Compliance

PGE Group is building employees’ awareness of applicable laws, regulations and internal standards. Everyone is obliged to be familiar with the current laws and agreements that regulate the day-to-day duties at their workplace. To ensure compliance with the law, internal regulations applicable to both PGE SA and the Group as a whole are monitored on an ongoing basis. When the law changes and affects the content of an internal regulation – the owner is obliged to amend it. In order to build awareness of the applicable law, communication activities are carried out, as well as training.

PGE Group communicates on an ongoing basis on issues related to compliance with the law and ethical standards.

The contents of PGE Group’s Code of Ethics, as well as other policies of the Compliance area, are available to employees, business partners and other interested stakeholders – in Polish and English – on the corporate website www.gkpge.pl  and the websites of individual PGE Group companies.

Posters informing about the values and principles are available in each of the companies, together with information on channels for reporting non-compliance.

The basis for the operation and improvement of the PGE Group management system are legal provisions, adopted values and ethical standards of operation. The PGE Group operates in accordance with the law, internal regulations and high ethical standards, and requires the same business rules from its contractors.

The PGE Capital Group has a compliance management system based on the recommendations of the ISO 37301 Compliance Management Systems (CMS) standard, which formulates requirements for shaping, implementing and ensuring the effectiveness of compliance management systems.

The system is also compliant with the standards set by the Warsaw Stock Exchange: „Standards recommended for the compliance management system in the field of counteracting corruption and the whistleblower protection system in companies listed on the markets organized by the Warsaw Stock Exchange.”

The PGE Group has an organizational structure dedicated to the performance of Compliance tasks. In PGE SA, it is the Compliance Department, whose director serves as a Compliance Officer, with a direct reporting path to the Management Board and the Audit Committee of the Supervisory Board of PGE.

The companies and branches of the PGE Group appoint Compliance Coordinators who report to the head of the Compliance Department in PGE SA with respect to the performance of their tasks.

These persons are also provided with an appropriate direct reporting path to the Management Board of a given company. In PGE Capital Group there are 49 Compliance Coordinators. The Compliance Management System in 2022 in the PGE Group comprised the Corporate Centre and 21 direct subsidiaries of PGE SA, actively conducting business activities (in September 2022, 6 of these companies were sold to PGE GIEK S.A. and one was acquired from this company). The implemented solutions apply to all employees of the PGE Capital Group and other persons performing work for the Group, regardless of their positions.

Communication activities are one tool for educating employees. Developing an awareness of the importance of acting with integrity in building the organisation’s value and in achieving its business goals fosters the subsequent choices of employees. Thanks to their knowledge, they take into account in their daily actions and decisions, elements related not only to compliance with the law, but also with ethical standards.

The role of managers is extremely important here, as the knot that binds together the values and principles set out in the Code of Ethics and in other documents derived from it, including the PGE Group’s Anti-Corruption Policy, with promoting them among their employees – by making model decisions and, above all, by the example of their own behaviour.

In 2022, the communication activities carried out in PGE Group focused on the topics of anti-corruption and avoiding conflicts of interest, and it was these topics that were the focus of most activities, such as two Lunch & Learn sessions, an online training course aimed at all PGE Group employees, articles in the magazine 'Under the Umbrella’ and publications on the intranet.

Considerable attention has also been given to building an organisational culture conducive to compliance as a basis for compliance – a culture based on honesty (integrity) and geared towards open communication and responsiveness (speak-up culture).

With the outbreak of war in Ukraine, communication activities were naturally supplemented by those also touching on sanctions on Russia, compliance with which by PGE Group companies was an important area of compliance.

One of them is the Legal Guide, prepared on a monthly basis in PGE SA, which is devoted to changing acts of common law relevant to the operations of Group companies.

The Legal Guide is distributed to selected PGE Group companies to ensure access to information on changes in the law and to ensure compliance. On an ongoing basis, a series of meetings is held on the most important changes in the area of domestic and international regulations, at which information on the various stages of the ongoing legislative process is also provided.

