Integrated approach to reporting

Integrated reporting is a new method for communicating our business model.

Reporting is part of an extensive system for the communication of PKN ORLEN’s activities and performance. Our reports are released on an annual basis and their scope and form are subject to continuous modifications in line with internal developments within the Company and changes in our external business environment, so as to meet our stakeholders’ expectations in a best possible way.

Until 2014, we published an annual report and a CSR report separately; from the Company’s inception, PKN ORLEN had published 14 annual reports and 10 CSR reports. Since 2008, our CSR reports have been prepared in line with Global Reporting Initiative standards. PKN ORLEN did not make any restatements  of information presented in previous reports.Furthermore, the Integrated Report has been externally assured by Deloitte, a reputable audit firm.

In the reporting period, there were no major changes in the feedstock supply chain.

However, there were some significant changes in the structure of the ORLEN Group. Essential to the size and further growth of the ORLEN Group was the acquisition, through subsidiary TriOil, of Birchill Exploration’s production assets located in the Ferrier/Strachan area, as well as merger of the two companies. The new asset acquisitions and the development of existing licences pushed the Group’s 2P reserves from 22 to nearly 50 mboe.

Implementation of the ORLEN Group’s value growth strategy as well as optimisation of its ownership structure were carried out through: acquisition by Unipetriol of shares in Česka Rafinerska, acquisition by PKN ORLEN of a Lithuanian retail company AB Ventus Nafta, merger of Rafineria Trzebinia S.A. and Rafineria Jedlicze S.A. into a new entity − ORLEN Południe S.A., and consolidation of the Group’s oil, bitumen, and environmental assets.

For details regarding the structure of the ORLEN Group and significant changes in its size and ownership, see Notes 5 and 5.1. to the ORLEN Group’s consolidated financial statements for 2014.

One of the cornerstones of our CSR strategy is the objective of being perceived as a CSR leader by our stakeholders. To that end, we have committed to implementing a number of initiatives and measures, including the adoption of integrated reporting. This report is PKN ORLEN’s and certain ORLEN Group companies’ first-ever integrated report, and another step towards raising the bar on the quality of our reporting.

Integrated reporting is a new method for communicating our business model. The goal of this process is to analyse and collect information which is of key relevance to our stakeholders in the form of a reliable integrated report which explains how our business strategy and risk management system translate into creation of the Company’s value over time, having regard to our impact on the environment. Our integrated report discusses the activities of PKN ORLEN and selected ORLEN Group companies in 2014, shows results and effects of our operations, as well as the main aspects of the ORLEN Group’s financial and non-financial activities which build the Company’s value.

Process for defining reporting aspects

In the area of financial reporting, the Company has adopted the International Financial Reporting Standards (IFRS). In non-financial reporting, we follow the Global Reporting Initiative (G4) guidelines. In developing the Company’s first integrated report, we have followed the guidelines announced in 2013 by the International Integrated Reporting Council (IIRC). Both the GRI and IIRC guidelines focus on the selection of the key reporting aspects that are most relevant to a company’s operations, its impacts, and stakeholder expectations at a given moment.

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

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

PKN ORLEN also meets the requirements of Directive 2014/95/EU “as regards disclosure of non-financial and diversity information by certain large undertakings and groups”. Pursuant to the Directive, in the near future European public undertakings will be obliged to prepare non-financial reports containing information relating to environmental matters, social and employee-related matters, respect for human rights, anti-corruption and bribery matters. The new EU law is designed to enhance the transparency, relevance and comparability of non-financial disclosures. Therefore, in the GRI Index above we have identified the content which includes information on certain indicators relating to anti-corruption or social matters. The provisions of the Directive are also covered in the 'Core Values and Standards of Conduct of PKN ORLEN'.

Part of the process of defining PKN ORLEN’s key reporting aspects was to identify those aspects in the three strategic impact areas indicated in the CSR Strategy. These are the organisation and its immediate and more distant environment. Process participants were representatives of various internal and external stakeholder groups, including employees, NGOs, trading partners, and market analysts, as well as experts in CSR, media, and other fields.

The results of a survey carried out among employees and external stakeholders played a key role in determining the contents of this report. For employees, the most important matters related to their employment and occupational health and safety, as well as to the Company's financial performance, customer safety and environmental protection, including the consumption of water and energy, emissions, effluents and waste. For equity analysts, on the other hand, the vital aspects included − in addition to the Company's financial performance and employment matters − its use of feedstock and raw materials, its products and services, as well as energy-related matters. Representatives of the academic community also regarded as important the Company's indirect economic impact, initiatives supporting local communities, as well as diversity and equal opportunity management. Anti-corruption measures were important to both internal and external stakeholders. Other key aspects featured in the report and included in the relevance matrix resulted from the opinions of the media, non-governmental organisations, trading partners, and CSR specialists. All these elements have been addressed in this year's report.

The end result of our efforts is the Relevance Matrix.

Stakeholder Map

As part of work on the Company’s Integrated Report, we have reviewed PKN ORLEN’s stakeholder map. Our analysis has shown that the stakeholder base has been rather stable for many years. In the course of internal consultations and based on a survey we carried out, we have identified key and major stakeholders, adding financial institutions to the list. It also seemed justified to include local authorities in the ‘public administration’ group.

Our relations with stakeholders are built on the principles of responsibility and dialogue. To ensure highest quality of stakeholder relations, the frequency and methods of communication are tailored to the characteristics and current expectations of each stakeholder group. A number of such measures are described below.