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ORLEN Group 2016 Integrated Report

II nagroda specjalna w kategorii Raport Zintegrowany | Najlepszy raport on-line

Our Report

Capitals:  

Our approach to reporting

We present the ORLEN Group’s Annual Report, prepared as an integrated report. This document is our third Integrated Report, showing interactions and interrelations between the financial and non-financial aspects of the ORLEN Group’s operations. As such, this Report provides a comprehensive and coherent overview of the Group’s activities, business model, strategy, value creation process and financial performance from the point of view of our key stakeholders. To successfully achieve this objective, we have structured the layout and content of the document based on the International Integrated Reporting Council (IIRC) and Global Reporting Initiative (GRI) guidelines. The report also reflects the latest directions in the EU legislation on disclosure of non-financial and diversity information.

Experience in reporting

Reporting is a fixed and important part in the process of communicating information on the ORLEN Group’s activities. Communication and dialogue with the environment play a vital role in the ORLEN Group’s CSR strategy for 2015−2017. Reports are issued on an annual basis and are continuously evolving, to reflect changes within the ORLEN Group and in its environment.

Until 2014, we published annual reports and CSR reports separately. Since its inception, PKN ORLEN has published 14 annual reports and 10 corporate social responsibility (CSR) reports. Since 2008, we have produced our CSR reports in line with the Global Reporting Initiative standards. Until 2013, ecology and environmental reports were issued as separate publications.

In August 2015, PKN ORLEN published its first Integrated Report, covering 2014.

Why integrate?

Integration is a tenet of our approach to reporting, but it also underlies certain efforts made by the ORLEN Group to understand and meet the expectations of our stakeholders:

The Integrated Report, which has superseded the annual and CRS reports published every year, presents interactions and interrelations between the financial and non-financial aspects of the ORLEN Group’s activities. It reflects global standards and trends in corporate reporting, promoted by organisations such as the International Integrated Reporting Council (IIRC). Its guidelines, published in 2011, encourage firms to abandon performance reporting based strictly on their organisational structure in favour of a more dynamic and multidimensional approach to communication with stakeholders. Integrated reporting is a way of communicating and an organisation’s communication tool which demonstrates how the organisation’s strategy, corporate governance and performance, in the context of its environment, allow it to create value in various time horizons.

“Integrated thinking leads to integrated decision-making and actions that consider the creation of value over the short, medium and long term.” (IIRC framework).

Our Report’s new formula followed as a natural next step in adapting our reporting to market tendencies and stakeholders’ expectations, permitting the stakeholders to better understand the business model, strategies and risks, and to better identify business opportunities.

How we prepared the report

One of the cornerstones of our CSR strategy is the objective of being perceived as a CSR leader by our stakeholders. To that end, we have committed to implementing a number of initiatives and measures, including the adoption of integrated reporting. This Report is the third such publication, but the second one to cover the entire ORLEN Group, and it is another step towards improving the quality of our reporting.

Integrated reporting is a new method for communicating our business model. Preparation of an integrated report includes performing analyses and collecting information which is of key relevance to the ORLEN Group and its stakeholders. As a result, a comprehensive Integrated Report is compiled, which, among other things, provides information on how the business strategy pursued by the Group and its risk management system translate into the Company’s value creation over time, taking into account the Company’s environmental impact. This Integrated Report presents the activities of the ORLEN Group in 2016, shows results and effects of its operations, and the key aspects of the Group’s financial and non-financial performance vital to value creation.

No changes have been made in the previously reported information. No information presented in previous Reports has been corrected. Furthermore, this Integrated Report has been externally assured by Bureau Veritas, a reputable audit firm.

Significant changes in the organisation's size, structure, ownership, and supply chain during the reporting period

The changes made in the ORLEN Group’s structure were in pursuance of the strategy to focus on core business and allocate the released capital to development of the business areas that offer the greatest growth potential.