The objective of the compliance area is to support the management boards of PGE Group companies in the implementation of uniform operating principles in PGE Group, as a result of which the organisational culture supports compliance with the law and ethical principles as well as activities in line with sustainable business principles.

In 2022, the Compliance Department of PGE SA continued its existing practice of conducting cyclical training on the PGE Group Code of Ethics and anti-corruption regulations and compliance communication, as well as carrying out the core tasks of the process, i.e. identification of laws and regulations, identification and assessment of compliance risks, compliance assessment and cyclical reporting.

The training ensures that employees and other persons are properly informed about applicable regulations and practical examples of their application. Training focuses on fostering an ethical culture within the organisation by identifying and promoting appropriate attitudes and behaviours in relation to the environment in which the company operates and the specifics of the organisation. Training sessions are conducted by designated employees on the basis of materials consistent for PGE Group, including hands-on examples.

The effectiveness of these activities is evaluated on an ongoing basis and, where necessary and possible, improved. The implementation of the compliance management process includes the repetition of activities, the development of forms and ways of flowing, collecting and analysing data, as well as operating practices adapted to the needs of the organisation. From 2022 onwards, ongoing monitoring of the implementation of follow-up actions following investigations and compliance monitors was initiated.

In order to assess the effectiveness of the Compliance area, Compliance Assessments were carried out in individual PGE Group companies. Eight areas of compliance were examined as part of the Compliance Assessment in the basic part: implementation of the compliance management process (Compliance), principles of fair business and ethics, respectful activities, protection of personal data, counteracting corruption, counteracting conflict of interest, employer-employee relations, relations with Business Partners, counteracting money laundering and terrorist financing (AML/CFT).

In the part dedicated to energy trading, the issues of the application of the principles of fair competition and protection of consumer interests, compliance with REMIT (Regulation No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency) were again examined.

The Code of Ethics also addresses the issue of the requirement to respect human rights in PGE Group. In this regard, it refers to the Universal Declaration of Human Rights and the standards of the International Labour Organisation and the 10 principles of the United Nations Global Compact.

In addition, in accordance with PGE Group’s Anti-Corruption Policy, contractual clauses are used to oblige Business Partners to observe the same compliance standards as PGE, explicitly citing, among others, the observance of human rights.

PGE Group’s top management is responsible for human rights compliance issues, while the Compliance area is responsible for organisational coordination.

Employee training on the Code of Ethics and on policies and procedures for respecting human rights is compulsory and repeated periodically for all persons in companies where a compliance management system – Compliance – is implemented. The first training for new persons in companies, mainly in an on-line format, takes place within 3 months of starting work or cooperation with a PGE Group company.

It discusses in detail PGE Group’s values and principles, human rights, the whistleblowing system, as well as the full range of protection, rights and reporting rules for Whistleblowers.

After its completion, participants submit declarations confirming that they have familiarised themselves with the content provided and that they undertake to comply with it. The training is valid for three years. After this period, it is repeated as refresher training.

The structure of PGE Group’s compliance management system includes compliance coordinators at PGE SA and PGE Group companies. One of their roles is to consult ethical concerns related to compliance with internal regulations such as Code of Ethics, Code of Procedure for PGE Group Companies’ Business Partners, anti-corruption regulations.

The Code of Ethics imposes an obligation on any person acting for and on behalf of PGE Group who is in possession of information on irregularities resulting in a breach of the law, internal regulations or the Code of Ethics of PGE Group to report this fact. Reporting of irregularities may be done anonymously.

Individuals who make a report of non-compliance acquire the status of a Whistleblower and are protected. A whistleblower, because of having made a report, cannot face retaliation from employees, others or the employer.

A whistleblower can be anyone, especially an employee, consultant, contractor, subcontractor, supplier. This is a person who reports irregularities, information on suspicion or occurrence of a non-compliance incident, the consequences of which may be detrimental to PGE Group companies.

The reports may concern, in particular, actions of a criminal or corrupt nature, violations of human rights or conflicts of interest.

The wide range of possible forms of whistleblowing and the possibility to report, including anonymously, also facilitates communication for people in vulnerable groups (e.g. people with disabilities) who may find it more difficult to take advantage of the opportunity to report in person. People in vulnerable groups can report without fear of being stigmatised due to publicity.

