Overview

Russell Hardy, CEO

We are pleased to present our second Environmental, Social & Governance (ESG) report, which is endorsed by the board.

This report begins by giving an overview of our business and our strategy, we then go on to detail how we are addressing the challenges we face across environmental, social and governance issues.

Russell Hardy

Vitol is one of the largest movers of energy in the world. Last year we delivered a record 510 million mTOE across oil products, gas and LPG. Since our beginnings in Rotterdam in 1966, our business has grown through anticipating change in the evolving environment in which it operates.

Today, our strategy is shaped by the context of the energy transition. The business needs to change to ensure it is well-positioned to navigate the next decade and beyond.

Beyond the headline figure of $1.3 billion of capital that we have committed to identified renewable investments is a wider expansion of our business scope. We have invested significantly in building capabilities across transitional businesses, such as power and gas, as well as establishing a presence in relatively new areas, such as biogas, renewable natural gas, hydrogen and electric vehicles (EVs).

Our renewable generation pipeline is now 1.2 GW and spread across the Americas, Asia and Europe, with large-scale projects in India. Power demand is expected to grow 3% per annum for the next decade and we will continue to invest in renewables in developed and developing economies to meet increasing demand.

Alongside the renewable power portfolio, we are participating in a range of circular economy solutions including plastic and tyre recycling initiatives, methane capture and hydrogen production.

We continue to progress a large decarbonisation project associated with one of our power plants in the UK. The project, which aims to remove eight million tonnes of carbon dioxide, is being supported financially by the UK government. In a further phase, the project aims to produce hydrogen at commercial scale, ultimately allowing fuel switching, from natural gas to hydrogen, to fully decarbonise our industrial site in the UK.

Our traditional business has given us insights into the transport sector and we see the transition to EVs as an opportunity to leverage our technical skills, financial strength and market understanding. We are developing a multi-faceted EV strategy which will focus initially on vehicle fleets.

Within the transport sector we are invested in a gas-for-transport company offering a low-carbon solution for heavier vehicles. Currently this is LNG-based, but is likely to be replaced by biogas or renewable natural gas in the near term.

Notwithstanding the significant expansion in transitional and sustainable energy, the traditional business of crude oil and products remains the core of our business. We believe oil demand will continue to grow for the next decade as energy demand growth outpaces the development and deployment of alternative energy solutions. The environmental strategy in respect of this business line is twofold: firstly, to identify and reduce emissions in our operations as much as we can and secondly to work with our portfolio companies to ensure they are fit for the energy transition.

A great deal of work has been undertaken to collate and aggregate our emissions data, including that of our investments. We have worked closely with these companies to ensure the accuracy of this data to help them develop plans to address these emissions where possible.

Just as we are considering Vitol’s own strategy in the context of the energy transition, so we are challenging the boards of all the companies in which we are invested to develop clear energy transition plans as part of a holistically redefined corporate strategy.

In other areas, we deeply regret that there was one fatality in our operations during 2021. This is simply not acceptable; the circumstances have been carefully reviewed and lessons learnt. We continue to strive for zero fatalities across our business.

We are very mindful of our responsibilities to our people. During the pandemic the welfare of seafarers was put at risk as Covid restrictions impaired normal operations including regular crew changes. The Vitol shipping team worked extremely hard to mitigate these issues and we are pleased that none of the crews on vessels managed by LSC, our technical shipping management company, were onboard for unreasonable lengths of time. This is reflected in the results of the Seafarer Happiness Index which were above the industry average.

Across the business, as our team continues to grow, we are focused on recruiting and developing the best talent. We recognise that a more proactive approach to diversity is required and we are working on embedding relevant measures throughout our recruitment and development process.

This, our second report, is a further step along our ESG journey. We will continue to improve our reporting and, more importantly, will continue to work hard to improve the ESG performance of our business worldwide.

About this report

Reporting standards

This report has been prepared with reference to the relevant parts of the Global Reporting Initiative (GRI) Standards. The Energy Transition portion of the report is structured around the recommendations (governance, strategy, risk management, metrics and targets) of the Task Force on Climate-Related Financial Disclosures (TCFD). We also follow the World Business Council for Sustainable Development (WBCSD) GHG protocol and the International Petroleum Industry Environmental Conservation Association (IPIECA) GHG reporting guidelines as closely as possible. The human rights section has been drafted to include some of the requirements of the UN Guiding Principles Reporting Framework and we will work to include information to meet the required minimum information thresholds in subsequent reports.

