Naftogaz

Naftogaz aims to reduce its emissions by 65% by 2030 compared to 1990, and it aims to achieve zero scope 1 and 2 absolute emissions by 2040. To align with its 1.5°C pathway, Naftogaz should establish a long-term target covering its scope 1, 2, and 3 emissions, as well as intermediate targets no more than five years apart to encourage near-term action. Naftogaz should also disclose its 1990 baseline emissions to allow progress tracking against its 2030 ambition. The company should clearly define the scopes and boundaries of the reported emissions and quantify the use of offsets, in order to assess its performance on its scope 1 and 2 emissions reduction target by 2040.

Naftogaz does not report its spending on low-carbon technologies in 2021 and does not disclose its planned capital expenditure (CapEx) spending on low-carbon technologies for the next five years. Scope 1 and 2 emissions intensity from its operations slightly decreased between 2016 and 2021. This is not in alignment with the company’s 1.5°C pathway, which requires the company to reduce its scope 1 and 2 emissions intensity by more than 7% per year between 2021 and 2026.

Naftogaz can improve by integrating climate change oversight and low-carbon transition at a strategic level. Furthermore, there is no evidence that Naftogaz has a low-carbon transition plan, or that it uses climate scenario analysis to inform its business plans. The company should establish a time-bound action plan that outlines how it will transition to a low-carbon economy. This should include medium and long-term targets, verifiable and quantifiable key performance indicators and financial commitments. The plan should be informed by scenario analysis to ensure that the plan’s ambition is sufficient for a 1.5°C pathway.

Naftogaz is developing low-carbon business models and aims to have 1 gigawatt (GW) of renewable electricity capacity by 2030. The company plans to produce biofuels, biomethane, and hydrogen in the long term. The company has also launched various projects and pilots, including biomass-to-heat and biomass-to-power, biomethane, biofuels, and solar and wind-powered green hydrogen production. Naftogaz has also ventured into electric vehicles (EV) charging business. However, specific metrics like profitability and growth potential are not provided in the disclosure.

Naftogaz is working towards a 65% emissions reduction by 2030 compared to 1990 as per a nationally determined contribution (NDC) established by Ukraine. The company also has the ambition to achieve zero scope 1 and 2 absolute emissions by 2040. The company does not quantify the extent to which it plans to use offsets to achieve its targets.

Naftogaz has not developed a transition plan but aims to develop one in the next few years. Naftogaz has identified several low-carbon business models, although their deployment schedule is unclear due to the ongoing war. By 2030, the company aims to have 1 GW of renewable electricity capacity. Also, its long-term goal is to produce up to 1 million tons of biofuels and up to 5 billion cubic meters of biomethane and hydrogen annually.

The company has launched several projects and pilots such as biomass-to-heat, biomass-to-power, green hydrogen production and EV-charging, however, no evidence is found of Naftogaz’s investments in low-carbon technologies or in R&D into climate change mitigation technologies in 2021. At the same time, the company aims to grow the production of fossil gas.

Naftogaz sligntly decreased its scope 1 and 2 emissions intensity between 2016 and 2021, showing a noticeable increase in the emissions intensity of its midstream operations and only a marginal decline in the emissions intensity of its upstream operations. The company’s carbon budget between 2022 and 2050 is projected to exceed its total 1.5°C carbon budget for the period by more than 30%.

The ongoing war in Ukraine is impacting the company’s ability to transition. Naftogaz is focusing on raising funds to purchase gas to heat homes in Ukraine. The company’s gas production decreased by 5% in 2022, as 870 assets owned by the group were destroyed. Naftogaz aims to increase its domestic production of fossil gas in 2023. The transition is on the company’s agenda but the low-carbon initiatives cannot be implemented at the speed required.

The company publicly discloses a commitment to engaging in social dialogue with workers and unions. However, no relevant disclosure was found regarding the categories of stakeholders it engages with on a just transition. Nor was there any evidence to show the company’s ongoing social dialogue and meaningful engagement with affected stakeholders. No evidence was found that the company undertakes just transition planning to mitigate the social impacts of the low-carbon transition on workers, affected stakeholders and its business relationships. Additionally, no evidence was found to demonstrate the company’s engagement in social dialogue and with stakeholders in its just transition planning.

No public commitment by the company was found stating its intention to create and support access to green and decent jobs as part of the low-carbon transition. Moreover, no evidence was found of the company’s action to promote these jobs in a way that ensures gender balance and inclusion of vulnerable groups. Additionally, no relevant disclosure was found that the company conducts assessments on employment dislocation risks. The company does not disclose the actions it takes to provide opportunities for workers and affected stakeholders. Furthermore, no relevant disclosure was found that the company embeds equality of opportunity for women and vulnerable groups in these actions. Furthermore, no evidence was found of the company having a process for identifying skills gaps for workers and affected stakeholders or a public commitment to help workers displaced by the transition to re- or up-skill.

No relevant disclosure was found to show if the company identifies impacts of the low-carbon transition on social protection for workers and affected stakeholders, nor how it contributes to social protection. Additionally, no evidence was found that the company expects its business relationships to contribute to the social protection of their workers and affected stakeholders. No relevant disclosure was found to show how the company identifies any misalignment of its lobbying activities with policies and regulations that support the just transition, nor of the measures it takes to address misalignment. Furthermore, no evidence was found that the company lobbies for policies and regulations for green and decent job creation; retention, education and reskilling; and social protection for workers.

The company commits to respecting human rights and the International Labor Organisation (ILO) fundamental rights at work, and it expects its business relationships to respect the ILO fundamental rights at work. However, no evidence was found of the company’s process to identify, assess and mitigate salient human rights risks in its own operations and supply chain. Moreover, no evidence was found of the company disclosing the stakeholders whose human rights have been affected by its activities. The company does, however, have a grievance mechanism available to workers and external stakeholders.

The company commits to respecting the health and safety of its workers and expects the same commitment of its business relationships. However, no evidence was found of a time-bound target for paying all workers a living wage. While the company discloses the proportion of its direct workforce covered by collective bargaining agreements, no relevant disclosure was found of the company’s required working hours. The company discloses some indicators of workforce diversity, including age and gender. However, no relevant disclosure was found of additional indicators of workforce diversity. Furthermore, the company does not commit to gender equality and women’s empowerment.

The company does not commit to personal data protection, however it has policies regarding anti-bribery and anti-corruption. The company can strengthen its disclosure on these subjects also including expenditure on its lobbying activities.