About the report

Hereby we are presenting the report about the activities of the Group in the field of sustainable development. The report represents the approach the Group is using in terms of resolving the issues in the field of sustainable development and social responsibility as well as the main trends and achieved results in this sphere. This is the ninth Sustainable Development Report (hereinafter referred to as the Report) published by Viru Keemia Grupp, and it carries on the tradition of annual publishing of noncommercial reports by the company. VKG's sustainable development report is a public document available at the group's website in Estonian, English and Russian.

As a rule, its target group is a wide range of participants interested in how the Group is doing, including its employees, shareholders, local community, social organisations, customers, and partners.

The main parts of the report deal with the efficiency of business activities, the provision of manufacturing safety, staff support and development, and the support the Group is providing to the social and economic development of the area of its activities. In addition to that, with the help of the present report we intend to introduce and promote the concept of sustainable development and the basics of responsible entrepreneurship in Ida-Viru County and in Estonia as a whole.

In order to handle the topics of interest appropriately in this Report, the analysis of the significance of the aspects of sustainable development has been carried out within the Group on the basis of the studies of internal and external environment, in accordance with individual indicators and topics listed in the GRI reporting standard, involving the parties concerned. A wide range of issues has been dealt with in the present Report in detail, related to the priorities of the Group in the field of sustainable development in 2018.

The report includes information about VKG (in the report also referred to as VKG, Viru Keemia Grupp, and the Group) and its related companies for the year 2018. The information about the financial status and the output of the Group has been presented, using the consolidated data about Viru Keemia Grupp AS. Unless otherwise has been mentioned in the text, the data concerning labour relations within the Group, the social sphere and environmental activities cover both VKG and its related companies. The report also includes mid- and long-term plans, which are just predictions at this point. The implementation of the plans described in the report also depends on such factors (economic, social, legal) that the Group is not in control of. Therefore, the actual outcomes can be different from the expected ones.

Various channels for obtaining feedback are functioning within the Group. Remarks and recommendations concerning the Sustainable Development Report can be submitted to us by phone and e-mail. The main contact for this enquaries is Public Relations Manager Irina Bojenko irina.bojenko@vkg.ee. We are going to study all the message we'll receive from you carefully and take them into consideration while preparing our next Report.

Principles of Drawing up the Report

While drawing up the Report for the year 2018, the Global Reporting Initiative's sustainability reporting guidelines (GRI) were used as a basis, including reporting elements considered to be important for businesses in the oil and gas industry. The Group shares and applies the principles of Oil and Gas Industry Guidance on Voluntary Sustainability Reporting (IPIECA/ API, 2016). The compliance of this publication with the high standards of the disclosure can be found on the last page of the report, where GRI table of contents is located. Previous reports have been prepared in accordance with GRI levels G3 and G4.

The GRI is a voluntary organisation promoting reporting and gathering enterprises that value sustainable development all over the world. This organisation is the founder of the concept of sustainable development and it has developed recommended guidelines for sustainable development reports.

Read more about the organisation and the guidelines at
www.globalreporting.org

The ISO and OHSAS certification materials of the enterprise were also used while preparing the report. The data pertaining to environment protection and occupational safety conform to the requirements prescribed in the relevant standards.

Limitations related to the report

The preparation of sustainable development reports is voluntary for organisations. The Sustainable Development Report within the Group is drawn up at the level of the company, and it includes consolidated information about all the subsidiaries of the Group. Economic data of 2018 has been audited and projections for 2019 collected. Reports from 2014 and earlier reflected unaudited financial statements. For this reason, data in reports from 2014 and earlier may somewhat diverge from data in approved annual reports. The group presents reprorted data based on transparency and good business practice.

Disclosure of information

Main principles of working with the information:

regular, consistent and operative communication;
offering equal, unobstructed and easy access to the information to all persons concerned;
objectivity, credibility, completeness and comparability of the data disclosed;
neutrality of the information; i.e. refraining from preferring to satisfy the interests of one interest group to the interests of another;
retaining a reasonable balance between the openness of the company and its business interests.

