Progress in 2023
Governance
While we continue to work on a complete set of direct Governance and Organization KPIs, we have already recognized the themes that are governing this pillar and have started measuring them internally.
We are utilizing a draft-set of KPIs that have been developed within our organization, which is raising awareness on ESG issues across the Group and enhancing our ESG strategy.
Likewise does the Agenda 2030 newsletter, sent regularly to all Mercuria employees since 2019, which has become the main communication tool throughout the company concerning various ESG initiatives, strategy and developments. As recognition of the importance of defining material issues impacting the company’s stakeholders, we conducted an internal survey which sought employees’ views on a set of ESG topics and will serve as a first step for the construction of Mercuria’s Materiality matrix. The survey was based on the GRI standards because of their good definition of ESG metrics.
Finally, we are continuing to look at the different themes (governing purpose, quality of governing body, stakeholder engagement, ethical behaviour or risk and opportunity oversight) in order to consider all aspects of the Governance pillar in our sustainability strategy. We continue to enhance and add additional KPIs in order to improve our performance and our reporting.
Materiality matrix
Our Materiality Analysis is conducted annually and aims to gather anonymous employee feedback via a questionnaire grounded in GRI standards. The survey is sent to all our employees globally. This survey is designed to capture our employees’ perspectives on our progress on a range of Agenda 2030 topics. Participants are asked to rank each topic on a scale from 0 to 10 (10 being the highest score), first assessing how important they perceive the topic and then evaluating Mercuria’s perceived prioritization of it. We highly value our employees’ insights and use the survey outcomes to improve our performance.
In 2023, with a growing number of new hires and a younger average employee age, we observed a rise in the perceived importance of the Agenda 2030 topics. This increase suggests our employees are becoming increasingly knowledgeable about sustainable practices. This is also reflected in the increase in the number of responses compared to previous years. We analyze the results to gain a clearer understanding of our employees’ evaluations to help us identify and highlight areas for improvement, which we will use to improve our performance and align more closely to our employees’ expectations.
In the first figure, we show the average of the answers grouped into three main topics: Economic, Environmental and Social. Social topics include both our social practices and in relationship to our employees.
Results show that our employees rated both topics and Mercuria’s perception of the topics highly, above 7 on average for all three topics. In general, people tend to hold you to higher standards, and therefore we see slightly higher scores when comparing how the topics are perceived by employees in comparison to how they are perceived by Mercuria.
In the second figure, we analyze some of the questions that stood out. Regarding economic topics, Anti-corruption, Anti-competitiveness Behaviour and our approach to Tax and Risk Governance were rated among the highest, both on how they are perceived by our employees and by Mercuria. This highlights how important these topics are and how we excel in our governance and compliance procedures. Conversely, the Procurement Practices spending on local suppliers or under-represented groups scored the lowest out of all the questions, albeit still a score above a 6 out of 10, which aligns with our organizational operations. Given our core competency in bridging global supply and demand to enhance value across the commodity supply chain, our emphasis naturally gravitates towards a global framework.
Regarding Environmental topics, we analyze the results of Environmental Compliance, Energy Consumption of Mercuria, Biodiversity Protection, Greenhouse Gas (GHG) Emissions and Supplier Environmental Assessment. Again, Environmental Compliance is rated the highest. All other Environmental topics are highly rated, with a difference in score comparing how it is perceived by our employees and by Mercuria of less than 0.7. We believe that our actions, including net-zero commitment, emissions reporting, Scope 1 and 2 emissions offsetting and investment into green energy and biodiversity all contributed to this high evaluation.
Regarding Social topics, we are rated very high on topics related to our operations. The highest rating is given for having no association with child labour, which reflects our robust due diligence procedures, risk management and compliance structure. The highest discrepancies were observed in areas concerning Employee Development, Benefits, Personal Trainings and Office Ergonomics. Our employees are our most valuable assets, embodying the spirit and strength of our organization. Recognizing this, we are committed to diligently addressing any discrepancies and challenges that were documented in this Materiality Analysis. We commit to placing a heightened focus on the personal training, development and overall well-being of our team members. It is our firm belief that by investing in the growth and fulfillment of our employees, we not only benefit our employees but also enhance the vibrancy and effectiveness of our workplace.
