RESPONSIBLE DEVELOPMENT Corporate Responsibility Report Polski Koncern Naftowy ORLEN Spó³ka Akcyjna 2010
Table of contents Table of contents Letter of the President of the Management Board of PKN ORLEN SA...5 What is worth knowing about PKN ORLEN?...7 1. Market...13 PKN ORLEN a brand open to dialogue...14 1.1. PKN ORLEN on the Capital Market...16 Corporate Governance...16 Relations with the capital market...17 RESPECT Index...18 1.2. The Supervisory Board...19 1.3. Integrated Management System...20 Compliance audit internal and external verification of the Management Systems...22 Development of the Integrated Management System...23 Process Management...23 1.4. Relations with suppliers...25 1.5. Responsible marketing...26 1.6. Service Standards...27 2. SOCIETY...29 PKN ORLEN as a responsible citizen...30 2.1. Expectations of our stakeholders...30 2.2. Risk Management...32 2.3. Participation in public life...33 2.4. Participation in local and European projects...35 2.5. National heritage...35 2.6. Sports...36 2.7. Charity...37 2.8. ORLEN Safe Roads...40 3. SAFETY...41 Safety the key to development...42 3.1. Safety Policy at PKN ORLEN...42 3.2. More than HSE...43 Product safety...43 Employee safety...44 ORLEN Group regions and companies...46 Safety of service suppliers and outsourced contractors...47 Technology safety and process safety...47 3.3. Fire Protection In-House Fire Brigade...48 3.4. Transport Safety the SPOT system...50 3.5. Disseminating the idea of safety education...50 2
Corporate responsibility report 4. Environment...51 PKN ORLEN activities and their impact on the climate and environment...52 4.1. Climate changes challenges...52 4.2. In the heart of Poland...54 4.3. Water and wastewater management...55 4.4. Waste...56 4.5. Greenhouse gas emissions...58 4.6. Expenditure and investments in environmental protection...61 4.7. Together, we change the world...63 4.8. Responsible Care...63 4.9. Green Company...64 4.10. Responsible production...64 Pro-environmental effects in terms of fuel production...67 5. Workplace...71 Responsible employer...72 5.1. Code of Ethics and core values as the foundation of our operations...72 5.2. PKN ORLEN employee figures...74 5.3. Recruitment...77 5.4. Professional development...78 5.5. Employee support provided by the employer...79 5.6. Dialogue with the employees...80 5.7. Responsibility for retired employees...81 5.8. Employee Volunteering...82 Awards...84 Certificates...85 Useful websites...86 GRI Index...87 Contact us...88 3
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Letter of the President of the Management Board of PKN ORLEN SA Dear Sir or Madam, the essence of socially responsible business practices is to maintain a balance between economy, ecology and ethics, and to reconcile the interests of the Company and the needs of its environment. The fact that those objectives are strongly visible in the strategy of our Company proves that we take corporate responsibility seriously and perceive it as a commitment towards all our stakeholders. We are aware that without a wonderful team of workers and associates, local societies positively disposed towards our efforts, trusted business partners and loyal customers PKN ORLEN s success would not be possible. This is why we create a friendly work environment, promote safety on the roads and engage in the development of Płock, the city where our largest refinery is located. One of the proofs of our social sensitivity and responsibility is our 8-year participation in the Global Compact programme initiated by the UN Secretary-General. According to the assumptions of the programme, we respect human rights and the standards of work and environmental protection, and we support anti-corruption activities. We improve environmentally-friendly technologies because we are aware that what we do today influences our future and the future of the generations to come. We have been involved in the Responsible Care Programme for the last fourteen years. During that period, we have implemented more than a hundred projects, some of which went far beyond the markets where our business operates. To our satisfaction, PKN ORLEN has been once again included in the RESPECT Index, the first Polish index of socially responsible companies. The inclusion of our company in the consecutive editions of the index is a reason to be proud, but also an obligation and motivation to continue our efforts to promote the local environment. We believe that for our shareholders, PKN ORLEN s presence in the elite group of stock market companies is another confirmation that they were right to invest in a Company that combines effective business management with responsibility for the environment in which it operates. We would like to thank you for your support for our social activities. We are pleased to note that more and more Customers are asking for environmentally-friendly fuels at our fuel stations and order Fairtrade certified coffee at the Stop Cafe bars. We are also very happy to report that participants of the VITAY programme share our concern for children in family-run children s homes and donate a portion of their points to them. Another generation of peregrine falcons that hatched in the nesting boxes at the premises of the Production Plant in Płock lets us believe that we have achieved a balance between the needs of contemporary people and respect for the nature. There are plenty of other examples that could be found in PKN ORLEN to prove that it is worth to be a socially responsible company. The Report you will find enclosed presents last year s achievements in the field of corporate responsibility as well as our future commitments. We hope that the Report will reassure you that we are a trustworthy Company. To conclude, I would like to emphasize that as much as we are satisfied with current achievements, we are also aware of the huge amount of work that still needs to be done in a dynamically changing world. Dariusz Jacek Krawiec President of the Management Board of PKN ORLEN 5
What is worth knowing about PKN ORLEN Our motto Whenever you need us. Our mission Aiming to become the regional leader, we ensure long-term value creation for our shareholders by offering our customers products and services of the highest quality. All our operations adhere to best practice principles of corporate governance and social responsibility, with a focus on care for our employees and the natural environment. MAŽEIKIŲ VILNIUS HAMBURG BERLIN PLOCK WARSAW PRAGUE 6