In the reporting period, a number of material changes were made, affecting the size, structure and ownership of the ORLEN Group, including:



The organisational efforts undertaken in 2016 involved further work on the consolidation of Unipetrol Group companies. Starting from 2017, Polymer Institute Brno, Benzina, Unipetrol Services, Unipetrol Rafinerie, Chemopetrol and Ceska Rafinerska operate jointly as Unipetrol RPA.
In 2016, Unipetrol RPA, a member of the Unipetrol Group, executed an agreement to acquire all shares in Spolana, a former subsidiary of Anwil. The acquisition will enable the Unipetrol Group to more efficiently plan and optimise production and respond to changing external conditions.


In 2016, ORLEN Upstream Canada was merged with Kicking Horse Energy Inc., KCK Operating Company Ltd., Columbia Natural Resources Canada, Ltd. and Kicking Horse International Exploration Ltd. To further optimise the Upstream segment’s structure, ORLEN Upstream Sp. z o.o. was merged with ORLEN Upstream International B.V.


As part of consolidation of the ORLEN Group’s service companies, in January 2016 ORLEN Serwis, ORLEN Wir and Wircom were merged. The final stage of the consolidation process was the acquisition by PKN ORLEN of all shares in ORLEN Serwis.


In 2016, PKN ORLEN closed the sale of all shares in ORLEN Transport. The disposal of transport assets, which are non-core assets, is in line with PKN ORLEN’s strategy to build PKN ORLEN’s value in the long term.


In 2016, ORLEN Laboratorium changed its legal form and began to operate under the name of ORLEN Laboratorium Spółka Akcyjna, abbreviated to ORLEN Laboratorium S.A. The change was part of the process designed to systematise the ownership structures of ORLEN Group companies.

Deletion of companies from the National Court Register

In 2016, the liquidation of Pro-Lab Spółka z o.o., EkoNaft Sp. z o.o. and Unipetrol Austria HmbH was completed.

No material changes occurred in the ownership structure of other ORLEN Group companies.

Reconstruction of the ethylene production plant in Litvinov after an accident which occurred in August 2015, and the emergency shutdown of the fluid catalytic cracking unit at the Kralupy refinery operated by the Unipetrol Group made it necessary to optimise production processes, coordinate product flows within the ORLEN Group, and purchase finished and semi-finished products to mitigate the effect of the shutdown.

Major changes in the feedstock supply chain in 2016 included execution of a new five-year contract between PKN ORLEN and PGNiG, valid until September 2021 and valued at more than PLN 7bn. The contract makes PGNiG a strategic supplier of gas fuel to ORLEN Group companies in Poland. The ORLEN Group takes steps to ensure supply stability and to lower its natural gas procurement costs, including by diversifying supply sources, centralising natural gas trading, and improving trading expertise. Structured in 2016, the new portfolio of gas supply contracts makes it possible to implement optimisation measures covering different suppliers, various gas indices and different supply locations.

As regards crude oil supplies, in 2016 the following long-term contracts were in force: with Rosnieft Oil Company and Tatneft Europe AG for oil supply through an oil pipeline to the Płock refinery, and with Saudi Arabian Oil Company for oil supply by sea. Oil deliveries under the contracts proceeded as planned and accounted for more than 70% of the supplied crude. Oil was also imported from Kazakhstan, Iran and Azerbaijan. Under separate agreements, PKN ORLEN S.A. supplies oil to three ORLEN Group refineries: in Litvínov and Kralupy in the Czech Republic, and in Mažeikiai in Lithuania. The refinery in the Czech Republic received oil from Russia, Algeria, Saudi Arabia, Azerbaijan and Kazakhstan, while the refinery in Mažeikiai processed mainly Russian oil, with some volumes supplied from Saudi Arabia and Kazakhstan.


