3. Corporate Social
Responsibility
and Sustainable Development

3.1. Introduction

Sakhalin Energy’s activities in the area of corporate social responsibility (CSR) are aimed at the implementation of the corporate strategy to improve the company’s image and role in society, and to carry out its business activities in compliance with the standards of sustainable development and good business ethics. It is an integral part of Sakhalin Energy’s production and business activities and strategic development plans.

At Sakhalin Energy, corporate governance has gradually transformed into management of the company as an open system, due to a high degree of transparency and active stakeholder engagement (see Section 5. Corporate Governance and Section 6. Stakeholder Engagement Management). Sakhalin Energy has developed a system for accounting and controlling internal and external factors of production, financial, technological, social, and environmental impacts, which allows the company to mitigate all types of risks in order to enhance its corporate sustainability (see Section 5.4. Risk Management).

Grand Prix of the RUIE All-Russia Sustainable Development Competition

In 2018, Sakhalin Energy won the Grand Prix for Effective Sustainable Development Practices in the Leaders of Russian Business: Dynamics and Responsibility 2017 contest.

The company won the main award of the contest by taking the leading position in four categories: For Contribution to the Solution of Social Problems of Territories, For High Quality of Reporting on Sustainable Development, For Achievements in the Field of Occupational Safety and Health of Employees, and Progress in Human Resources Development.

Leader of the Sustainable Development Vector Index and the Responsibility and Transparency Index

In 2018, for the third year in a row, Sakhalin Energy was among the leaders of the Sustainable Development Vector Index and the Responsibility and Transparency Index, compiled by the RUIE since 2014 with the purpose of making an independent assessment of companies in terms of sustainable development, corporate responsibility and reporting.

When compiling the Responsibility and Transparency Index, the RUIE evaluates the disclosure of information in key areas of activity, analyses 70 indicators characterising responsible business practices, including economic, environmental, and social performance indicators, as well as governance aspects. The Sustainable Development Vector Index shows performance dynamics and therefore makes it possible to identify leaders among the largest companies with the highest degree of transparency and, at the same time, demonstrating a generally positive dynamics in the area of sustainable development.

Leader of the Social Efficiency of the Largest Russian Companies Ranking

In 2018, Sakhalin Energy entered the Top 10 of the Social Efficiency of the Largest Russian Companies ranking, which is compiled by AK&M Information Agency. In addition, the company was also recognised as “the most socially efficient” in the category of oil and gas industry (according to the Companies with the Highest Contribution to Social Development per Unit of Environmental Load rating).

The Social Efficiency of the Largest Russian Companies ranking evaluates major Russian companies in terms of social performance in order to identify the best. Thus, the ranking determines the flagships of the Russian economy that not only set economic performance goals, but also take an active and open position in the field of sustainable development.

3.2. Sakhalin Energy’s CSR System

Corporate social responsibility applies to all activities of Sakhalin Energy. This approach is supported by its mission, vision, and values. The practical aspects are addressed and approved in a number of corporate documents (see Section 5. Corporate Governance), such as:

  • Code of Conduct, including the Statement of General Business Principles;
  • Sustainable Development Policy;
  • Human Rights Policy;
  • Commitment and Policy on Health, Safety, Environment and Social Performance.

Sakhalin Energy’s CSR Management System

Sakhalin Energy extends an essential part of the requirements and business principles set out in these documents to its contractors. This is in line with the GRI standards that took effect in July 2018. In addition to special contractual provisions and specific requirements, including the results of environmental, health, and social impact assessments (see Section 3.5.2. Impact Assessment), the company arranges training sessions and workshops to ensure that business ethics, social and environmental principles are effectively integrated into the work of its contractors, and to oversee their compliance (see Section 7.4. Supply Chain Management).

At Sakhalin Energy, CSR areas and indicators are regularly evaluated by authorised personnel and senior management within the company’s system of internal control and audit, as well as by lenders, their consultants, and external certifying authorities by means of external professional evaluations. Assessments are also carried out through stakeholder engagements:

  • public consultations;
  • workshops and focus meetings;
  • opinion surveys;
  • consultations in the information centres established by the company in the communities located along the transSakhalin pipeline and in close proximity to other facilities of Sakhalin Energy;
  • addressing grievances and appeals, etc.

