- data has been verified, full text of the Independent Assurance Report

The LOTOS Group assesses the impact of all its products obtained from crude oil refining on human health and safety, as required by the REACH Regulation concerning the registration, evaluation and authorisation of chemicals. The Regulation is an EU-wide legal act adopted to systematise and codify the requirements for ensuring the protection of human health and the environment during the production, use and importation of chemicals.

Implementation of the REACH Regulation is expected to take 11 years, however the majority of measures regarding the registration of substances were completed in 2010. Registration of such was made jointly with other refineries, based on relevant agreements concluded through the agency of CONCAWE, an organization of oil companies whose research covers water and air quality.

Grupa LOTOS was automatically placed on several SIEFs (Scientific Information Exchange Forum). Information between the individual companies involved in SIEFs with the European Chemicals Agency (ECHA) based in Helsinki, Finland, is exchanged via electronic channels. In 2012, the Company set up a Product Safety Team responsible for working with the SIEFs. Product registration dossiers are reviewed on an on-going basis to reflect any newly identified hazards and updated by Grupa LOTOS’ Product Safety Team, if need be. Also, the Team prepares Safety Data Sheets and Hazard Identification materials to communicate key information down the supply chain.

The complete list of documents effective at the LOTOS Group is published on Grupa LOTOS’ website. The Company’s customers may therefore rest assured that they receive registered, high-quality products. None of the substances produced and marketed by Grupa LOTOS are currently included on the SVHC Candidate List published by the European Chemicals Agency, and none are subject to the authorisation procedure.

Customer health and safety

The threat of serious failure at the Grupa LOTOS refinery lies in the handling and processing of hazardous substances on the refinery's premises. Accordingly, the Company is subject to legal regulations which are very specific as to what type of activities a plant has to carry out to provide an effective safety system and what steps must be taken to prevent serious failures. Grupa LOTOS has implemented a safety system guaranteeing safety for humans and the environment. The system includes:

• Definition, at each organization level, of the duties of employees responsible for the implementation of emergency procedures and their training;
• Mechanisms for systematic identification of failure risks or the likelihood of their occurrence;
• Manuals for safe operation under standard conditions, temporary production breaks, or for monitoring of the plant in a manner allowing for corrective actions in case of any incidents deviating from standard procedures;
• Monitoring of the operation of units where hazardous substances are stored or processed, which enables corrective measures to be taken upon the occurrence of irregularities in unit operation;
• Systematic analysis of expected emergencies with a view to developing appropriate rescue operation plans.

This system is one element of the comprehensive plant management system. Grupa LOTOS has also implemented a certified Integrated Management System, including emergency response procedures, procedures for occupational safety and health monitoring, as well as procedures for prevention of emergencies, preparation for possible emergencies and accidents at work.

During the implementation of the comprehensive plant management system, in November 2011 the Company, the Chief Inspector for Environmental Protection, the State Labour Inspection Authority and the Head of the National Fire Service all signed a declaration on an agreement to improve occupational safety, fire protection and environmental protection in the oil and gas industry. Being a representative of the refining industry, the Company has undertaken preventive steps and measures to maintain risk exposures at its plants at or below acceptable levels, so as to minimise the possibility of serious failures. Such initiatives are designed to improve occupational safety, fire protection and environmental protection.

All its existing security systems render the Company well prepared to fight industrial failures. The possibility of the occurrence of such failures has been analysed and necessary preventive measures have been taken, while the solutions designed into units handling hazardous substances guarantee human and environmental safety.

In 2012, Grupa LOTOS recorded three Tier 2 process safety threats, none of which adversely affected the natural environment.

LOTOS Asfalt has taken steps to fully eliminate or at least minimise potential hazards to the natural environment and human safety. The safety assessment of bitumen products covers the entire process, from the design phase to selection of raw materials, production process optimisation and selection of binders for the final product. By participating in industrial conferences, the company gains access to the most recent research papers discussing those features of bitumen which affect human health and the environment. The knowledge thus gathered includes both risk assessment for exposure to noxious conditions and best practices minimising the adverse effect.

With bitumen products, one question not yet unequivocally answered is the noxiousness of bitumen fumes emitted when bitumen is used in high temperatures. Although there is no scientific evidence stating that bitumen fumes are harmful, and despite petroleum bitumens not being listed as hazardous substances under current regulations, LOTOS Asfalt includes the most recent recommendations on safe handling of bitumen products in its Information Sheets for substances or admixtures for which a Safety Data Sheet is not required.

Paving grade bitumens, which account for more than 95% of the company’s production volume, are subject to conformity assessment, whose outcome represents a warranty for the customer that the product has the appropriate functional properties and meets construction industry requirements. LOTOS Asfalt’s products all carry declarations of conformity with technical specifications. There are procedures in place at the company which seek to ensure that any amendments to legal requirements affecting the company’s operations are identified. To this end, the company has extended the range of its relevant safety-enhancing activities to include transport and distribution. Safety rules and instructional videos are in place for bitumen loading, haulage and unloading. Providers of transport services are also assessed for compliance with LOTOS Asfalt’s safety standards.

Life cycle stages at which the impact of LOTOS Asfalt’s products on health and safety is improved	Yes	No
Concept of product development	x	-
Research and development	x	-
Certification	x	-
Manufacturing and production	x	-
Marketing and promotion	x	-
Stocks distribution and supply	x	-
Use and service	x	-
Disposal, reuse or recycling	-	x

In the reporting period, LOTOS Asfalt recorded no incidents of non-compliance with the regulations and voluntary procedures concerning the health and safety impact of the company’s products at any stage of their products' life cycles.

