1 PROTECT Corporate social responsibility 2013
2 EXPAND STRATEGIC REPORT 2013 CoR por a TE governance 2013 C ORPORa TE s OCial REs POnsibiliT y 2013 financial statements 2013 Heritage Oil PLC Corporate Social Responsibility Report 2013 Heritage Oil Plc is an independent oil and gas exploration and production company with a Premium Listing on the London Stock Exchange ( LSE ) (symbol HOIL). The Company is a member of the FTSE 250 Index and has Exchangeable Shares listed on the Toronto Stock Exchange ( TSX ) (symbol HOC) and the LSE (symbol HOX). Heritage is a versatile organisation, dedicated to creating and increasing shareholder value with a portfolio of quality assets managed by a highly experienced team with excellent technical, commercial and financial skills. The Company has producing assets in Nigeria and Russia and exploration assets in Tanzania, Papua New Guinea, Malta, Libya and Pakistan. Contents The Heritage Oil Plc Annual Report and Accounts 2013 consists of four documents. overview Highlights Outlook The CSR Committee Chairman s Statement 02 About this report 04 Our CSR framework 05 CSR policy framework 06 Targets and achievements 08 strategic report The Strategic Report provides an overview of Heritage, its processes and a Business Review. PROTECT Corporate Social Responsibility The CSR Report provides detailed information concerning Heritage s CSR strategy, policies, systems and performance. Key Areas Environment and sustainability 10 Health and safety 12 Employees 14 Community and human rights 16 Business conduct 18 Corporate governance 20 STRUCTURE Corporate Governance The Corporate Governance Report provides detailed information on all aspects of Heritage s corporate governance. evolve Financial Statements The Financial Statements Report provides detailed information on Heritage s financial position. Additional Information Risk management 22 Global Reporting Initiative 23 CSR glossary 34 Advisers and financial calendar IBC
3 Corporate Social Responsibility Report 2013 Heritage Oil PLC 01 Highlights 2013 operational Approximately US$5.3 million spent on Corporate Social Responsibility ( CSR ) related initiatives, significantly higher than 2012 Community projects implemented through health, education and social programme investments across all operating regions Zero whistle-blowing cases or breaches in business conduct principles Zero Lost Time Incidents ( LTIs ) or fatalities across all operations Employment of local people remains high across all operations Adhered to mandatory reporting of Greenhouse Gas ( GHG ) emissions Commenced adoption of Heritage s CSR policies and systems in the Shoreline Natural Resources Limited ( Shoreline ) joint venture EMPLOYEES Number of local people employed, % Environment and sustainability Significant environmental incidents, fines or sanctions, all operations Papua New Guinea Tanzania Nigeria Russia Pakistan Libya Malta Health and safety LTIs, all operations 0 Business conduct Breaches in business conduct policies 0 CsR CSR related initiatives, $ 000 $5,300 Corporate governance Reviewed policies and commenced their implementation to Shoreline Continue to apply best practice principles in reporting New information provided on gender information of employees, GHG emissions and the Group s Human Rights Policy Outlook 2014 Continue to extend our practices to our operations in Nigeria Review the impact of mandatory reporting on GHG emissions Continue to review our reporting to ensure it meets new developments and best practice All dollars are US dollars unless otherwise stated.
4 Heritage Oil PLC Corporate Social Responsibility Report THE CSR COMMITTEE CHAIRMAN S STATEMENT engaging w i t h communities PAUL ATHERTON Chairman, CSR Committee I am pleased to report that our operations in Nigeria are proceeding well and we are looking to expand our footprint there and throughout our core areas, whilst building on our achievements in respect of all our existing operations. In addition, we started to assemble our exploration portfolio in Papua New Guinea in 2013 by farming in to four licences. In 2012 we acquired an interest in OML 30, Nigeria, through our interest in Shoreline Natural Resources Limited ( Shoreline ), an indigenous company, and we continue to implement our CSR policies in this joint venture. A natural part of the licence development involves consultation with local communities and this is carried out within OML 30 where over 90 communities are situated in the licence area. Business in new territories brings new challenges which we are confident of meeting through both the application of our existing policies and by adapting these as required. We are aware of the importance of effective engagement with all stakeholders, therefore procedures to achieve this are embedded within our business model. We aim to operate to the highest international social, environmental and safety standards within the industry and believe it is important to maintain a positive influence in areas where we conduct our business. We are continuing to extend our philosophy and practices to Shoreline s operations in Nigeria. In accordance with new legislation, with effect from 1 October 2013, all UK quoted companies are required to report on their greenhouse gas ( GHG ) emissions as part of their annual reporting. As noted in previous reports our primary activities in prior years have been in exploration, therefore we have not produced material amounts of GHG emissions and consequentially not reported this information. However, with the acquisition of an interest in OML 30 we have formulated processes to secure all relevant information for reporting GHG emissions. In addition, the Company continued with its participation in the Carbon Disclosure Project in 2013.
