Sustainability Report 2016 Contents Key Facts about Gazprom 4 Message from CEO 6 About the Report 8 Stakeholder Engagement 11 Group Information 14 Business Model 14 Geography of Business 16 Key Performance Indicators 22 Strategy 24 Sustainability Management 25 Corporate Governance 26 Internal Control 29 Anti-Corruption Practices 30 Risk Management 31 1. Gazprom is a Responsible Energy Supplier 32 1.1. Energy Supply to the Domestic Market 36 1.2. Responsibility to International Consumers 47 1.3. Responsibility to Business Partners 55 2. Gazprom is a Responsible Employer 58 2.1. HR Management 62 2.2. Employee Motivation 66 2.3. Corporate Culture and Communications 68 2.4. Professional Development 69 2.5. Young Talent Management 72 3. Gazprom is Responsible for Health and Safety 74 3.1. Year of Occupational Safety 78 3.2. Occupational Health and Safety Management 80 3.3. Management of Occupational Health and Safety Compliance 82 3.4. Improving Contractor Safety Performance 85 4. Gazprom is Responsible for Local Communities 86 4.1. Development of Regions of Presence 90 4.2. Social Responsibility 94 5. Gazprom is a Responsible Natural Resource User 100 5.1. Environmental Sustainability Management 104 5.2. Minimization of Negative Environmental Impact 107 5.3. Energy Efficiency 113 5.4. Natural Gas as a Vehicle Fuel 120 5.5. Climate Risk Management 121 Appendix 1. GRI Table 124 Appendix 2. Additional Information on the Group’s Activities in 2012–16 134 Group Information 134 Gazprom is a Responsible Energy Supplier 138 Gazprom is a Responsible Employer 141 Gazprom is Responsible for Health and Safety 143 Gazprom is a Responsible Natural Resource User 145 Appendix 3. Glossary of Abbreviations and Code Names Used in the Report 147 Contacts and Feedback 150 Gazprom Group’s Sustainability Report 2016 3 Key Facts about Gazprom Global Global 66% leader leader of Russia’s in natural gas in natural gas total reserves — production — natural gas around 17% around 11% output Operator Owner Owner of Russia’s of the world’s of the world’s Unified largest largest Gas Supply network underground System of high-pressure natural gas (UGSS) natural gas storage capacity trunk pipelines World’s Key Russia’s largest natural gas only natural gas supplier producer exporter in Russia and exporter and the FSU of liquefied natural gas (LNG) Gazprom Group’s Sustainability Report 2016 4 11 % 18% 15% of Russia’s of domestic of domestic total oil refining electricity crude oil and stable generation and condensate gas condensate output processing First Processes Largest among local peers half of domestic domestic to commence natural and producer underwater associated gas of heat energy gas extraction output Pioneer Best Russian energy company in terms in the of corporate climate reporting development and greenhouse gas reduction strategy of Russia’s rated on CDP’s top global climate Arctic offshore ranking resources Gazprom Group’s Sustainability Report 2016 5 Gazprom Group’s Sustainability Report 2016 6 Message from CEO Dear stakeholders, Gazprom continues on a sustainable in Russia has risen from 53.3% to 67.2%. progress towards reducing the internal growth path. The year 2016 was marked by Better access to gas supply means an consumption of natural gas and other increased production of gas and liquid improved quality of life for our citizens and resources and mitigating our environmental hydrocarbons, as well as by growing levels wider opportunities for social and economic footprint, while at the same time building of electricity and heat generation. We development in the Russian regions. upon our production capabilities. Between commissioned major production facilities With a view to maximizing the effi cient 2011 and 2016, Gazprom reduced its energy that are critical to securing reliable energy use of natural gas, which is known to be the consumption by 15.2 million tonnes of supplies to consumers both within and most economic and environmentally friendly coal equivalent and cut greenhouse gas outside Russia for many decades ahead. source of energy, we continue to expand emissions at its production facilities by 24%. Gazprom is committed to sustainable its use as a vehicle fuel. With 35 fi lling Occupational safety is a fundamental development, which is embedded into our stations added in 2016 alone, Gazprom has part of our business. Across our group, we business agenda. We are confi dent that increased its chain of CNG fi lling stations employ over 467,000 people whose health long-term business growth is inseparably across 21 Russian regions to 254. The use and safety is an absolute priority for us as linked to the balanced use of natural of natural gas as a vehicle fuel signifi cantly an employer. The number of occupational resources and corporate