Corporate responsibility report What is worth knowing about PKN ORLEN? PKN ORLEN is a regional leader of the crude oil industry and the leading producer and dealer of refinery and petrochemical products. The main activities of the Company include the processing of crude oil into petrol, diesel fuel, furnace oil, aviation fuel, plastics and petrochemical products. The Company manages seven refineries in Poland, the Czech Republic and Lithuania, including refinery and petrochemical facilities located in Płock, Poland, which have been ranked among the most modern and efficient facilities of the kind in Europe. PKN ORLEN has the largest fuel station network in Central Europe with 2,601 fuel stations in Poland, Germany, the Czech Republic and Lithuania. The ORLEN retail network is based on an effective logistics infrastructure consisting of over- and underground storage facilities and a network of long-distance pipelines Refinery The ORLEN Group refinery segment consists of the refinery plant in Płock, production assets of Rafineria Trzebinia and Rafineria Nafty Jedlicze, ORLEN Asfalt, ORLEN Eko (Poland), the Litvinov, Kralupy and Paramo refineries (the Czech Republic), and the ORLEN Lietuva refinery (Lithuania). Petrochemistry The ORLEN Group petrochemical segment consists of selected units of the Petrochemical Production Plant in Płock and the following companies: Basell Orlen Polyolefins and Unipetrol. We are the sole manufacturer of olefins, polyolefins and most petrochemicals in Poland and the Czech Republic. The high quality of our products and our efficient distribution network make us one of the strongest market players in this part of Europe. Oil The ORLEN Group oil segment consists of ORLEN Oil (Poland) and Paramo (the Czech Republic). Chemistry The ORLEN Group chemical segment comprises ANWIL in Włocławek and its subsidiary, Spolana, based in Neratowice, the Czech Republic (ANWIL Group). Upstream This area is entirely operated by ORLEN Upstream. The company coordinates, among others, exploration and production projects at the Baltic Shelf in the Latvian Economic Zone, in the Lublin region and in the Polish Lowlands as well as projects aimed at the exploration, recognition and documentation of unconventional shale gas resources. Kambr (Cambrian) Project THE BALTIC SEA POLAND Sierakow Project LITHUANIA Karbon (Carboniferous) Project 7
What is worth knowing about PKN ORLEN Power engineering We have started developing a new segment. We have established a Power Engineering Office in order to coordinate all activities related to power engineering within the ORLEN Group. Our major brands Wholesale ORLEN Group deals in wholesale of fuel and non-fuel products in Poland, the Czech Republic, Germany, Slovakia and Lithuania. The Group s wholesale segment consists of PKN ORLEN wholesale units, five Regional Market Operators, Petrolot, ORLEN Gaz (Poland), Uniraf Slovakia (Slovakia), Unipetrol BUI (the Czech Republic), ORLEN Lietuva (Lithuania, Ukraine, Poland, sea sales). ORLEN Retail ORLEN Group offers its products for retail sale in Poland, Germany, the Czech Republic and Lithuania. The entities responsible for managing commercial operations in the respective markets are PKN ORLEN, ORLEN Deutschland, Benzina and Ventus Nafta. Verva Logistics The ORLEN Group s infrastructure, which ensures a smooth and effective flow of raw materials and ready-made products, consists of Fuel Terminals, land and offshore transshipment facilities, a network of industrial raw material and product pipelines as well as road and rail transport. FLOTA All products are available both to wholesale and retail customers. We do our best to make sure that our customers and beneficiaries are satisfied with our products and services. Club Vitay Club Super Vitay 8
Corporate responsibility report About the Report Stop Cafe This is already the seventh edition of PKN ORLEN Corporate Responsibility Report, and the third one developed in accordance with B-level GRI G3.1 guidelines. This tells the reader how advanced the Company is in terms of the number of indicators and the possibilities for further extension of reporting in the following years. It also corresponds to the level of incorporation of the GRI G3.1 Guidelines and GRI Reporting Framework. Ekoterm Plus BLISKA For more information on application levels and the GRI G3.1 Guidelines, visit: http://www.globalreporting.org. This Report presents the most important events in PKN ORLEN in 2010. Our regular readers will note that this time we put more focus on activities in the field of corporate responsibility of the ORLEN Capital Group. For more information, visit: The 2009 Corporate Responsibility Report, pp. 14 15 Among the 117 Capital Group companies, 80 are subsidiaries, of which 36 are direct and the other 44 indirect. At the end of 2010, the ORLEN Group included 4 joint ventures, 2 of which were associated with the Group directly and 2 indirectly. 9
What is worth knowing about PKN ORLEN The table presents the total number of companies associated with PKN ORLEN. Year 2008 2009 2010 Total number of ORLEN Capital Group companies 106 101 95 Number of directly associated companies 37 35 36 Number of indirectly associated companies 69 66 59 The 2010 Report contains a revised employment level as on 31 December 2009, due to the fact that the 2009 Report quoted the total number of persons employed in 2009 instead of the number of employees as on 31 December. The Report as a whole was not verified by an external auditor. Compliance with GRI 2002 C C+ B B+ A A+ Mandatory Optional Internal declaration Third party verification External verification of the report External verification of the report External verification of the report 10