5 Corporate Social Responsibility Report 2013 Heritage Oil PLC 03 The CSR Committee is tasked with developing, implementing and overseeing our CSR strategy systems and performance and ensuring these are in line with our overall business aims and objectives. The Terms of Reference for this Committee can be found on our website Our CSR policy framework, on pages 6 to 7, supports our business model and sets out the essential core values making Heritage a good corporate citizen. We measure ourselves against deliberately high standards and recognise the importance of being a partner of choice. We identify specific responsibilities in each of the six core areas of potential impact and opportunity, specific to the CSR aspects of our activities. Adherence to these CSR values is viewed as one of the key factors in securing the long-term operational success of the Company. I am pleased to report that during 2013 we continued to have an excellent health and safety record with no Lost Time Injuries ( LTIs ) or fatalities. During the year community projects were implemented in our main areas of operation and there were no significant environmental incidents. Our initiatives last year were focused on health, education and social investments across our operating regions, coupled with maintaining our high standards of both business conduct and corporate governance. This is our sixth CSR Report and has been prepared based on our operating principles and with the help of stakeholder feedback. In this report you will find an overview of key areas of impact and opportunity, specific to the CSR aspects of our activities: environment and sustainability oil and gas operations have the potential to damage the environment but, if managed well, any activity impacts can be minimised; health and safety health and safety is a priority and a key element of all our activities; employees our ability to create sustainable shareholder value is linked to our ability to recruit, motivate and retain high calibre staff; community and human rights we ensure that relationships with our neighbours and local communities are conducted sensitively and with mutual respect; business conduct we uphold the highest standards of business conduct across all our operations; and corporate governance we are committed to protecting the interests of all stakeholders through compliance with relevant legal and regulatory environments and through the effective management of risk. In Nigeria, it was determined early on in the year that engagement with local communities would be fundamental to driving an improved performance from the licence and in generating shared wealth to all stakeholders. To this extent a not for profit Non- Government Organisation ( NGO ), registered and working in Nigeria and West Africa for over 20 years, was engaged to work with the National Petroleum Development Company ( NPDC ), the operator, and Shoreline to ensure a cohesive approach to community issues. Conclusions from extensive consultations with communities within the OML 30 licence allowed Shoreline to gain an understanding of any fundamental issues of concern arising from activities in the area. This enabled Shoreline to engage accordingly in the interest of the impacted communities as well as helping to restore and build an environment such that all can benefit. This is being done by: ensuring regular and transparent dialogue with all communities; ensuring that there is no discrimination with regards to employment and that, wherever possible, priority is given to members of local communities; increasing resources towards pipeline and asset security; and ensuring that any CSR related initiatives are offered equally to all affected communities. In 2013, as in previous years, we set ourselves targets across these areas and I am pleased to report we surpassed all targets set. Our targets for this year are set out on page 9 of this CSR Report. We continue to welcome feedback from, and dialogue with, interested parties concerning all aspects of this report. Contact details are noted at the back of this report and can also be found on our website I would like to thank our Directors, employees, joint venture partners and contractors for the continued excellent performance of our Company in all aspects of our CSR approach and for their continued commitment and dedication to respecting our vision and legacy in the many areas in which we operate. PAUL ATHERTON chairman, csr committee
6 Heritage Oil PLC Corporate Social Responsibility Report About this report In this report we disclose information relating to our CSR strategy, policies, systems and performance in We also detail our future aims, targets and objectives. This report relates to the period 1 January 2013 to 31 December 2013 and should be read in conjunction with the entire Heritage Oil Annual Report and Accounts for 2013, in particular the Corporate Governance Report, and the Company website Our principal activities during 2013 were in Nigeria and, as such, a majority of the information in this CSR Report relates to our operations in this region. CSR WITHIN THE HERITAGE BUSINESS MODEL Heritage s business model balances the exploration and appraisal process with cash generating production assets supported by high standards of governance, regional knowledge and contacts and an effective CSR approach. Our vision is to be a leading exploration and production company whilst also generating shareholder returns. We believe this to be fundamental in creating shared economic wealth. Therefore, we have a responsibility to ensure that we deliver on our business objectives in a way that benefits all stakeholders. Heritage considers this framework, supported by robust policies, systems and exemplary performance, as a key element of long-term success. Managing relationships with stakeholders remains a key element in developing and maintaining Heritage s reputation as a preferred partner of choice. MATERIALITY AND COMPLETENESS By using the GRI G3.1 Guidelines (the G3.1 Guidelines ) and the recently published oil and gas sector supplement as a foundation we are able to report on key operational material. The Global Reporting Initiative ( GRI ) table on pages 24 to 33 contains information set out in the G3.1 Guidelines. In addition, we also determine materiality by assessing the significance and relevance of the information by considering: Heritage s policy position on the issue; its impact on shareholder value in the short, medium and long-term; the level of stakeholder interest in the matter (assessed by dialogue with contractors, employees, suppliers, shareholders, research organisations, Non-Governmental Organisations ( NGOs ), governments and advisers); and the degree of interest in the issue emanating from public arenas, reflected through reporting in the media. The CSR Committee continues to review the scope of this information and intends to refine the reporting process over time taking into account the issues noted above and changes in our business activities. EXTERNAL ASSURANCE Information within this report has not been externally verified as we do not believe this would be of material benefit at this time. Every effort has been made to ensure that information contained in this report is accurate. The CSR Committee continues to review this matter of external verification and to assess whether any change is required.