Viru Keemia Grupp aims to ensure a high level of openness and transparency. The company will disclose in due course and regularly topical information about its operation, including:

information on the structure of the share capital;

information on the council and board members;

financial statements;

annual reports and reports on sustainable development.

The information published is balanced and objective and thereat negative information concerning the company is not withheld.

Cooperation with mass media is regulated by the Media Relations Procedure.

Procedure for defining the importance and boundaries of aspects

While selecting the topics presented in the report, Viru Keemia Grupp was governed by their topicality both from the point of view of the development of the Group and the interest groups. We are keeping a close watch on the scope of activities of the Group and their effect on economics, social environment and nature, and we also deal with the enquiries submitted by interest groups. We have assessed the significance of the topics covered in the report in the context of the society and from the perspective of the obligations of the company, including the obligations that have been established in Estonian national and international documents. While determining crucial issues and relevant indicators, the Group has taken into consideration the global situation, international and Estonian standards in the field of social responsibility and sustainable development of companies, GRI standards, the research carried out in the field of management of sustainable development and reporting, and the analysis of cooperation with interest groups done by the Group.

The methodology also provides for carrying out internal consultations, starting from the group's highest officials to the specialists of subunits and subsidiaries, who have first-hand information about the situation of specific directions, considering the limitations of possible internal aspects. The source of additional information is the analysis of operational indicators and most important occasions. The impact of various changes regarding corporate management, strategy, composition of aspects, but also content and limitations that are considered important, is being analyzed.

Differences from the report of sustainable development of 2017.

The report presents a set of data concerning important changes in comparison to previous periods – virtually all of them are listed and expained in the text. Important changes in the limitation of aspects have not beed added compared to the previous reporting period.

General standard elements of reporting

Themes and aspects	The priorities of internal interested parties	The priorities of external interested parties	Reasoning
ECONOMIC EFFICIENCY
The group's strategy			The development and implementation of a flexible and competitive strategy, taking into account the needs of internal and external interested parties – this is the basis of the stability and persistence of the Group's business activities.
Financial stability			Increasing production efficiency is the most important factor of the group's competitiveness.
Investment projects			nvestment projects in the field of oil shale mining and processing – one of the key priorities of the group and an important factor in achieving strategic goals.
Production quality			Improving the quality of production promotes the satisfaction of buyers and stronger market positions.
Innovative actions			Development and introduction of innovation – an important factor in the group's efficiency and competitiveness.
ENVIRONMENTAL SAFETY
Compliance with environmental protection laws according to EU directives			Compliance with environmental protection laws, international standards and EU directives, but also environmental inspection of production is the group's main priority in environmental safety.
Performed environmental inspection
Rational use of natural resources			The group's activity is related to impact on the environment and natural resources: air, water, soil. The company has taken the responsibility to rationally use, restore and protect these resources.
The use and efficiency of energy			Increase of production over the last 7 years requires higher use of energy resources in the group. VKG is working on increasing energy efficiency and optimizing energy resources in order to mimimize the impact of this process.
Exhaust emissions			Oil shale processing is related to the emission of substances, including greenhouse gases, dioxides, sulphur.
PRODUCTION SAFETY AND OCCUPATIONAL HEALTH AND SAFETY
The safety of production processes, preparedness for emergencies			The group's manufacturing operations are related to potential safety risks. Safe production, complete lack of damage to persons, objects and machines – these are the key priorities of Viru Keemia Grupp.
Occupational health and safety, caring for the health of employees
EMPLOYEES
Training and development of employees			Training and development of employees allows the group to supply itself with qualified human resource at the moment and in the future.
Employment relationships and employment rate			The group's performance of obligations to employees and engaging and keeping the best specialists ensures stable operation and helps to achieve strategic goals.
Valuable working environment and social benefits of employees			A competitive work environment and fair wage system with social benefits – the most important factor in engaging and retaining employees.