years OF SUSTAINABLE DEVELOPMENT LUKOIL Group Sustainability Report for 2020 Sustainability Report for 2020 LUKOIL Group 2020 LUKOIL for Report Sustainability 30 YEARS OF SUSTAINABLE We have defined LUKOIL’s next mission in the context of a global energy transformation as a “responsible hydrocarbon producer”. We believe DEVELOPMENT2 Message from the President 119 OUR EMPLOYEES that considering LUKOIL’s competitive of PJSC LUKOIL 4 30 years of sustainable development 123 Our goals advantages, the best we can do is to 6 Business model 124 Protecting workers during continue to supply the world economy 8 Geography the coronavirus pandemic 10 Strategic goals of LUKOIL Group regarding 126 Employment relations with the most efficient fossil energy sustainable development 129 Personnel characteristics resources, while at the same time 12 Material topics and issues of the Report 132 Social policy 136 Training and Development focusing on reducing the carbon 14 Our contribution to the UN Sustainable Development Goals in 2020 footprint of their production. 16 About the Report 139 SOCIETY 18 About the Company: highlights of the year 142 Product quality and customer relations Vagit Alekperov 146 External social policy priorities 21 SUSTAINABLE DEVELOPMENT 155 Supporting indigenous minorities MANAGEMENT of the North President, Chairman of the Management Committee 25 Message from the Chairman of PJSC LUKOIL of the Strategy, Investment, Sustainability 156 CONCLUSION and Climate Adaptation Committee 27 Management System 33 Ethics and Human Rights 157 APPENDICES 37 Stakeholder engagement 157 Appendix 1. 40 Principles of sustainable development LUKOIL Group’s structure in production projects outside Russia 160 Appendix 2. 42 Supply chain Identification of material topics of the Report 44 Technologies 162 Appendix 3. Incidents and financial sanctions 47 CLIMATE CHANGE 164 Appendix 4. GRI Content Index 50 Carbon management system Appendix 5. Individual GRI Indicators 53 Reporting 172 Appendix 6. 56 Climate Strategy 174 References: Acronyms and Abbreviations, 59 Reducing methane emissions Definitions and Calculation Formulas 60 APG utilization and flaring reduction Appendix 7. Main ESG Indicators 61 Energy conservation 179 Appendix 8. Indicator boundaries 66 Renewable energy sources 203 204 Appendix 9. Independent assurance statement 69 SAFETY 208 Appendix 10. Conclusion of the Board 73 Integrated HSE management system of Non-Financial Reporting of the RSPP 76 Industrial Safety 214 Contact information 79 Reliability of Russian Pipeline System 83 Prevention of spills at sea 85 Occupational health and safety 90 Safety of facilities in the Arctic Zone 92 The Komi Republic The e-version 97 ENVIRONMENTAL PROTECTION of the LUKOIL Group 103 Water resources Sustainability Report 2020: 108 Emissions 109 Waste 114 Biodiversity conservation 2 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 3 01 MESSAGE FROM THE PRESIDENT OF PJSC LUKOIL We also optimized our investment and this thereby protected other LUKOIL is approaching its 30th program and cut down on our staff members. Enhanced safety anniversary as a leader in the global production volumes; however, this measures and special working energy market. We continue to did not affect the implementation conditions were introduced at our evolve in line with UN Sustainable Dear Readers, of our principal growth projects non-stop production facilities. We Development Goals and the highest across all business segments were able to prevent mass infection, environmental standards. We are pleased to present you with or our environmental initiatives. and our personnel continued to work the LUKOIL Group Sustainability LUKOIL’s capital investments in 2020 throughout the pandemic. We place great value on the Report for 2020. The year 2020 surpassed the figure for 2019. We assessment of our efforts by our proved to be uniquely challenging believe that retaining investment Despite all the external challenges stakeholders. It is gratifying to for the entire world, on account in growth projects was the right faced, LUKOIL fully met its wage observe that LUKOIL is ranked higher of the COVID-19 pandemic and all decision, since the situation vis-à- indexation plans, and we preserved in leading international and Russian the economic consequences that vis the global economy is gradually all previously approved employee ratings and is receiving awards entailed. Epidemiological restrictions returning to normal and energy guarantees and compensations. In for the quality of our non-financial for the energy market as a whole, demand is recovering – and we are addition, a new agreement between reporting. We see this as proof of and for LUKOIL in particular, ready to satisfy this demand as the employer and the trade union