Reporting boundaries

Defining consistent boundaries for our ESG reporting can be challenging due to the complexity of our business. We endeavour to be consistent when applying reporting boundaries across our operations and the businesses in which we are invested.

This report includes Environmental and Social (E&S) and greenhouse gas (GHG) emissions key performance indicators (KPIs) for operationally and non-operationally controlled investments. The operationally-controlled scope includes all subsidiaries and consolidated associates, as well as associates and joint ventures where Vitol is the operating company. The non-operationally controlled scope includes associates and other investments in which Vitol holds a non-controlling interest or joint ventures where we are not the operating company. Reporting is consistent with our accounting consolidation methodology. Emissions are reported on an ‘operational control basis’ according to the WBCSD GHG protocol. Emissions from vessels that we took operational control of part-way through 2021 are also included.

E&S data (excluding GHG’s) is reported on a 100% basis for all investments, in which we hold equity. We generally aim to include E&S KPI data from the quarter in which a transaction closes. E&S metrics in 2021 include a broader scope of activities, such as incidents and hours from office-based Vitol employees and contractors and from certain trucking operations.

Incidents on vessels are reported where Vitol is the holder of the International Safety Management Code Document of Compliance (DOC). Exposure hours in relation to shipping are recorded according to the Oil Companies International Marine Forum (OCIMF) “Marine Injury Reporting Guidelines” definition. Work-related criteria for incidents are aligned with the International Association of Oil & Gas Producers (IOGP) safety data reporting user guide.

Restatements and adjustments

Historical data is sometimes adjusted due to, for example, re-classification of incidents after investigationsor changes in emissions factors used by authorities or changes in reporting guidelines.

Vitol has a comprehensive GHG restatement policy, which sets out when and how we recalculate our baseline or annual GHG footprint in case of a material change to our business. For the 2020 and 2021 footprints, we have applied restatement rules to include the ‘acquired emissions’ of companies in which we are invested as of 31 December 2021. For the major investments that were made during 2021 we have therefore restated our 2020 data to take account of the emissions arising from these investments in the preceding year.

Minor changes and or restatements to our 2020 GHG data include: (1) updated emission factors for certain countries, (2) GHG data that was verified in-house or by third parties/regulators after the publication of our 2020 ESG report, (3) inclusion of fugitive emissions data, (4) exclusion of emissions from an upstream investment where hydrocarbons produced were combusted onsite.

Where available, actual emissions data are used to calculate restatement figures. Where no data preceding Vitol’s involvement was available, we have estimated emissions based on data from the asset once under Vitol’s operational control or under the control of one of the companies in which we are invested.

Minor changes to our 2020 E&S data include: (1) additional hours and incidents from 4 vessels where we held the DOC, (2) two FAC1s were reclassified to an MTC2 and an RWI3 after our reporting deadline, (3) contractor hours and distance travelled reported by two non-controlled investment companies were found to have been understated once data was audited. The latter resulted in the 2020 TRIR4 for all Vitol investments decreasing from 1.21 to 1.18 and the RTIF5 decreasing from 0.34 to 0.33.

Emissions factors

Emissions factors used in our GHG calculations come from a range of sources: (1) Shipping and barges from IMO or DEFRA.6 (2) DEFRA, the EPA7 and other appropriate sources for combustion, electricity, heat, steam and cooling emission factors at investment companies, where site specific or country factors are not available. (3) Business travel (flights and hotel nights) from DEFRA. (4) Rail, truck and pipeline transport, CapEx and OpEx-related emissions, spend-based emission factors from Quantis. (5) EPA factors for the downstream use of produced oil and gas.

1 First Aid Case.

2 Medical Treatment Case.

3 Restricted Work Injury.

4 Total Recordable Injury Rate.

5 Road Traffic Incident Frequency.

6 Department for Environment, Food & Rural Affairs.

7 Environmental Protection Agency.

About Vitol

Vitol is a global energy business. Its primary function is the distribution of energy and energy-related solutions. We source from producers, refiners, generators and intermediaries and deliver to refineries, utilities, airlines and retail distribution networks as well as wholesalers and other traders.