In 2012, there were two occurrences of Tier 2 process safety threats. However, they did not pose direct, significant threats to human health or life, the environment or the company's assets. This attests to the high process safety culture in the organization, which emphasises the identification of potential safety threats, training of employees responsible for process control, as well as implementation of best engineering practices by including them in job and process manuals. Identified threats are examined on a case-by-case basis by the Accident Committee appointed to thoroughly explain the causes and circumstances of any accident or failure, as well as to recommend preventive measures increasing safety and minimising the risk or recurrence.

LOTOS Kolej, being a railway carrier, specialises in transport of dangerous goods and provides comprehensive rail transport services all over the country. It also provides comprehensive rail transport services to Grupa LOTOS, LOTOS Jasło and LOTOS Czechowice. The company transports dangerous goods in compliance with the provisions of the Rail Transport Act, the Act on Transport of Dangerous Goods by Rail and other regulations pertaining to transport of dangerous goods.

In 2012, there were 13 accidents (compared with 15 in 2011) and 5 incidents (compared with 8 in the previous year) involving LOTOS Kolej’s employees and rolling stock (according to the classification provided for in the Regulation of the Minister of Transport, dated April 30th 2007). As in 2011, one accident occurred by fault of the company’s employee. The reason for the accident was identified as the inclusion of a non-operational car in a train set. The company was not responsible for the other accidents and incidents. The decrease in the number of recorded accidents and incidents confirms the effectiveness of the company’s steady efforts to improve the safety and quality of services provided.

LOTOS Kolej puts enormous emphasis on the process safety and occupational safety of its employees. In its operations, the company strives to minimise identified threats by introducing various safety controls and monitoring. Given the company’s business profile, the largest threats are connected with railway traffic.

Owing to the preventive measures taken, in 2010-2012, LOTOS Kolej recorded only one process safety threat, classified as a Tier 1 threat. In order to minimise the adverse effects of the incident, safety procedures and additional safety measures were implemented.

All products manufactured by LOTOS Oil have Safety Data Sheets (SDS), drafted based on the applicable legal requirements. The product description in an SDS advises users of potential hazards that the product may generate with respect to human health and the natural environment. In addition, SDSs contains information on dangerous ingredients in the product, exposure controls/personal protection, fire-fighting and environmental release measures, as well as empty container handling procedures.

Life cycle stages at which the impact of LOTOS Oil’s products on health and safety is improved	Yes
Concept of product development	x
Research and development	x
Certification	x
Manufacturing and production	x
Marketing and promotion	x
Stocks distribution and supply	x
Use and service	x
Disposal, reuse or recycling	x

Products are supplied to customers along with relevant quality certificates. If a product is classified as dangerous, the relevant SDS is enclosed with the documents submitted with the initial delivery of the product. Otherwise, the customer is provided with SDSs on demand.

In the reporting period, LOTOS Oil recorded no incidents of non-compliance with applicable regulations, rules and codes concerning the health and safety impact of the company’s products and services.

To maintain an appropriate level of process safety, LOTOS Oil develops inspection timetables for key equipment, supporting prevention of accidental emission of substances, including non-toxic and non-flammable materials. The company keeps records of events which might potentially affect process safety. In this way, it monitors the progress of the elimination of identified threats. Another driver of process safety improvement is the implementation, in the company’s production departments, of a system for maintenance of well-organised, clean, high-performance and high-quality work spaces. In 2012, LOTOS Oil registered no Tier 1 process safety threats, and monitoring revealed eight Tier 2 process safety threats in 2012. Their identification made it possible to take early safety measures and prevent their transformation into Tier 1 threats.

LOTOS Paliwa markets ready fuels meeting quality requirements provided for in industrial standards and legal regulations. To ensure compliance, LOTOS Paliwa regularly monitors fuels sold through the own and partner station chain in terms of their conformity with relevant requirements. At each station of the LOTOS chain, all fuels are inspected on an annual basis.

Grupa LOTOS assesses the impact of its fuels on health and safety during fuel production. For each fuel type, the supplier prepares an SDS (for dangerous substances), including information on threats connected with the use of the fuels and required precautions. An SDS is delivered directly to each wholesaler and is available to retail customers at the LOTOS stations. Given the fact that the company uses road or railway transport to supply fuels to its customers, internal procedures were developed to ensure safety and limit the adverse effect on human health of fuels in transit.

As regards fuel sales from own stations, LOTOS Paliwa sets the standards, and supervises adherence to those standards by the station managers. The process is governed by separate agreements and effective working procedures, which are improved on a continuous basis. In 2012, there were no reports submitted by station managers about the products being sold having any adverse effects on their employees’ health.

Given their nature, service stations are retail facilities exposed to the risk of aggressive behaviour by persons who are not customers. This kind of behaviour may pose a threat to the physical safety of the station’s employees. In 2012, two such instances were recorded. The company has been taking a number of various technical, organizational and HR measures with a view to preventing such occurrences in the future.

LOTOS Paliwa sets the standards, and supervises adherence to those standards by service station managers. Based on monitoring data and sales process safety assessments, existing procedures are improved and new procedures implemented, as are corrective and preventive measures designed to mitigate the risk of threats and limit their effects on service stations.

In 2012, LOTOS Paliwa recorded no Tier 1 process safety threats. Eight Tier 2 process safety threats were recorded. In each instance, the employees responded properly, following the applicable procedures. The relevant emergency services were alerted in order to remedy the threat and secure the premises. Affected station managers analyse each dangerous incident and reports it to LOTOS Paliwa’s OSH team, where the incident is again analysed for the possibility of a recurrence and the formulation of preventative measures.