Corporate responsibility report Irena Pichola Leader of the Sustainable Development and Corporate Responsibility Team of PwC Polska Sp. z o.o. What are the challenges facing companies that want to report their social involvement in a regular, accurate and attractive way? PKN ORLEN has been actively involved in corporate social responsibility for many years, and is one of the leaders of social and environmental reporting in Poland. Being one of the leading Socially Responsible Companies, listed in the RESPECT Index, ORLEN proves that corporate responsibility is a way of managing business which, in this particular company, is reflected by its day-to-day business operations. Judging by the consecutive CSR reports, which PKN ORLEN has been issuing for almost ten years now, the company is dynamically developing not only its business, but also its strategic approach to corporate responsibility for the internal and external environment. When a company has been reporting its data for so many years in a row, it inevitably faces the challenge of presenting the data in an ever more innovative and attractive manner, at the same time making sure that each report is comparable to the previous editions. The 2010 CSR Report, which is once again an interesting and comprehensive presentation of the company s objectives and achievements in the field of responsible business management, shows that PKN ORLEN is not only aware of the challenges, but also knows how to tackle them. 11
What is worth knowing about PKN ORLEN Selected financial data (in 000 PLN) 2008 2009 2010 I Total sales revenue 57,224,864 47,481,278 62,215,581 II Operating income 636,354 790,306 2,756,827 III Profit/(loss) before tax (2,063,057) 1,907,812 2,826,324 IV Net profit/(loss) (1,570,947) 1,635,885 2,357,127 V Net operating cash flow 1,292,773 2,806,414 3,895,427 VI Net investing cash flow (1,993,857) (1,615,776) (2,568,977) VII Net financing cash flow 975,898 335,897 (1,881,372) VIII Net increase/(decrease) in cash 274,814 1,526,535 (554,922) IX Net profit/(loss) and diluted profit/(loss) per ordinary share (in PLN) (3.67) 3.82 5.51 as on 31 December 2008 as on 31 December 2009 as on 31 December 2010 X Fixed assets 20,427,025 23,006,696 24,663,871 XI Current assets 11,572,579 14,009,655 15,230,187 XII Total assets 31,999,604 37,016,351 39,894,058 XIII Long-term liabilities 1,216,318 10,368,702 8,350,861 XIV Short-term liabilities 15,401,410 9,514,751 12,004,148 XV Equ ty 15,381,876 17,132,898 19,539,049 XVI Share cap tal 1,057,635 1,057,635 1,057,635 XVII Number of shares 427,709,061 427,709,061 427,709,061 XVIII Book value and diluted book value per share (in PLN) 35.96 40.06 45.68 Throughput and output of the Płock Refinery (in 000 tonnes) Crude oil processed 14,218 14,526 14,452 Petrol 2,800 3,055 2,735 Diesel fuel 5,078 5,330 5,359 Ekoterm 840 790 699 Aviation fuel JET A-1 418 245 394 LPG 223 212 241 Environmental impact Water consumption from the Vistula (in m 3 ) 22,991,953 22,448,565 22,785,313 Sewage discharge to the Vistula (in m 3 ) 12,381,024 11,351,599 12,757,779 COD load in sewage discharged to the Vistula (kg/y) 676,524 726,812 889,310 Total emissions of all pollutants (in Mg), 6,189,145.40 6,158,012.71 6,385,884.25 including: Sulphur dioxide 20,444.59 20,975.23 22,381.42 Nitrogen monoxide (as per n trogen dioxide) 6,821.48 7,124.27 8,460.74 Carbon monoxide 812.16 1,010.87 1,309.07 Total hydrocarbons 1,384.01 1,238.12 1,412.07 Fuel combustion dust 453.34 399.75 509.65 Carbon dioxide 6,158,959.11 6,126,894.42 6,351,440.32 Other pollutants 270.71 370.05 370.99 Responsible production Environmental charges (in PLN), 16,572,326.63 17,226,918.00 19,644,093.00 including: for emission (including transport) 14,784,628.49 15,461,484.00 17,679,435.00 for water consumption 1,085,832.47 1,082,459.00 1,146,012.00 for sewage discharge 701,865.67 682,975.00 818,646.00 Investment expend tures for environmental protection (in PLN) 259,126,877.37 191,757,998.86 148,118,479.00 Our employees Employment as on 31 December 4,725 4,482 4,513 Accidents at work (including major) 26 23 28 Absence from work following accidents at work 952 996 789 1) Selected financial data concerns PKN ORLEN and applies to the year that ended on 31 December. 2) COD chemical oxygen demand. 3) The amount includes charges for CO 2 emission allowance allocation. 12
1. MARKET 1.1. 1.2. 1.3. 1.4. 1.5. 1.6. PKN ORLEN a brand open to dialogue PKN ORLEN on the Capital Market The Supervisory Board Integrated Management System Relations with suppliers Responsible marketing Service Standards
PKN ORLEN a brand open to dialogue MARKET PKN ORLEN a brand open to dialogue Leszek Kurnicki Executive Director, Marketing and Corporate Communication New business ethics requires that companies be open and attentive to the environment. Such an attitude is a very important proof of the company s genuine involvement in implementing the CSR concept, and its success to a large extent depends on the quality and effec tiveness of communication with the environment. Long-term relations with stakeholders should be based on dialogue and mutual understanding of each other s needs and expectations. This is the way to turn responsibility into a natural element of the mechanism creating the company s goodwill. Each of the large groups of PKN ORLEN s stakeholders requires an individual approach. Let me explain this on the example of corporate communication. We have developed time-tested methods of communication and dialogue with our employees. Our internal bi-weekly newsletter ORLEN ekspres has been a popular medium of communication for many years. The programmes broadcast by ORLEN Studio, the corporate radio station, have also found an eager audience among our employees. These traditional media are accompanied by the dynamically developing intranet. In 2010, we conducted an innovative study in order to better understand the expectations of our stakeholders. We dedicated the study entirely to the CSR issues. We hope that its consecutive editions will help us improve the quality of our contacts with the environment and make the dialogue easier. This objective is also to be served by advancing the methods of communication. And indeed, we communicate proactively by means of a broad variety of information channels, ranging from the corporate website to other channels dedicated to the respective areas of PKN ORLEN activities. Our stakeholders have also noted our presence in new media. Setting up the VERVA Street Racing Facebook page in the spring of 2011 proved a great success. The actions taken on the fan page resulted in an almost 500% increase in fan activity. These results entitle us to believe that we have taken the right direction towards improved dialogue with our stakeholders, incorporating a broad range of means and methods of communication. We continue applying time-tested methods, but at the same time we are aware of and react to the changing requirements of our environment. 14