Our business involves complex logistical processes to distribute energy safely and efficiently. We manage the physical risk associated with moving energy and understand the associated infrastructure which we also invest in. In addition to physical risks, the business manages financing and other risks. In all instances we seek to manage risk in a measured and careful way.

The company was founded in 1966 to trade oil. Today our business spans the energy sector:

Crude oil and products

  • Trading 8+ mb/d
  • 6,200+ ship journeys a year
  • Producing assets in the US and West Africa
  • 16 m m3 storage
  • 6,800+ service stations

Trading is the core of our crude oil and products business. Every day we trade over eight million barrels of crude oil and products, buying from producers and delivering to refiners, wholesalers and distributors worldwide. Our trading business is underpinned by both leased and owned infrastructure, from refineries through to terminals and service stations.

Transitional energy solutions

  • 16.6+ mTOE per annum LNG
  • 12.4 mTOE per annum LPG
  • 93.2 mTOE delivered sales of natural gas a year
  • 3.3 GW thermal generation capacity

Vitol plays a key role in transitional energy markets worldwide. These include energy solutions required in the early stages of the energy transition as well as those which have a place in the long-term energy mix. We are a longstanding participant in power markets, as well as important transitional markets, such as LNG and LPG, which are displacing solid fuels across developing markets and enabling the rollout of renewables. We are invested in a range of infrastructure from storage and transportation to power generation.

Sustainable energy solutions

  • 1.2 GW renewable generation operational and committed
  • 133 m MT carbon sales

Comprising environmental products, renewable energy and related activities, Vitol is investing in and developing initiatives across a range of sustainable solutions and technologies. We are deploying our balance sheet and expertise to support the deployment of new technologies, new concepts and new markets. We continue to build on our market-leading expertise in environmental products and are actively investing in high quality carbon abatement projects.

Vitol 3rd party Physical Energy Product Purchases by Region
% of TOE

Vitol 3rd party Physical Energy Product Purchases by Region % of TOE

Vitol 3rd party Physical Energy Product Sales by Region
% of TOE

Vitol 3rd party Physical Energy Product Sales by Region % of TOE

Purchases by counterpart
Crude, oil products, LNG and LPG
m MT

Purchases by counterpart Crude, oil products, LNG and LPG m MT

Sales by counterpart
Crude, oil products, LNG and LPG
m MT

Crude, oil products, LNG and LPG m MT

Oil and product volumes by type
m MT

Oil and product volumes by type m MT

TRANSITIONAL ENERGY PRODUCT VOLUMES BY TYPE
mTOE

TRANSITIONAL ENERGY PRODUCT VOLUMES BY TYPE mTOE

A business in transition

Trading & distributionManufacturingInfrastructure & logisticsCustomer facing
Using our market understanding to enable the efficient flow of energy around the worldDeploying our capital to source and create the energy the world needsA highly specialised, quality network of energy assets evolving to serve new marketsDelivering quality and innovative energy solutions to B2B and B2C customers
Crude oil and productsMarket-leading position in crude oil and products

Strategy: consolidate market share as demand rises for next decade, before beginning to fall. Reduce environmental impact where appropriate through efficient use of vessels and other logistical solutions
Invested in producing assets in Ghana and the Americas

Strategy: capture anticipated near-term increase in oil demand to early 2030s by investing and producing assets. Maintain position as the reliable source of low-cost gas to Ghana
500+ kb/d refining capacity and 16 m m3 owned storage capacity

Strategy: adapt asset base to transitional and sustainable solutions

Owned and managed vessels, efficient and lower-emissions

Strategy: adopt cleaner technologies as available and practicable
Networks totalling 6,800 service stations

Strategy: evolve distribution assets to serve customers through transitional fuels to sustainable solutions
Transitional energy solutionsGrowing presence in LNG, gas and LPG

Strategy: consolidate position in gas markets worldwide as natural gas displaces coal and complements deployment of renewables