7 Corporate Social Responsibility Report 2013 Heritage Oil PLC 05 Our CSR Framework Heritage considers that an effective CSR framework, supported by robust policies, systems and exemplary performance is paramount in securing long-term success. The framework supports our core business model together with high standards of governance and regional knowledge. OUR AREAS OF IMPACT AND OPPORTUNITY Heritage recognises specific responsibilities in each of six core areas of potential impact and opportunity, specific to the CSR aspects of our activities. Adherence to these CSR values is viewed as a key factor in securing the long-term success of the Company. We aim to apply targets, across our identified areas of impact and opportunity, to focus employees and enable the Company and stakeholders to monitor performance. OUR CSR VISION to be a responsible and transparent business in all the areas in which we operate, believing this is fundamental in generating long-term growth for the Company; to create lasting legacies for local communities; to operate to the highest international social, environmental and safety standards; and to maintain high standards of corporate governance. CSR encompasses the Company s management of relationships with shareholders, employees, contractors, partners and local communities where we work, together with the impact it has on society and the environment. IN ACTION Our approach to CSR supports the business model and sets out the essential core values to make Heritage a good corporate citizen. The Company sets itself a high standard against which to measure itself and recognises the importance of being a partner of choice. Our approach to CSR includes how we conduct relationships with all of our stakeholders and the wider impact we can have on society and the environment. We undertake CSR related initiatives across our asset portfolio where we are actively working. set policies Environment and sustainability We aim to make a positive contribution to global sustainability and to protect the environment Health and safety A core element of all activities and a natural priority Employees Our ability to create shareholder value is linked with our ability to recruit and retain high calibre staff Community and human rights Active and enduring relationships are an essential and fundamental element of our business Business conduct We maintain robust policies with respect to all matters concerning our business conduct Devise and maintain systems Measure and monitor performance Communicate and report to stakeholders Corporate governance As a company with a Premium Listing and a member of the FTSE 250 Index, Heritage maintains high corporate governance standards Apply stakeholder feedback
8 Heritage Oil PLC Corporate Social Responsibility Report CSR POLICY FRAMEWORK The CSR policy framework sets out the essential core values to make the Company a good corporate citizen. The framework defines how the Company should operate across all levels of business, setting a high standard against which to measure. Our approach to: ENVIRONMENTAL AND SUSTAINABILITY MATTERS ENVIRONMENTAL We aim to make a positive contribution to the protection of the environment where we operate and to minimise any adverse effects of our operations. Wherever possible, we will prevent, or otherwise minimise, mitigate and remediate, harmful effects of our operations on the environment. We will also promote, encourage and prioritise reuse and recycling methods throughout our operations and endeavour to meet the challenges presented by climate change. SUSTAINABLE BUSINESS We aim to contribute positively to global sustainability through our operations, the development of our fields, our adoption of new technologies and the conduct of our relationships with all stakeholders. Ensuring that relationships between our employees are cohesive, safe and effective is important to our Company and we expect all our employees to respect different cultures, traditions and employment practices across our business areas. We share common goals with our employees and contractors, in particular the elimination of workplace injuries, and are committed to good corporate values and responsible behaviour. We recognise achievement and create opportunities for individuals at all levels of our businesses. In dealing with our employees we act in compliance with national regulatory requirements and our obligations under relevant national and international laws. ILO DECLARATION ON FUNDAMENTAL PRINCIPLES AND RIGHTS AT WORK We support the four fundamental principles contained within the International Labour Organisation ( ILO ) Declaration. In accordance with local legislation and practice, we respect freedom of association, the right to collective bargaining, employment that is freely chosen with no use of forced or child labour and we do not discriminate on the basis of gender, colour, ethnicity, culture, religion, sexual orientation or disability. EQUAL OPPORTUNITY We value all employees for their contribution to the business and are committed to diversity and opportunities for advancement. These factors are not influenced by any considerations other than performance and aptitude. Employees are provided with the opportunity to develop their potential and, where appropriate, to develop their careers further within the Group. OCCUPATIONAL HEALTH We aim to protect the physical health of all of our employees and contractors whilst in the workplace. In particular, we endeavour to meet any challenges presented to our employees and the wider communities in which they live and operate. Our approach to: HEALTH AND SAFETY MATTERS Health and safety is a natural priority and a core element of all of our activities. All energy companies face a wide range of health and safety matters ranging from industrial accidents to occupational illnesses. Our goal, and a key performance of the Company, is zero injuries and fatalities across all areas of our operations. We aim to ensure that important factors, such as an understanding of cultural differences in host countries and use of external contractors, are addressed in the development of our health and safety systems and procedures with a view to constructing, maintaining and developing world-class safety systems across all of our operations. Our approach to: EMPLOYEE MATTERS EMPLOYEES Our ability to