For detailed information on the mechanisms for interaction with different stakeholders, see Section 6. Stakeholder Engagement Management.

3.3. Performance Standards

Russian companies refer to the area of CSR their business, social, and environmental activities defined by legislation, as well as a range of additional programmes and responsibilities with regard to employees and society. The results are reflected in various non-financial reports on activities. A number of companies take on additional responsibilities beyond the minimum set by legislation based on their strategic and regional priorities and their level of corporate culture. Sakhalin Energy is one of such companies. It operates in accordance with the international standards established with regard to CSR.

Many initiatives and standards have been established worldwide in the area of environmental and social responsibility. The leading standards are the United Nations Global Compact, the Global Reporting Initiative (GRI), the European Council Directive on disclosure of non-financial information, the International Finance Corporation Performance Standards, ISO standards and others.

In 2009, Sakhalin Energy joined the UN Global Compact (UNGC) and pledged its commitment to consistently follow the UNGC principles concerning human rights, labour, environment, and anti-corruption.

Sakhalin Energy in the UN Global Compact LEAD

In 2011, Sakhalin Energy became the first (and the only, as of late 2018) Russian company participating in Sustainable Corporate Leadership platform—Global Compact LEAD—established in the framework of the UN Global Compact. LEAD companies are obliged to carry out certain activities in the areas of environmental protection, social performance, and corporate governance, as well as to develop new CSR standards.

Beginning with 2018, the UN Global Compact is implementing the LEAD programme using new criteria, with regard to which Sakhalin Energy continued to participate in the UNGC, including in the Reporting on the SDGs and Decent Work in Global Supply Chains Action Platforms (see Sections 3.4.2. UN Sustainable Development Goals and 9.4.1 Human Rights: Principles and Management System). The company submits an annual Communication on Progress (annual reporting by a member of the UN Global Compact) at an advanced level.

At the UN Global Compact Leaders Summit 2018 in September 2018, held at the UN headquarters in New York, companies were announced which had been recognised by the Global Compact LEAD as showing their continued commitment to the UN Global Compact and its ten principles of responsible business. Global Compact LEAD companies (a total of 34 organisations in the world) are the most active participants in the UN Global Compact—the world’s largest corporate sustainable development initiative.

The main international standards that Sakhalin Energy applies are as follows:

  • ISO standards (environmental management, quality control, health and safety, and social responsibility);
  • European Union and United Nations standards and directives (environment, human rights, indigenous peoples, etc.);
  • World Bank and International Finance Corporation standards (governance systems, risk and impact assessment, biodiversity, health, cultural heritage, indigenous peoples, involuntary resettlement, stakeholder engagement, grievance mechanisms, etc.);
  • GRI standards (non-financial reporting, stakeholder engagement).

3.4. Sustainable Development Policy

3.4.1. Key Provisions of the Sustainable Development Policy

Since its foundation, Sakhalin Energy has pursued the Sustainable Development Policy by incorporating SD principles into the company’s business strategies, plans, and processes.

According to the UN definition, sustainable development is about ensuring that ‘the needs of the present generation are met without compromising the ability of future generations to meet their own needs.’ In its practice, Sakhalin Energy relies upon this definition. This approach presumes and ensures economic effectiveness, environmental safety, social justice, and ethical behaviour of the corporation and its employees, combined with an overall reduction of human impact on the ecosphere. This is implemented via strong, transparent, constructive, and systematic cooperation and two-way communication with all the stakeholders.

In 2018, Sakhalin Energy consistently implemented the provisions of the Sustainable Development Policy—a public policy document approved by the Committee of Executive Directors in 2003 (the latest 2016 revision of the document includes the company’s commitment to the United Nations Sustainable Development Goals, see Section 3.4.2. UN Sustainable Development Goals). This Policy describes the company’s SD principles, development areas and commitments.

The main provisions of the company’s Sustainable Development Policy are as follows:

  • Sakhalin Energy will carry out its business activities with utmost responsibility and efficiency to maximise benefits for the Russian Federation, the Sakhalin Oblast, and the shareholders;
  • Sakhalin Energy will contribute to the present and future needs of the society on Sakhalin Island, keeping a balance between economic development, environmental protection, and social responsibility, and with due regard for cultural diversity;
  • Sakhalin Energy will work with all stakeholders to identify ways to contribute to the wider, long-term economic, environmental, and social benefits in the Sakhalin Oblast.

