About the report

This is the seventh annual Corporate Social Responsibility Report of the PGNiG Capital Group which sums up our dedication to CSR issues in 2014. Since the publication of its first CSR report, the PGNiG Capital Group has operated under the assumption that transparency through social reporting is the key to business development and accomplishment of the Group's mission. The process of gathering and publishing key data is also an important part of our sustainable development strategy.

The CSR Report of the PGNiG Capital Group for 2014 presents the undertaken CSR initiatives and the Group's future plans in the area of business, community and the environment. The information presented in the report was supplied by 14 members of the PGNiG Capital Group, including their subsidiaries, 9 branches and the Headquarters of PGNiG SA. They are: Polska Spółka Gazownictwa sp. z o.o., PGNiG Obrót Detaliczny sp. z o.o., PGNiG Termika SA, Operator Systemu Magazynowania sp. z o.o., Exalo Drilling SA, PGNiG Upstream International AS, Geofizyka Kraków SA, Geofizyka Toruń SA, PGNiG Technologie SA, Geovita SA, Polish Oil and Gas Company Libya BV, PGNiG Sales and Trading GMBH, PGNiG Finance AB, PGNiG Serwis sp. z o.o., BSiPG Gazoprojekt SA, Headquarters of PGNiG SA, Branch in Odolanów, Branch in Zielona Góra, Branch in Sanok, Geology and Hydrocarbon Production Branch, Central Measurement and Testing Laboratory, Borehole Mining Rescue Station, Wholesale Trade Branch, and two Underground Gas Storage Facilities in Wierzchowice and Mogilno. The information presented in the report covers the period from 1 January to 31 December 2014 and is valid as at the end of that year unless specified otherwise. CSR reports are developed annually. The last CSR Report of the PGNiG Capital Group was published in 2013. The data presented in the previous CSR report has not been amended or modified in any way in the present report.

Reporting standards

The CSR Report of the PGNiG Capital Group for 2014 has been developed based on the latest Global Reporting Initiative (GRI) G4 Sustainability Guidelines "in accordance" option Core and the corresponding "GRI 4 Oil and Gas Sector Supplement". All data presented in the report have been verified by an independent auditor – Bureau Veritas Polska Sp. z o.o. The report has received GRI's "Materiality Disclosures Service" verification, which verifies that the General Standard Disclosures G4-17 to G4-27 were correctly located in both the GRI Content Index and in the text of the final report

Reporting process

G4-18
G4-27

The process of defining reporting content was based on the three stages recommended by GRI G4 Guidelines: identification, prioritization and validation. The content of the report was prepared in accordance with the following Principles:

Materiality,
Stakeholder Inclusiveness,
Sustainability Context,
Completeness.

In the first stage of the process, we created a list of topics which are most important for reflecting the Capital Group's economic, social and environmental impacts or influencing the stakeholders' decisions. The key Aspects to be covered by the report were selected in the following steps:

analysis of the list of topics that are most frequently covered by other oil and gas companies (including "GRI: Sustainability Topics for Sectors: What do stakeholders want to know?"),
analysis of reports presenting trends and challenges in sustainable development for the power sector,
analysis of reports and strategies developed by government agencies and the EU (including "The Vision of Sustainable Development for Polish Business 2050", "Sustainable Development Strategy", "Roadmap to a Resource Efficient Europe"),
analysis of topics tackled by previous CSR reports of the PGNiG Capital Group,
online survey addressed to the key stakeholder groups, top management of the PGNiG Capital Group and employee representatives.

A total of 31 topics were selected in the above process. In the following step, the PGNiG team responsible for the reporting process prioritized the chosen topics based on their ability to: reflect the organization’s significant economic, environmental and social impacts, or substantively influence the assessments and decisions of stakeholders. The applied criteria supported the identification of three groups of Aspects with various degree of relevance for the PGNiG Capital Group and the environment: low relevance, moderate relevance and high relevance.

The most relevant Aspects were validated by assessing the PGNiG Capital Group's impacts on the organization and the environment. A full list of Aspects allocated to each significance group is presented in the materiality matrix. The Aspects prescribed by the GRI G4 Sustainability Reporting Guidelines and the corresponding sector supplement were then allocated to each group.

The final list of topics to be addressed by the report was approved by the Chief Sustainability Executive at PGNiG SA.

As part of the survey, our Stakeholders not only selected the most important topics from the presented list, but also proposed other areas of engagement which, in their opinion, should be included in the social report.

When developing this year's report, we did our best to address most of the proposed topics, including the suggestions made by:

the employees' representatives: workplace ethics, remuneration policy, dialogue with employees, business development strategy,
members of the local communities: financial support for CSR initiatives, environmental education programs launched by the company outside the organization,
business partners: waste disposal and management,
universities: national energy security, domestically paid taxes, educational initiatives relating to shale gas exploitation.

The entire reporting effort was coordinated by GoodBrand & Company Polska, an external consulting agency.