create sustainable shareholder value is linked to our ability to recruit, motivate and retain high calibre staff as detailed in the risk section in the Strategic Report on pages 32 to 34. Our approach to: COMMUNITY AND HUMAN RIGHTS MATTERS COMMUNITIES It is important to the Company that relationships with neighbours and local communities are conducted sensitively and with mutual respect. These relationships recognise that active and enduring partnerships are a central and fundamental element of our business. We aim to promote the sharing of economic benefit created by our activities through the conduct of our community relationships. UNITED NATIONS UNIVERSAL DECLARATION OF HUMAN RIGHTS We support human rights, consistent with the stipulations contained within the United Nations Universal Declaration of Human Rights and remain committed to upholding these principles. We endeavour to ensure that these commitments extend to all of our supply chains and we work with our partners and contractors to ensure that they are part of our contractual requirements.
9 Corporate Social Responsibility Report 2013 Heritage Oil PLC 07 UNITED NATIONS DECLARATION ON THE RIGHTS OF INDIGENOUS PEOPLES Heritage supports the principles that underpin the United Nations Declaration on the Rights of Indigenous Peoples. In particular we support rights to culture, identity, language, employment, health and education. LAND ACCESS We ensure that we receive the widest possible support for our proposals throughout the life cycle of our activities. We do this by working in partnership with our stakeholders to optimally and sensitively co-ordinate relevant economic, technical and sustainable development factors in an integrated process. Our approach to: BUSINESS CONDUCT MATTERS POLITICAL INVOLVEMENT Heritage does not, directly or indirectly, participate in party politics and the Company does not provide financial support to political parties or politicians. BRIBERY AND CORRUPTION Heritage is resolutely opposed to bribery and corruption in whatever forms they may take. Gifts or entertainment may only be offered to a third party if they are consistent with usual business practice in the relevant territory, are modest in value and cannot be interpreted as a form of inducement. It is Heritage s policy that revenues, purchases and services from suppliers are made solely on the basis of price, quality, performance, value and for their benefit. Sales, purchases or award of contracts should never be made as the result of giving or receiving inducements in the form of gifts, money or entertainment from third parties or favours in any other form. Employees should not accept gifts, money or entertainment from third party organisations or individuals, where these might reasonably be considered likely to influence business transactions. Gifts, other than trivial ones of low value, are not accepted. In a culture where such an action might cause offence, the gift must be declared to the Company and, if practical, donated to an appropriate charity. Heritage has a robust Anti-Bribery and Corruption policy. TREATMENT OF CUSTOMERS We regard mutual trust and confidence with our contractors and customers as very important. We require employees to deliver high levels of service consistently, surpassing expectations and meeting their changing requirements. RELATIONS WITH SUPPLIERS We ensure that all of our suppliers are treated fairly and responsibly. All potential suppliers will have a reasonable opportunity to win business with us. We aim to pay our suppliers on time and in accordance with agreed terms of trade. Suppliers will conduct their activities in accordance with our own policies. COMPETITION We always aim to compete vigorously with our competitors, but in a fair and responsible way, and aim to ensure that our success is built upon excellence. When in contact with our competitors, employees are required to avoid disclosing confidential information and we will not make improper attempts to acquire competitor trade secrets or other confidential information. Employees will not undertake any arrangements or practices that may conflict with laws applicable to the conduct of our business. Our approach to: CORPORATE GOVERNANCE MATTERS COMPLIANCE WITH THE LAW AND RELEVANT REGULATIONS We are committed to protecting interests of our shareholders and other stakeholders through compliance with relevant legal and regulatory environments and similarly through effective management of business risks. We comply fully with all relevant national and international laws and act in accordance with local guidelines and regulations, including those that are industry specific and govern our operations. It is the responsibility of senior personnel to ensure, by taking legal or other advice where appropriate, that they are aware of all local laws and regulations that may affect the area of the business in which they are engaged. ACCOUNTING AND RECORDS Heritage maintains accounting systems that identify clearly the true nature of all business transactions, assets and liabilities, in line with relevant regulatory, accounting and legal requirements. No record or entry may be false, distorted, incomplete or suppressed. All Group reporting must be accurate and complete and in compliance in all material respects with stated accounting policies and procedures. Employees must not materially misstate, or knowingly misrepresent, management information for personal gain or any other reason. EXTERNAL REPORTING Our businesses may be required to make statements or provide reports to regulatory bodies, government agencies or other government departments. Our businesses will take care to ensure that such statements or reports are correct, timely and not misleading. Senior management must be made aware of any sensitive disclosure before it is made. We ensure that statements made to the media are correct and not misleading. Media enquiries are referred to our media experts and/or advisers and statements are only made by designated spokespersons. We provide, through our Group website the Annual Report and Accounts and other statements, including this report, appropriate information to enable shareholders and stakeholders to assess the performance of the Company. We always comply with applicable laws and regulations concerning disclosure of information about the Group.