To comply with these principles, Sakhalin Energy makes the following commitments to sustainable development:

  • incorporate SD principles into business plans, procedures, and processes;
  • ensure compliance with the corporate Commitments and Policy on HSE and Social Performance, as well as standards specified in the Health, Safety, Environmental and Social management systems and Action Plan;
  • provide detailed information to stakeholders and engage them in evaluating company’s SD performance and sharing feedback;
  • develop and implement social investment and sustainable development programmes and projects that are linked to the company’s strategy and priorities, and have clear procedures and controls;
  • pay special attention to developing strategic partnerships with external stakeholders;
  • provide annual non-financial reporting in accordance with the Global Reporting Initiative (GRI) standards and principles, as well as the corporate Sustainable Development Report Preparation Procedure;
  • participate in the UN Global Compact (UNGC), complying with and promoting its ten principles;
  • be a member of UNGC LEAD initiative demonstrating sustainability leadership.

3.4.2. UN Sustainable Development Goals

At the 70th session of the UN General Assembly in September 2015, a new global agenda was adopted—Transforming Our World: the 2030 Agenda for Sustainable Development with 17 Sustainable Development Goals (SDGs), which replaced the Millennium Development Goals. One of the specific features of the new Goals is the chosen approach to achieve them: the SDGs are addressed not only to governments, but also to other participants in the sustainable development process, in particular—to businesses, civil society, and all individuals. The universal character of the SDGs allows companies to adopt a set of goals that best corresponds to their activities and existing CSR programmes.

In its work towards the achievement of the SDGs, the company primarily focuses on the following international documents:

  • the SDG Compass for business, developed by the United Nations Global Compact, the Global Reporting Initiative (GRI) and the World Business Council for Sustainable Development (WBCSD);
  • Mapping the Oil and Gas Industry to the Sustainable Development Goals: An Atlas, developed by the International Petroleum Industry Environmental Conservation Association (IPIECA) in partnership with the International Finance Corporation (IFC) and the United Nations Development Programme (UNDP);
  • the SDG Industry Matrix, developed by the UN Global Compact and KPMG.

At the end of 2015, Sakhalin Energy initiated work to study the SDGs and to define the company’s contribution to their achievement, including:

  • Making a preliminary review of the SDGs to consider their targets and indicators against the company’s priorities, objectives, activity areas, programmes and projects (2015–2016).
  • Making a commitment with respect to the SDGs. The company’s commitment to contribute to the achievement of the SDGs is included in the corporate Sustainable Development Policy: Sakhalin Energy endeavours to take the lead in sustainable development taking into account the Sustainable Development Goals of the 2030 Agenda for Sustainable Development (2016 revision).
  • Defining priorities and goals—analysing the company’s priorities and goals and selecting the most significant SDGs in terms of their importance to the company’s activities and contribution to their achievement (annually since 2016). When defining the company’s priorities and objectives in respect of the SDGs, a significant prerequisite of success is the involvement of stakeholders in the exchange of ideas about possible ways to achieve the SDGs by the company. Since 2016, relevant questions have been put on the agenda of dialogues with the external stakeholders in the preparation of the Sustainable Development Report and discussions with the company’s personnel. In 2017, questions regarding these issues were added to questionnaires for the stakeholders to determine the content of the Sustainable Development Report. As a result, in 2018, as in the previous year, the company’s stakeholders named SDGs 3, 4, 7, 8, 12, 14 and 15 to be the most significant for Sakhalin Energy (see Section 2.1. General Information).
  • Integrating commitments and goals with the processes and practices of the company. An analysis indicated that the company’s existing processes, programmes, and practices in the field of sustainable development contribute to the achievement of most of the SDGs and the targets they set (since 2016). In 2017, an analysis was made of each SDG target (in total, 169 targets) to determine specific processes and practices of the company that correspond to each of them. The analysis showed that not all SDG targets were applicable or relevant to the company’s activities. In 2018, the company analysed the global indicators (in total, 232 indicators) to identify and systematise corporate indicators that correspond to each target and global indicator. These corporate indicators should demonstrate the efforts that the company makes to achieve the global indicators of relevant SDG targets. The summary of the analysis results are presented in the table below, namely: the goals and objectives of the company with examples of areas of activity, projects, programmes or actions that correspond to specific SDGs and their targets, as well as key corporate indicators. In addition, Appendix 1. GRI Standards Compliance Table contains SDGs that correspond to specific topics / targets of GRI standards.
  • Public reporting. The company made a decision to include information on its contribution to the SDGs achievement in annual Sakhalin Energy Sustainable Development Reports (starting with the 2016 Report and at least until 2030), as well as in its annual reporting as a participant of the UN Global Compact (Communication on Progress).

