Petron

Nov 24, 2023

PETRON MALAYSIA REFINING & MARKETING Petron Malaysia Refining & Marketing Nov. 23 Petron Malaysia Refining & Marketing : Sustainability Report 2022 November 24, 2023 at 04:06 am EST Share Celebrating a Decade of CELEBRATING A DECADE OF SUCCESS In 2022, Petron Malaysia celebrated 10 years of fuelling happiness. We trace back our humble beginnings to the time we built the first Petron service station in MRR2 Selayang, Kuala Lumpur in 2014. The following decade saw the incredible growth of our service station network, as well as numerous upgrades in our refinery, plant and distribution facilities, placing us at the forefront of the local oil industry. Our 2022 Sustainability Report cover design highlights our journey in sustainability efforts, which aim to create positive economic, environmental and social impacts. The metallic silver in our 10th anniversary logo reflects the Company's strength and resilience in its journey. In this Sustainability Report, we also celebrate the people - employees, business partners and other stakeholders, who have shared their time and dedication with us. We are proud of what we have achieved together and the impact we have made on our customers' lives through the products and services we offer, embedding sustainability in all that we do. Throughout our 10 years of Sustainability Journey, we have consistently created value for our stakeholders, planting the seeds today, for tomorrow. We are poised to grow, rise and fuel more successes in the next decade and beyond without forgetting our responsibilities to the environment and the communities. We look forward to turning the pages to the next and more exciting chapters of our journey to sustainability. OUR VISION To be the leading provider of total customer solutions in the oil sector and its allied businesses. OUR MISSION We will achieve this by: Being an integral part of our customers' lives, exceeding expectations and meeting changing needs, delivering a consistent customer experience through quality products and innovative services Developing strategic partnerships in pursuit of growth opportunities Fostering an entrepreneurial culture that encourages teamwork, innovation and excellence Acting with professionalism, integrity and fairness at all times Adhering to the strictest safety and environmental standards Promoting the best interests of all our stakeholders and caring for our community OUR VALUES Message from the Chairman Air Emissions and Pollution Management Waste and Circular Economy Safety ABOUT THIS REPORT Our pursuit of a better and more resilient future is underpinned by our efforts in sustainability. It is the focal point of everything we do - from the time crude oil is refined to the time our petroleum products reach our customers. Our six corporate values - Excellence, Customer Focus, Innovation, Teamwork, Ethics and Safety - sum up our efforts towards a sustainable future. As we advance forward to become the leading provider of total customer solutions in the oil sector and its allied businesses, we remain guided by our sustainability commitment, even in the face of recent challenges. From our disclosures to comply with evolving local and global reporting standards and regulations. In 2018, we published our inaugural stand-alone Sustainability Report. through a materiality assessment, as reported on page 20-21. This report outlines our initiatives, programmes and performance outcomes related to these material matters. It also communicates our efforts to incorporate sustainability into our everyday operations and business management, reflecting SUSTAINABILITY IMPACTS This report encompasses the sustainability performance of Petron Malaysia Group, which includes Petron Malaysia Refining Marketing Bhd (PMRMB), Petron Fuel International Sdn. Bhd. (PFISB) and Petron Oil (M) Sdn. Bhd. (POMSB). This report covers all operations within the entities above, unless otherwise specified. The reported information covers the time period of 1 January 2022 to 31 December 2022. SUSTAINABILITY REPORT 2022 REPORTING FRAMEWORKS This sustainability report has been prepared with reference to the Global Reporting Initiative (GRI) Standards and GRI 11: Oil and Gas Sector 2021 as well as the following reporting guidelines and requirements: Bursa Malaysia Sustainability Reporting Guide 2nd and 3rd Editions Securities Commission's Malaysian Code on Corporate Governance (MCCG) 2021 The United Nations Sustainable Development Goals (UN SDG) 5 THE BUSINESS OF PETRON OUR STRUCTURE Petron Malaysia Group is under the Petron Corporation since 2012 and Petron is an Asian company with global mindset. We aim to be an integral part of the journey of every Malaysian. Petron Malaysia Group comprises Petron Malaysia Refining & Marketing Bhd (PMRMB), and its sister companies, Petron Fuel International Sdn. Bhd. and Petron Oil (M) Sdn. Bhd. Petron Malaysia Group is Malaysia's third-largestdownstream oil and gas player. Petron Malaysia Our Business 11strategically located terminals and plant Port Dickson Terminal, Negeri Sembilan Bagan Luar Terminal, Penang Klang Valley Distribution Terminal (JV-Petronas/Shell), Selangor Pasir Gudang Terminal (JV-Chevron), Johor* Sepangar Bay Terminal, Sabah* ~140service stations offer cash and carry LPG SUSTAINABILITY REPORT 2022 Automotive Diesel Oil (ADO) Distribution of our high quality fuels and LPG • Blaze 100RON Euro 4M • Turbo Diesel Euro 5 • Blaze 97RON Euro 4M • Diesel Max Euro 5 • Blaze 95RON Euro 4M • Petron Gasul Our convenience store Treats, provides a rewarding one-stop shop experience to cater to customers' needs. Petron Gasul provides efficient energy for Malaysian households for