At LOTOS Petrobaltic, each reported dangerous incident, failure or environment-affecting activity is thoroughly analysed in order to identify and implement preventive measures. Among the dangerous incidents and technological failures reported in 2012, the company identified one Tier 1 process safety threat. The other companies of the LOTOS Petrobaltic Group recorded no such threats in 2012. The company takes steps designed to record and classify events affecting process safety in accordance with the most recent standard covering such events: Standard API RP 754.

Product labelling

In April 2011, the European Parliament and the Council issued a new Common Provisions Regulation specifying harmonised conditions for the marketing of construction products. The Regulation permits product marketing within the European Union in the transition period, i.e. until June 30th 2013, pursuant to existing national regulations implementing Directive 89/106/EEC on construction products. In accordance with Art. 4 of the Construction Products Act of April 16th 2004 (Dz.U. No. 92, item 881), a construction product may be placed on the market if it is suitable for use in construction works in line with its functional properties and intended use. In practise, this means that its functional properties are such that properly designed and constructed buildings in which it is to be permanently applied would meet basic standards.

LOTOS Asfalt manufactures construction materials which include such product groups as paving grade bitumens, modified bitumens, bituminous emulsions and waterproofing materials. The manufacturer is required to provide full product information for each product classified into a given group. Construction product information, along with appropriate product marking, either with the CE mark (if the manufacturer declares that the product conforms with the EU’s harmonised standard) or the Polish ‘B’ building mark (if the manufacturer declares that the product has obtained a Polish technical approval), is particularly important. Mandatory submission of product-related information is required for over 98% of the total volume of products sold by LOTOS Asfalt.

Next to the required marking, the documents supplied with each delivery of the product being sold provide the following information:

• The address of the manufacturer and the location where the product was manufactured,
• The product’s name and grade/class based on the technical specifications, as well as its trade name,
• The number and publication date of the Polish standard or technical approval that the product conforms to,
• The number and issue date of the national declaration of conformity,
• The name of the certifying body.

In addition, although petroleum bitumens are not listed among hazardous substances, bitumen products manufactured by LOTOS Asfalt are sold with the Information Sheet for substances or admixtures for which a Safety Data Sheet is not required.

Extent of the product and service information required by LOTOS Asfalt’s internal procedures:	Yes
Source of the product or service’s components	x
Content, particularly substances that might have an environmental or social impact	x
Safe use of the product or service	x
Environmental/social impact of the product’s disposal	x
Other: Potential hazards of the product’s use, Details required by technical specifications (harmonised standards, approvals) to be included in the information supplied with the product, Marking/labelling based on legal requirements (building law).	x

In the reporting period, LOTOS Asfalt identified no incidents of non-compliance with the regulations and voluntarily applied procedures concerning product markings and provision of information on products and services.

In the course of its operations, LOTOS Kolej complies with regulations concerning international carriage of dangerous goods by rail (RID). The classification of dangerous goods consists in assigning a given material or product to the appropriate hazard class and packaging group, as well as specifying the good’s identification number (UN number), hazard identifier and classification code. The hazard class is determined from the characteristics of the major hazard posed by a given hazardous product, in line with the classification criteria of a given class.

Hazardous goods are products and materials which – given their physical, chemical or biological properties – pose a potential threat to human health or life, the natural environment or property if not properly handled in transport, or in cases of failure or accidents.

Consignors of hazardous goods are obliged to place orange-coloured information plates on each side of the rail cars carrying such goods. The obligation to place information plates also applies to empty, unclean rail cars and containers in which hazardous substances had been carried. In the case of the LOTOS Group’s products, LOTOS Kolej is responsible for the proper marking of rail cars.

In 2012, LOTOS Kolej identified no incidents of incorrect or defective marking of hazardous goods consignments.

LOTOS Oil provides information on its products in product sheets and through various other communication channels. Product characteristics are confirmed by Quality Certificates and their intended uses are specified in Technical Requirements. A more comprehensive version of the Technical Requirements is the Product Data Sheet, which is used for marketing purposes. Some lubricants and oils are deemed hazardous to the environment or even toxic. Therefore, it is required by law that they are classified and labelled. Approximately 22% of the company’s products bear special labelling.

The most extensive documents comprehensively addressing these issues are Safety Data Sheets or Product Information Sheets (for non-hazardous products), which are required under the REACH Regulation. Manufacturers of chemical substances and mixtures are required to pass these documents down the supply chain and register their products with the European Chemicals Agency (ECHA). LOTOS Oil receives Safety Data Sheets from its sub-suppliers, as well as develops and updates its own SDSs. Thanks to the provision of consistent registration numbers for hazardous substances registered with the ECHA, customers can access full information on a given product, including its effect on the environment and human health.

Guidelines on how to safely use and handle hazardous substances are also included in the Safety Data Sheets. In addition, labels on packaged products include pictograms providing information about the risks posed by the product. As required by law, lubricants manufactured by the company which are no longer fit for use are collected for disposal or treatment.

Extent of the product and service information required by LOTOS Oil’s internal procedures:	Yes
Source of the product or service’s components.	x
Content, particularly substances that might have an environmental or social impact.	x
Safe use of the product or service.	x
Disposal of the product and environmental/social impact	x
Other: Potential hazards of the product’s use, Details required by technical specifications (harmonised standards, approvals) to be included in the information supplied with the product, Marking/labelling based on legal requirements.	x

In 2012, LOTOS Oil identified no incidents of non-compliance with the regulations and voluntarily applied procedures concerning marking and provision of information on products and services.

LOTOS Paliwa ensures access to information on the impact of products on consumers’ health and safety in compliance with the requirements specified by applicable laws and internal procedures stipulating the provision of such information. As regards retail sales, information concerning the properties of the fuels sold by the company is provided at the customer’s request in the form of Safety Data Sheets for dangerous substances. Service station dealers are required to provide, at the customer’s request, Safety Data Sheets for hazardous goods available from their stations.