Definition of reporting aspects

We comply with the International Financial Reporting Standards (IFRS) in our financial reporting, and follow the Global Reporting Initiative (G4) guidelines for non-financial reporting. In our work on the Integrated Report, we applied the guidelines of the International Integrated Reporting Council. Both the GRI and IIRC guidelines focus on the selection of the key reporting aspects that are most relevant to a company’s operations, its impacts, and stakeholder expectations at a given moment.

The Global Reporting Initiative offers an international CSR and sustainability reporting standard for enterprises. It provides a consistent framework for reporting on sustainability aspects, which is applied worldwide. The guidelines set the standards and define indicators which may be used by corporations to measure and report their economic, environmental and social performance. In 2013, the GRI published its most recent and comprehensive CSR reporting guidelines − the G4, which extended the scope of CSR reporting in the area of stakeholders’ engagement in the reporting process, and placed a greater emphasis on the role of the value chain and selection of the most relevant information to be included in the report. In 2014, PKN ORLEN published its ‘Corporate Social Responsibility Report 2013. Ten years of CSR reporting‘, the Company’s first report prepared in keeping with the GRI G4 guidelines.

According to the IIRC, integrated reporting is a process that results in communication by an organization, most visibly a periodic integrated report, about value creation over time. An integrated report is a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the short, medium and long term (Source: Consultation draft of the international framework, International Integrated Reporting Council, April 2013).

PKN ORLEN also meets the requirements of Directive 2014/95/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups. The requirements set forth in the Directive were implemented into Polish law under the Accountancy Act of December 15th 2016. As of January 1st 2017, large public interest entities in Poland are obliged to prepare statements on environmental matters, social and employee-related aspects, respect for human rights, anti-corruption and bribery issues. The new EU law is designed to enhance the transparency, relevance and comparability of non-financial disclosures. The matters addressed in the Directive are also covered in the PKN ORLEN S.A.’s Core Values and Standards of Conduct.

The process of defining relevant reporting aspects at the ORLEN Group included the following activities:

The ORLEN Group’s stakeholders, both internal and external, were engaged in the process of structuring the contents of this Report. Just like in two previous years, they expressed their opinions through surveys. Internal stakeholders, that is ORLEN Group employees, viewed all economic, social and environmental aspects as highly relevant. External stakeholders considered the following three aspects: macroeconomic impacts, professional development and employee relations, and diversity and equal opportunities, as being of moderate relevance, and the other aspects as important.

This multiple-step process of defining the relevant aspects led to developing the ORLEN Group’s Relevance Matrix.

ASPECTS
ECONOMIC
ASPECTS
SOCIAL
ASPECTS
ENVIRONMENTAL
P U O R G   N E L R O   E H T   R O F   T C E P S A   E H T   F O   E C N A C I F I N G I S H G I H                          
               
E G A R E V A      
W O L      
  LOW AVERAGE HIGH
SIGNIFICANCE OF THE ASPECT FOR THE ORLEN GROUP ENVIRONMENT

 


Stakeholder map

As part of our work on this Integrated Report, we again reviewed the ORLEN Group’s Stakeholder Map. Our analysis showed that the stakeholder base has been rather stable for many years. Internal consultations and the survey allowed us to identify those ORLEN Group stakeholders who at the next stage of the map review were classified as key or important stakeholders. Representatives of various areas of the ORLEN Group’s business were involved in the review. As a result of the review, a new stakeholder group was added – innovators and startups. The following have been identified as key stakeholders: employees, shareholders, customers and the State Treasury.

Legend:
grey - important Stakeholders
red - key Stakeholders


Our relations with the stakeholders are built on the principles of responsibility and dialogue. The way to build those relations is defined in the PKN ORLEN’s ‘Core Values and Standards of Conduct’, in which we declare that “We firmly believe that open and honest communication helps foster good relations with stakeholders, thereby enhancing the Company’s competitive advantage and value.” We want our relations with trading partners to be founded on integrity, transparency, mutual respect and professionalism. To ensure highest quality of stakeholder relations, the frequency and methods of communication are tailored to the characteristics and current expectations of each stakeholder group. A number of such measures are described in this Report.