10 Heritage Oil PLC Corporate Social Responsibility Report TARGETS AND ACHIEVEMENTS We aim to apply targets to enable stakeholders to assess our performance. In the table below we show our achievements against our 2013 targets and detail further targets for progress Environment and sustainability no major spills or environmental incidents; no exceptional fines or sanctions related to our environmental management; Environmental Impact Assessments ( EIAs ) conducted for all major work programmes; and reported GHG emissions. Health and safety no fatalities or LTIs; continued knowledge sharing amongst staff and peer group; and no fines or sanctions related to our health and safety management. Employees majority of employees drawn from each country of operation; contributed to training for staff; promoted diversity; and continued to keep staff turnover at low levels. Community and human rights no human rights violations; no fines or sanctions related to our community and human rights management and activities; further engagement with stakeholders for relevant programmes in our areas of operation; and continued dialogue with specialist organisations. Business conduct no fines or sanctions related to poor business conduct; continued to develop systems to identify risks; and monitored developments and peer group best practice. Corporate governance reported findings and decisions of the CSR Committee; provided clear information on executive pay; developed our approach to managing risk; and continued emphasis on Company best practice and compliance with the UK Corporate Governance Code (the Code ).
11 Corporate Social Responsibility Report 2013 Heritage Oil PLC targets 2013 TARGETS ACHIEVED no major spills or environmental incidents; no exceptional fines or sanctions related to our environmental management; and EIAs to be conducted for all major work programmes TARGETS ACHIEVED no fatalities or LTIs; and no fines or sanctions related to our health and safety management TARGETS ACHIEVED use local staff where appropriate; promote training for staff; promote knowledge sharing amongst staff; remain committed to diversity; and keep staff turnover at low levels TARGETS ACHIEVED active engagement with stakeholders for relevant programmes in our areas of operation; no human rights violations; no fines or sanctions related to our community and human rights management and activities; and continue dialogue with specialist organisations TARGETS ACHIEVED maintain high standards of business conduct with no fines or sanctions; continue to develop systems to identify risks; and monitor developments and peer group best practice TARGETS ACHIEVED report publicly the findings and decisions of the CSR Committee; review recent UK government proposals in respect of executive remuneration and narrative reporting; continue to develop our approach to managing risk; and review amendments to the Code.
12 Heritage Oil PLC Corporate Social Responsibility Report ENVIRONMENT & SUSTAINABILITY Oil and gas operations have the potential to damage the environment but, if managed well, any negative impacts from activities can be minimised HIGHLIGHTS POTENTIAL IMPACT AND OPPORTUNITY once more we can report that we have had no major environmental incidents, such as spills, during the year; we conducted EIAs for all major work programmes in line with local regulations; and adhered to mandatory reporting of GHG emissions. The potential environmental impact of our activities includes: the impact of wells, pipelines and other infrastructure with a resulting effect on biodiversity; the accidental release of hydrocarbons or chemicals; and emissions which can affect air quality and can potentially be linked with climate change. A strong environmental performance is key to maintaining our reputation and ability to generate shareholder value. Consequently, we undertake operations in accordance with the high international standards of the oil industry and EIAs are conducted before any major capital expenditure is incurred. In doing so we maintain a reputation of being considered as a partner of choice. MITIGATION OF IMPACT Number of major environmental incidents ZERO We have specific Group requirements and recommendations governing our identification and management of potential impacts of projects that carry particular environmental and social risks; these apply to new projects and acquisition negotiations. We have developed systems and practices that are designed to help us: identify and assess potential environmental impacts in the early stages of a project or acquisition; take necessary action to mitigate impacts throughout our operations; and leave a limited footprint, in line with local regulations.
