VALUES MATTER | 2019 SUSTAINABILITY REPORT Excellence
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VALUES MATTER | 2019 SUSTAINABILITY REPORT Excellence. Trust. Respect. Responsibility. Table of Contents 1. Message from our Chief Executive Officer 2. Economic & Operational Highlights 3. Our Approach to Business 4. Sourcing Our Energy 5. Updates 6. Sustainability Vision 7. Sustainability Policy 8. Company Performance – Awards and Ratings 9. External Associations and Initiatives 10. About Our Report 11. Our Value Chain 12. Stakeholder Engagement 13. Identifying Issues 14. Material Issues 15. Validation & Review 16. Abbreviations & Terms 17. Governance Dashboard 18. Our Approach to Governance 19. Ethics & Anti-Corruption 20. Sustainability Governance 21. Risk Management 22. Climate-Related Risks & Opportunities 23. People Dashboard 24. Our Approach to People 25. Our Approach to Human Rights 26. Performance Management, Training and Development 27. A Great Place to Work 28. Feature: Energy Apprenticeships 29. Feature: OECD: Inclusive Growth 30. HSE Dashboard 31. Our HSE Approach and Management sustainability.vermilionenergy.com Page 1 of 163 32. HSE Measurement and Evaluation 33. HSE Training and Communication 34. Safety Dashboard 35. Our Approach to Safety 36. HSE Perception Survey 37. Feature: Safety in The Netherlands 38. Feature: Safety Case Revision in Australia 39. Feature: Wandoo Life Extension 40. Environment Dashboard 41. Our Approach to Environmental Stewardship 42. Measurement & Evaluation 43. Approach to Climate-Related Issues 44. CDP Case Study 45. Approach to Methane Emissions Reduction 46. Feature: Energy and Emissions Reduction Projects 47. Feature: Renewable Energy Projects in France 48. Feature: Renewable Energy Projects in The Netherlands 49. Water Stewardship 50. Water Efficiency 51. Land Stewardship 52. Communities Dashboard 53. Our Approach to Communities 54. Volunteering Around the World 55. Key Community Partnerships 56. Appendices GRI Content Index Performance Metrics Materiality Analysis sustainability.vermilionenergy.com Page 2 of 163 Values Matter | Vermilion 2019 Sustainability Report Message from our Chief Executive Officer Message from our Chief Executive Officer Anthony Marino President and CEO As we progress through the energy transition, the foundation of sustainable development still rings true: ensuring we can meet the needs of both present and future generations. At Vermilion, our leadership in sustainability is about doing the right thing for the planet and for the business. These are not mutually exclusive concepts – in fact, it is just the opposite. We believe that by integrating sustainability principles into our business, we increase shareholder returns, enhance our business development opportunities and reduce long-term risks to our business model. Sustainability performance speaks volumes about a company to investors, demonstrating the way it comprehensively does business, encompassing economic, environment, social and governance factors. High sustainability performance means that a company is on top of its game, producing its products as efficiently as possible, and continuously striving for improved results. Even more importantly, a company that is looking after its external impacts is a company that is ethically centered. Our approach to the energy transition reflects this convergence of sustainability and business strategy. As the world works to reduce reliance on hydrocarbon-based fuels, we will be better off with energy production – traditional and renewable – in the hands of best-in- class producers who operate with environmental and social responsibility, and with the needs of both current and future generations in mind. Our track record of reducing emissions while optimizing production, and our groundbreaking use of geothermal energy, sets Vermilion apart as an industry leader. We see sustainability performance as the critical competitive advantage for our industry, defined as: Environmentally protective. Socially conscious. Economically inclusive. We are conscious of our purpose and our responsibility to provide safe, affordable and reliable energy for our stakeholders. We are achieving this by increasing our operating efficiency and reducing our environmental impact: producing lower carbon fuels such as natural gas, and deploying energy and emissions efficiency improvements throughout our operations. Between 2014 and 2017, this strategy reduced absolute emissions while increasing energy production, reducing our emissions intensity by 45% – equivalent to taking 38,000 passenger vehicles off the road. This achievement resulted in large part from our integration of the Elkhorn assets we acquired in southeast Saskatchewan in 2014, in which we set an absolute target to reduce associated scope 1 emissions by 