Extent of the product and service information required by LOTOS Paliwa’s internal procedures:	Yes
Source of the product or service components.	within the LOTOS Group
Content, particularly substances that might have an environmental or social impact	x
Safe use of the product or service	x
Environmental/social impact of the product’s disposal	x
Other: Identification of hazards, procedure for inadvertent environmental release, transport information.	x

In 2012, LOTOS Paliwa identified no incidents of non-compliance with the regulations and voluntary codes concerning labelling and information on fuels and non-fuel products.

Human rights

There are no formal or systemic measures in place at LOTOS Group companies to verify whether our trading partners respect human rights. In the business landscape in which we operate, human rights issues are governed by a legal framework. We maintain relations only with those entities that operate legally and are required to comply with the law, including human rights regulations. One of the human rights issues we do face in our business environment is ensuring safe working conditions for our employees. Due to the priority given to occupational health and safety in our relations with our trading partners, agreements executed with our suppliers include mandatory provisions requiring these entities to comply with the relevant laws, which compliance is then monitored.

Also, in selecting our trading partners, we require that companies bidding for contracts submit certificates confirming that they are not in arrears with their social security contributions.

Human rights issues are also included in our training programmes. Grupa LOTOS has devoted 721 training hours to informing its employees of policies and procedures governing compliance with human rights standards in business. In 2012, a total of 23.3%  of the Company’s employees took part in such training.

At the LOTOS Group, the responsibility for providing property and personal protection services lies with LOTOS Ochrona (permit control officers and licensed guardians). The company conducts regular job-related training, which also covers various aspects of human rights law. In 2012, 92%  of staff employed by LOTOS Ochrona participated in training devoted to these issues (permit control officers are not subject to this training).

We are also committed to the equal treatment of all employees. In 2012, as in previous years, there were no instances of discrimination against employees of the LOTOS Group on account of their sex, age, colour, religion, political leanings, national origins or sexual orientation.

Agreements executed by Grupa LOTOS with contractors at its production sites include provisions requiring the contracted entities to provide a safe working environment . This approach is underpinned by internal procedures, which put a lot of emphasis on health and safety considerations. During an agreement’s execution, LOTOS Group companies operating within Grupa LOTOS’ premises must also follow internal procedures requiring suppliers and sub-contractors to observe OHS rules. The monitoring of compliance with these requirements varies with the terms of cooperation and may take the form of regular, daily, unscheduled or audit-related inspections.

Contracts for investment and repair work executed by LOTOS Asfalt are compliant with agreement templates and standards in force in the LOTOS Group. They provide for rules applicable to construction sites and company premises, as well as OHS guidelines. Compliance with these contractual obligations is monitored in the case of all agreements executed by LOTOS Asfalt. Other aspects of human rights regulations are not monitored. In 2012, altogether 200 contracts, commissions and orders were signed in the scope of investments and renovations.

All essential contracts concluded by LOTOS Kolej include clauses which require their business partners to provide for and follow health and safety regulations, regardless of whether the signed agreements are of an investment or trading character. Approximately 60% of all 2012 investment contracts included clauses regarding the provision of proper conditions of work and leisure for their employees. Ad hoc inspections of the employees of cooperating companies were carried out with a view to monitoring their observance of the terms and conditions of the contracts. Because of the safety certificates held by the company, such as the Safety Management Systems, the requirements that our business partners and their employees must meet are among the crucial demands for providing for the transport safety of hazardous goods. Approximately 40% of all contracts concluded with subcontractors providing cargo transportation services include clauses regarding the provision of adequate work and leisure conditions for their employees. Based on these terms and conditions and the procedures in force at the company, 6 transport management safety audits were carried out at LOTOS Kolej in 2012. The conditions which require that employees’ rights are observed are also included in the contracts for the provision of security services and passenger transport. Apart from the audits carried out in the company, there are also inspections of specific safety conditions to ensure the occupational safety of each worker. In the case of any discrepancies, the company makes every effort to eliminate the problem by, for example, issuing specific instructions or providing employee training. In 2012, some inconsistencies were found in 7 out of 8 inspected companies, yet none of the contracts were rejected or terminated because of violation of provisions on the observance of employee rights.

LOTOS Oil requires its suppliers of transport and repair services to protect human rights, primarily in the area of occupational safety and health, as well as persons executing ordered tasks. In its agreements for transport services, the company also emphasises the personal development of external service providers’ employees, including through training, as well as improvement of health conditions at their workplace. Cooperating carriers are obliged to inspect, on an everyday basis, the technical condition of the transport used, in the interest of persons directly performing services and persons in its vicinity. The provisions of repair and investment agreements oblige suppliers and sub-contractors to follow occupational health and safety rules.

LOTOS Paliwa expects its suppliers to respect human rights, particularly in the area of occupational health and safety. Further, in its requests for proposals, bidders are required to submit a representation to the effect that they are not in default of payment of any due taxes, charges or social security premiums.

Purchases that are important in terms of their scale are mainly made in the following three areas: fuels, fuel transport and construction investment projects, such as the construction, modernisation and visualisation of service stations. LOTOS Paliwa purchases fuels from Grupa LOTOS. In 2012, two main and two supplementary carriers were responsible for the transport of its non-LPG fuels. The agreements for fuel transport services concluded with those carriers provided for the employment of drivers under employment contracts. The agreements also included provisions obliging the carriers to respect the duration of drivers’ working time, occupational health and safety rules, fire protection and environmental protection rules, procedures applicable at LOTOS Paliwa and international regulations on the transport of hazardous materials (ADR), applicable in particular to fuels. The agreements also required that the carriers should provide their drivers with work wear and protective wear suitable for fuel transport. The agreements further specified the maximum age and mileage of the vehicles to be used, guaranteeing a safe work environment for the drivers, as well as the safety of the environment during the transport of hazardous goods. The company’s employees responsible for logistics conducted constant supervision of the carriers’ compliance with these requirements. In 2012, LOTOS Paliwa concluded 19 significant investment agreements. All of these agreements included provisions obliging the contractor to their duties to operational safety and occupational health and safety, as well as all protective measures required under the occupational health and safety rules across their entire construction sites.