We would like to thank all persons and organizations involved in the preparation and publication of the report for their commitment and valuable input.

Significant changes in reporting

G4-23
G4-33

The most significant change from the previous reporting period was that, for the first time in the history of the PGNiG Capital Group, the entire CSR report was developed based on the most up-to-date version of the GRI Guidelines – G4. Previous CSR reports were prepared in accordance with selected GRI indicators.

The implementation of GRI G4 Guidelines and the focus on significant Aspects of sustainability from the point of view of the Group's employees and stakeholders also led to changes in the evaluation of the main reported topics and their presentation in the final publication.

This is also the first CSR Report of the PGNiG Capital Group to be verified by an external auditor. We believe that an external audit is yet another milestone in the process of improving the quality and reliability of the presented information. The resulting report complies with GRI G4 Guidelines, and it has received GRI's "Materiality Disclosures Service" verification of the General Standard Disclosures G4-17 to G4-27 (the verification confirmed that the General Standard Disclosures G4-17 to G4-27 were correctly located in both the GRI Content Index and in the text of the final report).

Your opinion matters!

G4-31

We would be very grateful for any feedback concerning this year's CSR Report and areas of PGNiG Capital Group's commitment to corporate social responsibility.

Katarzyna Mróz

Chief Officer for CSR and Communications
Communications Department

Polskie Górnictwo Naftowe i Gazownictwo SA,
ul. M. Kasprzaka 25,
01-224 Warsaw
katarzyna.mroz@pgnig.pl

Materiality matrix

G4-19
G4-27

Identified Material Aspects and Boundaries

G4-20
G4-21

GRI G4 Content Index for "In accordance" - Core

G4-32

Key:
- fully reported - partially reported - not applicable / not reported

General Standard Disclosures
GRI G4 Indicator	GRI G4 Indicator description	Scope	Link	Omissions	External Assurance
STRATEGY AND ANALYSIS
G4-1	Statement from the most senior decisionmaker of the organization about the relevance of sustainability to the organization and its strategy for addressing sustainability.		Link 1		-
G4-2	Description of key impacts, risks, and opportunities.		Link 1 Link 2 Link 3		-
ORGANIZATIONAL PROFILE
G4-3	Name of the organization		Link 1		-
G4-4	Primary brands, products, and services		Link 1		-
G4-5	Location of organization's headquarters		Link 1		-
G4-6	Number of countries where the organization operates		Link 1		-
G4-7	Nature of ownership and legal form		Link 1		-
G4-8	Markets served, including geographic breakdown, sectors served, and types of customers/consumers and beneficiaries		Link 1		-
G4-9	Scale of the organization’s operations		Link 1 Link 2 Link 3		-
G4-10	Total number of employees by employment type and labor contract, by gender		Link 1		YES
G4-11	Number of employees covered by collective bargaining agreement (percentage of the total workforce).		Link 1		YES
G4-12	Supply chain description		Link 1		YES
G4-13	Significant changes during the reporting period regarding size, structure or ownership form		Link 1 Link 2		YES
G4-14	Report whether and how the precautionary approach or principle is addressed by the organization		Link 1		YES
G4-15	Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or endorses		Link 1		YES
G4-16	Memberships in associations (such as industry associations) and/or national/international advocacy organizations		Link 1		YES
IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES
G4-17	List all entities included in the organization’s consolidated financial statements or equivalent documents. b. Report whether any entity included in the organization’s consolidated financial statements or equivalent documents is not covered by the report.		Link 1 Link 2		YES
G4-18	a. Process for defining the report content and the Aspect Boundaries. b. How the organization has implemented the Reporting Principles for Defining Report Content.		Link 1		YES
G4-19	List of material issues identified in the process for defining the report content.		Link 1		YES
G4-20	Boundaries set for each of material aspects within the organization.		Link 1		YES
G4-21	Boundaries set for each of material aspects within the organization		Link 1		YES
G4-22	Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement (e.g., mergers/ acquisitions, change of base years/periods, nature of business, measurement methods).		No changes in the reporting period		-
G4-23	Significant changes from the previous report in the scope and boundaries of aspects		Link 1		YES
STAKEHOLDER ENGAGEMENT
G4-24	List of stakeholder groups engaged by the organization		Link 1		YES
G4-25	Basis for identification and selection of stakeholders with whom to engage		Link 1		YES
G4-26	Organization’s approach to stakeholder engagement, including frequency of engagement by type and by stakeholder group, and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process.		Link 1		YES
G4-27	Key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics and concerns, including through its reporting		Link 1 Link 2 Link 3 Link 4		YES
REPORT PROFILE
G4-28	Reporting period		Link 1		YES
G4-29	Date of most recent previous report		Link 1		YES
G4-30	Reporting cycle		Link 1		YES
G4-31	Contact point for questions regarding the report or its contents		Link 1		YES
G4-32	A) Indication of the reporting option chosen by the organization. B) Table identifying the location of the Standard Disclosures in the report. C) Indication of reference to external assurance (if such assurance has taken place).		Link 1		YES
G4-33	Policy and current practice with regard to seeking external assurance for the report		Link 1 Link 2		YES
GOVERNANCE
G4-34	Governance structure of the organization, including committees under the highest governance body responsible for specific tasks.		Link 1 Link 2		YES
ETHICS AND INTEGRITY
G4-56	Values, principles, standards and norms of organization’s behavior, such as code of conduct or code of ethics		Link 1		YES