All structural units of Sakhalin Energy are involved in the above-described work with respect to the SDGs.

One of the conditions for achieving the SDGs, which is also highlighted as a separate Goal 17, is to join efforts in global, regional or local partnerships, uniting governments, business and civil society. Sakhalin Energy attaches great importance to the creation and implementation of strategic long-term partnerships engaging external stakeholders. This applies to environmental projects, personnel development programmes, social investments, etc. (see Sections 8.3. Environmental Monitoring and Biodiversity Conservation, 9.1. Personnel: Management and Development, and 9.5. Social Investment and Contribution to Sustainable Development of the Host Region).

In 2018, the company joined the Reporting on the SDGs Action Platform, which was initiated by the UN Global Compact and the Global Reporting Initiative (GRI) in partnership with the Principles for Responsible Investment (PRI) initiative in order to unite the efforts of all stakeholders in developing the framework, principles, and recommendations for corporate reporting on the SDGs. The initiators of the project are guided primarily by the GRI Standards and the UN Global Compact requirements. As a result, companies will be able to integrate reporting on the SDGs with existing reporting formats.

Sakhalin Energy’s goals and objectives, examples of activities, projects, programmes, or measures related to SDGs, and key corporate indicators

Note: since SDGs are complex and indivisible, the goals and objectives of the company, with examples listed, are presented for several SDGs simultaneously.

SDGs and their targets

Goals and objectives of the company

Areas, programmes, projects (examples)

Key indicators

Report section(s) and/or other references

1.1

1.2

1.4

1.5

 

2.3

2.4

 

9.1

9.4

 

11.1

11.2

11.4

 

12.7

12.8

Provision of an attractive, competitive remuneration and benefits package. Achievement of Russian content at the level of 70% for the entire duration of the project (as per the PSA). Contribution to sustainable development of host region (Sakhalin Oblast). Effective management of grievances from stakeholders, paying special attention to vulnerable groups. Timely and efficient environmental, social, and health impact assessment.

Remuneration and bonus system. Social guarantees, benefits and compensations system. Supply chain management. Vendor Development Programme. Local business contracts. Financial benefits to the Russian Federation and the Sakhalin Oblast. Sakhalin Island. infrastructure upgrade programme. Grievance mechanisms. Social and environmental impact management. Resettlement Action Plan. Sakhalin Indigenous Minorities engagement practices (in accordance with the Human Rights Policy, indigenous peoples are a vulnerable group) Social investment programmes and projects. Cultural heritage protection plans. Projects to preserve indigenous languages. Measures to ensure road safety.

Ratio of standard entry level wage compared to local minimum wage.

Russian content level.

Significant indirect economic impacts.

Grievance resolution indicators.

Operations with significant actual or potential negative impacts on local communities.

Operations where involuntary resettlement took place, the number of households resettled in each and how their livelihoods were affected in the process.

Total number of incidents of violations involving rights of indigenous peoples and actions taken.

Operations where indigenous communities are present or affected by activities and where specific engagement strategies are in place.

The number and description of significant disputes with local communities and indigenous peoples.

Number of people injured in road traffic accidents

6, 7, 9.1, 9.2, 9.4, 9.5;
for references, see Appendix 4:

·      Sakhalin Oblast infrastructure upgrade;

·      Resettlement: Experience of Sakhalin Energy brochure;

·      websites of social investment programmes and projects,

·      Public Consultations and Disclosure Plan,

·      Archaeological Heritage of Sakhalin Island.

3.3

3.5

3.6

3.8

3.9

Goal Zero: No harm, No leaks.
Occupational health assurance

Labour safety and protection (measures to ensure industrial safety, road safety, etc.). Occupational health (health risk assessment, occupational hygiene, organisation of medical examinations, medical emergency response, voluntary health insurance and disease prevention programmes, etc.). Industrial environmental control.