All five carriers providing fuel transport services were verified to have met these requirements. In 2012, LOTOS Paliwa carried out a total of 1,533 inspections of fuel supplies delivered by external carriers providing services to the company, including 1,176 checks on drivers having abided by the required rules. The inspections were recorded in reports on the meeting of the requirements and the procedures’ implementation percent ratio. 357 inspections, representing approximately 23% of all inspections performed, related to the meeting of technical conditions, as well as conditions relating to the equipment, age, mileage and aesthetic qualities of the vehicles carrying fuels for LOTOS Paliwa. The inspections also examined whether the drivers used appropriate work wear, protective wear and personal protective equipment, as well as whether they had carried the required documentation while transporting hazardous goods. Whenever the rules regulating a driver’s work time or the use of protective wear and personal protective equipment were not followed, the company requested the carrier to promptly restore compliance. In the case of construction projects, compliance with the requirements stipulated in the agreements with the contractors is monitored on an ongoing basis during a project’s execution.

LOTOS Petrobaltic also puts enormous emphasis on occupational safety and environmental protection. Agreements with contractors executing projects for the company stipulate the contractor’s full cooperation in this scope. To ensure compliance with occupational safety and health provisions, as well as environmental protection, the company developed specific clauses in its contractor agreements, obliging the latter to include such clauses in their agreements with subcontractors. The company is also subject to the provisions of Public Procurement Law. Therefore, agreements concluded with bidders selected by way of public tenders are deemed strategically material. In 2012, the company signed 14 such agreements, all of which were verified to ensure occupational safety and health and, where applicable, agreements included relevant provisions doing so.

LOTOS Petrobaltic has implemented a procedure for assessing and classifying its suppliers of goods and services. In particular, the procedure covers work of intrinsic importance in the areas of diving/underwater work, production services and work to which specific occupational safety and health requirements apply. In these areas, service providers are assessed after each completed contract for a service’s provision, and in other key areas, suppliers also undergo annual assessment. Assessment criteria include the occurrence of workplace accidents, failures to follow occupational safety and health rules, and the use of personal protective equipment. In 2012, LOTOS Petrobaltic used three suppliers of key services, all of which were positively verified.

AB LOTOS Geonafta’s suppliers and service providers are contractually obliged to follow the company’s ethical regulations and standards. No agreement or understanding concluded by the company in 2012 included provisions specifically relating to human rights. On the other hand, the company strives to ensure that its suppliers respect and abide by internationally recognised human rights in their operations.

Other LOTOS Petrobaltic Group companies operating exclusively in the European Union or other European countries respecting internationally recognised human rights and working with entities operating within the same area, did not assess any agreement or trade partner for compliance with these standards.

Customer satisfaction

Good relations with customers and their satisfaction working with LOTOS Group companies are of key importance to us, a fact confirmed by our adoption of the Group’s Code of Ethics in 2013.

Grupa LOTOS and the major marketing companies of the LOTOS Group conduct customer satisfaction surveys on a regular basis.

Company	Survey frequency	Customers by segment	Common survey areas
Grupa LOTOS	Annually	Conglomerates, sulphur, aviation fuel	• Cooperation assessment, • Product quality assessment, • Market position survey, • Customer expectations, • Assessment of commercial and marketing activities
LOTOS Asfalt	Annually	Bitumen, heavy fuel oil
LOTOS Kolej	Biannually	Key business partners
LOTOS Oil	Annually	Industry, automotive, authorised distributors
LOTOS Paliwa	Every two years a comprehensive satisfaction survey for all segments/ twice a year a market position survey	LDS, fleet customers, wholesalers, independent stations, partner stations, retail customers

Grupa LOTOS has implemented a new model for customer surveys based on licensed TNS-TRI*M Index methodology, which provides a synthetic measure of customer satisfaction and loyalty. The 2012 survey covered 53 respondents working with the Company, drawing on conglomerates, aviation fuel and sulphur customers. An external survey institute conducted the survey using CAWI (Computer-Assisted Web Interview) and CATI (Computer Assisted Telephone Interview) techniques. The survey covered a number of areas, including:

• Quality of contact with company representatives,
• Response times to requests for proposal and orders,
• Product quality and availability,
• Timeliness of deliveries,
• Availability of product information,
• Competitiveness and likelihood of recommending the company to colleagues.

In total, we achieved a satisfaction and loyalty index score of 80. Given a lack of historical data for comparison, we adopted the Index TRI*M: All industries–Europe–Business Customers (2008–2011) as the main benchmark, and the Index TRI*M: Building/Chemical Industry–World (2008–2011) as an additional benchmark.

Grupa LOTOS’s Index TRI*M is 10 points higher (80 compared to 70) than the All industries Europe–Business Customers (2008-2011) benchmark. The vast majority (94%) of our customers declared high satisfaction with the company’s services.

The survey also revealed that nearly 60% of customers place high trust in the company. Our comprehensive product range and the honesty of our customer relations were also highly assessed. Flexibility, innovativeness and knowledge of our customers’ needs proved relatively weak. More than half of our customers assessed response times to requests for proposals as being very good. Our trade partners indicated the lack of alternative suppliers for particular fuel types, product availability and price, as well as successful cooperation to date as the main reasons for staying with us. Successful previous cooperation and the lack of other suppliers were particularly material for our aviation fuel customers, while the conglomerates emphasised product availability and prices, as well as service quality.