The Director of the Compliance Department has been appointed to handle reports. The system allows for the reporting of both the risk of a breach (alert system) and real, completed breaches. The designated channels for reporting problems or violations of the law or of values and principles are also dedicated to questions in the area of compliance.

In addition, a separate email address for questions or concerns is indicated on the external 2022 website: OpiniaCompliance.pgesa@gkpge.pl

PGE Group has had anti-corruption regulations in place since 2017, updated in 2021. These regulations are the operationalisation of PGE Group’s Code of Ethics, which is the overarching document.

PGE Group’s Anti-Corruption Policy is a declaration addressed to all internal and external stakeholders. It represents a strong and unequivocal commitment to zero tolerance of corruption in PGE Group. It defines the key principles and responsibilities for countering corruption, including:

• responsibility for anti-corruption prevention in PGE Group,
• anti-corruption rules, including in particular zero tolerance of corruption and any dishonest behaviour, avoidance of conflicts of interest, relations with external partners, business gifts,
• reporting of irregularities and/or suspected irregularities,
• consequences of non-compliance with the policy.

The anti-corruption policy references the „Recommended Standards for an anti-corruption compliance management system and a whistleblower protection system for companies listed on the markets organised by the Warsaw Stock Exchange”. It is available on external websites, implementing one of the guidelines of the Stock Exchange.

The purpose of the anti-corruption policy is to meet these standards, as well as to clearly declare and communicate within and outside the organisation PGE Group’s approach to corruption.

The Policy details the provisions of PGE Group’s Code of Ethics, in particular the principle: „We do not tolerate corruption and dishonest behaviour”. Detailed activities, responsibilities and solutions implemented in the area of counteracting corruption are included in the General Procedure – Counteracting Corruption in PGE Group, which is an internal document implemented in PGE Group companies.

As part of a survey conducted in 2022 in Group companies on awareness of the values and principles from the PGE Group Code of Ethics, PGE employees indicated that the principle „We do not tolerate corruption and dishonest behaviour” is the second most important principle of the PGE Group Code of Ethics for both employees and the organisation.

Qualitative results of the anti-corruption policy include building an authentic internal and external image of PGE Group companies as honest business entities, as well as raising awareness of corruption risks and anti-corruption prevention.

The counteraction procedure defines the responsibilities and activities performed in the framework of counteracting corruption in PGE Group, including in particular the principles of business gifts, transparent cooperation with business partners and avoiding conflicts of interest.

The document also indicates the procedure for reporting suspected breaches of the rules or provisions of the generally applicable law related to corruption and bribery.

The monitoring of business activities to identify and explain events that are unusual for the business, as well as the analysis of the presence of fraud drivers and the introduction of formal system solutions (bylaws, procedures, policies) lead to an increasingly better corporate governance performance of the organisation.

The number of operations (events) to be analysed in a given year results from the permanent monitoring plan, which is approved by the President of the Management Board of PGE SA, and from the implementation of the provisions of the internal supervision regulations, according to which all operations monitored by the internal supervision area are analysed for the occurrence of possible corruption events.

Based on the analysis of the internal environment (processes, regulations, events) and the external environment, the following risks were defined:

• unfamiliarity or non-compliance by employees with the regulations in order to commit fraud, in particular the anti-corruption policy and related documents,
• conflict of interest,
• insufficient knowledge of regulations to prevent abuse by employees,
• inadequate response to suspected abuse, or to identified instances of abuse by employees or the employer,
• excessive or inadequate authority, staff overstepping the scope of their authority under the power of attorney,
• using a false power of attorney and other identification documents,
• unclear responsibilities of employees for the performance of assigned tasks,
• nepotism and cronyism,
• no intervention in the event of a suspicion or occurrence of corruption on the part of an immediate superior or a person with such knowledge,
• leaving out a piece of the process or part of a task from supervision in sensitive business areas such as communications, purchasing, wholesale, retail, administration, investor relations, mergers and acquisitions.