CATEGORY: ECONOMIC
GRI G4 Indicator	GRI G4 Indicator description	Scope	Link	Omissions	External Assurance
Economic Performance
G4-DMA			Link 1 Link 2 Link 3 Link 4		YES
G4-EC1	Direct economic value generated and distributed		Link 1		YES
Aspect: Indirect Economic Impacts
G4-DMA			Link 1		-
G4-EC7	Development and impact of infrastructure investments and services supported		Link 1		-
Aspect: Reserves
G4-OG1	Volume and type of estimated proved reserves and production		Link 1 Link 2		YES

CATEGORY: ENVIRONMENTAL
GRI G4 Indicator	GRI G4 Indicator description	Scope	Link	Omissions	External Assurance
Aspect: Water
G4-DMA			Link 1 Link 2		YES
G4-EN8	Total water withdrawal by source		Link 1		YES
Aspect:Biodiversity
G4-DMA			Link 1 Link 2		YES
G4-EN11	Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas		Link 1		YES
Aspect: Emissions
G4-DMA			Link 1 Link 2		YES
G4-EN15	Direct greenhouse gas (GHG) emissions (SCOPE 1)		Link 1	Due to the diversity of the Capital Group and its suppliers, PGNiG is not able to show complete data on emissions of greenhouse gases from transport.	YES
G4-EN21	NOX, SOX, and other significant air emissions		Link 1		YES
Aspect: Effluents and Waste
G4-DMA			Link 1 Link 2 Link 3		YES
G4-EN22	Total water discharge by quality and destination		Link 1		YES
G4-EN23	Total weight of waste by type and disposal method		Link 2		YES
Aspect: Compliance
G4-DMA			Link 1		YES
G4-EN29	Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations		Link 1		YES

CATEGORY: SOCIAL
GRI G4 Indicator	GRI G4 Indicator description	Scope	Link	Omissions	External Assurance
Aspect: Employment
G4-DMA			Link 1		YES
G4-LA1	Total number and rates of new employee hires and employee turnover by age group, gender and region		Link 1		YES
G4-LA3	Return to work and retention rates after parental leave, by gender		Link 1	Indicator presents data for the years 2013-2014. Retention rate after returning from parental leave will be possible to disclose after the end of 2015.	YES
Aspect:Occupational Health and Safety
G4-DMA			Link 1		YES
G4-LA5	Percentage of total workforce represented in formal joint management–worker health and safety committees that help monitor and advise on occupational health and safety programs		Link 1		YES
G4-LA6	Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender		Link 1	PGNiG Group does not have access to data concerning injuries, occupational diseases, fatalities etc. from its independent contractors.	YES
Aspect:Training and Education
G4-DMA			Link 1		YES
G4-LA9	Average hours of training per year per employee by gender, and by employee category		Link 1		TAK
G4-LA11	Percentage of employees receiving regular performance and career development reviews, by gender and by employee category		Link 1		YES
Aspect:Local Communities
G4-DMA			Link 1		YES
G4-SO1	Percentage of operations with implemented local community engagement, impact assessments, and development programs		Link 1 Link 2 Link 3		YES
G4-OG10	Number and description of significant disputes with local communities and indigenous peoples		Link 1		YES

Scanned copy of auditor's report

G4-33

Glossary

PGNiG	Polskie Górnictwo Naftowe i Gazownictwo SA
Group	PGNiG Group
E&P	Exploration and Production
T&S	Trade and Storage
OGP Gaz-System SA	Operator Gazociągów Przesyłowych GAZ-SYSTEM SA
OSM	Operator Systemu Magazynowania Sp. z o.o.
PSG	Polska Spółka Gazownictwa Sp. z o.o.
PGNiG Retail	PGNiG Obrót Detaliczny Sp. z o.o.
PPE	Polish Power Exchange
TTF	Title Transfer Facility; Dutch Power Exchange
NCG	Natural Converted Gas
Gaspool	German Energy Exchange
GM	General Meeting

URE	Urząd Regulacji Energetyki; Energy Regulatory Office
CNG	Compressed Natural Gas
LNG	Liquefied Natural Gas
WACC	Weighted average cost of capital
Upstream	Exploration and production of mineral deposits
R&D	Research and development
EIP	Efficiency Improvement Programme
EBIT	Operating profit
EBITDA	Operating profit before depreciation and amortisation
UGS	Underground gas storage facility
CUGS	Underground gas storage cavern facility
Boe	Barrel of oil equivalent (one barrel is ca 0.136 tonnes)