13 Corporate Social Responsibility Report 2013 Heritage Oil PLC 11 OUR APPROACH Greenhouse Gas ( GHG ) Emissions Statement We work to understand and manage the sensitivities of the environments in which we operate, and our responsibilities to them, throughout the lifecycle of our operations. We are committed to making a positive contribution to the protection of the environment in areas in which we operate and aim to minimise any adverse effects of our operations. We want to contribute positively to global sustainability through our operations, the development of our fields, the adoption of new technologies and the conduct of our relationships with all stakeholders. We identify and assess potential environmental impacts at the planning stage of our operations. We protect, as best we can, the local environment during operations and aim to restore it to the same standard that we found it in once activities are completed. This restoration activity is conducted in conjunction with local authorities and communities where we operate. None of our active operations during 2013 were in protected areas or areas of high biodiversity value. Q&A From 1 October 2013, all UK quoted companies are required to report on their greenhouse gas emissions as part of their annual Directors Report. As noted in previous reports, our primary activities in prior years have been in exploration, therefore we have not produced material amounts of GHG emissions and consequentially have not reported this information. However, with the acquisition of OML 30 we have formulated processes to secure all relevant information for reporting GHG emissions. This assessment has been carried out in accordance with the World Business Council for Sustainable Development and World Resources Institute s (WBCSD/WRI) Greenhouse Gas Protocol; a Corporate Accounting and Reporting Standard. This protocol is considered current best practice for corporate GHG emissions reporting. Tonnes of equivalent (tco 2e 1 ) Scope 1 1,949,067 Scope 2 4,115 Scope Total 1,953,448 Intensity ratio per bbl Do the effects of the Company s activities on the environment represent a material potential risk to its shareholders and stakeholders? During 2013, the Company s activities, prior to any mitigation, presented a small environmental impact, representing an immaterial risk to its shareholders and stakeholders. 1 Carbon dioxide equivalent or CO 2e is a term for describing different greenhouse gases in a common unit. For any quantity and type of greenhouse gas, CO 2e signifies the amount of CO 2 which would have the equivalent global warming impact.
14 Heritage Oil PLC Corporate Social Responsibility Report HEALTH & SAFETY Health and safety is a priority and key element of all of our activities. All energy companies face a wide range of health and safety challenges ranging from industrial accidents to occupational illnesses HIGHLIGHTS POTENTIAL IMPACT AND OPPORTUNITY zero fatalities and LTIs reported across our operations; no exceptional fines or sanctions related to our health and safety management; and continued focus on training. A major event can impact on our employees, contractors and local communities leading to a potential loss of reputation. Our ability to demonstrate a strong track record is an important factor in obtaining stakeholder approval for proposed projects. A strong health and safety record is one of our key business drivers and also forms part of our Key Performance Indicators ( KPIs ) by which we monitor our performance. MITIGATION OF IMPACT Effective safety performance across our operations depends on the right behaviour and attitude. This requires: setting the right expectations for all employees and contractors we require that everyone behaves in a safe manner and follows all applicable safety rules; empowering people to intervene to stop a task if they believe it to be unsafe or intervene if a colleague s behaviour could lead to harm; accountability requiring people to take responsibility for their own safety and the safety of others and to be accountable for their behaviour; leadership managers and supervisors are expected to lead by example and demonstrate their commitment to safety; and safety management systems being implemented at all sites, both operational and administrative.
15 Corporate Social Responsibility Report 2013 Heritage Oil PLC 13 OUR APPROACH We are very proud of our health and safety performance and believe it assists in making us a partner of choice. Safeguarding people working for our Company and ensuring that all of our operations are designed and managed properly and to high international standards is always at the core of how we operate our business. Our goal in this area is zero injuries and fatalities across all areas of our operations and to minimise and/or negate operational health issues. It is the Company s responsibility to minimise our employees exposure to health and safety risks of any kind. In implementing health and safety systems, we balance the need to protect our workers with the knowledge that working practices and traditions vary by location and so we amend or tailor these systems where necessary. All sites are covered by safety management systems with general managers responsible for overall safety measures. We also ensure that our contractors adopt these principles. Our employees have the authority to intervene in a task if they believe it could lead to harm or is considered unsafe. We do, however, appreciate that no organisation is immune to a crisis, which can happen at any time. Due to the potential consequences that these can have, we recognise the importance of being prepared for such an unfortunate incident. We continually review crisis management systems to ensure that our processes match our needs and requirements. Q&A How does Heritage ensure that its contractors and sub-contractors adhere to its health and safety standards? Our local managers are tasked with ensuring that all employees, contractors and sub-contractors are fully aware of the Company s policies and procedures in this important area. We regularly review our systems to ensure that they are commensurate with best practice, taking into account local health and safety culture. This can vary widely and we therefore take an individual approach in each area to ensure compliance with our corporate standards.