  • Invest in LPG infrastructure in developing economies to support transition away from solid fuels, such as charcoal and wood, reducing household pollution and empowering women
3.3 GW gas-fired generation

Strategy: deploy generation to complement roll out of renewables. Develop emission mitigation strategies from hydrogen to carbon capture and storage
Dedicated fleet of LPG and LNG vessels and storage

Strategy: supporting the development of these markets with modern and efficient vessels and storage infrastructure
Invested in gas-for-transport

Strategy: support development of gas-for transport infrastructure with a view to transitioning to sustainable gas solutions
Sustainable energy solutionsStrong presence in power and carbon markets and supporting development of new markets including biogas and hydrogen. Developing environmental solutions offering

Strategy: to remain market-leading in the movement of energy and associated products
  • Over $1.3 bn capital committed to renewables
  • 1.2 GW solar and wind operational and ommitted
  • Implementing carbon capture and storage
  • Developing and deploying hydrogen generation
  • Waste-to-biogas production
  • Circular economy solutions transforming waste-to-feedstock
  • Global carbon mitigation portfolio deployed to deliver offset solutions

Strategy: to evolve portfolio over time to ensure it continues to complement the core trading business in the context of the energy transition
Participating in cleaner shipping initiatives, such as ammonia for fuel

Strategy: adapt to anticipated growth in demand for ‘new’ products, such as biofuels and hydrogen
Corporates: offering bespoke solutions for businesses seeking to use sustainable power

Communities: working with communities to develop localised solar power solutions

Transport: building gas-for-transport network involved in electric vehicle deployment

  • Municipal transport e-solutions delivered
  • EV fleet solutions in developed markets
  • Battery swapping for two and three-wheeler vehicles in developing markets

Strategy: leverage footprint and market understanding to develop a range of low-carbon solutions

Our stakeholders

Vitol engages directly with all relevant stakeholder groups. We appreciate that our licence to operate is not a given right, but one that must be earned through responsible operations and gaining the trust of all our stakeholders.

Vitol will seek to address any topics or concerns raised by stakeholders. This engagement is undertaken by suitably senior employees, either board members or direct reports of board members. This is intended to ensure that any relevant issues are raised promptly with the board. The engagement is ongoing.

Man in a suit at a meeting
People working in an office environment
Workman wearing a hardhat
Young people from a community

Employees
Our employees are our owners and our most important stakeholder group. We rely on their expertise, commitment and professionalism for the business to function and succeed. As an employee-owned business, there are governance processes in place to ensure appropriate challenge and review of board decisions. We believe this ownership model, unusual in a company of our size, engenders a culture of challenge and constructive criticism.

Insurers
Insurance is key to helping us manage the physical risks of our business and we have longstanding and strong relationships with our insurers.

Customers and counterparts
We have business relationships with the companies that produce, consume and move energy. Our customers include governments, national oil companies, manufacturers, and local and national power grids. We believe in partnership and look to invest in long-term relationships.

Financing banks
We are fortunate to work with over 80 banks worldwide on the financing of our core business and strategic investments.

Regulators
Our business requires us to operate across regulated and unregulated markets worldwide. We seek to have an open and ongoing dialogue with regulators wherever we operate.

Co-investors
We invest in many of our energy assets alongside a select group of investment partners, including private equity, family offices and sovereign wealth funds.

Portfolio companies
Our portfolio companies represent the breadth of the energy sector. As a shareholder, our responsibilities extend to them and their employees.

Governments
We seek to have an open and constructive relationship with governments in every jurisdiction in which we operate.

Impacted communities
We seek to develop two-way communication channels with relevant stakeholders to ensure Vitol and local Environmental & Social (E&S) frameworks are understood and implemented. For exploration and production projects, we tailor our approach depending on the type of project, geography and commodity in question, as well as the requirements of local regulations, and our operating and financial partners. As part of any E&S impact assessment, we seek to engage and consult with all relevant impacted stakeholders, including disclosing information to affected communities throughout our operations.

Stakeholders’ materiality assessment

In response to our inaugural ESG report we engaged with a range of stakeholders to seek their feedback; what they would like to see in future reports and the topics they view as important. This included informal and structured interviews, video calls and face-to-face meetings with bankers, portfolio companies, co-investors, employees, peers and third parties. We quantified the topics that came out of these meetings in terms of the importance to stakeholders and the impact on Vitol. The schematic below summarises this output.

