2 On the report

As a transmission system operator, we play a key role in the Polish economy.
We are aware of our impact on the environment. We also feel responsible for future generations.
We are implementing a new business strategy to develop our business in an integrated way.

On the reporting process

We are continuously improving the reporting process

We are presenting to you our third social report, which is also the first publication prepared in an integrated form. We are proud to present here a new business strategy of Polskie Sieci Elektroenergetyczne based on three values: dependability, reliability and responsibility.

In the course of work on the report, we placed special focus on presenting the value creation model, relations and dependencies between non-financial and financial aspects of our activities.

Selection of issues for the report

GRI 101,GRI 102-42 GRI 102-46

Three stages of the process of selecting issues

Stage 1

Defining topics which are material in terms of sustainable development of PSE, preceded by an analysis of our company's responsibility to the market, society and the environment, and responsibility at the workplace. The analysis also identified the groups of our stakeholders.

Stage 2

Holding a dialogue session with representatives of key shareholder groups. The objective of the session was to identify priority issues which, in the shareholders' opinion, should be discussed in PSE's integrated annual report.

Stage 3

Arranging an internal validation workshop during which the executive and management staff indicated key issues from our company's point of view, and referred to the results of the dialogue session.

Preparation of the report

GRI 102-40 Preparation of the report is one of the stages of the social dialogue that PSE has periodically conducted with its stakeholders under the AA 10000 SES standard. The third dialogue session was devoted to identifying the key subjects for the current report. It was held on 8 May 2017 at the company's headquarters in Konstancin-Jeziorna.

Presented below are the key stakeholder groups whose 64 representatives took part in the meeting.

Stakeholders

Customers
Contracting parties (contractors and subcontractors)
Scientific
and research institutions
Environmental organisations
Industry
and social organisations
Non-governmental organisations
Media
Trade unions
Central
and local government administration
The regulatory authority

In the report creation process, we also considered stakeholders' opinions on our second social report. Relevant information was provided mainly by statements made during the dialogue session mentioned above and the results of a survey conducted among employees and external stakeholders.

Materiality Matrix

GRI 102-47 GRI 102-44 The results of the dialogue session with stakeholders and PSE's internal validation workshop were subjected to a qualitative analysis. This way, 31 material topics were selected from four areas of responsibility:

to the market,
at the workplace,
to society,
to the natural environment.

Material issues which should be included in the report, in the opinion of our company and its stakeholders, are presented in the matrix

Evaluation of materiality according to the environment: evaluation by the environment – external stakeholders (dialogue session), evaluation for the interior of the organisation (employee survey).

Issues of very high materiality
Issues of medium materiality

Materiality for internal stakeholders

Materiality for the environment

Issues material to the organisation

14 19 20 21 22 23 24 29 30 31

Issues material to the organisation
and the environment

1 2 3 4 5 6 7 8 9 10 15 16 17 18 25 26 27 28

Issues material to the environment

11 12 13

The colours reflect the respective areas:

Market
Workplace
Social
Environment

Topics material to PSE and boundaries of their impact included in the report

GRI 103-1

Responsibility to the market

Topics defined as material	Topics covered by GRI standards	Impact of topic within the organisation	Impact of topic outside the organisation
Structure of the power system in Poland and PSE's role*	Organisation profile Economic performance	PSE S.A.	In particular material to customers
Long-term security of electricity supply (preventing the blackout risk) – implementing the capacity market and supporting tools*	Indirect economic impact	PSE S.A.	In particular material to customers
Critical infrastructure management*	-	PSE S.A.	In particular material to customers
Strengthening innovation and implementing new technologies	-	PSE S.A.	In particular material to customers
Power system development plan	Strategy	PSE S.A.	In particular material to the regulatory authority and customers
New model of infrastructural project implementation*	Strategy	PSE S.A.	In particular material to contractors, subcontractors and suppliers
IT strategy/PSE CG cyber-security model	-	PSE S.A.	In particular material to owner and participants of the electricity market
The role of PSE in the European electricity market and directions of its development**	-	PSE S.A.	In particular material to owner and participants of the electricity market
Management of regulatory risk, including that arising from the possible entry into force of the various solutions of the Clean Energy for All Europeans package, engagement in dialogue with the administration and the regulatory authority*	-	PSE S.A.	In particular material to owner and participants of the electricity market
Development of energy production from renewable sources (RES) and energy storage methods	-	PSE S.A.	In particular material to RES, environmental and social organisation
Improving the balancing market model	-	PSE S.A.	In particular material to electricity market participants
Ethics and transparency in relations with business partners (including tendering procedures)	Ethics and integrity Procurement practices	PSE S.A.	In particular material to suppliers, contractors and subcontractors
Requirements and standards of cooperation with suppliers, contractors and subcontractors	Procurement practices	PSE S.A.	In particular material to contractors and subcontractors
Availability and transparency of company data material to business partners	Indirect economic impact	PSE S.A.	In particular material to customers