LOTOS Asfalt conducts its own annual satisfaction survey of its business partners. Participants in the survey include customers in Poland and abroad who have purchased large quantities of LOTOS Asfalt’s products in the period covered by the survey. The survey is targeted specifically at customers purchasing bitumen and heavy fuel oil.

The 2012 satisfaction survey differed from those conducted in previous years in that it was organised by an external research agency using the CAWI (Computer-Assisted Web Interview) methodology for the survey and the TRI*M Index for evaluation.

The questionnaire included both closed and open-ended questions. Among the questions asked, topics included:

• Interaction with LOTOS Asfalt’s sales force and its competence,
• Response times to RFQs and orders,
• Product quality evaluation,
• Product availability,
• Timeliness of deliveries,
• Availability of product information,
• Likelihood of recommending the company to colleagues.

The results of the survey revealed that, overall, LOTOS Asfalt’s customers are satisfied with their cooperation. Our satisfaction index came in at 3.6 on a 5 point scale. In total, we achieved a satisfaction and loyalty index score of 70.

LOTOS Asfalt’s TRI*M index is close to the score in the category All industries–Europe–Business Customers (2008-2011).

The key advantages of the company as revealed by the survey are:

• Timeliness of deliveries,
• Availability of products,
• Turnaround time,
• Consistently high product quality.

Corporate image was also among the topics surveyed. LOTOS Asfalt is seen as:

• A trusted partner,
• An innovative business,
• A fair trader,
• A business partner with a comprehensive product range.

Findings derived from the summary of the survey’s scores allow the company to assess the operations of its individual departments, and to define further steps to be taken in order to ensure that its business partners are fully satisfied. Comments and feedback from our customers are always verified, and if any failures on our part are confirmed, corrective measures are implemented.

For LOTOS Kolej, the top quality of its freight services lie at the core of the company’s development. Customer satisfaction with the company is primarily driven by:

• Its expert staff,
• The timeliness and reliability of its deliveries,
• The high level of support given,
• Current, reliable freight status updates,
• Its focus on meeting business partners’ needs,
• The flexible and tailored terms of its commercial offers.

Customer satisfaction data is primarily obtained by direct interaction with the customers. Positive opinions shared by customers include LOTOS Kolej’s favourable pricing terms and opinions on other contract delivery terms.

Another tool we use for measuring customer satisfaction is the questionnaire-based mutual evaluation system. This covers the rail freight services provided by LOTOS Kolej and is conducted biannually. The results of the survey are examined and discussed in detail during the annual review of the Integrated Management System within the company.

The most recent survey again covered such topics as:

• Delivery deadlines and the timeliness of deliveries,
• The integrity of goods carried,
• Rolling stock and customer service quality,
• Customer interactions with management and technical personnel operating the rolling stock,
• Pricing and comprehensiveness of the services offered,
• Payment methods and deadlines,
• Response to complaints,
• Reliability and overall evaluation of LOTOS Kolej.

2012 average /H1/	2011 average	2010 average
4.59 *	4.63	4.63
12 customers	13 customers	17 customers

The key advantages of the company as revealed by the survey are:

• Reliability,
• Rail freight delivery times,
• Customer service quality,
• The integrity of goods carried,

Aspects receiving the lowest scores were:

• Payment methods and deadlines, discount policy,
• Service prices (as compared with similar companies),

LOTOS Kolej continues to score highly in most of the surveyed areas. Of particular note is the high regard for the company’s reliability, which is important in building relationships with customers.

LOTOS Oil conducts customer satisfaction surveys at the conclusion of each year’s commercial operations. These surveys are carried out by the sales reps and commercial staff of the company’s distributors and partners. They cover two primary areas of the company’s operations: the wholesale channel, whose respondents are Authorised Distributors, and the retail sales channels, where trade partners from the industrial and automotive segments are surveyed.

The surveys focus on certain aspects of the key market operations of the company, such as:

• Cooperation,
• Range,
• Products,
• Sales,
• Marketing,
• Oil services,
• Proposals for customer support.

The 2012 survey covered 163 respondents, 90.8% of whom returned completed survey forms, which is a marked improvement on the previous year.

From the responses received, customers appear to value LOTOS Oil primarily for the high quality of the services it provides, the high and consistent quality of its products and good aftersales support. Customers are particularly pleased with LOTOS Oil’s facility with building commercial relations, the quality of its information on new products and the training it gives to its customers’ sales staff. Some of the most important elements of these efforts are investments in and visual identity support for car mechanics, and the oil services for customers from the industrial and automotive segments, which consists of oil consultancy and research, and comprehensive oil management monitoring.

Information obtained from the surveys contributes to improvement of work processes, which enables the company to fine-tune its current operations to customer requirements.

LOTOS Paliwa systematically measures customer satisfaction, as required by the Integrated Management System. The frequency and methodology of its research accounts for the division into retail and institutional customers

Measurement identifier	Measurement frequency	Measurement method	Procedure
Retail customers
Quality evaluation indicator	annually / every two years	Individual customer surveys, CAPI or PAPI	Data analysed to plan and implement improvements to the indicator
Overall station evaluation (image) indicator		Individual customer surveys	Data analysed to formulate future marketing plans
Institutional customers
Customer cooperation satisfaction index	annually / every two years	CATI	Data analysed to plan for and implement actions to improve the indicator
Account manager satisfaction index
Customer Service Office satisfaction index
Functionality evaluation index
Brand image index			Data analysed to formulate future marketing plans

2012 saw deployment of the retail customer satisfaction survey. The results showed that retail customers have diverse expectations regarding service stations, and that the actions taken by LOTOS Paliwa ensure that the specific needs of our strategic customer groups are increasingly being satisfied. Premium customers appreciate the improving non-fuel and food services offered by LOTOS service stations, LOTOS Dynamic fuels and the Navigator loyalty programme. At the same time, value-oriented customers have access to service stations which are ever more friendly, operate tested and high-quality equipment, are staffed with polite and competent personnel, and sell quality, affordable fuels. In response to this diversity of expectations, a new network of service stations was established in the economy sector in 2011, expanding the LOTOS brand presence to two segments: Premium, with the LOTOS stations, and economy, with the new LOTOS Optima stations.