Rates of injury.

Occupational disease rate.

Total number of work-related fatalities.

Coverage of employees carrying out activities in hazardous, dangerous and difficult working conditions by mandatory periodic medical examinations. Coverage of employees by dispensary medical examinations.

Emissions of greenhouse gas (GHG).

Emissions of ozone-depleting substances (ODS).

Nitrogen oxides (NOX), sulphur oxides (SOX), and other significant air pollutant emissions.

Total water discharge by quality and destination.

Total weight of waste by type and disposal method.

Total number and volume of significant spills.

Volume of flared and vented hydrocarbon.

Number of people injured in road traffic accidents

9.2, 9.3, 8.2, 8.5

4.3

4.4

4.5

4.7

 

8.1

8.2

8.3

8.5

8.6

8.8

Meeting the company’s needs for highly qualified personnel to achieve current and strategic objectives. Achievement of Russian content at the level of 70% for the entire duration of the project (as per the PSA). Contribution to the sustainable development of host region (Sakhalin Oblast)

Personnel development and training programmes. Supply chain management, Vendor Development Programme. Local business contracts. Financial benefits to the Russian Federation and the Sakhalin Oblast. Sakhalin Island. Remuneration and bonus system. Social guarantees, benefits and compensations system. Measures to ensure occupational safety and health of personnel

Average hours of training per year per employee by gender and by employee category.

Percentage of trained personnel by gender and employee category.

Expenses for staff training.

Indicators of skills development and education programmes, including for graduates, trainees, and so on.

Percentage of employees receiving regular performance and career development reviews, by gender and by employee category.

Russian content level.

Ratio of standard entry level wage compared to local minimum wage.

Percentage of employees who returned to work after parental leave and retention rates after parental leave, by gender.

Rates of injury.

Occupational disease rate.

Total number of work-related fatalities.

Number of people injured in road traffic accidents

7, 9.1, 9.2, 9.3

5.1

5.2

5.4

5.5

 

10.3

Compliance with Russian legislation and international standards for the observance, protection and promotion of human rights.

Assurance of gender equality and non-discrimination in all aspects of labour relations, including recruitment, selection, hiring, assessment, promotion, training of employees, maintaining discipline, training and development, remuneration, and termination of employment contracts.

Total number of incidents of discrimination and corrective actions taken.

Ratio of the basic salary of men and women.

Composition of governance bodies and main employee categories by gender and age group.

Percentage of employees receiving regular performance reviews, by gender and by employee category.

Average hours of training per year per employee by gender and by employee category.

Percentage of trained personnel by gender and employee category.

Percentage of employees who returned to work after parental leave and retention rates after parental leave, by gender.

Total number of new employee hires and employee turnover by age group and gender. Ratio of standard entry level wage compared to local minimum wage

9.1

6.3

6.4

6.6

 

7.3

 

8.4

 

 

9.5

 

12.2

12.4

12.5

12.6

 

13.1

Implementation of efficient and lean production methods.

Introduction of innovative solutions and digitisation of all processes.

Compliance with legislation on environmental protection, observance of established environmental standards, assurance of the sustainable use of natural resources, and fulfilment of plans for minimising the environmental impact

Using gas turbines equipped with devices to reduce emissions of nitrogen oxides. Using a gas turbulence increasing system, which facilitates gas flaring in a soot-free mode. Drilling waste disposal via dedicated re-injection wells into deep subsurface horizons with the necessary insulating layers. Activities to improve operational reliability and to ensure trouble-free operation of equipment. Industrial environmental control of the impact on atmospheric air and water bodies; waste management. Energy saving and energy efficiency activities. Stakeholder engagement practices.

Public reporting on sustainable development

Amount of drilling waste (drill mud and cuttings) and strategies for treatment and disposal.

Volume and disposal of formation or produced water.

Volume of flared and vented hydrocarbon.

Total weight of waste by type and disposal method.

Total water discharge by quality and destination.

Nitrogen oxides (NOX), sulphur oxides (SOX), and other significant air pollutant emissions.

Specific emissions of pollutants into the atmosphere.

Emissions of ozone-depleting substances (ODS).

Energy indirect greenhouse gas (GHG) emissions.