Concept and key funcionalities

This Report covering 2016 is only available online. It is possible to generate a pdf file containing the entire text of the Report.
The idea and contents of the ORLEN Group’s 2016 Integrated Report are based on the following four principles:

INTEGRATION

We have defined our key areas with the principle of integration in mind, which is reflected in the very structure of this Report:

CAPITALS

Presentation of the ORLEN Group’s operations through its capitals – the financial, production, human, intellectual, social and natural capital.
These capitals represent resources which are accessible to the Company and which it draws on to create value.

HUMAN FACTOR

Strategies, achievements and efficient organisation require more than just data and processes. Behind every decision and every success there are People, which is why we asked our key stakeholders to voice their views for this Report.
Thanks to them, this document provides a fuller picture of how the Group creates value, makes decisions, manages risks and delivers results − as well as its prospects for the future.

CONNECTIVITY

The contents of this Report are not static.
Its pages are interlinked, forming a unique, chain-like structure.
Each sub-section is linked to:

The contents may be defined through different kinds of capital − whether financial, production, human, intellectual, social or natural.


 
This linkage enables easier access to information on the capitals, which often overlap, building the Company value in different areas.

Linkage to GRI G4 guidelines.

This Report presents non-financial data in compliance with the G4 version of the Global Reporting Initiative guidelines.

Each page contains information on the relevant GRI indicator, along with several other tools, such as the GRI search and the GRI table.

 

Selected internal pages link back to data from the Company’s previous Report, allowing users to compare relevant data and trends over the past few years.

This Report contains a number of interactive tools facilitating access to contents, an interactive GRI Indicators Table, a glossary of economic and industry-specific terms, and an online survey.

 

Auditor's opinion

 It is our policy to arrange for external assurance of the Report by an independent organisation.

Opinia audytora

Auditor's opinion, PDF 262 KB

 

GRI Table

Below is the complete GRI Table including GRI indicators reported for 2016.