Payments to governments
As part of its Anti-Bribery and Anti-Corruption Policy, Mercuria prohibits the payment of facilitation fees. Mercuria takes care to ensure that any fees being paid to a government agency in relation to deals are legitimate payments and not facilitation payments, including payments in the form of gifts or entertainment.
Below you can find information on the payments that Mercuria has made to governments in relation to our extraction facilities.
* Specific tax for energy companies with the purpose to tax the extra-profit made due to significant price increases
The consolidated overview presented above discloses the sum of the Group’s payments to governments in each country where the Group had extractive operations. The overview is based on the location of the receiving government.
About Payments to Governments in 2023
This report has been prepared in line with the Swiss Code of Obligations and the EU Accounting Directive 2013/34/EU, as amended which has been transposed into Cyprus legislation. The report’s publication aims to provide for enhanced transparency of payments made to governments in the context of extractive and harvesting activities.
Article 964d of the Swiss Code of Obligations states that “Companies that are required by law to undergo an ordinary audit and which are either themselves or through a company that they control involved in the extraction of minerals, oil or natural gas or in the harvesting of timber in primary forests must produce a report each year on the payments they have made to state bodies.”
Article 42 of Directive 2013/34/EU states that “Member States shall require large undertakings and all public interest entities active in the extractive industry or the logging of primary forests to prepare and make public a report on payments made to governments on an annual basis.” The provisions of this EU Directive are integrated in 13th Schedule of the Companies Law, Cap 113 in Cyprus.
Basis of Preparation and Scope
Mercuria Energy Group Ltd as parent of the Mercuria group of companies (the “Group”) has prepared the report on a consolidated basis and reports the activity of any of its subsidiary undertakings that perform extractive operations. Taxes, royalties, license fees, production entitlements and infrastructure improvements to governments are presented as incurred during the reporting period.
This report includes all payments to governments for activities which relate to exploration, discovery, development and extraction of minerals and other materials resulting from extractive operations of each of the Group’s consolidated subsidiaries during the 12-month period ended December 31, 2023.
Payments made to a government as a single payment or as a series of related payments of EUR 100,000 or more in financial year 2023 form part of this report.
This report excludes payments by non-consolidated entities (such as those that are accounted for using the equity method) regardless of the amounts paid and also excludes payments to governments related to the processing, marketing and trading of any of the Group’s products. Equally, any donations made, for example in respect of social or community programs, are excluded.
Unless otherwise noted, the following terms have the meanings as explained below:
Government
Any national, regional or local authority of a country, and includes a department, agency or other undertakings controlled by that authority.
Materiality Payments
Payments made as a single payment exceeding EUR 100,000 or as part of series of related payments within a financial year exceeding EUR 100,000.
Reporting Currency
All payments have been reported in USD.
Amounts in currencies other than USD (presentation currency for this report) have been converted based on the average annual foreign exchange rates prevailing as of December 31, 2023.
Payment Types
“Payment” is defined as an amount paid whether in cash or in kind, for relevant activities where the payment is of any one of the types listed below:
Production Entitlements/Rights
Represents host government’s share of production. This payment is generally made in kind.
Taxes
Represents taxes levied on the income, production or revenues or profits of a consolidated subsidiary, excluding taxes levied on consumption such as value added taxes, personal income taxes or sales taxes. Where practical, we have reported the amounts associated with the extractive operations only. Tax payments are made in accordance with current local regulations, which may include instalments.
Royalties
Represents percentage of production payable to the owner of the mineral rights.
Fees
Represents license fees, surface or rental fees, and other consideration for licenses and / or concessions paid for access to the area where extractive operations are conducted.
Infrastructure Improvements
Represents payments for local development, including the improvement of infrastructure, not directly necessary for the conduct of extractive operations but mandatory pursuant to the terms of a production sharing contract or to the terms of a law.
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