Direct greenhouse gas (GHG) emissions.

Specific greenhouse gas (GHG) emissions.

Energy intensity.

Energy consumption within the organisation.

Specific energy consumption.

Total water withdrawal by source.

Water sources significantly affected by withdrawal of water.

Specific water use indicators.

Total number and volume of significant spills.

Operational sites located on, or adjacent to, protected areas and areas of high biodiversity value outside protected areas.

Impacts of activities on biodiversity in protected areas and areas of high biodiversity value.

Total number of IUCN red list species and national conservation list species.

New suppliers that passed the environmental assessment.

Environmental costs and payments for the adverse impact, including breakdown of details

2, 4, 6, 8.2, 8.5,

references in Appendix 4:

·      Public Consultations and Disclosure Plan.

14.1

14.2

14.3

14.а

 

15.1

15.2

15.5

15.9

Goal Zero: No harm, No leaks. Assessment of the state and rehabilitation of the environment in the areas of production facilities, identification of signs of current impact and development of mitigation actions, if necessary.

Effective and timely environmental, social and health impact assessment.

Impact mitigation, development and implementation of actions aimed at the preservation of rare and endangered species, as well as environmentally significant and vulnerable biotopes.

Implementation of agreed biodiversity conservation and local monitoring programmes. Environmental risk and impact assessment. Implementation of an effective and sustainable waste management strategy. Implementation of the action plan to achieve the established environmental standards. Maintenance and improvement of emergency and oil spill response mechanisms

Volume of flared and vented hydrocarbon.

Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations

Nitrogen oxides (NOX), sulphur oxides (SOX), and other significant air pollutant emissions.

Energy indirect greenhouse gas (GHG) emissions.

Direct greenhouse gas (GHG) emissions.

Total number and volume of significant spills.

Operational sites located on, or adjacent to, protected areas and areas of high biodiversity value outside protected areas.

Impacts of activities on biodiversity in protected areas and areas of high biodiversity value.

Recovery of wetlands in disturbed areas of the ROW.

Changes in the status of nesting populations, protected plant species and habitats.

Changes in aquatic ecosystems.

Overgrowing of the ROW.

Total number of IUCN red list species and national conservation list species

8,

references in Appendix 4:

·      Biodiversity Action Plan;

·      Oil spill prevention and response plans.

16.1

16.2

16.3

16.5

16.6

16.7

16.10

Compliance with all applicable laws and regulations of the countries in which the company operates.

Effective corporate governance.

Corporate culture development. Anti-bribery and corruption.

Provision of safe and confidential ways for all stakeholders to express concerns and grievances, or report non-compliances

Availability of the General Business Principles, values, norms and standards of the Code of Conduct. Anti-bribery and corruption actions.

Grievance mechanisms. Assurance of safety with respect for human rights.

Conflict of Interest policy. Stakeholder engagement practices, including open public consultations and public sustainable development reporting

Total value of political contributions by country and by recipient/beneficiary

Total number of incidents of non-compliance with regulations or voluntary codes concerning product and service information and labelling.

Total number of incidents of discrimination and corrective actions taken.

Confirmed incidents of corruption and actions taken.

Communication and training on anti-corruption policies and procedures.

Percentage of security personnel trained in the organisation’s human rights policies or procedures that are relevant to operations.

Operations and suppliers identified as having significant risk for incidents of forced or compulsory labour, and measures to contribute to the elimination of all forms of forced or compulsory labour.

Stakeholder engagement indicators.

Grievance resolution indicators

2, 5, 6, 9.4;
for references, see Appendix 4:

·      Code of Conduct;

·      Human Rights: Experience of Sakhalin Energy brochure.

 

Sakhalin Energy continued making efforts to promote the SDGs in the business community. In particular, in 2018:

  • Sakhalin Energy became the only Russian company whose experience was included in UN Global Compact International Yearbook. In total, the edition contains 39 international examples that demonstrate various approaches to the implementation of the SDGs.
  • Sakhalin Energy made a presentation on the Business and Sustainable Development Goals: Disclosure in Non-Financial Reporting at the Towards the Sustainable Development Goals: Promotion of Sustainable Development and Decent Work International Conference in Baku.
  • The company supported the publication of the Russian Business and Sustainable Development Goals, a new compendium of corporate practices, prepared by the Russian Union of Industrialists and Entrepreneurs with the support of the International Labour Organisation (ILO). The compilation presents the practical experience of 25 companies (including Sakhalin Energy) from various sectors of the economy, describing the companies’ sustainable development goals and targets in correlation with the SDGs. The examples included in the compendium demonstrate that Russian business is actively involved in working towards the SDGs.