Indicator Description
  GENERAL STANDARD DISCLOSURES
  Strategy and analysis
G4-1 Statement from the most senior decision-maker of the organization (such as CEO, chair, or equivalent senior position) about the relevance of sustainability to the organization and the organization’s strategy for addressing sustainability.
G4-2
G4-2
Description of key impacts, risks, and opportunities.
  Organisational profile
G4-3 Name of the organisation.
G4-4 Primary brands, products, and services.
G4-5 Location of the organisation’s headquarters.
G4-6 Number of countries where the organization operates, and names of countries where either the organization has significant operations or that are specifically relevant to the sustainability topics covered in the report.
G4-7 Report the nature of ownership and legal form.
G4-8 Markets served (including geographic breakdown, sectors served, and types of customers and beneficiaries).
G4-9 Scale of the organization, including:
- total number of employees;
- total number of operations;
- net sales (for private sector organizations) or net revenues (for public sector organizations);
- total capitalization broken down in terms of debt and equity (for private sector organizations);
- quantity of products or services provided.
G4-10 a. Total number of employees by employment contract and gender.
b. Total number of permanent employees by employment type and gender.
c. Total workforce by employees and supervised workers and by gender.
d. Total workforce by region and gender.
e. Report whether a substantial portion of the organization’s work is performed by workers who are legally recognized as self-employed, or by individuals other than employees or supervised workers, including employees and supervised employees of contractors.
f. Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries).
G4-11 Report the percentage of total employees covered by collective bargaining agreements.
G4-12
G4-12
Describe the organization’s supply chain.
G4-13 Report any significant changes during the reporting period regarding the organization’s size, structure, ownership, or its supply chain, including: changes in the location of, or changes in, operations, including facility openings, closings, and expansions; changes in the share capital structure and other capital formation, maintenance, and alteration operations (for private sector organizations); changes in the location of suppliers, the structure of the supply chain, or in relationships with suppliers, including selection and termination.
  Identified material aspects and boundaries
G4-14 Report whether and how the precautionary approach or principle is addressed by the organization.
G4-15 List externally developed economic, environmental and social charters, principles, or other initiatives to which the organization subscribes or which it endorses.
G4-16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization: holds a position on the governance body; participates in projects or committees; provides substantive funding beyond routine membership dues; views membership as strategic. This refers primarily to memberships maintained at the organizational level.
  Identified material aspects and boundaries
G4-17 a. List all entities included in the organization’s consolidated financial statements or equivalent documents.
b. Report whether any entity included in the organization’s consolidated financial statements or equivalent documents is not covered by the report. The organization can report on this Standard Disclosure by referencing the information in publicly available consolidated financial statements or equivalent documents.
G4-18 a) Explain the process for defining the report content and the aspect boundaries.
b) Explain how the organization has implemented the reporting principles for defining report content.
G4-19 List all the material aspects identified in the process for defining report content.
G4-20 For each material aspect, report the aspect boundary within the organization, as follows: Report whether the aspect is material within the organization. If the aspect is not material for all entities within the organization (as described in G4-17), select one of the following two approaches and report either: - the list of entities or groups of entities included in G4-17 for which the aspect is not material or - the list of entities or groups of entities included in G4-17 for which the aspect is material. Report any specific limitation regarding the aspect boundary within the organization.
G4-21 For each material aspect, report the aspect boundary outside the organization, as follows: - Report whether the aspect is material outside of the organization. - If the aspect is material outside of the organization, identify the entities, groups of entities or elements for which the aspect is material. In addition, describe the geographical location where the aspect is material for the entities identified. - Report any specific limitation regarding the aspect boundary outside the organization.
G4-22 Report the effect of any restatements of information provided in previous reports, and the reasons for such restatements.
G4-23 Report significant changes from previous reporting periods in the scope and aspect boundaries.
  Stakeholder engagement
G4-24 List of stakeholder groups engaged by the organisation.
G4-25 Basis for identification and selection of stakeholders with whom to engage.
G4-26 Report the organization’s approach to stakeholder engagement, including frequency of engagement by type and by stakeholder group, and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process.
G4-27 Report the organization’s approach to stakeholder engagement, including frequency of engagement by type and by stakeholder group, and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process.
  Report profile
G4-28 Reporting period (such as fiscal or calendar year) for information provided.
G4-29 Date of most recent previous report (if any).
G4-30 Reporting cycle (such as annual, biennial).
G4-31 Provide the contact point for questions regarding the report or its contents.
  GRI content index
G4-32

a. 'In accordance' option the organization has chosen.
b. GRI Content Index for the chosen option.
c. Report the reference to the External Assurance Report, if the report has been externally assured. GRI recommends the use of external assurance but it is not a requirement to be 'in accordance' with the Guidelines.

  Assurance
G4-33 a. Report the organization's policy and current practice with regard to seeking external assurance for the report.
b. If not included in the assurance report accompanying the sustainability report, report the scope and basis of any external assurance provided.
c. Report the relationship between the organization and the assurance providers.
d. Report whether the highest governance body or senior executives are involved in seeking assurance for the organization's sustainability report.
  Governance
G4-34 Report the governance structure of the organization, including committees of the highest governance body. Identify any committees responsible for decision-making on economic, environmental and social impacts.
  Ethics and integrity
G4-56 Describe the organization’s values, principles, standards and norms of behavior such as codes of conduct and codes of ethics.
G4-57 Report the internal and external mechanisms for seeking advice on ethical and lawful behavior, and matters related to organizational integrity, such as helplines or advice lines.
G4-58 Report the internal and external mechanisms for reporting concerns about unethical or unlawful behavior, and matters related to organizational integrity, such as escalation through line management, whistleblowing mechanisms or hotlines.

