee competences. At the same time, it is a continuation of activities aimed at effective management in areas such as environment, human resources, occupational health and safety, and mining damages.

Unchanged remains the focus on consistency between JSW Group's growth strategy and sustainability strategy. The sustainability strategy aims to support the objectives of the overall strategy and to clarify the approach represented therein. The word "Respect" which played a pivotal role in the existing document and aptly reflects the management approach also remains unchanged.