cooking, lighting, etc. 12kg 14kg 50kg High quality selection of industrial products to Plantations, Airlines, Workshops MESSAGE FROM THE CHAIRMAN To Our Valued Stakeholders, The impacts of climate change have continued to worsen over the last few years, affecting businesses and livelihoods globally as weather events and natural disasters swing towards greater extremes. Petron being an oil company is also balancing its efforts to care for the environment as well as to support economic development of the country as we fuel the energy needs of the economy. RAMON S. ANG 9 INTRODUCTION At Petron Malaysia, we are cognisant of our role in helping the nation to accelerate towards a low-carbon future and in responding to the global climate change emergency. We are committed to support Malaysia's aim of achieving carbon neutrality as early as 2050. This includes supporting Malaysia's National Energy Policy 2022-2040, which aims to drive the sustainable development of the energy sector while ensuring optimal utilisation of energy resources. Efforts such as identifying climate-related risks and opportunities, producing cleaner fuels, and promoting a circular economy. These are in addition to reducing our operational greenhouse gas (GHG) emissions. We have commenced our journey towards cleaner energy since 2016 by introducing Malaysia's first and only RON 100 fuel, a motor gasoline with typically less than 10ppm sulphur content, emitting cleaner air and lower GHG. In addition, in the same year, our Turbo Diesel B7 complied with E5's sulphur content regulation. This clearly demonstrates our commitment to produce cleaner energy even before we invested in a Diesel Hydrotreater (DHT) facility, which produces cleaner fuel with lower sulphur content. Commissioned in 2021, this facility includes a Bio-Sulphur Recovery (BSR) plant that uses an eco-friendly desulphurisation process for it to be recovered as elemental sulphur that can be used to make fertilisers, enabling us to reduce our waste and further venture into the circular economy. Alongside the DHT, our new Marine Import Facility 2 (MIF2), which was also commissioned in 2021, has enabled us to lower our carbon emission as we can now receive larger parcels of imported finished products, thus reducing the frequency of imports. Additionally, our investments in a Multi-Product Pipeline and the Klang Valley Distribution Terminal have allowed us to rationalise our truck deliveries by an average of 720,000 km/month. This generates an equivalent to 486,000 kg of CO2 emissions savings or carbon sequestered by 8,036 tree seedlings grown for 10 years. The year 2022 was a momentous occasion for Petron Malaysia as we marked our 10th Anniversary, symbolising significant achievement throughout a decade-long journey. During the year, we continued to invest in our facilities not only to increase production and efficiency, but also to bolster our sustainability efforts. This included the completion of our Lumut Palm Methyl Ester (PME) plant expansion, further boosting production capacity by 30% or up to 90,000 metric tonnes of PME per year, enabling us to meet the rising demand for biodiesel to support Malaysia's aspiration to improve air quality through cleaner emissions. The Lumut PME Plant (LPP) also completed the refurbishment and upgrading of its wastewater treatment plant, enabling the plant to further reduce its effluents by more than half. STEPPING UP OUR SUSTAINABILITY EFFORTS In the year under review, we took several concrete measures to strengthen the foundations of our sustainability journey. As a start, we enhanced our sustainability governance by establishing a Board Sustainability Committee (BSC) to steer sustainability strategies, priorities and targets. The BSC is tasked with advising the Board, which has oversight of sustainability matters including climate-related risks and opportunities. To manage our economic, environmental and social (EES) impacts better, we reviewed our material matters by holding an in-depth materiality assessment. This crucial step allowed us to include Climate Change, Natural Resources, Biodiversity and Sustainable Supply Chain as the sustainability matters that are material to our business and stakeholders. Additionally, we have taken steps to align our sustainability strategy with the Company's corporate strategy. This includes incorporating Petron Malaysia's six core values (Excellence, Customer Focus, Innovation, Teamwork, Ethics and Safety) into our enhanced sustainability framework, which is anchored on EES. Furthermore, we are reviewing and revising our sustainability-related policies. These efforts will enable us to implement strategic sustainability initiatives that are aligned with Petron Malaysia's goals and embed sustainability across our operations. SUSTAINABILITY ACHIEVEMENTS Our sustainability achievements in 2022 demonstrated our positive EES impacts and commitment to support the nation's mobility as businesses recovered from COVID-19 disruptions. We made a significant impact to the nation's economy in the year under review by contributing over RM18 billion of economic value, which included paying taxes, dividends and salaries, investing in local community and supporting local businesses. To this end, we channelled RM8.2 billion or 46% of our procurement spend to local suppliers, who form 96% of our total suppliers. To further empower the local community, we have engaged 120 local entrepreneurs in our Sapot Lokal programme since its launch in 2021. This initiative supports local entrepreneurs by enabling them to sell their goods in our service stations and we plan to expand the programme to 150 service stations by 2025 and to all Treats