6.1.Sustainable Development Principles of Transneft Group

Transneft follows the basic principles of sustainable development and seeks to increase reliability, industrial and environmental safety of its operations, reduce negative environmental impact and ensure social support in the regions of the Group’s operations.

The Company shares the UN’s understanding of sustainable development: “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.

The Company also shares the basic principles stipulated in the Declaration on Environment and Development adopted at the UN Conference in Rio de Janeiro in June 1992, as well as contributes to the achievement of the Organisation’s goals, adopted by the United Nations General Assembly Resolution on 25 September 2015.

Transneft is gradually introducing the principles of sustainable development and social responsibility into its business strategy. The Company considers compliance with these principles one of the key factors in long-term sustainability.

Corporate Culture

The general principles of professional ethics and the basic rules of conduct at work, mandatory for all employees of the Company regardless of their position, are outlined in the Code of Ethics and Conduct for Employees of Transneft and Transneft Subsidiaries. It defines the basic ethical values and principles of the Company:

  • ensuring strict compliance with Russian laws, with due account of the laws of the countries where Transneft and its subsidiaries operate, whether individually or in cooperation with other entities;
  • observing the unconditional priority of the state interests of the Russian Federation, as well as a respectful attitude to the interests of foreign states’ entities in all business aspects;
  • ensuring financial transparency of the business;
  • building relations with government authorities, legal entities and individuals pursuant to the principles of openness and fair practice;
  • zero tolerance towards corruption of any form or manifestation;
  • strong social focus.

Compliance of the Company’s Goals with the United Nations Sustainable Development Goals until 2030

Transneft Group’s strategic priorities and development areas are reflected in the Transneft Strategy, which encompasses all areas of the Company’s activities, including economic, environmental and social issues. The Long-Term Development Programme of Transneft was developed and approved.

The Transneft Sustainable Development Report for 2019 shows the correspondence between the key lines of the Group’s development and the United Nations Sustainable Development Goals, as well as presents specific indicators to achieve these Goals.

Key Events of the Year in Sustainable Development (KEV)

Within the framework of the IX St. Petersburg International Gas Forum, Transneft was awarded the Best Socially Oriented Company in the Oil and Gas Industry prize in the contest of the Ministry of Energy; the Company was also recognised a winner in five out of six categories: salary and social benefits, systematic activity of the organisation, use of innovative tools in training, interaction with professional education institutions, as well as the best public non-financial report within the oil and gas sector.

Minenergo

In recognition of the Company’s achievements in using best practices in the field of sustainable development in accordance with recognised international standards, in June 2019 Transneft’s preferred shares were included in the FTSE4Good index, calculated by the FTSE agency and used as a guideline in the preparation of investment portfolios by ESG investors. Based on the results of a review in December 2019, the preferred shares were kept within this index.

FTSE4Good

The Company has hit The World’s Best Regarded Companies — a Forbes rating based on such criteria as trustworthiness, social conduct, quality of products and services, as well as attractiveness as an employer, and became the only company representing the Oil Services & Equipment category.

FTSE4Good

Transneft was earlier included in the 17th annual rating of the world’s biggest and most influential public companies Forbes Global 2000.

FTSE4Good

Interaction with Stakeholders

Transneft seeks to hold an open dialogue with representatives of stakeholder groups, as well as to take their opinions and interests into account in making business decisions, and regards constructive collaboration as the most important element of interaction.

The Company’s information policy provides for effective information exchange between Transneft, its shareholders, investors and other stakeholders, as well as gives insight into aspects of its operations. The interaction is carried out at all corporate management levels; the Company employs all mechanisms and forms of cooperation that correspond to the nature of issues and the scale of the tasks to be solved.

Stakeholders of Transneft Group
Stakeholder group Forms of engagement Stakeholder value
Investment community (shareholders, investors, analysts, rating agencies)
  • Publishing reports on the Company’s website and on the Interfax: Centre of Corporate Information Disclosure website
  • Holding General Meetings of Shareholders.
  • Holding meetings of the Board of Directors and of the Committees under the Board
  • Communicating with minority shareholders on their rights
  • Placing reference information on the Company’s website
  • Arranging meetings and teleconferences for the management to communicate with analysts and investors; publishing presentations for investors on the Company’s website in Russian and English
  • Publishing the Analyst Handbook
  • Reporting to rating and ESG agencies

Revenue, RUB bn — 1,064

Net profit, RUB bn — 197

Dividends, RUB bn — 77.6

Loan providers (lenders, bond holders, rating agencies)
  • Holding meetings and negotiations with lenders and rating agencies
  • Disclosing information about the debt structure and policy in the Company’s financial statements and annual reports
  • Placing information on bonds (issue prospectuses, coupon rates, yield curve, payment schedule) on the Company’s website

Equity capital, RUB bn — 2,169.0

Loan capital (loans and borrowings), RUB bn — 637.4

In 2019, leading rating agencies, including Moody’s, S&P Global Ratings and RAEX, confirmed or raised their rating of Transneft:

  • In February 2019, the Moody’s international rating agency upgraded Transneft’s rating to Baa2 with a stable outlook due to the increase in the sovereign rating of the Russian Federation by a level (to Baa3).
  • The international rating agency S&P Global Ratings kept Transneft’s long-term credit rating at BBB- (stable outlook) in foreign currency and at BBB (stable outlook) in national currency.
  • The RAEX (Expert RA) rating agency confirmed Transneft’s RuAAA credit rating (stable outlook).
Consumers (integrated oil companies, stock exchange participants trading in petroleum products, as well as companies storing petroleum products at loading depots)
  • Ensuring that the Company’s representatives participate in the Transneft Consumer Council for Operational Issues
  • Placing information on contracts signed on the Company’s website
  • Placing tariff information on the Company’s website
  • Feedback system

Oil turnover —1,247.6 bn tkm

Petroleum products turnover — 49.8 bn tkm

Volume of oil transported via Transneft’s oil trunk pipeline system — 485.0 mln tonnes

Volume of petroleum products transported via Transneft’s oil trunk pipeline system — 37,8 mln tonnes

Transneft Group’s employees and trade unions
  • Collective agreements
  • Personnel incentive system
  • Professional education and advanced personnel training
  • Mandatory medical examinations
  • Sports and cultural events
  • Social benefits for employees: voluntary health insurance, accident insurance, organisation of recreation for employees and their family members, non-state pension plans

Salaries and other payments and benefits for employees, RUB bn — 172.2

Average headcount — 115.9 thousand employees

Average salary in 2019 — RUB 99.1 thou

Professional associations
  • Holding regular meetings
  • Disclosing information on the Company’s website

The Company participated in two IAOT meetings in 2019.

The Company’s website was updated, and the list of voluntarily disclosed information was expanded significantly.

Mass Media
  • Holding events for the media (briefings, press conferences etc.)
  • Ensuring quick distribution of news
  • Handling mass media requests
47 press releases were published.
Government authorities (the Government of the Russian Federation, industry regulatory bodies and organisations, ministries and agencies, regional executive authorities)
  • Engaging with members of the Expert Board under the Russian Government on matters of implementing the Corporate Governance Code (CGC) at the Company and amending the Long-Term Development Programme
  • Reviewing reports on execution of the Long-Term Development Programme, as regards the improvement of corporate governance
  • Participating in proceedings of the Expert Board on Corporate Governance of the Bank of Russia and the Moscow Exchange Share Issuer Committee
  • Interacting within the framework of the effective regulatory acts

Meetings of the Bank of Russia’s Expert Board on Corporate Governance and the Share Issuer Committee of the Moscow Exchange are held as necessary, usually once every two months.

Under the requirements of Federal Law No. 382 FZ On State Information System for the Fuel and Energy Sector (SIS FES) dated 03 December 2011, as well as for the purpose of providing authorities with reliable information on a regular basis, Transneft and Transneft subsidiaries, being the subjects of the SIS FES, registered in the SIS FES.

Cooperation agreements were concluded with six constituent entities of the Russian Federation.

Local governance bodies
  • Interaction within the Board of Directors
  • Cooperation agreements
  • Social and charitable programmes
  • Public hearings to assess the environmental impact of new projects

Cooperation agreements were concluded with six constituent entities of the Russian Federation.

More than 1,000 charitable projects were funded.

Government supervision and oversight bodies
  • Regular inspections
  • Regular meetings and joint work
245 facilities of Transneft subsidiaries were inspected to ensure their safety and anti-terror security.
Population in the regions of operation (including indigenous minorities, as well as civil society organisations)
  • Social and charitable programmes
  • Public hearings to assess the environmental impact of new projects
  • Mass media publications

Number of jobs created — 1,500

Investments in local communities — RUB 9.6 bn

Suppliers and contractors
  • Commission for Dealing with Suppliers and Contractors
  • Steering Committee
  • Pursuing the Company’s policy in quality control enhancement, development and adoption of standards and mechanisms for work performance and control
  • Feedback system
  • Placing information on procurement and other matters for suppliers and contractors on the Company’s website
  • Placing information about SME support on the Company’s website

In 2019, Transneft arranged about 3,041 consolidated purchases

Competitive procurements’ share — 93.5%

Business community (RID, RSPP, Russian Gas Society)
  • Public events (forums, conferences, etc.)
Participation of the Company's representatives in Russian forums, conferences, and exhibitions
Social and charity organisations
  • Interacting in social projects
  • Cooperation agreements

Spending on charity — RUB 9.2 bn

Sponsorship expenditures — RUB 207.56 million

More than 1,000 charitable projects were funded.

Public environmental organisations
  • Certification of all divisions of the Group’s companies in accordance with the Environmental Management System
  • Holding environmental audits and publishing environmental reports
  • Public hearings to assess the environmental impact of new projects

Current expenditure on environmental protection — RUB 2.05 bn

Investments in environmental protection — RUB 3,212.733 million

Educational institutions (universities etc.)
  • Collaboration in research and development
  • Personnel training, retraining and refresher courses
  • Requests for R&D
There is ongoing cooperation with universities in terms of advanced staff training according to jointly developed programmes.
Research community (research institutes, hi-tech companies, startups etc.)
  • Engaging with scientific organisations and placing requests for R&D
  • Publishing the Profile of Transneft’s Innovation Development Programme for 2017–2021 on the corporate website
  • Publishing an innovation proposal submittal form on the website of Transneft R&D
In 2019, in terms of R&D, Transneft cooperated with more than 50 research institutes, universities, scientific and industrial organisations.