Materiality assessment for esg disclosures

Stakeholders materiality assessment

ESG AT VITOL

Gerard Delsad, CIO and chair of the ESG committee

Talks about Vitol’s ESG journey and its ambitions and plans for the future

Russell Hardy

What does ESG mean to Vitol?
ESG equates to good business practice. It is good business to ensure that operations are managed safely and responsibly, that our workforce is diverse and that stakeholder views are both canvassed and considered. Increasingly, in the context of the energy transition, it is also good business to think strategically about the implications of the transition on the company and how this will evolve in order to mitigate risks and identify and capture opportunities.

Over the years, we’ve tackled many of the issues related to ESG in an informal manner and with various degrees of granularity across our business. But as the business evolved it became evident that a more formalised approach was required. Co-ordinating an ESG approach through the ESG committee that we created in 2018 has enabled us to be more strategic and thoughtful, as well as providing the framework for us to ensure ESG is applied in a consistent manner across all our operations, according to best practice.

Why have you only recently started reporting on ESG?
We’ve always been mindful of ESG considerations and discussed these with key stakeholders, such as our financing banks, co-investors or customers. For us, 2021 was the right time to consolidate our thinking and performance into a formal document. But 2021 was just the start; putting frameworks in place, collating and verifying data all takes time and we intend to build on this year-on-year to provide more transparency about what we are doing and our performance.

What has surprised you the most since you started on this ESG journey?
The internal response. When we began this journey, only a few people were familiar with the concept of ESG. But as we’ve explained it and as the value has become apparent, the buy-in and genuine interest from employees to participate in this journey has been really appreciated.

How are your ESG efforts structured?
We have a six-pillar strategy covering ESG, human rights, energy transition, education and training, risk management and reporting. We have made some good progress over the last three years under each pillar, but there is still much to do to embed our E&S framework across all of our activities.

Has ESG impacted the way you manage the business?
On the reporting side, the implementation of a more formalised structure has enabled us to monitor performance across the company better, highlighted potential areas of weakness as well as areas where we can improve. The changing energy mix is the greatest challenge the company has faced and is impacting people across multiple functions from finance, through to operations, shipping and trading. What ESG and related reporting guidelines have done is give us a framework to articulate our thinking. Every conversation with stakeholders begins with questions about our approach to ESG!

Where does Vitol have the greatest room for improvement?
Across the board we expect to improve continuously; the goalposts will, quite rightly, keep moving and ever higher standards will be expected of us. More specifically, areas that require a focus in the near term are diversity and human rights.

Regarding diversity, we simply do not have enough women in senior commercial roles. Regrettably, this problem is common across our industry so hiring senior women is not a solution. Instead we are focusing on hiring, developing and nurturing female talent at an earlier stage in their careers.

For human rights we began formalising our approach in 2019. Last year we hired our first human rights manager and we trust this will enable us to improve our approach and reporting around human rights.

Are there any downsides to a more formalised approach to ESG?
Not thus far. I believe the key factor is to make sure that the frameworks are relevant and useful for the business. There is no point in reporting if it is not truly relevant and representative and if it does not have a positive impact on underlying business operations.

What aspects of ESG are you (personally) passionate about?
I care about the business and our role in society. It is imperative that we do not cause harm. On a personal level, I am excited by the potential we have to use our business to improve lives and accelerate the energy transition. The transition will require capital and if we deploy ours wisely, we can build a sustainable future.

ESG progress 2021 and outlook for 2022

Ben Winterton, head of Environmental and Social governance, comments on the company’s performance and ambitions

This has been an important year for Vitol in terms of ESG. We rolled out the third year of our six-pillar ESG strategy and supported the business on a number of transactions. We are working with new businesses in which we have equity to embed the relevant parts of our E&S framework. We also assisted a number of matrices during the year to further embed ESG into our activities. For example, we are working with the carbon trading matrix to ensure that E&S governance and human rights risk is well managed within our voluntary carbon projects over and above the required verification processes.