16 Heritage Oil PLC Corporate Social Responsibility Report Employees Our ability to create sustainable shareholder value is linked to our ability to recruit, motivate and retain high calibre staff. Heritage aims to ensure that relationships between our employees are cohesive, safe and effective HIGHLIGHTS POTENTIAL IMPACT AND OPPORTUNITY we continued to operate with a high percentage of local workers drawn from our areas of operation, using expatriates only when particular skill sets were not available locally; staff turnover has remained low at 2%; and on the job training and third party training provided to local personnel. Our ability to create sustainable shareholder value relies on our ability to recruit, motivate and retain employees with a diverse range of skills. We believe that our competitive advantage is derived as much from our people as from our asset base and attractive and growing business opportunities. The loss of key employees is one of the primary risks of the business which can potentially cause short and medium-term disruption to operations. We believe that our success has been attributable in part to assembling the right team of people and we focus on how to attract, manage and engage both employees and contractors. Our continued focus on recruiting, where possible, from local communities is an important factor in maintaining excellent stakeholder relationships. MITIGATION OF IMPACT To ensure successful recruitment, motivation and retention in a challenging, international market for skills and experience, we aim for: a competitive approach to remuneration with packages reviewed regularly; establishing long-term incentive schemes; learning and development programmes that enhance employees careers; a commitment to diversity; a focus on recruitment from within host countries and communities, where certain skill sets are available; and workplaces that motivate and engage employees at all levels, and which are free from discrimination and harassment of any kind.
17 Corporate Social Responsibility Report 2013 Heritage Oil PLC 15 OUR APPROACH We value all employees for their contribution to our business. Opportunities for advancement are equal and not influenced by considerations other than performance and aptitude. Employees are provided with the opportunity to develop their potential and, where appropriate, to further their careers within the Group. Staff are motivated to develop within a flexible framework and are encouraged to provide feedback on their expectations. Local sourcing is important to our business practices and we aim to contract services to local firms where possible. For example, many of our transport and security needs have been fulfilled using local firms. Training of employees and contractors continued to receive high priority in 2013 and we have continued to invest heavily in this area. We believe there is a strong business case for investing in development of our workforce as this can result in efficiency savings, reduce time lost through injury and assist in identifying opportunities for improving our business. It is our responsibility to train all workers to provide better access to job opportunities in the long term. We emphasise transferable skills and a broad range of learning, as well as the basic aim of developing a knowledgeable, productive and happy workforce. Q&A Does Heritage try to secure staff locally or are there a large number of expatriates in its areas of operation? Heritage continues to operate with a high percentage of workers drawn from local communities, as can be seen on page 1. Where particular skill sets are not available locally then expatriates are used but training schemes are devised to help transfer skills to local labour. How important are staff within the Heritage business model? The success of Heritage s business model is a reflection of having experienced staff that enjoy working within the Company. It is therefore important to ensure that staff are correctly remunerated and motivated to develop their potential within the Group.
18 Heritage Oil PLC Corporate Social Responsibility Report COMMUNITY & HUMAN RIGHTS We ensure that relationships with our neighbours and local communities are conducted sensitively and with mutual respect. Enduring partnerships are a central and fundamental element of these relationships HIGHLIGHTS POTENTIAL IMPACT AND OPPORTUNITY a Non-Government Organisation ( NGO ) in Nigeria was engaged to work with the operator, and Shoreline to ensure a cohesive approach to community issues; Shoreline engaged accordingly in the interest of the impacted communities as well as helping to restore and build an environment such that all can benefit; and across our operations we participated in many healthcare, environmental and training initiatives. The support of host communities, governments and other stakeholders is crucial in the achievement of our long-term business objectives. If managed incorrectly we could potentially: alienate communities, leading to conflict and disruption; and create a culture of dependency upon our Company or create conflict between communities and governments. Managed correctly, we can work together with local communities to generate shared long-term prosperity, some of which will stem from health and education initiatives. MITIGATION OF IMPACT To ensure that we maintain healthy relationships with local communities and governments we: promote sharing of economic benefits created by our activities through the conduct of community relationships and are firmly committed to upholding principles set out in the United Nations Universal Declaration of Human Rights; enter into long-term sustainable community projects requested by local communities; seek to ensure access to land is secured using approaches that are sensitive to local concerns and values; generate socio-economic benefits that address long-term local needs; and provide opportunities for local suppliers when there is often a significant gap between the highly technical requirements of the industry and the level of skills available locally.
