ESG Governance
Our ESG strategy
At its core, our mission is to deliver the energy and raw materials the world currently depends on, while contributing to the transition towards a lower-carbon future, safely and reliably. Our ESG strategy is made of seven building blocks covering our trading operations and investment portfolio.
Manage operational risks
Understanding and managing ESG risks across transactions helps us to carefully manage activities. Vitol undertakes risk-based ESG due diligence on all companies in which we take equity and we continue to increase the breadth of our activities.
Address legal & regulatory matters
Positive ESG performance helps to reduce Vitol’s risk of adverse legal action. Shortcomings generally lead to downside risk. We continue to keep abreast of, and comply with, ESG regulations.
Sustain talent & productivity
A strong ESG proposition helps to retain and attract talent. Stakeholders, particularly employees, appreciate transparency around our role as an energy trader and how we embed ESG across our business.
Increase earnings
ESG performance contributes to sustainable profits. Progress made under VETI directly translates into increased earnings.
Rebalance capital allocation
Allocation of capital to transitional and sustainable business opportunities enhances the sustainability of Vitol's business.
Meet the highest ESG standards
Strong ESG performance is an enabler and reduces the risk of adverse business impacts. Undertaking ESG audits, monitoring, analysing and reporting lagging and leading metrics facilitates an improved performance and lowers the probability of negative events.
Optimise resource use & cost efficiency
Optimising resources is better for the environment and makes economic sense. We continue to review resource consumption and encourage improved efficiency across our portfolio.
Stakeholder engagement approach
Understanding stakeholder interests
We greatly value our international network of stakeholders for the insights they provide, and we seek to facilitate consistent, coordinated and meaningful engagements. We believe it not only strengthens relationships but introduces improvements to our approach. In line with IPIECA guidance, we conduct stakeholder mapping to identify key groups and prioritise our engagements.
We engage stakeholders who hold both positive and negative perceptions of Vitol to inform our approach to ESG management. Sentiment and critical matters raised by stakeholders is collated and reported to the Board and to the ESG committee as appropriate.
| Stakeholder | Why we engage | How we engage |
|---|---|---|
| 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 | We maintain active, year-round, open dialogue with co-investors through the portfolio-company Board and committee meetings |
| Customers and counterparties | We have business relationships with companies that produce, consume and move energy. Our counterparties include governments, national oil companies, manufacturers, and local and national power grids. We believe in partnership and look to invest in long-term relationships | Every day, we engage with parties through our commercial teams |
| Employees | Our employees are 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 high performance | We communicate via email, virtual and face-to-face townhalls, intranet content, employee networks and events. Communication is led by senior management, directors and team leaders |
| Financial Institutions | We are fortunate to work with over 100 banks worldwide on the financing of our core business and strategic investments. Equally, insurance is key to helping us manage the physical risks of our business and we have longstanding and strong relationships with our insurers. Increasingly, our banks and insurers are seeking not only insight into operational awareness of our assets and investments but longer-term strategic insights such as climate-related risk | Through corporate presentations and results meetings, and regular bilateral calls and meetings |
| Government | We seek to have an open and constructive relationship with governments in every jurisdiction in which we operate | Communications with governments are maintained through statutory representation and multilateral meetings |
| Impacted Communities | We seek to develop two-way communication channels with relevant stakeholders to ensure Vitol and local ESG 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 ESG impact assessment, we seek to engage and consult with all relevant impacted stakeholders, including disclosing information to affected communities throughout our operations | We seek to uphold positive relationships with communities via project and location specific engagements based on community impact and needs |
| Media | We regard free and independent media as an important part of society | We engage with the media on a regular and ongoing basis through our communications department |
| Non-Governmental Organisations (NGOs) | We respect the role that NGOs play in society | We engage with NGOs as appropriate, either directly or through portfolio companies |
| Portfolio Companies | Our portfolio companies represent the breadth of the energy sector. As a shareholder, our responsibilities extend to them and their employees | In many instances, we hold Board positions in our investments and therefore conduct engagement through this channel. Our ESG team engages through its audit processes and via peer to peer meetings and workshops |
| 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 | Engagements with regulators are maintained through bilateral meetings, regulatory filings and upon request |
Enterprise risk management
Managing risk across our business
We split risks into the five main categories described in the table below. A number of functions exist in Vitol to mitigate these risks. The heads of these functions report directly to a Board member and provide quarterly updates at Board meetings. Environmental and Social risks can occur across strategic, hazard and operational risk categories. ESG controls are embedded across Vitol, as appropriate, to control these risks.