Corporate responsibility report Stakeholder map UNIVERSITIES EMPLOYEES CUSTOMERS SHAREHOLDERS NGOS CAPITAL GROUP COMPANIES THE MEDIA LOCAL SOCIETY BUSINESS PARTNERS INDUSTRIAL AND CONSUMER ORGANISATIONS COMPETITION SUPPLIERS PUBLIC ADMINISTRATION AND LOCAL AUTORITIES AGENTS 15
PKN ORLEN a brand open to dialogue 1.1. PKN ORLEN on the Capital Market PKN ORLEN shares are listed on the Warsaw Stock Exchange (WSE) and in the form of Global Depository Receipts (GDRs) on the London Stock Exchange. Depository receipts are also traded in the US OTC market. For more information, visit: The 2009 Corporate Responsibility Report, p. 18 In 2010, there were two changes in the structure of holders of more than 5% of the Company s share capital. First, on 5 February 2010, Aviva Otwarty Fundusz Emerytalny Aviva BZ WBK acquired 5.08% of PKN ORLEN share capital. Later on that year, on 23 November 2010, ING Otwarty Fundusz Emerytalny notified the Company that it reduced its share in the total number of votes at PKN ORLEN General Meeting to less than 5%. ING Otwarty Fundusz Emerytalny was a holder of more than 5% of the Company share capital since 18 February 2009. Corporate Governance In 2010, PKN ORLEN applied all the principles of corporate governance, established both in the previous and in the updated version of the Code of Best Practice for WSE Listed Companies. In mid 2010, the Warsaw Stock Exchange revised the Code of Best Practice for WSE Listed Companies, adjusting it to the changes in legislation, international guidelines and stakeholders expectations. The Company applies both the mandatory and the optional recommendations defined in the Code. PKN ORLEN shareholding structure as on 31 December 2010 27,52% State Treasury 67,40% Other** 5,08% Aviva OFE* * according to information submitted to the Company on 9 February 2010. **On 23 November 2010, the Company was notified that on 18 November 2010 ING OFE decreased its share to less than 5%. 16
Corporate responsibility report PKN ORLEN implements various measures to streamline communication with the environment and ensure equal access to information to anyone who might be interested. In order to reach a broad audience, we apply both traditional and modern tools of communication with representatives of the capital market. We organise live online transmissions (with simultaneous interpretation into English) of press conferences organised after each important event in the Company, such as publication of quarterly results, strategy announcements or General Meetings of PKN ORLEN Shareholders. Video recordings of conferences are available on the Company website. The investor relations section of the www.orlen.pl website has a bookmark related to the Code of Best Practice for WSE Listed Companies. The bookmark offers downloadable annual reports on implementation of the Best Practice in the Company as well as the Code of Best Practice for WSE Listed Companies. It also features short information about the Best Practice applied by the Company and the rules for selecting an auditor of the Company s financial statements. The corporate website offers information on dates of General Meetings, draft resolutions, as well as a complete set of documents presented to shareholders at General Meetings. Moreover, the company has a special online contact form for its shareholders, which is intended for communication in matters concerning General Meetings. Relations with the capital market PKN ORLEN has been regularly increasing the standards of communication with the capital market in order to guarantee access to reliable and exhaustive information about the Company s operations to its shareholders, investors and other stakeholders. The Management Board pays particular attention to the relationship with this group of stakeholders, as they have a major impact on the Company s valuation and image in the global market. For this reason, the company publishes official stock exchange communications in Polish and in English Dariusz Grębosz Director of the Investor Relations Office For many years, we have been working hard to make sure that PKN ORLEN is perceived as a healthy body of contemporary business, where a lot of attention is focused on the right relationship with shareholders and investors as well as other stakeholders. Where the principles of Corporate Governance are a standard rather than an obligation. We are constantly improving the process of communicating the environment, e.g. by incorporating new ICT technologies. We establish internal procedures to ensure the safety, reliability and up-to-dateness of information communicated to the public. Continuous monitoring of the information needs of our shareholders and investors, who, as we are well aware, have a major say in the market valuation of our company, is an essential element of our communication. The prestigious international IR Magazine award, which we have once again received for the best investor relations in Poland, as well as our inclusion in the RESPECT Index have reassured us that we have chosen the right direction. 17