UN Sustainable Development Goals: Sakhalin Energy’s Measures

3.5. HSE and Social Performance Management

3.5.1. HSE and Social Performance Management System

The company is committed to preventing potential damage to the community and environment as a result of its operations and contributes to sustainable development to benefit the residents of Sakhalin and other primary stakeholders. Since the beginning of the Sakhalin-2 project implementation, the Russian Federation and the Sakhalin Oblast have received numerous benefits from it, including multi-billion investments, employment growth, contracts with Russian companies, etc. (see Section 7.1. Importance of the Sakhalin-2 Project for the Russian Federation and the Sakhalin Oblast). Understanding that the scope and complexity of the project can have an impact on the environment and social performance, Sakhalin Energy made a commitment to consistently prevent associated potential problems and adverse impacts, and to reduce risks. In its operations, the company adheres to the principle of eliminating hazards and threats, paying special attention to preventive risk management and impact assessment (see Section 5.4. Risk Management).

Health, safety, environment, social performance, and industrial safety management is an integral element of the corporate management system and is regulated by a number of fundamental documents that include:

  • Sustainable Development Policy;
  • Commitment and Policy on Health, Safety, Environment and Social Performance;
  • HSE and SP Management System Manual;
  • Health, Safety, Environment and Social Action Plan;
  • Flaring Commitment;
  • Statement of Industrial Safety Policy;
  • Safety Management Syastem Manual;
  • Regulation on Industrial Environmental Control;
  • Business Continuity Policy;
  • Guidance on the Business Continuity Management System.

The above documents were approved by the Committee of Executive Directors, signed by the Sakhalin Energy Chief Executive Officer, and communicated to the personnel and contractors.

The commitments adopted by the company following the results of assessing the impact on the environment, health, and social performance, conducted before the start of the Phase 2 construction work, are included in the Health, Safety, Environment and Social Action Plan (hereinafter — the Plan). The development of the Plan was a mandatory condition for obtaining a loan for Sakhalin-2 Phase 2 implementation.

The Plan was developed in compliance with Russian laws and international standards, including the World Bank’s Policies and Directives, the standards of the International Finance Corporation, and others. The Plan describes the HSE and SP management system, provides detailed information on measures to minimise the adverse environmental impact, monitoring, activities in environmental and social areas, as well as all internal and external standards regulating the company’s HSE and SP activities. The Plan is approved by the project lenders. The fourth edition was approved in 2014 and published in 2015.

The Plan was posted on the company’s website (in Russian and English), as well as in the company’s information centres and libraries of the communities located in the vicinity of the company’s assets. A few materials are available in Japanese for stakeholders in Japan. The implementation of the Plan is regularly monitored by the company, lenders and their consultants; inspection results are published on the company’s website (www.sakhalinenergy.com).

The company applies a systemic approach to handling HSE and social performance issues, which ensures continuous improvement in this area. The comprehensive HSE and SP management system includes controls used by Sakhalin Energy to handle hazardous situations and risks. The system is applied to all Sakhalin Energy assets, projects, and operations, including those conducted by contractors. Sakhalin Energy considers control of risks as a critically important prerequisite for successful performance; therefore, the risk management system is subject to continuous updating, improvement, and optimisation.

The system is based on the Plan-Do-Check-Act methodology of ISO 14001 and OHSAS 18001 standards.

HSE and Social Performance Management System

The Plan-Do-Check-Act Methodology is applied in order to:

  • identify goals and establish procedures necessary to achieve performance indicators in compliance with the Commitment and Policy on Health, Safety, Environment and Social Performance. This includes identifying legal and other requirements, determining problems and risks, assessing impacts, identifying management elements, as well as developing annual performance improvement plans;
  • implement procedures for training and advanced training, contractor performance management, engagement and interaction, change management, emergency response, as well as operational control over hygiene, personal safety, integrity of assets, and industrial safety. The procedures cover the issues of transportation, health, safety, environment, and social performance, including those associated with public activities, cultural heritage, land acquisition, relocation and provision of additional assistance, conducting scheduled consultations and sharing information with the community, grievance consideration; with social investments;
  • monitor and assess performance in accordance with the set objectives, legal and other requirements; provide reports on findings, incidents, and non- compliances; take corrective and preventive measures; conduct audits of the HSE and social performance management system at the company’s assets and in functions;
  • regularly perform a review of the management system and promote continuous optimisation of HSE and SP performance.