Vitol believes its ownership structure encourages a long-term outlook and that the proprietary systems which underpin the business and are developed and built in its Geneva hub, enable it to manage enterprise and market risk across its global operations.
Creating a resilient environment is vital in mitigating risk across these five main categories. The cyber security programme’s objectives are to protect Vitol and facilitate new opportunities, while reducing the risk of exposure to cyber-attacks or data privacy incidents. The cyber strategy is driven by industry best practice objectives of Confidentiality, Integrity and Availability, delivered via the three pillars of governance, technology and employees. The management of cyber risk is led by the Head of Cybersecurity (CISO) who presents metrics on exposure and consolidation every quarter to the Board. The programme covers not only Vitol cyber risks but also supply chain and third party risk management.
| Risk | Why we engage | Description |
|---|---|---|
| Strategic and marketplace risk | Potential negative impacts on Vitol resulting from external factors impacting overall strategy and competitive environment | These risks include: Talent risk, which can arise due to employee attrition or a skills gap; Margin and volume risk, from price volatility or fluctuating demand; Joint venture risk, which may stem from conflicting goals or cultural differences; Sanctions risk, resulting from trade restrictions or financial penalties; Business continuity risk, occurs when there is a natural disaster or supply chain disruption; Competition risk, which may include price wars or lost market share; Technology risk, arise due to cyber attacks or data breaches; and Reputational risk, from negative publicity or counterparty complaints |
| Hazard risks | Potential harm or damage to people, property, or the environment resulting from natural disasters, accidents, or other unforeseen events | Hazard risks are split into: Regulatory risk, which may arise from changes in laws or regulations, which could impair Vitol’s ability to operate or comply with relevant standards and Environmental risk, which may stem from pollution, natural disasters, or other environmental factors that can harm Vitol’s assets, operations or reputation |
| Operational risks | Potential losses or disruptions resulting from internal processes, systems, human error, or external events beyond Vitol’s control | Operational risks can have significant negative impacts on Vitol operations including: Storage and freight risk, which refers to the possibility of loss or damage of goods during transportation and warehousing; Inflation risk, unexpected increase in expenses and operating costs; Control failure risk, could occur when there is a failure to enforce policies and regulations leading to non-compliance and potential legal repercussions; Fraud and corruption risk, involves individuals engaging in intentional deception or dishonesty for personal gain; and Litigation risk, stems from exposure of Vitol to legal action or lawsuits |
| Financial risks | Potential losses or negative impacts on a company’s financial position resulting from fluctuations in financial markets, interest rates, credit ratings, or other financial factors | Financial risks include: Country risk, i.e. political and economic instability in a country; Counterparty risk, arises from the risk of default or non-payment by a business partner; Liquidity/cash risk, threat from insufficient cash or liquidity to meet financial obligations, Currency exchange risk, involves fluctuations in exchange rates that can result in significant financial losses; Interest rate risk, arise due to changes in interest rates, which could impact profitability and financial stability; and Insurance coverage risk, refers to the risk of inadequate or loss of insurance coverage |
| Transactional risks | Potential financial loss resulting from errors, fraud, or other issues that may arise during a transaction or business deal | Transactional risks are those associated with day-to-day operations such as: Trading strategy risk, result from potential losses due to poor trading strategies; Sourcing risk, stem from poor supplier selection or performance; Price risk, arises from fluctuating commodity prices; Basis risk, occurs when there is a discrepancy between related commodity prices; Structural risk, arises from changes in the market structure, Market liquidity risk, arises due to a lack of liquidity; and Rogue trader risk, associated with fraudulent trading activities by an individual |