PKN ORLEN a brand open to dialogue and has a bilingual website. The corporate website offers an extensive collection of information and tools presenting the details of the Company s strategy and financial stance. PKN ORLEN regularly and actively participates in meetings with investors and analysts both in Poland and abroad. The Company attends conferences, individual and group meetings, and teleconferences with representatives of capital markets, observers and journalists. The ways of communication with the capital market include so-called roadshows a series of meetings with representatives of foreign financial institutions and investors operating in the global capital market. Every now and again the Company organises site visits for its investors and analysts. Site visits are a specially designed series of meetings at the Company s premises with its managerial staff, combined with visits to selected operating assets, such as production units, warehouse facilities or fuel stations. The meetings with capital market players are an opportunity to find out how they perceive the Company and what their expectations regarding the types and channels of communicating information are. Our efforts to communicate with capital market players have not gone unnoticed. In 2010, we received a number or awards in the area of investor relations. RESPECT Index PKN ORLEN shares have been listed in the RESPECT Index of socially responsible companies since 19 November 2009. The Company maintained this elite status after the 2010 update of the Index. The RESPECT Index project followed certain measures taken by the WSE in 2009 which have resulted in the first index of socially responsible companies on the Warsaw Stock Exchange. The aim of the index is to promote the highest standards of responsible management. Companies included in the index have been selected on the basis of an extensive analysis of many aspects of their business. Only the companies with highest liquidity may qualify. The WSE, accompanied by the Association of Stock Exchange Issuers, take into account the companies corporate governance and communication practice. During the final stage of the selection process, a comprehensive questionnaire and audit are conducted in order to review the measures taken by companies in the field of sustainable development, corporate governance and functioning on the Stock Exchange as well as management systems and social and environmental projects implemented by the company, and its attitude towards various groups of stakeholders. It is the intention of the WSE to review the Index every six months. Inclusion in the index motivates PKN ORLEN to further intensify their efforts to recognize and satisfy the requirements of shareholders and other social groups related to the Company. COMMITMENT PKN ORLEN will take all reasonable efforts to remain in the index in the years to come. For more information, visit: www.odpowiedzialni.gpw.pl 18
Corporate responsibility report 1.2. The Supervisory Board The PKN ORLEN Supervisory Board continuously super vises the Company s operations in all areas of business. The Supervisory Board has the powers established in the Polish Code of Commercial Partnerships and Companies and the Company s Articles of Association. Its members are appointed and dismissed by the General Meeting of Shareholders in accordance with the Company s Articles of Association. The Supervisory Board consists of 6 to 9 members appointed for a joint term of office. Individual members of the Supervisory Board, and the whole Supervisory Board, can be recalled any time prior to the end of the term of office. The Chair of the Supervisory Board is appointed and dismissed by the General Meeting, while the Vice-Chair and the Secretary are elected by the Super visory Board from among the rest of its members. The State Treasury is entitled to appoint and dismiss one member of the Supervisory Board. This privilege will expire if the State Treasury sells all the shares held in the Company. At least two Supervisory Board members must be independent from the Company and entities closely associated with the Company. In order to be appointed to the Supervisory Board, independent members submit to the Company a written statement confirming that they meet the criteria established in 8 (5) of the Company s Articles of Association. The Company informs the shareholders about the current number of independent members of the Supervisory Board via its website. If the number of independent members of the Supervisory Board is smaller than two, the Company s Management Board is obliged to immediately convene the General Meeting of Shareholders in order to change the composition of the Supervisory Board. Until any changes are made, the Supervisory Board continues to work in its current composition. As on December 31, 2010, the PKN ORLEN Supervisory Board had 4 independent members. The Supervisory Board has the following standing committees: Audit Committee, Strategy and Development Committee, Appointment and Remuneration Committee and Corporate Governance Committee. 8 members of those committees are male and 1 is female. In 2010, the work of the Supervisory Board was managed by the Chair. The Supervisory Board is authorised to review all of the Company s documents, order the Management Board and employees to provide reports and explanations, and inspect the Company s assets. Moreover, the Supervisory Board may request the Management Board to prepare expert opinion or appraisal, or to engage an advisor. In 2010, the PKN ORLEN Supervisory Board held 11 recorded meetings and adopted 95 resolutions. Besides, members of the Supervisory Board attended 12 recor ded meetings of the Audit Committee, 1 meeting of the Strategy and Development Committee and 4 meetings of the Corporate Governance Committee, and 4 meetings of the Appointment and Remuneration Committee, of which 1 meeting was held jointly with the Audit Committee. In 2010, the PKN ORLEN Supervisory Board had 8 male members and 1 female member. The age structure was as follows: 30 50 years 6 persons; over 50 years 3 persons. In accordance with the Company s Articles of Association, the policy of remunerating members of the Supervisory Board, is determined by the General Meeting. In 2010, members of the Supervisory Board were remunerated pursuant to the Resolution of the Extraordinary General Meeting of Shareholders of 10 January 2001 on changes in the policy of remunerating members of the Supervisory 19