The TRI*M satisfaction index for Premium stations (before the visual changes) remained on the same level as in 2010, i.e. 76, whereas Premium stations in new colours scored very high (97) and LOTOS Optima stations’ score was higher than its competititors’ (78).

Institutional customers also value the improving quality of their work with LOTOS Paliwa, which follows from the better performance of the account managers and the company’s efforts to promote its image as an innovative partner that stands out from its competitors. The strengths of the LOTOS brand reside in its comprehensive range of fuels and its environmental awareness.

Marketing communication

In the LOTOS Group strategy for 2011-2015, along with the development directions until 2020, the fostering of a strong LOTOS brand and distinctive brand image are among the key elements. All individual product brands are subordinated to the corporate brand strategy, which is consistent with the business strategy of Grupa LOTOS.

Our strategic goal is to enhance LOTOS brand value by building its image as a brand that:

• Relies on the key values of state-of-the-art solutions, development and partnership,
• Has an international presence,
• Represents top quality products,
• Is socially responsible.

Fostering the image and strength of the LOTOS brand is one of the priorities for Grupa LOTOS. Efforts are always being made to increase brand awareness and to position Grupa LOTOS as an organization recognised for a professional management style that builds on its quality, innovation, environmental awareness and security.

Periodic marketing research confirms the increasing awareness of the LOTOS brand, its quality and prestige, by its customers. In the 9th edition of the Poland’s Most Valuable Brands ranking, published by the Rzeczpospolita daily in 2012, the LOTOS brand was valued at PLN 1,023m, which represents 15% growth on the previous year’s figure. LOTOS was ranked 9th among the 330 brands covered by the listing. Over the last five years the value of the LOTOS brand grew over two and a half times.

The following rules are strictly applied in the management of corporate brand strategy, product brands, promotion strategies, value creation, creation of the desired image of the LOTOS brand, advertising, promotion and sponsorship activities, as well as the marketing research of the LOTOS Group:

• Compliance with applicable laws,
• No deliberate harm or damage done,
• Accountability,
• Education, professional background and experience of personnel put to good use.

We conduct our operations without using any discriminatory or controversial content which may offend certain social groups or abuse the trust of the recipients of our communications, and without inciting negative emotions. These rules complement the effective and unconditionally binding laws and regulations, which include the Constitution of the Republic of Poland and the following Polish Acts: the Civil Code, the Act on Combating Unfair Competition, the Press Law Act, the Radio and Television Act, the Act on Protection of Certain Consumer Rights, the Act on Provision of Electronic Services, the Act on Personal Data Protection, the Act on Copyrights and Neighbouring Rights, and the Act on Industrial Property.

All our sponsorship contracts are transparent and clear, and precisely identify all stakeholders and the obligations of the sponsored entity. We do not engage in any events which may cause damage to objects or facilities of historic or artistic value, or events which could have an adverse environmental effect. In our sponsorship activities, Grupa LOTOS and its commercial companies LOTOS Oil and LOTOS Paliwa apply the rules defined for wholly and partially state-owned companies in Directive No. 5 of the Minister of the State Treasury, dated February 13th 2009. We also respect the guidelines of the Culture Sponsoring Code - an initiative of the National Centre for Culture, the PKPP Lewiatan employers’ association and the Warsaw Stock Exchange. We have also published the objectives of our sponsorship and charity policies. 

The above corporate practices in the area of marketing communications are applicable to Grupa LOTOS and all its commercial companies, i.e. those companies which, considering their business profile, distribute communications regarding their products and services to wider audiences. LOTOS Oil and LOTOS Paliwa, which are responsible for product brand communications, have adopted their own supplementary regulations.

At LOTOS Paliwa, the development of marketing content and standards of conduct, including standards of communication with customers, is regulated by the following internal documents, approved by the company’s Board:

• Communication and Positioning Strategy for LOTOS and LOTOS Optima Service Stations,
• Communication and Positioning Strategy for the LOTOS Dynamic brand,
• Strategy of Sponsorship and Motor Sports Involvement.

LOTOS Oil and LOTOS Paliwa, in their activities in the area of marketing communications, including advertising, promotion and sponsorship, adhere (on a voluntary basis) to the standards of the Code of Ethics in Advertising, developed by the Polish Board of Advertising and the Polish Advertising Standards Committee.

Due to the specificity of the market on which LOTOS Asfalt and LOTOS Kolej are present, the companies have not implemented separate procedures for marketing communications.

Sponsorship

Key objectives for our sponsorship activities include the promotion and raising of brand awareness of LOTOS Group products, improvement of their recognition, building of positive images and supporting advertising activities focused on growing product and service sales. Our 2012 sponsorship activities were carried out in accordance with the Sponsorship Plan approved by the Company’s Supervisory Board.