19 Corporate Social Responsibility Report 2013 Heritage Oil PLC 17 OUR APPROACH We view stakeholder engagement as an integral part of our business model. The success of projects in the different parts of the world is dependent on relationships with governments, local authorities and local communities. A natural part of a new project development involves consultation with local communities as well as government authorities, to identify ways in which our expertise can be best applied. Our licence to operate in any area is dependent on being viewed as a positive force by those most directly affected by our operations and therefore it is in our interest to consult stakeholders and find ways to be a trusted and useful partner. where local communities have a sense of ownership, thus increasing their long-term effects. However, in terms of having the greatest impact, we believe this is best achieved through helping countries realise their natural resource potential to create shared economic wealth for everyone. Comments and feedback are welcomed and can be provided by referring to the contact information at the back of this CSR Report or on our website We believe that by partnering with other organisations such as NGOs, governments (local and national) and other companies, we reduce the risk of creating dependency, encourage dialogue and manage expectations. It is our intention to improve conditions in the vicinity of our operations and we try to invest in sustainable projects, Q&A Many of Heritage s operations are located in areas of economic deprivation. How does the Company address this? Heritage always develops close relationships with local authorities and communities in areas where it operates. An important element of these relationships is the design and operation of sustainable development programmes that aim to address important aspects of local need. These activities are always performed in conjunction with local stakeholders and their input in the process is important when establishing our CSR programmes.
20 Heritage Oil PLC Corporate Social Responsibility Report BUSINESS CONDUCT We uphold the highest standards of business conduct across all of our operations. We are resolutely opposed to bribery and corruption in whatever forms they may take and do not participate in, or finance, party politics HIGHLIGHTS POTENTIAL IMPACT AND OPPORTUNITY the Company had no material breaches of its policies during 2013; and over the year we engaged with a number of stakeholders (including NGOs, investors and research companies), increasing their understanding of our approach and allowing us to apply their feedback to develop our systems and procedures, where necessary. Failure to comply with the highest standards of corporate conduct, which is expected by our diverse stakeholders, will impact on our reputation and ability to be viewed as a partner of choice. Good corporate conduct makes sound business sense which guides correct actions and enhances our reputation amongst stakeholders. MITIGATION OF IMPACT Number of Company policy breaches ZERO We recognise the Company can mitigate any disruptive impact through committing to: develop and maintain systems to identify potential risks; continue to develop policies in accordance with a changing regulatory background; ensure employees and contractors are aware of procedures; and instil a sense of accountability amongst all members of staff.
21 Corporate Social Responsibility Report 2013 Heritage Oil PLC 19 OUR APPROACH Our activities are predominantly carried out in developing countries. Our approach both within these countries and in the parts of the world where we may wish to conduct business in the future, is dependent upon how our relationships are conducted. We are, in particular, resolutely opposed to bribery and corruption in whatever form they may take. Our policies preclude financial support for political parties, require that relationships are conducted with mutual trust and confidence and that suppliers and competitors are treated fairly. We aim to ensure that this fundamental aspect of our business extends to all of our relationships with our host governments and local authorities, suppliers, customers, business partners, employees, contractors and other key stakeholders. The Company has whistle-blowing procedures and systems that are reviewed regularly. These aim to ensure that employees and other parties connected with the Company have the opportunity to confidentially report breaches of business conduct policies. Details of these procedures are available to all of our employees at all of our offices. The Chairman, CEO or Chairman of the Audit Committee receive any reports and are responsible for their follow-up. The outcomes of these instances are reported to and monitored by either the Audit Committee or the Board. Q&A Are your Company policies static or have they been developed over time? The Company reviews its policies through its various committees regularly and develops them to enable best practice in the relevant areas of operation.
22 Heritage Oil PLC Corporate Social Responsibility Report CORPORATE GOVERNANCE Heritage is committed to protecting the interests of shareholders and stakeholders, through compliance with relevant legal and regulatory environments and through effective management of risk HIGHLIGHTS POTENTIAL IMPACT AND OPPORTUNITY The Board and Remuneration Committee have reviewed changes in UK executive remuneration reporting; Amendments to the UK Corporate Governance Code, which came into effect for financial years beginning on or after 1 October 2012, have been actioned; and Consideration has been given to changes in UK narrative reporting requirements to ensure the Company complies with best practice. Failure to comply with corporate governance codes and practices could result in adverse sentiment towards the Company. A strong and transparent approach to corporate governance viewed favourably by the Company s current and potential shareholders. MITIGATION OF IMPACT We recognise the importance of maintaining strong corporate governance procedures and processes and continue to develop systems. We do this through: employing the skill, expertise and resources of the Group and its advisers; reviewing compliance with corporate governance codes and other regulatory guidelines routinely; regular updates on potential changes to the regulatory landscape; complying with all relevant national and international laws and acting in accordance with local guidelines and regulations (including those that are industry specific) that govern our operations; and establishing Board level responsibility and accountability.