PKN ORLEN a brand open to dialogue Board. Monthly remuneration constitutes a certain multiple of the average monthly salary in the corporate sector, excluding profit bonus payments in the fourth quarter of the previous year, announced by the President of the Polish Central Statistical Office. in Supervisory Boards of subordinate, jointly controlled and associated companies of the ORLEN Group. The only exception was UNIPETROL a.s., but in this case remuneration for membership in the Supervisory Board was donated to the ORLEN Dar Serca Foundation. The Supervisory Board is authorized to represent the Company in contract negotiations with the Management Board members, including with respect to the terms and conditions of employment and remuneration. There is an incentive scheme for the members of the Management Board. The amount of annual bonus depends on the Company s operating results and achievement of individual tasks defined by the Supervisory Board for individual members of the Management Board. In order to avoid a conflict of interests in the ORLEN Group, the Company applies the provisions of the Polish Code of Commercial Partnerships and Companies, provisions of the Constitution of the Supervisory Board, as well as the Code of Best Practice for WSE Listed Companies. In accordance with the rule no. 6 of the 1st Section of the Code of Best Practice for WSE Listed Companies A member of the Supervisory Board should have relevant knowledge and experience and be able to devote the time required to properly perform his/her duties. A member of the Supervisory Board should undertake relevant measures to ensure that the Supervisory Board receives information on any significant issues concerning the Company. 1.3. Integrated Management System PKN ORLEN has implemented an Integrated Management System (IMS). The system guarantees professional customer service and compliance with the highest standards in terms of HSE, data safety and food safety. The IMS system consists of the following systems: Quality Management System according to PN-EN ISO 9001:2009; Quality Management System according to AQAP 2120:2009 (supplies to NATO); Environmental Management System according to PN- EN ISO 14001:2005; Occupational Health and Safety Management System according to PN-N-18001:2004; Data Safety Management System according to PN ISO/IEC 27001:2007; Food Safety Management System HACCP according to Codex Alimentarius; In 2010, members of the PKN ORLEN Management Board did not receive remuneration for their membership For more information, visit: The 2009 Corporate Responsibility Report, pp. 24 26 and www.orlen.pl 20
Corporate responsibility report Integrated Management System Policy Polski Koncern Naftowy ORLEN S.A. declares delivery of products and services of guaranteed and increasing quality to its Customers and Partners, while at the same time striving to achieve maximum possible environmental neutrality, high occupational health and safety standards and a high level of information security. Our objective being to maintain the leader position on the Polish and international market and the reputation of a professional and trustworthy Company that observes the principles of corporate governance and corporate social responsibility in all its operations, we undertake to: 1. Constantly monitor the current and prospective development directions in the field of operational and environmental properties of our products in order to take measures taking into account the current and future needs of the Customers; 2. Increase the economic performance of processes by ensuring continuous technological development, which enables us to manufacture products that meet the quality requirements of international standards. 3. Achieve full compliance with the law and standards in the field of pollution prevention, environmental protection, safety at work and health protection while at the same time observing the principles of sustainable development. 4. Ensure prevention of major industrial and radiological failures, monitoring of emissions to the environment, their spread in the air, soil, earth and underground waters, and their impact on human life and health. 5. Prevent climate changes by effective greenhouse gas emission management. 6. Constantly improve methods of hazard recognition and prevention of incidents at work and occupational diseases, and implement ergonomic solutions that reduce inconveniences of a workplace and occupational risks. 7. Cooperate only with those contractors and suppliers that have the qualifications required by the Company and meet the quality, HSE, fire protection, radiological protection, process safety and information security standards determined by the Company. 8. Enable all the interested parties to access information concerning the Company s environmental impact and measures taken to improve safety of the working environment and health protection continuation of the Responsible Care Programme. 9. Constantly improve corporate culture by increasing the skills and environmental awareness of the employees and by promoting involvement in measures aimed at satisfying Customer expectations, protecting the environment and improving the working conditions. 10. Take measures aimed at ensuring adequate protection of information in each of the Company s information processing systems, including in ICT systems and networks and in paper document circulation, based on the best applicable standards and practices in the field of information security. 11. Comply with the requirements of the generally applicable law in the field of processing of groups of information protected due to its confidentiality, in particular in the field of protecting classified information, personal data and information associated with public trading in securities. 12. Constantly improve protection of information constituting business secret within the meaning of the Fair Trading Act. 13. Ensure the required level of safety of the other groups of information protected due to its confidentiality, classified and processed in the Company. 14. Ensure protection of entrusted information being the property of persons or entities that cooperate with the Company, where required by relevant contractual information protection clauses. 15. Identify, assess, eliminate and supervise potential hazards relevant to the health safety of food products. 16. Take all measures in the field of production, storage and distribution of finished food products, taking into account the principles of the Good Manufacturing Practice and the Good Hygienic Practice, and the requirements of the Codex Alimentarius. 17. Monitor Critical Control Points and apply corrective measures at each stage of the process of manufacturing of and trading in food, to guarantee detection and removal of irregularities. 18. Constantly improve the Integrated Management System by ensuring resources that make it possible, among others, to increase the performance of processes and to take effective corrective and preventive actions. These tasks define the Company s strategy, which translates into the current and future development programmes and other measures undertaken on the basis of the Integrated Management System, implemented in compliance with the requirements of ISO 9001 and AQAP 2120 Quality Management System, ISO 14001 Environmental Management System, PN-N-18001 Occupational Health and Safety Management System, PN-ISO/IEC 27001 Information Security Management System and Codex Alimentarius Food Safety Management System. We will continue measures aimed at harmonising the principles of the functioning of the Integrated Management System in the Company. Płock, on 20 April 2010 President of the Management Board, Chief Executive Officer 21