50% by 2020. We have already exceeded this target, reducing emissions by 84%. This improvement in our initial set of southeast Saskatchewan assets has been part of the overall emissions intensity reduction we have executed for each of the past three years. In 2018, we acquired another set of assets in southeast Saskatchewan by merging with Spartan Energy, which increased our Canadian production by approximately 60% between 2017 and 2018. The emissions intensity of the new assets was approximately 3½ times the pre-acquisition intensity of Vermilion's other Canadian assets. We didn’t shy away from the Spartan assets because of their higher intensity. We knew that these high margin assets would be in production for many decades whether we acquired them or not. We took on the mantle of improving their emissions efficiency, knowing that our expertise and commitment would yield both environmental and economic improvements. These traditional energy assets needed to be in best-in-class hands to minimize their profile of carbon and other emissions. We strongly believe these assets will perform better on an environmental and economic basis under our guidance, and we have already begun this work. We set a target in 2018 to reduce the flaring and venting emissions associated with the Spartan assets by 50% by 2024. Our operational improvements have already reduced these emissions by11,000 tCO2e: that’s 6% progress towards our target in the first seven months of operation. sustainability.vermilionenergy.com Page 3 of 163 Values Matter | Vermilion 2019 Sustainability Report Message from our Chief Executive Officer This role for Vermilion as an aggregator and improver of assets is very important, particularly in light of guidance from the Sustainability Accounting Standards Board to consider not just data – for example, absolute emissions along with normalized metrics such as emissions intensity – but context. When we take over assets that were previously in production with less efficient and less emissions- conscious companies, our approach will result in those assets having fewer emissions, less flaring and better spill performance. We seek to make immediate improvements, as we have already with the Spartan assets, and continuously progress from there, such that the cumulative enhancement to the environment is very significant. While we focus on environmental protection, prioritizing emissions reduction in the drive to the Paris Agreement’s “well-below-2°” scenario, we must also focus on the strength of our communities. We operate in countries with very well-developed regulatory regimes on safety, human rights, labour practices and the environment. In the majority of our business units, we also sell our oil and gas within the country of production. This reduces emissions associated with transportation, increases national energy security, and provides those countries with energy that is produced with a world-class approach to environmental and social responsibility. This includes our longstanding commitment to the economic and social wellbeing of the communities where we operate. Just as the United Nations Sustainable Development Goals are inextricably linked, with contributions to one goal contributing to several others in turn, our strategic community investment program always keeps in mind our ultimate goal of leaving no-one behind. Our approach to community development is to work with our communities to identify where our technical innovation, financial resources and employee time can be of most benefit in advancing environmental and social improvement, and advancing economic inclusivity. Our geothermal projects in France are a good example. With two projects in production and one in development, our operations are providing heat to industrial-scaled agriculture that supports hundreds of local jobs, and to housing projects that provide low-income housing. We believe that these geothermal projects provide a leadership example to our industry competitors in redeploying strategic energy infrastructure in service of the energy transition. This reflects our belief that a community that is good for business needs to help create opportunity for every person in it. This is why some of our most recent investments support at-risk LGBT+ youth: Camp fYyrefly offers a summer camp program in Alberta and Saskatchewan that is a source of acceptance and understanding, while the Boys & Girls Clubs’ Aura program in Calgary helps youth who are homeless transition into safe housing. We call on other independent energy companies to follow Vermilion’s lead and to support the LGBT+ community. We understand that the wellbeing of our environment, our communities and our business are inextricably intertwined. As long as we still need oil and gas to support present generations’ increasing quality of life,