* A broad-impact aspect

Responsibility at the workplace

Topics defined as material	Topics covered by GRI standards	Impact of topic within the organisation	Impact of topic outside the organisation
Method of knowledge management in the organisation	Education and training	PSE S.A.	In particular material to potential employees
Adaptability capacity of the company: know-how, structures and internal procedures prepared for quick legislative changes taking place in the energy market, as well as quality and environmental requirements for services provided	Employment Regulatory compliance	PSE S.A.	In particular material to potential employees and the regulator
Training and method of ensuring employee development (including a competence model, talent development programmes, incentive schemes, career paths)	Education and training	PSE S.A.	In particular material to potential employees
Ensuring occupational safety	Occupational safety and health	PSE S.A.	In particular material to potential employees, contractors and subcontractors
Employee health-promoting benefits and programmes	Employment	PSE S.A.	In particular material to potential employees
Pay level and employment conditions	Employment	PSE S.A.	In particular material to potential employees
Method of ensuring skilled personnel with regard to the company's present and future needs (including internships and traineeships)	Employment	PSE S.A.	In particular material to potential employees
Method of dialogue with employees(including complaint management)	Employment	PSE S.A.	In particular material to potential employees
Value-based organisation culture	Ethics and integrity	PSE S.A.	In particular material to potential employees
Ethics in internal relations	Ethics and integrity	PSE S.A.	In particular material to potential employees

Responsibility to society

Topics defined as material	Topics covered by GRI standards	Impact of topic within the organisation	Impact of topic outside the organisation
Social communication in the investment planning and implementation process	Local community	PSE S.A.	In particular material to local communities
Winning social acceptance for line routes (including the acquisition of transmission rights of way)	Local community	PSE S.A.	In particular material to local communities
Dialogue and way of fostering relations with local authorities and social partners around projects being implemented	Local community	PSE S.A.	In particular material to local communities
Promoting energy security knowledge and implementing educational programmes	Indirect economic impact	PSE S.A.	In particular material to local communities
Minimising the negative social impact of projects being implemented (noise, interference with the landscape)	Local community	PSE S.A.	In particular material to local communities

Responsibility to the natural environment

Topics defined as material	Topics covered by GRI standards	Impact of topic within the organisation	Impact of topic outside the organisation
Responsibility to the natural environment in project implementation	Compliance with environmental regulations Environmental assessment of suppliers	PSE S.A.	In particular material to local communities
Minimising impact on the natural environment in PSE's operations	-	PSE S.A.	In particular material to local communities

Topics defined as material

Topics covered by GRI standards

Impact
of topic within the organisation

Impact
of topic outside the organisation

Responsibility to the natural environment in project implementation

Compliance with environmental regulations

Environmental assessment of suppliers

PSE S.A.

In particular material to local communities

Minimising impact on the natural environment in PSE's operations

PSE S.A.

In particular material to local communities

Prudence principle

GRI 102-11 Detailed issues presented in the report are based on the business strategy adopted by the Management Board and approved by the Supervisory Board. The management approach was presented in accordance with the procedures described in corporate governance regulations and standards in force at PSE. All published information presented in the report has been verified for compliance with internal documents of the company, and supervision of activities in the different areas is exercised by management staff. Strategic decisions are taken at the Management Board level.

Reliability of the report

GRI 102-56 The report was subjected to the internal assurance process. Reliability of the report, its content and compliance with guidelines was examined by the PSE CG Sustainable Development Team. The report was not subjected to external assurance.

Contact

GRI 102-53

Thank you for reading our report.

Should you wish to share your opinion with us on the report, please send your comments to:

Małgorzata Jachimowska-Noworyta
Sustainable Development Officer
at PSE CG
malgorzata.jachimowska-noworyta@pse.pl

For any questions relating to Polskie Sieci Elektroenergetyczne S.A. please refer to:

Ady Konczalskiej-Boguckiej
Director, Communication Department
ada.konczalska@pse.pl

GRI 102-3

Address:
Polskie Sieci Elektroenergetyczne S.A.
ul. Warszawska 165
05-520 Konstancin-Jeziorna
www.pse.pl

Integrated annual report 2017 edition

2 On the report

On the reporting process

We are continuously improving the reporting process