PKN ORLEN a brand open to dialogue Compliance audit internal and external verification of the Management Systems In 2010, the IMS was audited by Bureau Veritas Certification. Non-compliances were not reported and PKN ORLEN s IMS received a certificate of compliance with the following four standards: PN-EN ISO 9001:2009, PN-EN ISO 14001:2005, PN-N-18001:2004 and PN-ISO/ IEC 27001:2007. Paweł Kukowski Head of the Management Systems Department With the Integrated Management System, we are able to supervise and improve processes across all the areas of the Company operations, which translates into their higher effectiveness and efficiency. The management systems help us better adjust our products and services to customer expectations. Successful implementation of the system is supported by an elaborate training system. In 2010, more than 300 persons participated in 9 training sessions. The purpose was to raise their awareness of the system. Multimedia training sessions were organised, including workshops for managers and internal auditors. E-learning training for all employees is being developed. The IMS enables us to deliver top quality products and at the same time take care of the environment, employee safety and the safety of the data provided by our customers and contractors. 220 200 180 160 The Integrated Management System was once again re-cer tified for compliance with AQAP in July 2010. The audit confirmed that the Company complies with relevant procedures and requirements applicable to deliveries to the army. In 2010, the IMS was audited 804 times by internal auditors. 13 audits concerned the HSE Management System (HMS) in the Fuel Terminal area and 26 were autonomous internal audits of the HSEMS in Płock. The audits confirmed that the IMS is functioning in compliance with relevant standards, but at the same time suggested possible improvements. Non-compliances reported during internal audits in 2009 2010 185 205 140 120 2009 2010 22
Corporate responsibility report The 10% increase in the number of non-compliances reported in 2010 as a result of internal audits was interpreted as a challenge, and consequently a number of measures were taken in order to eliminate reasons of non-compliance. The compliance of operations conducted by suppliers and contractors was also audited in 2010. The 9 audits did not report any non-compliance. COMMITMENT To implement solutions which improve the quality of our products, higher safety and neutral impact on the environment. Process Management In March 2010, the Process Book, a supplement to the Inte grated Management System Book, was approved. The Process Book contains maps and charts of processes identified within the Quality Management System. The Book is being constantly improved. New processes are identified and described, and their monitoring via a system of approved process efficiency indicators is developed. In order to optimise those efforts, the Company purchased and is implementing an electronic application that supports process management (PM). Efficient management and improvement of existing processes based on actual and measurable data is possible through monitoring and measuring, comparing to the values of approved and planned criteria, and analysing any changes and differences. As a result of process identification, a process owner Development of the Integrated Management System In 2010, the Data Safety Management System was reconstructed as part of a broader project to develop the organisation and adopt our operations to the changing internal and external context. Requirements of the PN ISO/IEC 27001:2007 standard were implemented and a relevant certificate of compliance was received. is associated with each process. The effect was optimisation of the decision-making process and process supervision. Another advantage of PM is that it raises the awareness of employees involved in process implementation and their impact on the work of other employees, improves transparency of operations and optimises information flow between respective organisational units involved in specific operations. The HSE Management System extended its area of operation: the requirements associated with that system were implemented at all fuel terminals. This was a step towards adding compliance with the PN-N-18001:2004 standard to the current portfolio of certificates. In order to improve and develop its IMS, PKN ORLEN purchases and implements electronic applications that support process management, auditing, circulation of noncompliance related documentation, registering of potential hazards and assessment of professional risk. 23
PKN ORLEN a brand open to dialogue Moreover, the areas of environmental protection, health, data safety and food safety have their risk assessment conducted on an ongoing basis. This indirectly translates into implementation of innovative solutions that serve as a basis for continuous development and improvement of our customer offering. List of selected ORLEN Capital Group Companies and their Management System certificates Company ISO 9001 ISO 14001 PN-N-18001 / OHSAS 18001 ISO 27001 IMS Anwil SA yes yes - - yes Basell Orlen Polyolefins Sp. z o.o. yes yes yes - yes ORLEN Administracja Sp. z o.o. yes - - - - ORLEN Asfalt Sp. z o.o. yes yes yes - yes ORLEN Automatyka Sp. z o.o. yes yes yes - yes ORLEN Centrum Serwisowe Sp. z o.o. yes yes yes - yes ORLEN Eko Sp. z o.o. yes yes yes - yes ORLEN GAZ Sp. z o.o. - - - - - ORLEN KolTrans Sp. z o o. yes - - - - ORLEN Księgowość Sp. z o.o. - - - - - ORLEN Laboratorium Sp. z o.o. - yes yes - yes ORLEN Ochrona Sp. z o.o. yes - - - - ORLEN OIL Sp. z o.o. yes yes - - yes ORLEN PetroCentrum Sp. z o.o. - - - - - ORLEN PetroTank Sp. z o o. - - - - - ORLEN Prewencja Sp. z o.o. yes yes yes - yes ORLEN Transport SA - - - - - ORLEN Wir Sp. z o. o. yes yes yes - yes Rafineria Nafty Jedlicze SA yes - - - - Rafineria Trzebinia SA yes - - - - 24