Ben Winterton

The Covid pandemic posed a number of challenges across the business. Controls, checks and balances continued to be implemented across Vitol and our investment companies to ensure that the health and wellbeing of our employees and contractors was maintained. The pandemic and consequent travel restrictions disrupted the delivery of the 2021 ESG audit schedule, but we will assign additional focus to this in 2022.

The E&S team also grew in 2021, with the addition of a human rights manager to put further focus on this very important topic and continue to roll out our human rights governance and reporting plan.

As a business we made some progress around energy transition, with the development of a proprietary GHG footprint calculation engine within our core trading systems to measure all emissions on an ongoing basis. This engine also includes data for our most material scope 3 categories for the first time, including third party transport. We have framed our approach in the context of the TCFD recommendations as well as highlighting our progress against each of its elements (governance, strategy, risk management and metrics). We have documented a road map for future years and set out our energy transition ambitions in the context of our strategy.

In our last ESG report we set ourselves 21 targets covering a broad range of environmental and social topics. Overall, we made solid progress against these targets, achieving or partially achieving 76% of these. We have included an updated set of E&S targets for 2022.

Our KPI performance over the last three years is shown on the page opposite. Our TRIR performance remained constant for 2021 at 1.18, a strong performance compared with our peer group and industry metrics. We thank all of our portfolio companies and business partners for their pragmatic, proactive and continued commitment to ESG matters. We need to retain focus on ESG performance optimisation, continue to work with portfolio companies to manage ESG risk and always ensure that we do not become complacent in terms of these matters.

We still have a lot to accomplish, but are working hard to achieve our goals. We hope you enjoy reading this, our second report and welcome any feedback that you may have.

E&S performance

Vitol1 Key Performance Indicators (KPIs)

Fatalities

Fatalities

Total Recordable Injury Rate (TRIR)2

Total Recordable Injury Rate (TRIR)2

Lost Time Injury Frequency (LTIF)3

Lost Time Injury Frequency (LTIF)3

Environmental exceedances

Environmental exceedances

Waste (KT)

Waste (KT)

Freshwater extraction (km3)

Freshwater extraction

Scope 1 emissions (KTCO2E)

Freshwater extraction

Scope 2 emissions (KTCO2E)

Freshwater extraction

Scope 3 emissions (KTCO2E)

Freshwater extraction

Number of small spills (<100L)

Number of small spills (100L)

Number of LARGE spills (>100L)

Number of LARGE spills (>100L)

Tier 1 process safety event

Tier 1 process safety event

Tier 2 process safety event

Tier 2 process safety event

Road Traffic Incident Frequency (RTIF)4

Road Traffic Incident Frequency (RTIF)4

Minor human rights breaches5

Minor human rights breaches5

Number of complaints

Number of complaints

Key

Key

1 See page 5 for reporting boundaries. Data comes from companies in which Vitol is invested, our offices and operations.

2 TRIR is the sum of employee and contractor work-related Medical Treatment Cases (MTCs), Restricted Work Injuries (RWIs), Lost Time Injuries (LTIs) and Fatalities, per million-person hours worked.

3 LTIF is the sum of employee and contractor work-related LTIs, excluding fatalities, per million-person hours worked.

4 RTIF is the number of road traffic incidents, per million kilometres driven.

4 Classified as minor according to Vitolʼs risk matrix.

Case Study

Sun Mobility

SUN Mobility battery swap point, India

SUN Mobility

Access to charging facilities is a challenge in many developing countries, SUN Mobility’s battery swapping system will facilitate the deployment of electric fleet and livelihood vehicles in developing markets

In late 2021 Vitol invested in SUN Mobility which provides a cost effective and durable solution for the electrification of fleet and livelihood vehicles. This includes three-wheelers, two-wheelers, taxis and cargo vehicles in India, which has over 160 million two and three-wheeler vehicles, and other emerging markets.

Its battery swapping system allows for a lower total cost of ownership relative to combustion engine and fixed battery alternatives. Its solution is not reliant on grid infrastructure, public fast charging availability or access to dedicated parking and is particularly well suited to price sensitive and challenging conditions. It has successfully deployed its offering across 15 cities in its core market of India and we will look to expand into other fast-growing markets and sectors, including last-mile delivery in OECD markets.