stores by 2030. Our support for local economic growth is also reflected in the presence of 95% local talent in our Senior Management team, where we prioritise local individuals in senior positions with decision-making authority. This allows the local community to acquire leadership skills, earn higher income, and contribute to local economic development. While generating economic growth is an important part of our sustainability journey, we also prioritise high standards of ethical business practices and good governance. I am proud to report that we have maintained zero incidents of corruption cases and money laundering incidents. This was due to our robust Anti-Corruption and Anti-Money Laundering Policies, and the stringent measures we took to combat bribery and corruption in our organisation, including assessing all our operations for risks related to corruption. Our efforts to operate and grow responsibly have led us to attain various international standards across our operations. International standards such as ISO 14001:2015 Environmental Management System, ISO 9001 Quality Management System and ISO 45001:2018 Occupational Health and Safety Management System achieved by our various business units reflect our commitment to minimise the negative impact of our operations. 10 PETRON MALAYSIA REFINING & MARKETING BERHAD MESSAGE FROM THE CHAIRMAN 11 Under the environmental pillar, we have continually sought to implement renewable energy solutions to reduce our operational GHG emissions. We believe this will contribute to the nation's target of achieving 31% renewable energy share in the national installed capacity mix by 2025. It is worthy to note that we have made strides in adopting simpler, readily available and energy- and contractors through training and rigorous risk assessments and management. In 2022, all of our operations including service stations were evaluated for risks and hazards, and the number of employees receiving OSH standards training increased to 306 from 211 in 2021. AWARDS INTRODUCTION efficient alternatives such as switching to LED and solar-powered lights. We target to fully implement this initiative across our operations and business units by the end of 2023. Furthermore, 15 of our service stations are installed with solar power panels and we aim to install solar power panels in 120 of our service stations by 2024. This is estimated to reduce 6,740 tCO2 equivalent (CO2e) of emissions per year, which is equivalent to carbon sequestered by 101,103 tree seedlings grown for 10 years. Apart from energy conservation, we have implemented other initiatives to conserve natural resources and protect the environment. This includes harvesting rainwater in all our operations for non-essential usage such as cleaning, landscaping and toilet flushing. In addition, we intensified our recycling efforts and awareness across our business To develop an agile, diverse and thriving workforce, we prioritise the learning and development of our employees. As COVID-19 restrictions eased, we were able to resume physical training sessions. This resulted in a significant increase in the participation of management and female employees with the resumption of our Management Development Training in the Head Office. We also enhanced the sustainability knowledge and reporting skills of our Technical Working Group, whose roles are vital in enabling us to embed sustainability practices in our operations. To remain relevant, we believe in having a diverse workforce with employees from various backgrounds and age groups. Notably, we have achieved a 33% representation of women on the Board of Directors, Malaysian Society for Occupational, Safety and Health Awards (MSOSH) 2022 Category: Grand Award Winner Sepangar Bay Terminal* Kuantan Terminal* units and successfully increased our waste diverted from disposal by three times in volume compared to 2021. We also embarked on a Green Lung Project with Universiti Putra Malaysia to preserve and enhance the biodiversity of more than 400 acres of green areas within Port Dickson Refinery (PDR). consistently meeting and exceeding the 30% benchmark over the past three years. This is aligned with the recommendation in the Malaysian Code on Corporate Governance (MCCG). Within our Senior Management team, female employees constitute 23% of the team. Additionally, we are developing transition assistance programmes for Petron employees who are nearing retirement, and we target to launch the initiative by 2024. MOVING FORWARD Convenience Store category: 8th Place CERTIFICATIONS Given the increased volatility in the oil and gas sector, it is imperative that we conduct our business endeavours with sustainability in mind. Going forward, we will further enhance our sustainability efforts to mitigate risks and capitalise on opportunities. This will include adopting the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) to bolster our climate risk management. To enhance our leadership's commitment to sustainability, we aim to provide anti-corruption and anti-money laundering training to all Board members by 2024. We will also further embed sustainability practices in our supply chain by establishing a Sustainable Supply Chain & Procurement Policy by 2023 and a Supplier Code of Conduct by 2025. These efforts will pave the way for a 5S/Quality Environment Certification SUSTAINABILITY FRAMEWORK At Petron Malaysia, we are guided by sustainability principles, as we seek to create sustainable value for our stakeholders. We are part of our ultimate parent company's commitment to achieve net zero by 2050, consistent with Malaysia's target. SUSTAINABILITY REPORT 2022 SUSTAINABILITY GOVERNANCE A strong governance structure plays a crucial role in driving an organisation's sustainability performance, ensuring that the business operates responsibly. We continuously seek ways to strengthen our governance to create value for our stakeholders. 