Our sponsorships in 2012 covered both support for professional sports and projects to promote sports among children and youth. Key disciplines we support include motor rallying, football, skiing, basketball, speedway, volleyball, motor racing and cycling. The highest return on funds earmarked for sponsoring activities, as measured by media presence, was recorded for winter sports (ski jumping and cross-country skiing), as well as for cycling, football and motor rallying. The value of media return exceeded the value of the funds spent on sponsorships four times over.

We have supported the LOTOS TREFL Gdańsk men’s volleyball team (since 2009), the TREFL Sopot men’s basketball team (since 2010), the Lechia Gdańsk football team and the Stowarzyszenie Piłki Ręcznej Spójnia Wybrzeże Gdańsk handball club (since 2011).

For eight years now, we have also been Poland’s General Nordic Skiing Sponsor. As part of our work with the Polish Nordic Skiing Association, we support ski jumpers from the national team and youth teams, cross-country skiers from the national team and youth teams, as well as the Nordic combined team. The 2013 World Champion in ski jumping, Kamil Stoch, was the first person awarded a grant under our "In Search of the Champion’s Successors" social welfare project. For nine years, in collaboration with the Polish Nordic Skiing Association, we have supported the National Ski Jumping Development Programme.

We are also present in motorsports, and in 2012, we were involved in the LOTOS Baltic Cup Rally and the Poland’s Mountain Rally Championships.

From 2010 to 2012, LOTOS Paliwa was involved in the LOTOS Dynamic Rally Team project, running two rally teams in international events under its LOTOS and LOTOS Dynamic fuel brands. In Polish rallies, the LOTOS Dynamic Rally Team was represented by three-times Polish Rally Champion Kajetan Kajetanowicz and his navigator Jarek Baran. Outside Poland, the LOTOS Dynamic Rally Team colours were borne by Michał Kościuszko and Maciek Szczepaniak, two-time runners-up in the World Rally Championships (PWRC 2011 and JWRC 2009). In 2012, LOTOS Oil sponsored the LOTOS-Subaru Poland Rally Team (comprising Wojciech Chuchała and Kamil Heller). The presence of the Dynamic fuel brand in motorsports lends credibility to the benefits of LOTOS products to the public, including improved performance and dynamics and better harnessing of a car’s power. Related actions support the image of the entire chain of LOTOS stations and improve the reliability of the stations’ communication.

LOTOS Oil’s sponsorship activities in the area of motorsports complement the LOTOS brand’s trading and marketing work in the oil products segment with KIA and Subaru. From the point of view of brand image promotion, this involvement lends technology and quality credibility to the company’s vehicle oil products.

Apart from sports sponsorship, we are also involved in sponsorship of cultural events. Our efforts in this area are primarily intended to increase corporate value by promoting the intellectual and cultural potential of regions close to the company. Some of our key cultural sponsorships in 2012 that benefited the communities and regions we operate include:

• In Pomerania: Strategic Partnership of the Baltic Opera House, sponsorship of the Solidarity of Arts Festival, sponsorship of the Shakespearian Festival, the Siesta Festival, the ‘Daisy Chain Wonders - Summer Begins in Gdynia’ event, and the ‘Two Theatres’ Polish Radio and TV Festival;
• In southern Poland: Jasło Days, Czechowice-Dziedzice Days and the LOTOS Jazz Festival – Bielsko Jazz Blizzard.

Socially engaged marketing

In 2012, LOTOS Paliwa continued its work, begun two years earlier, with the SOS Children’s Villages Association in Poland. Each member of the LOTOS Navigator loyalty programme, available only from LOTOS service stations, could donate their credits to orphaned or abandoned children under the care of SOS Children’s Villages. This initiative is in line with the objectives of the LOTOS Group’s CSR strategy.

Funds raised from the credits donated are applied towards the costs of living, health care and education of children. They help ensure equal opportunities and prepare the children for their future, independent lives. The SOS Children’s Villages Association in Poland provides care for abandoned children, orphans and children at risk of losing parental care. It has been operating in Poland for 28 years and is part of SOS-Kinderdorf International, an international organisation present in 132 countries around the world.

In 2012, the Company also supported the nation-wide ‘donate 1% of your tax’ campaign carried out by the SOS Children’s Villages Association in Poland.

We also began working with the Polish Association for the Mentally Ill within the sphere of socially engaged marketing. The Association organises occupational therapy for the mentally ill, where they make seasonal decorations or gift wrapping materials. The company bought hand-made candles and canvas bags from the Association. Similarly, we worked with the Association Providing Help to Autistic Persons to provide Christmas decorations and other hand-made items to our clients and partners.

Our activities within the sphere of social economy in 2012 also included two entities with whom we have been working for a long time; the Foundation for the Development of Gdańsk University and the Kuling Waterbird Research Group. We bought souvenirs and gifts from the KWRG related to the ecological programmes that we run together, in support of their statutory objectives of research on and protection of biodiversity.

Compliance

In 2012, no cases of inconsistencies in promotional and advertising activities with the provisions of law, regulations and voluntary codes regulating marketing communications were found to have occurred at Grupa LOTOS or at its trading companies: LOTOS Asfalt, LOTOS Kolej, LOTOS Oil and LOTOS Paliwa.

No legitimate complaints or claims were lodged relating to violation of customer privacy or loss of data, and there were no significant incidents linked with the provision and use of products and services.

Consequently, no significant penalties for non-compliance with laws or regulations concerning the provision and use of products and services were imposed on any member of the LOTOS Group. The materiality level is such that total fines and damages in 2012 did not exceed 0.001% of turnover.

The proceedings described in the Annual Report 2011 concerning the anti-trust action taken by the President of the Competition and Consumer Protection Office, were pending in 2010-2011. On March 10th 2011, Grupa LOTOS paid the liability of PLN 1,000 thousand imposed on it by a court ruling of February 11th 2011, under a provision created earlier for this purpose.