 

Aspect Indicator Description
   

SPECIFIC STANDARD DISCLOSURES 

    CATEGORY: ECONOMIC
Economic performance G4-EC1 Direct economic value generated and distributed.
  G4-DMA Management approach to the Economic Performance aspect.
Indirect economic impacts G4-EC7 Development and impact of infrastructure investments and services supported.
  G4-EC8 Significant indirect economic impacts, including the extent of impacts.
  G4-DMA Management approach to the Indirect Economic Impacts aspect.
Procurement practices G4-EC9 Proportion of spending on local suppliers at significant locations of operation.
  G4-DMA Management approach to the Procurement Practices aspect.
    CATEGORY: ENVIRONMENTAL
Materials G4-EN1 Materials used by weight or volume.
  G4-DMA Management approach to the Materials aspect.
Energy G4-EN3* Energy consumption within the organization.
  G4-DMA Management approach to the Energy aspect.
Water G4-EN8 Total water withdrawal by source.
  G4-EN10 Percentage and total volume of water recycled and reused.
  G4-DMA Management approach to the Water aspect.
Emissions G4-EN15 Direct greenhouse gas (GHG) emissions (Scope 1).
  G4-EN21 NOx, SOx, and other significant air emissions.
  G4-DMA Management approach to the Emissions aspect.
Effluents and waste G4-EN22 Total water discharge by quality and destination.
  G4-EN23 Total weight of waste by type and disposal method.
  G4-EN25 Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally.
  G4-DMA Management approach to the Effluents and Waste aspect.
Products and services G4-EN27
G4-EN27
Extent of impact mitigation of environmental impacts of products and services.
  G4-DMA Management approach to the Products and Services aspect.
Compliance with regulations G4-EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations.
  G4-DMA Management approach to the Compliance aspect.
Overall G4-EN31 Total environmental protection expenditures and investments by type.
  G4-DMA Management approach to the Overall aspect.
Environmental grievance mechanisms G4-EN34 Number of grievances about environmental impacts filed, addressed, and resolved through formal grievance mechanisms.
  G4-DMA Management approach to the Environmental Grievance Mechanisms aspect.
    CATEGORY: SOCIAL
    Labour practices and decent work
Workforce G4-LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees, by significant locations of operation.
  G4-DMA Management approach to the Employment aspect.
Occupational health and safety G4-LA5 Percentage of total workforce represented in formal joint management–worker health and safety committees that help monitor and advise on occupational health and safety programs.
  G4-LA6 Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender.
  G4-LA7 Workers with high incidence or high risk of diseases related to their occupation.
  G4-LA8 Health and safety topics covered in formal agreements with trade unions.
  G4-DMA Management approach to the Occupational Health and Safety aspect.
Training and education G4-LA9 Average hours of training per year per employee by gender, and by employee category.
  G4-LA10 Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings.
  G4-DMA Management approach to the Training and Education aspect.
Diversity and equal opportunity G4-LA12 Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity.
  G4-DMA Management approach to the Diversity and Equal Opportunity aspect.
    Product responsibility
Customer health and safety G4-PR1 Percentage of significant product and service categories for which health and safety impacts are assessed for improvement.
  G4-PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning the health and safety impacts of products and services during their life cycle, by type of outcomes.
  G4-DMA Management approach to the Customer Health and Safety aspect.
Product and service labelling G4–PR3 Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements.
  G4-PR5 Results of surveys measuring customer satisfaction.
  G4-DMA Management approach to the Product and Service Labelling aspect.
Marketing Communications G4-PR6 Sale of banned or disputed products.
  G4-DMA Management approach to the Marketing Communications aspect.
Customer privacy G4-PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data.
  G4-DMA Management approach to the Customer Privacy aspect.
    Indicators specified in the Oil and Gas Sector Supplement
  OG-13 Number of process safety events, by business activity.
  OG-14 Volume of biofuels produced and purchased meeting sustainability criteria.

*Partially reported rate


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