Employees’ awareness of corruption, as a complex phenomenon in the context of the tasks they perform and their competences, is constantly being raised. This is mainly done through training, both general and dedicated to specific job groups, competences or areas of authority.

Training disseminates ethical patterns of behaviour and gives a clear message about the lack of social acceptance of fraud in PGE Group environment. Trainings on PGE Group’s anti-corruption regulations, just like trainings on the issues of PGE Group’s Code of Ethics, are obligatory and repeated periodically for all persons in companies where the compliance management system – Compliance – is implemented.

Training for all new people in companies takes place within 3 months of starting work or cooperation with a PGE Group company. It discusses in detail anti-corruption principles, standards set by the Stock Exchange, types of corruption, definitions, anti-corruption regulations in PGE Group.

The validity of this training, as in the case of the training on the Code of Ethics, lasts for 3 years. After this period, it is repeated as refresher training. After the first training session, participants submit a declaration confirming that they have read and understood the content provided and that they undertake to observe it.

In addition, depending on the needs, anti-corruption knowledge can be supplemented by dedicated, in-depth anti-corruption training, taking into account the specifics of the area and specific positions.

Such trainings may be addressed in particular to managers, executives and other persons working in areas particularly at risk of corruption.

Taking into account areas particularly exposed to the risk of corruption, dedicated additional training courses were also held in the field of anti-corruption prevention. Such an approach will be continued to an even greater extent in 2023.

The trainings were additionally supplemented by communication activities, related in particular to reminding employees of the rules regarding the exchange of business gifts, appropriate relations with business partners or the International Anti-Corruption Day.

As part of the measures to improve the anti-corruption system, the internal regulation concerning the recording of business gifts was revised in 2022, making the process more consistent so that it is easier to understand and, therefore, easier to comply with.

With regard to activities concerning the avoidance of conflicts of interest, persons carrying out internships and student placements were covered by the process in place in PGE Group companies. The compliance cells provide ongoing support and recommendations in the event of any questions or concerns regarding business gifts or conflicts of interest.

An important factor that raises the risk of undesirable developments is conflict of interest. The company’s internal regulations define what it is and who may have this type of conflict. In addition, each employee confirms his or her knowledge of the rules by making a declaration that he or she has no conflict and that he or she is obliged to provide information should such a conflict arise in the course of his or her professional tasks.

The prevention of a conflict of interest serves to ensure that decisions in PGE Group companies are made on the basis of merit criteria, in a transparent manner and in accordance with the best interests of PGE Group. The principle of avoiding conflicts of interest is comprehensively implemented in Group companies. It covers employees and other persons who act for and on behalf of PGE Group companies on a basis other than the employment contract up to the level of top management. Employees submit declarations of interest immediately upon starting work in PGE.

With regard to other persons, an appropriately dedicated part of the declaration is applied or, alternatively, appropriate contractual provisions are applied, incorporated into templates of e.g. contracts of mandate or contract for specific work.

All signatories signing their respective declarations simultaneously undertake not to undertake actions leading to a conflict of interest, as well as to inform their supervisor and the Compliance unit in writing of any concerns in this respect or of the occurrence of such a situation. They also acknowledge that they have been advised of their responsibilities in the event of any failure to comply with their declaration.

Enquiries regarding conflicts of interest, including, for example, doubts about the existence of a conflict of interest, are recorded by the Compliance area in order to ensure transparency in the analyses, recommendations and monitoring of the final action taken in the individual cases reported.

In the case of service contracts that PGE SA has assessed as being most at risk of conflict of interest, additional dedicated contractual clauses are applied.

PGE S.A. had 53 tasks planned for 2022 in the Compliance Programme, to which 5 tasks were added during the year. Overall, 93% of the planned tasks were completed. Of the 17 main tasks, 11 of the following issues were completed in 100%:

• implementation of the Compliance Management process;
• organisation and resources of the compliance management system;
• ethics communication;
• investigations;
• compliance monitoring;
• monitoring compliance with laws and regulations (standards), good practices;
• preventing corruption, including conflicts of interest;
• personal data protection;
• the company’s own activities resulting from the compliance assessment;
• the company’s own activities resulting from the identification of risks;
• own activities.