What Matters, Risk Management and Financing
What Matters
What matters is to understand the focus of the company’s various stakeholders, both within the organization and external to it, and to obtain feedback on activities along our supply chain, every year.
As presented in the previous report, we also use a data-driven process that allows us to dynamically review our understanding of what matters for our peers and civil society via the media.
To enhance that understanding, we will be carrying out a formal Double Materiality Assessment (DMA) which will be fully described in the next iteration of this report.
In 2023 we focused on strengthening our risk assessment process on human rights and carrying out a Group wide assessment to identify all risks that are material to the company as well as opportunities. From an Ethics &
Sustainability point of view, the main elements are described below.
Risk Management
Environment – Energy Transition
The energy transition and climate change present clear risks and opportunities to Gunvor.
As we are enhancing our operational systems to manage our chartered vessels, we remain alert to the impact that changes of weather patterns could have on the industry. The energy transition is pushing all players in our industry, and others, to answer the following questions:
- Are we doing all we can to develop lower/zero carbon solutions to global energy supply?
- Where those solutions are not yet available at affordable prices, do we provide supply or deprive the demand for fossil fuel energy?
Gunvor doesn’t create demand and has historically had a very minor role in creating supply. Our expertise is connecting existing supply and demand in tradable commodities. Our DNA is managing risks in open and highly competitive markets. Therefore, we strive to do what we can, to develop and ultimately trade in markets in low/zero-carbon fuels.
Since 2018 we have provided an energy mix with lower carbon intensity than the market and our ambition is to remain relevant by staying under the market curve as well as competitive.
Social – Human Rights
The oil and gas sector is impactful, and renewables, minerals and metals present high risks on human rights as well. They are, however, crucial to energy supply and the energy transition.
As a refiner, most of our activities are located in Europe with legal frameworks that significantly lower the level of risk. In our JVs and in our trading and shipping activities, risks are more severe depending on their geographic location, yet mitigation is not always within our reach. We must use our leverage, like we do with human rights assessments in our joint ventures and in our Time Chartering business
The trading supply chain and time-chartering activities present more risks and the next few years are an opportunity to strengthen our due diligence on entities that we do not directly contract but that are present in our value chain: technical managers on our time charters, practices of extractive companies, refiners, smelters, that are present in our upstream supply chain.
To that end, we are deploying a pilot project over the next 2 years to assess 5 strategic suppliers with different profiles and handling different commodities. We also aim to integrate human rights and sustainability into our KYC processes, with systematic rating and automatized risk rating. This would allow us to go beyond adverse media checks.
Governance – Compliance
As a company active in the global commodities markets, bribery and corruption and money laundering remain amongst the top risks to the company.
Following our decision to cease the use of “agents” for business development, Gunvor only works with a very limited number of consultants that only provide post-transaction or ancillary support, such as technical operational service providers, whose services entail greater transparency and a different, lower risk profile.
Following the end of external origination, Gunvor has wanted to ensure the appropriate level of controls and assurance is applied on internal business developers, as was applied to third-party consultants. Gunvor has thus developed a framework of controls on internal business developers.
In 2023, Gunvor Compliance continues reinforcing its joint-venture procedures to ensure the right review and monitoring are being done. In the coming years, our compliance risk assessments will be repeated, and the related program further enhanced
Governance Framework
All the risks stated in the previous section are within scope of specific policies. The Code of Conduct and Ethics addresses what is expected from employees and people working on behalf of Gunvor including anti-bribery and corruption, sanctions, human rights, health and safety.
The Code of Conduct and Ethics for Business Partners sets out expectations on topics similar to what is expected from the employees such as anti-bribery and corruption, sanctions, health, safety, human rights and environment.
The Health, Safety, Environmental, Human Rights and Communities Policy (“HSEC Policy”): is the overarching reference document for health and safety, human rights and environmental topics (including climate change, biodiversity,
waste management and resource efficiency).
The Modern Slavery Statement clarifies our position on issues such as forced and child labour.
The Group Compliance Committee (GCC) oversees the Group’s Compliance activities. The GCC includes senior members of Gunvor’s Executive Committee, as well as representatives from Legal and Compliance. It reviews all aspects of the Compliance risk mitigation plan and acts as a point of escalation. This setup is described in detail in the area of the Group’s website dedicated to compliance/Compliance.
The Group HSEC Committee is the HSEC governance body at corporate level for Energy Transition and Human Rights. It is chaired by Gunvor Group’s Chief Operating Officer (COO) and includes key Executive Committee
members and the Global Head of Ethics and Sustainability.
A subcommittee for the operational sites is called the Refining HSEC Committee. This committee meets every month to discuss the HSEC-related performance indicators, audit findings resolutions, incidents, and issues.
Financing
Gunvor has put in place KPI-linked facilities on all Sustainability topics that are material to the company:
REVOLVING CREDIT FACILITIES (RCF) IN EUROPE AND ASIA: 2022 was the first year when our performance was assessed against our commitments to 3 different KPIs. In 2023, the KPIs were partially completed. This performance
was externally verified by Deloitte. The following table provides an overview of our performance and commitments for 2024.
GUNVOR RAFFINERIE INGOLSTADT BORROWING BASE: The borrowing base in place on our refinery of Ingolstadt includes 11 indicators covering the three ESG topics:
- Environmental, including CO2 emissions and spills,
- Social, including process and personnel safety,
- Governance, including effective HSEC committee and transparency.
For 2023, we reached successful completion. The data was externally verified by PricewaterhouseCoopers.
LNG BORROWING BASE
In the company’s LNG Borrowing Base, Gunvor commits to publish the CO2 intensity of its LNG trading activities as well as the related overall emissions. The information is provided below.
Total Emissions: 9.08 million metric tons CO2 (2022: 14.18 million metric tons) Carbon intensity: 3.34 tons CO2 per ton of LNG traded (2022: 3.41 tons CO2 per ton of LNG traded).
FUEL OIL BORROWING BASE
Similar to the LNG borrowing base, information related to Fuel Oil are provided below. Total Emissions: 48.38 million metric tons CO2, carbon intensity: 3.94 tons CO2 per ton of fuel oil traded.