With us you are Number One Engen Limited Integrated Annual Report 2014 Engen Limited Integrated Annual Report 2014 1 Contents ABOUT THIS REPORT 4 HUMAN CAPITAL 44 Our Total Workforce 44 CHAIRMAn’S REVIEW 5 Developing Talent 44 Employment Equity 46 CEO’S StateMENT 7 Our Employment Equity Performance 48 Collective Bargaining 49 ENGEN AT A GLANCE 11 Organisational Health 49 Company Ownership 11 Occupational Health Programme 49 Our African Presence and Number of Retail Outlets and Terminals 11 Employee Wellness Programme 51 The Engen Brand 12 Safety 52 Our Operational Divisions 14 Behavioural Safety 52 Refinery 14 Visible Felt Leadership 53 Supply, Trading and Optimisation (STO) 14 Capability Development 53 Engen Sales and Marketing (ESM) 14 Safety Performance 53 International Business Division (IBD) 14 Engen Value Chain 16 SOCIAL AND RELATIONSHIP CAPITAL 54 Stakeholder Engagement 54 BUSINESS CONTEXT 18 Engaging our Stakeholders 55 Global Environment 18 Involvement in External Initiatives 56 Sub-Saharan Africa (SSA) Environment 19 Corporate Social Investment (CSI) 57 RSA Environment 19 Educational Support to External Stakeholders 57 Environment Management Support to External Stakeholders 58 GOVERNANCE AND ETHICS 21 Health and Safety Support to External Stakeholders 58 Engen’s Approach to Governance 21 Engen Employee and Dealer Outreach Initiatives 59 Engen Limited Board 22 Engen in Sub-Saharan Africa and the Indian Ocean Islands 61 Board Committees 22 Engen Management Committee 24 NATURAL CAPITAL 63 Compliance 26 Environmental Management 63 Health, Safety and Environment Management System (HSE-MS) 27 Fresh Water Management 63 Groundwater 65 RISK MANAGEMENT 29 Energy Management 65 Our Approach 29 Climate Change and Greenhouse Gas Emissions 66 Our Risk Governance Framework 29 Atmospheric Emissions 68 HSEQ Risk Management 29 Waste Management 69 Engen’s Top Risks 30 Loss of Primary Containment (LOPC) and Spill Management 70 SUSTAINABILITY IN CONTEXT 31 TRANSFORMATION 71 The Process to Determine Materiality 32 Our B-BBEE Performance 71 Material Issues 33 New B-BBEE Codes of Good Practice 73 FINANCIAL CAPITAL 36 GRI CONTENT INDEX 74 Financial Performance Overview 36 Key Financial Indicators 36 INDEPENDENT ASSURANCE REPORT ON SELECTED Capital Investment 36 ENVIRONMENtal INFORMatioN 76 Value added statement 37 Summarised flow of capital between stakeholders (Rm) 38 MANUFACTURED CAPITAL 41 The Refining Process 41 Sales and Logistics 42 ESM 42 IBD 43 2 Engen Limited Integrated Annual Report 2014 Engen Limited Integrated Annual Report 2014 3 About this report Chairman’s Review This report constitutes another important milestone in our efforts to deliver sustainable value to stakeholders. It builds on our 2012- 2013 Integrated Report and begins to include elements of the Global Reporting Initiative (GRI) guidelines for Sustainability Reporting GRI G4. It is also based on the principles and framework as presented in the International Integrated Reporting Framework (December 2013). The approach taken in preparing this report focusses on the value chain of the business and how the business manages the process of value creation across five of the six sustainability capitals as guided by the <IR> framework. We have also listened to guidance from internal and external stakeholders to make this report a better tool DATUK WAN ZULKIFLEE WAN ARIFFIN to share our sustainability journey. CHAIRMAN The scope of reporting covers our performance in the 18 countries Engen is committed to being the oil company of choice in Sub- Engen did however have encouraging successes. The Engen Refinery where we have retail presence, and all business concerns where Saharan Africa and the Indian Ocean Islands. Engen is driven by this in Durban experienced improved operating performance making we have operational control (see the map on page 11). We report strategic objective and reflecting on our sustainable development 2014 the best year for the plant since 2004. Part of the credit for fully on key sustainability performance indicators regardless of performance of 2014, I am pleased to share this journey with you. this outstanding accomplishment must be given to the exceptional percentage share ownership. In the event that there are material execution of the annual Turnaround. Well done to the entire Engen deviations from these reporting parameters, they will be clearly Maintaining the position as industry market leader in South Africa, Refinery team for completing and delivering superb results. stated in the report. as well as expanding Engen’s presence into Africa and the Indian Ocean Islands, has remained our focus. Operational Excellence and With noteworthy capital investments across the supply chain, focus The focus of this report is our performance for the period starting effective HSEQ and Risk Management, along with the continuous remained on providing the best service and convenience offerings. 