Corporate responsibility report 1.4. Relations with suppliers Suppliers are an important group of our stakeholders. It is very important for us what products we buy and from whom. We cooperate with our suppliers on a regular basis. The Company s cooperation with suppliers is governed by our purchase policy. One of the key policy documents is the PKN ORLEN Purchase Instructions. The detailed terms and conditions established in the Instructions ensure transparency of the supplier selection process. A large number of our requests for quotation are published at www.orlen.pl. Via the website, suppliers have access to the ongoing purchasing procedures, which means that those procedures are open even to suppliers with no history of cooperation with PKN ORLEN. The procedure is the same for local suppliers as well as for all the other suppliers. The advantages of local suppliers are their good knowledge of the local market, flexibility, familiarity with PKN ORLEN and lower costs e.g. of transport. However, all suppliers are treated equally. We do not have any statistics of the ratio of expenditure on the services of local suppliers to total expenditure. The personnel of the Procurement Office are willing to contact any suppliers interested in cooperating with the Company. They are always very helpful during tender procedures. They advise suppliers on the purchase procedures and clarify any doubts concerning the respective stages of a tender procedure. They explain the general and specific requirements that tenderers are supposed to meet. Our personnel must be professional in performing their duties, but at the same time respect the primary values and principles of the PKN ORLEN Code of Ethics. Piotr Małowiejski Acting Manager of the Professional Service Procurement Team In order to maintain the highest standards of our relations with the customers, the PKN ORLEN Procurement Office applies a number of essential principles. They include maintaining a friendly working environment and creating a model of effective cooperation with internal customers. We achieve this by satisfying their expectations in the best possible way and by being ready to provide the required support. Developing partnership relations with reliable suppliers is extremely important for us. PKN ORLEN cooperates with reliable suppliers from all over the world. All of them are subject to regular verification; we have developed long-term cooperation models with our key suppliers. The Company does not hesitate to use the services of local suppliers (whose headquarters are located in the Płock District), thus supporting the local market and business. However, the final selection criterion is always the suppliers ability to satisfy our high expectations. 25
PKN ORLEN a brand open to dialogue It should be noted that in the reporting period, no penalties were imposed on the Company for breach of law and regulations relating to supplies and application of products and services. 2010 was also another year when none of our agreements with suppliers required inclusion of a human rights clause. Neither did we report any signs suggesting that there exists a risk of forced or child labour among our major suppliers. Thus, we do not maintain any statistics concerning that issue. is the ORLEN Dar Serca Foundation. The Foundation allocates the money according to the specific suggestions of the donors. In 2010, the Foundation used the funds donated under the VITAY loyalty programme to pay for: 6,462 dinners, 557 hours of rehabilitation activities, 153 sets of school supplies, 84 monthly allowances for children from family-run children s homes. 1.5. Responsible marketing PKN ORLEN marketing and promotional activities are performed in view of the principles of corporate responsibility. Both the marketing activities and the accompanying communication take into account a long-term impact on the stakeholders and the surrounding environment. Our campaigns and communication rely on true and reliable information. The variety and complexity of the initiatives taken in this particular area are remarkable. Below is a brief presentation of those initiatives. In order to protect the environment and deal with the problem of growing volumes of waste, the ORLEN and Bliska fuel stations introduced environmentally friendly fully biodegradable shopping bags. Moreover, some fuel stations collect used batteries and accumulators from customers. Participants of the VITAY loyalty programme have the option to donate their loyalty points to family-run children s homes supported by the ORLEN Dar Serca Foundation. In 2010, the customers of ORLEN fuel stations donated almost 10 mn VITAY points, which is an equivalent of almost PLN 80,000. The beneficiary of the donated funds The Foundation also supports children from disadvantaged families, e.g. from the flooded areas, in particular by providing them with clothes, shoes and things for school. Children are welcome at our fuel stations. Some fuel stations even have baby change facilities. One of the corporate good practices is to offer fair-trade certified coffee at the fuel stations. The fair-trade logo means that the coffee at our Stop Cafes is supplied by fair suppliers. For more information, visit: The 2009 Corporate Responsibility Report, p. 46 PKN ORLEN follows the principles of transparency and fair play. Since 2006, the Company has been applying the principles of good practice, developed in cooperation with the Advertising Agencies Association, in the process of selecting an Advertising Agency and a Media House. In the period when the Polish Association of Branded Goods Manufacturers ProMarka existed, PKN ORLEN was involved in developing, promoting and protecting trademarks as distinctive features of a product. 26