our commitment to the principle of translated into an unprecedented restrictions on production are eased. association for 2021–2023 stipulates responsible business conduct. drop in the consumption of our an increase in the scope of a number products, significant difficulties in That said, we understand that many of guarantees. organizing the production process, other challenges the world is facing and uncertainty surrounding will continue to be relevant in 2021 In 2020 LUKOIL continued to roll out planning our work. and beyond, which is why we stick its environmental and industrial to our traditional conservative safety programs to the fullest extent Looking back on the year-end assessment of macroeconomic and stepped up efforts to adapt results, we see that LUKOIL was parameters and remain cautious in the Company’s strategy to tackling ABOUT THE ABOUT COMPANY able to successfully navigate our investment decisions. climate change. these challenges. Our Company’s corporate governance system once Last year we increased the amount We thoroughly revised the factors again proved its effectiveness: we of financial support for the regions affecting greenhouse gas emissions provided a flexible – one might say where we operate. We spent over from our operations and analyzed online – response to the volatile RUB 2 billion alone on preventing the risks associated with climate dynamics of global markets by the spread of the pandemic and on change. These steps allowed us optimizing our production structure supporting medical institutions, both to make a fair assessment of our and reorganizing our product supply in Russia and abroad. In addition, all potential and to proceed with chains. our sales and distribution entities developing our climate strategy. worked as usual and ensured a The year 2020 witnessed consistent fuel supply to customers Our climate change adaptation and disinvestment in the oil and in all regions where our gas stations decarbonization plans will form an gas industry as a result of the and oil depots are located. We also essential part of LUKOIL Group’s consumption slowdown and the provided fuel to ambulances and Strategic Development Program, need to comply with the OPEC+ other medical service vehicles free which we will be updated in 2021. As President of PJSC LUKOIL agreement, with many companies of charge. part of this work we have analyzed Vagit Alekperov within the industry leaving the various scenarios regarding the market. At the same time LUKOIL, LUKOIL also did its utmost to protect long-term development of the thanks to its robust financial position its personnel. We promptly arranged global energy industry, including and low debt load, confidently for remote working options to be the possibility of the most stringent fulfilled all its obligations to the available, and around a quarter climate-related regulations being states and regions where we of our employees switched to enforced. operate, employees, shareholders, telecommuting, which enabled sick partners, and customers. colleagues to be diagnosed early, 30 YEARS OF SUSTAINABLE DEVELOPMENT 4 LUKOIL Group Sustainability Report for 2020 LUKOIL Group 5 01 YEARS 2001–2005 2006–2010 2011–2015 2016–2020 OF SUSTAINABLE DEVELOPMENT The Company Sea and River The first renewable energy Certification for compliance Adoption of the Arctic Terminals Safe Operation projects were implemented with the international Biodiversity Program Concept was approved standard ISO 50001 Energy Management System Joining the World Bank’s An inventory of GHG “Zero Routine Flaring by ENVIRONMENTAL RESPONSIBILITY emissions was conducted, Participation in 2030” initiative The Department of Industrial The first Environmental A zero-discharge implementation of Kyoto international CDP and Environmental Safety and Safety Program was put principle was introduced projects in progress An agreement was signed Reporting and the Global Improvements to the Labor Protection was created into effect for offshore projects between the employer and Environment Facility’s carbon management trade union associations Biodiversity Conservation system LUKOIL’s first Energy Saving across foreign entities Program Program was adopted SOCIAL RESPONSIBILITY The Council for Young An agreement was signed Establishment of the LUKOIL The first APG utilization The Social Code was A quality management Professionals was founded with the WWF Charity Foundation and the projects were implemented adopted system was created Association of Trade Union Organizations The first collective Russia’s first Social Project agreements were signed Competition was held The Human Capital ABOUT THE ABOUT COMPANY CORPORATE First cooperation agreements Management Policy was GOVERNANCE signed with Russian regions The Company’s