01 January 2014 to 31 December 2014. In addition, we have efforts to optimise the supply chain, has been critical in ensuring Engen is proud to have once again been awarded with the Sunday provided relevant historical information and we make references to the reality of our vision. Engen remains steadfast in engaging Times Top brands award in the Top Petrol Station category and to past events in order to maintain historical context of the key issues stakeholders and providing customers with high quality products. have also been named the “Coolest Petroleum Brand” by young discussed. South Africans in the Sunday Times Generation Next survey. These However, 2014 proved to be a challenging year amidst a volatile prestigious awards reaffirm Engen’s position as the industry market As part of the wider Petroliam Nasional Berhad (PETRONAS) Group, global economic landscape. In this time, five of the countries in leader in South Africa. please consult the PETRONAS Sustainability Report 2014 for which Engen has an affiliate presence experienced economic additional information and context. contraction. With growth in the other 13 countries, it is expected the As we strive towards becoming the oil company of choice in Sub- GDP in Sub-Saharan Africa will continue growing over the next five Saharan Africa and the Indian Ocean Islands, we are mindful For this report, Ernst & Young provided the financial assurance years. This will however be at a rate below 4%, which is largely due to continue building and maintaining influential and effective and KPMG provided the non-financial assurance for selected to the subdued global economic landscape. relationships with all stakeholders. In 2014 we developed and sustainability information. The latter is indicated by the abbreviation adopted a Stakeholder Engagement Policy, which provides guidance “RA” for reasonably assured next to the figures quoted. The CPI index in most of Engen’s affiliate countries decreased in 2014, on stakeholder engagement at Engen with clear role definition, indicative of the tough market conditions as well as the associated terminology and scope. Engen Limited Sustainability Manager market slowdown. In addition, high pump prices decelerated Engen Court, Thibault Square. Cape Town, 8001 product demand. Supply constraints, along with the non-compliance Engen’s commitment to South Africa and the African continent PO Box 35, Cape Town, 8000 of Broad-Based Black Economic Empowerment (B-BBEE) in South is embodied in our corporate social investment activities, which E mail: [email protected] Africa were also contributing factors impacting profits. continued to be focused on the delivery of a nation-building Tel: +27 21 403 5258 agenda. In the year under review, Engen moved forward with Fax: +27 21 403 4384 Refining margins were under pressure but the sharp decline in projects focusing on education, environment, and health and safety. Web: www.engenoil.com global crude oil prices had a significant impact on improving these These projects were all aligned to the business and our operating margins towards the tail end of 2014. This was not unique to environment as well as being in line with national social priorities. Engen, affecting refineries across the globe with the entire industry displaying negative growth in the retail gasoline market. 4 Engen Limited Integrated Annual Report 2014 Engen Limited Integrated Annual Report 2014 5 CEO’s Statement We believe that through our activities, we have made substantial progress in achieving our objectives in order to meet customer needs, thus enabling an increase in our business interests and profit share across Sub Saharan Africa and the Indian Ocean Islands, delivering more value, at lower costs than our competitors. In closing, I would like to thank our shareholders, PETRONAS and Pembani, for their support and guidance. We serve Engen at their request and therefore hold our fiduciary and statutory obligations in the utmost regard. To my fellow Board members, thank you for your commitment in guiding the organisation through a turbulent global economic period. DATUK AHMAD NIZAM SALLEH MANAGING DIRECTOR AND CEO Finally, on behalf of the Engen Limited Board, I would like to extend my gratitude to the Engen Management Committee and all Engen employees for their loyalty, commitment and perseverance. Engen experienced a challenging year in 2014. The turbulent global performance, Overall Equipment Effectiveness (OEE) reached 97.4%, They have made Engen’s success possible, and they continue to economic landscape and continued high crude prices put severe far surpassing the plan of