The Sakhalin Energy HSE and SP management structure consists of the HSES Management Committee, which exercises comprehensive control over the area. The Committee is chaired by the company’s Chief Executive Officer. The HSE General Manager reports to the CEO and oversees the development, introduction, operation, and monitoring of the management system. To ensure the fulfilment of the industrial safety and HSE standards, HSE services were formed in the company’s structural and functional units.

In 2018, the company was certified to the new version of ISO 14001:2015, which provides for an improved systemic approach to environmental management. The new version of the Standard introduces the requirement for a company to integrate environmental management system requirements into the organisation’s business processes. This new version also takes HSE leadership to the next level: company executives take a more active role in environmental management by acting as guarantors of the corporate environmental management performance.

Although these principles have just been made part of the standard, Sakhalin Energy has implemented them for quite a while and they have proved efficient.

With the positive results of the re-certification audit obtained this year, Sakhalin Energy has once again guaranteed to external stakeholders that its environmental impacts are under control and its environmental management approaches continue to be improved.

3.5.2. Impact Assessment

The company is committed to making an impact assessment prior to any new activities or significant changes in existing projects. This is the basis of the due diligence approach and all risk management processes.

Impact management is a process of predicting and managing the future project activities by improving project solutions, taking measures targeted at minimising potential adverse impacts and increasing benefits from the company’s activities.

Sakhalin Energy seeks to avoid or reduce the impact to the lowest possible level or to compensate for it by taking appropriate measures. When any potential adverse impact is identified, the following actions are consistently developed and taken:

  • avoid;
  • prevent;
  • mitigate;
  • compensate;
  • use experience to reduce the probability of occurrence.

An integral part of any impact assessment carried out by the company are consultations with the stakeholders to inform them about the planned activities, identify concerns, take into account their opinions, and discuss possible measures to manage the impact.

Stages of Impact Assessment

The results of previous environmental and social impact assessments (including the results of comprehensive and strategic environmental assessments as well as the required additional and special studies) are taken into account in the company’s standards, while its ongoing activities are based on relevant plans and programmes. The results of impact assessments are published on the company’s website. The validity and completeness of the assessments are monitored by government authorities and project lenders.

In 2018, the company together with a specialised contractor developed a design package for the Piltun-Astokhskoye and Lunskoye 4D Seismic Project, which included integrated impact assessment according to international and Russian requirements. The company conducted public hearings within the required timeline and obtained a positive State Environmental Expert Review conclusion. The geophysical survey was conducted according to the established schedule with zero incidents. For details of the HSE and ESHIA information, please refer to the Sakhalin Energy`s website (www.sakhalinenergy.com).

3.5.3. Inspection and Audit

Since 2005, external and internal inspections and audits have been conducted to ensure control over all the elements of the integrated HSE and SP management system in compliance with approved annual plans. External audits are conducted by representatives of the company’s shareholders and lenders, external certifying authorities, etc. For internal audits, the company engages specially trained auditors — qualified employees of the company and shareholder specialists. In 2018, seven HSE and SP management system audits were conducted, six of which were external and one internal (see the Inspections and Audits of the HSE and SP Management System in 2018 table).

Inspections and Audits of the HSE and SP Management System in 2018

Audit level

Number of audits

Content

External

6

Control over the compliance with HSE and SP standards issued by the representative of lenders — by the independent environmental consultant *

Audit for compliance with ISO 14001 and OHSAS 18001 standards

SMBR: Shell Maritime Business Review

Road Safety Peer Review

Hazardous works audit: Lifting and Hoisting audit

Monitoring of Sakhalin Indigenous Minorities Development Plan (SIMDP) implementation — by independent expert in the frameworks of external SIMDP monitoring*

Internal

1

FMD HSE Audit

*The reports are available on the company’s official website ( www.sakhalinenergy.com).