13 In 2022, we engaged an external consultant to review our approach to sustainability and enhance our sustainability framework. As a result, we integrated the six values of Petron Malaysia: Excellence, Customer Focus, Innovation, Teamwork, Ethics and Safety into an enhanced sustainability framework. Our Board of Directors (BOD) has the oversight of sustainability matters within the organisation. In 2022, Petron Malaysia took a significant step towards advancing sustainability by establishing the Board Sustainability Committee (BSC) to effectively lead and promote sustainable practices within the organisation. The survey questions covered, among others, whether Board members can effectively convey and deliberate on the Company's sustainability matters. It also measured the effectiveness of the Company's overall sustainability governance framework in managing and reporting its risks, targets and initiatives. The evaluation, which Economic ADVANCING ETHICAL BUSINESS GROWTH To stay CUSTOMER FOCUSED and promote work EXCELLENCE towards ETHICAL business growth by giving due regards to sustainability impacts of business activities Generating Ethical Workforce The BSC reports to the BOD on the sustainability performance of Petron Malaysia and reviews and endorses sustainability material matters, strategies, goals and targets. The BSC meets four times a year and is supported by a Sustainability Council (SC), which is assisted by a Technical Working Group (TWG). The BOD, BSC, SC and TWG work closely through holding regular meetings to focus on mitigating significant EES impacts, resulting risks and leveraging opportunities to fulfil Petron Malaysia's intended sustainability outcomes. We conducted our first Sustainability Board Evaluation for the year 2022 as part of the annual Board Evaluation. The Sustainability Board Evaluation is one of MCCG 2021's recommended best practices. received an average rating of 3.94 out of 5, reflected the nascent stage of our sustainability journey, including our sustainability governance. It is worth noting that the BSC was only formed in the second half of 2022. We will continue to address the gaps and focus on the areas where we are lacking. To further reinforce our sustainability governance, policies, guidelines and procedures are established and implemented through our management systems based on respective ISO management system standards. For more information on our policies and guidelines, refer to https://www.petron.com.my/investor-relations/ corporate-governance/. SUSTAINABILITY AT PETRON shall be the CEO) or one Executive Director (the CEO) and a Non-Executive Director. BSC is assisted by up to three advisors (Senior Management) from the Company or the parent company - Advises the Board by reviewing and endorsing sustainability strategies, In 2022, we revised our prioritised stakeholder groups, resulting in the identification of nine key categories. We prioritised the stakeholders by assigning weight based on their dependency and influence on Petron Malaysia and vice versa. This was done through internal discussions and using historical information. We are mindful of the dynamic relationships we have with our stakeholders, as our relationships depend on various factors and the changing business environment. As a result, we added Financial Institutions as a new stakeholder group and included Union in the Employees stakeholder group. We have also separated contractors/vendors/suppliers and service providers from the Business Partners group, and categorised them as External Providers. Additionally, we have divided the Customers stakeholder group into two groups: one consisting of dealers, distributors and commercial entities, and PETRON AT SUSTAINABILITY the other comprising end users. This division allows us to better focus on the different needs of our customers. The table provides an overview of the list of prioritised stakeholder groups for the present time including their relevant needs and expectations, the various methods of engagement and the frequency of our engagements with them. goals and targets MATERIALITY ASSESSMENT PROCESS Petron Malaysia's material matters are determined based on a comprehensive materiality assessment process as demonstrated below: In 2022, we conducted a materiality assessment by determining our actual and potential EES impacts, assessing their significance and engaging with key stakeholders for their inputs. In assessing the EES significant impacts, factors such as the severity, likelihood, scale and scope of the impacts were taken into account. We also took into consideration impact assessments that have been carried out by Petron Malaysia to fulfil regulatory requirements such as Environmental Impact Assessment (EIA) and those conducted to conform to international standards such as ISO 14001 and ISO 45001. Stakeholder input was gained through responses provided via questionnaires and engagement sessions. We followed a defined step-by-step process as advocated by GRI. This process involved multiple employee awareness workshops, internal focus group interviews and discussions to ensure we captured the relevant EES impacts. 1 Assessment of EES Impacts Based on the outcome of the internal EES Impact Assessment, we identified significant impacts on the economy, environment and people, including human rights that are relevant to Petron, taking into account of both positive and negative ones. SUSTAINABILITY AT PETRON