social helps to reduce air pollution and protect the accidents in 2016 was the lowest since 2000. responsibility. environment in populated areas. Our goal is to achieve zero accidents. One of our key socially signifi cant Gazprom takes a holistic approach Dear stakeholders, initiatives is a large-scale program aimed to environmental protection. We have built Gazprom is an integrated energy at improving access to gas supply across a vertically integrated Environmental corporation with a strong technology base Russia. Between 2005 and 2016, Gazprom Management System (EMS) and have our that works seamlessly to the benefi t of built over 28,000 km of pipeline to supply own Environmental Inspectorate that has no local communities and in harmony with the gas to 815,000 homes and apartments and equivalent in Russia. We are also introducing environment. We constantly strive to improve to over 5,000 boiler stations. The share modern energy saving technologies. With our performance and move steadily towards of the population with access to gas supply all these efforts, we are making steady the set goals. Alexey Miller Gazprom CEO Gazprom Group’s Sustainability Report 2016 7 About the Report The Gazprom Group (“Gazprom” or the The Report covers the Group’s sustainability responsible departments across the Group “Group”) is a vertically integrated global activities for the period from 1 January 2016 to gather and consolidate the required infor- energy company focused on the exploration, through 31 December 2016. For the purpose mation, which was then reconciled internally, production, transportation, storage, pro- of comparison, most of the key indicators including during the final approval process. cessing, and marketing of gas, condensate, are presented for a five-year period from Gazprom’s existing data collection and crude oil and refined products, as well as 2012 to 2016. accounting systems, together with its internal generation and sales of electricity and heat. Some performance indicators used control procedures, ensure the accuracy The Group’s parent company is Gazprom in this Report apply to the entire Group, of reported data. PJSC (the “Company”). as defined in Gazprom PJSC’s 2016 IFRS The content of the Report was defined The perimeter for this Report encom- consolidated financial statements, and may based on an assessment of material topics passes the Gazprom Group companies, therefore differ from similar metrics appear- with input from various stakeholders to make which were consolidated in accordance with ing in Gazprom PJSC’s statutory reports sure it provides a comprehensive view of IFRS principles (IFRS 10 — Consolidated prepared under Russian law. the Group’s sustainable development Financial Statements), unless otherwise The Report also contains forecasts and activities. The assessment was performed stated. estimates, which reflect the Group’s expec- taking into account stakeholders’ disclosure The Report provides a comprehensive tations regarding future events. Due to the requirements and the Group’s interests, overview of the Group’s economic, social, effect of various objective factors, actual which were determined by direct consulta- and environmental performance, focusing results may differ from these forecasts and tion with the external stakeholders of various particularly on occupational health and estimates. Group divisions and the analysis of informa- safety, as 2016 was declared the Year of Numbers presented throughout this tion published in the local and foreign press. Occupational Safety at Gazprom. document may not add up precisely due to Materiality was assessed based on two The Gazprom Group’s 2016 Sustainability rounding. criteria, namely the importance of an issue Report (the “Report”) is the fifth in a series This Report is prepared in the Russian to both internal and external stakeholders. of similar publications prepared by the and English languages. The Report was compiled taking into account Company (the previous report, for 2014–15, Electronic versions of this and previous the available information about stakeholders’ was released in January 2017). Beginning years’ reports are available online at expectations. in 2016, Gazprom decided to move from www.gazprom.ru. The assessment of material issues to be a biennial to an annual reporting cycle in This Report was prepared in accordance disclosed in the Report consisted of three order to improve the transparency and with the GRI Sustainability Reporting Guide- main steps: relevance of the information reported. This lines, Core option. — identification; Report is the first publication after transition To prepare this Report, we formed — prioritization; to the new reporting cycle. a dedicated team that worked closely with — validation.