Warsaw, June 22, 2015

United NAtions Global Compact

I am pleased to confirm that Polskie Koleje Państwowe S.A reaffirms its support of the Ten Principles of the United Nations Global Compact in the areas of Human Rights, Labour, Environment and Anti-Corruption.

In this annual Communication on Progress, we describe our actions to continually improve the integration of the Global Compact and its principles into our business strategy, culture and daily operations. We also commit to share this information with our stakeholders using our primary channels of communication.

Jakub Karnowski
President of the Management Board
Polskie Koleje Państwowe S.A.

PKP S.A as the State Owned Company is managing the substantial part of the stations and railway infrastructure in Poland ( 2500 stations, approximately 30000 apartments and 100 000 lots of land) and it has a significant Impact on various groups of stakeholders. The business goals are implemented by PKP S.A according to the sustainable development principles. The PKP support the Human Rights observance, by enhancing the organizational culture development of the Company and its environment in the scope of building relations in the work environment and by setting the principles of cooperation with the internal and external environment. One of the basic elements supporting the process of creating and developing the desired organizational culture in the PKP is the Code of Ethics. The Code of Ethics includes the key company values, jointly identified by the employees and the clients: reliability, good management, safety, modernity, responsibility, respect and the guidelines on how to perform the work. There are also already implemented policies that support the adherence to the Code of Ethics principles: anti -harassment, fraud and corruption and managing of conflict of interest.

The PKP S.A has undertaken the following measures to prevent the human rights violation:
• The external “line of ethics” was open for the employees or clients to anonymously convey the information on fraud or corruption.
• The Ethics Commission, the Chief Ethics Officer for the PKP Group, the Ethics Officers in the daughter companies and the Value Leaders were appointed, whom the employees can approach while in need of the ethical issues interpretation.
• The Code of Ethics training for the staff was commenced.
• There are regular “welcome aboard” trainings provided on the issue of Code of Ethics for the newly employed staff
• A cooperation with the Ministry of Labor and Social Policy was established, where the PKP is the Ministry’s partner in the implementation of a social goal to lower the level of homelessness at the stations and its surroundings, as part of the program supporting the return of the homeless persons to the community. The total budget of the program is PLN 5 million. The company is actively supporting the initiatives by the organizations, that are specialized in work with the homeless. As the result of the activities so far the standards of activities targeting homeless at the stations were worked out and a cooperation and permanent contacts between the station managers and the welfare services, city guards, and police were established. The telephone hot line between the stations managers and the NGOs was established, that facilitates the process of directing the homeless to the night and day shelters.
• A special Program for the Debt Reduction for the housing tenants was commenced with the main aim to create the favorable conditions for the clients to pay off the existing debt, with a part waiver (e.g. by cancelling the interest)

The PKP S.A conducts on-going monitoring and evaluation of the undertaken activities to respect the human rights. The effectiveness of such activities was reflected in the results of a research, which indicate that: 92 % of all the employees state that the know the Code of Ethics well; 88 % believe that the implementation of the Code of Ethics has a positive impact on the company, 89 % well know the internal anti-harassment policy, 92 % - the policy of accepting gifts and benefits, 88 %- the management of conflict of interest regulation and 85 %- the anti-fraud policy.

The long term activity of NGOs who use the public funds to limit homelessness brings some concrete results. The provided assistance, stimulation methods and the street workers presence result in limiting the number of persons in a difficult life situation, who were staying at the station long term. For the PKP, as the owner and manager of railway stations it is important to improve the wellbeing and security of the passengers, and they also confirm that the scale of the homelessness at the stations is decreasing.

The PKP S.A has over 22 000 apartments. Some of the tenants have difficulties in making current payments of the rent. The conducted research indicated that over 93 % of the tenants want to pay the due rent. The commenced by the PKP Debt reduction Program is to assist them and motivate them to make current payments of the rent. The PKP S.A. also reduce the costs thanks to the fewer number of court cases and the bailiff proceedings.

The PKP S.A as the socially responsible company employs and supports the employees who are certified to be disable. In 2013 the Company has signed a contract with the consultant firm who is providing the services to assist the employees experiencing health problems to go through the medical and documentation process to obtain the certificate of disability. Such activities optimize the employment of the disable compared to the total employment and in result lower the fee paid by the company to the State Fund of the Disabled Rehabilitation.

In August 2014 the Board of management of PKP S.A made the decision to co-finance the private health care to all the employees and to finance in full the contribution by the persons with certified disability.
Towards the employee with the certified disability who did not benefit for the private health care the company has a plan to offer an alternative benefit, eg. the pharmacy voucher.
Depending on financial situation the PKP considers to additionally support the disabled employees with some financial assistance that could result in equalizing the chances compared to the other employees.

The employees who are in particularly difficult living or , material situation the company is using the Company’s Social benefits Fund to provide material of financial assistance in a form of an allowance.

The company cares about the good climate and the organizational culture that respects the diversity of the employees in the organization. The key issue here is the consciousness of the managers who should be setting an example.
There are Trade Unions active in the company and there is the Company’s Collective Labor Agreement that stipulates the labor conditions, according to the Polish labor code.
The Parties to the Agreement agree that the stipulations of the Collective Labor Agreement for the Employees of the Polish State Railways Stock Company will:
- Assist the integration of the employees around the mission and the objectives of the Polish State Railways Stock Company, where they are employed.
- Serve ensuring the proper working conditions and the fair remuneration, fulfilling the professionals ambitions of employees, respecting their dignity, while taking into consideration the principle of equal treatment on women and men,
- Should prevent conflicts and disputes
- Should impact creating strong links between the Company and its employees

The company strictly adheres to the Labor Code stipulations, that forbids to utilize forced labor and to employ children and under aged persons..

The Code of Ethics clearly forbids any employment related discrimination and also forbids to discriminate the employees, clients and sub-contractors both on the basis of age, gender, disability, race, religion, sexual orientation, nationality or origin, and on the basis of political or trade union activity.
The Code emphasizes that there is no tolerance towards any form of molesting and cruelty, both physical and mental.

As part of health promotion PKP S.A subsidizes a membership in fitness clubs for the employees. The company has signed contracts with three fitness and sport services providers that have facilities in various locations in Poland. The service providers offer their services at a very preferential price and in addition there is a subsidy coming from the Company’s Social benefits Fund. Approximately 24 percent of the employees is using the above facilities.
All the employees are provided with the orientation training on Code of Ethics and the employees’ rights and benefits. All the documents related to such issues are permanently available in the Intranet. For the employees who do not have an access to computers, the copies of the above documents are available at the HR Department.
During the recruitment process none of the candidates is discriminated on any grounds. The company encourages the disabled to apply for the positions offered. The recruitment process is regulated and there is a separate regulation on recruitment as wall the Recruitment Standards Book. The documents emphasize the need to respect the law, both towards the work candidates and the employees, who participate in recruitment processes in order to ensure confidentiality, respect or equal treatment. The recruitment process are conducted in a transparent way, and the vacancies are published in the Internet, Intranet and in a special newsletter.

Since 2013 the PKP S.A assists the employees to obtain the certificate on disability. Prior to this there were some 38 persons employed with such a certificate and at present there are 58 persons, that consists of 2.45 % of the totally employed.

In 2014 the PKP S.A conducted the research on the employees commitment and the result was 48 % which is the average national level, and above the average level for the railway companies employees.
The results impact the activities to improve the working conditions for the following year.
The PKP S.A. attempts to employ all the employed on the basis of a regular employment contract. At present some 94 % of the employed work on the basis of such a contract.
The PKP monitors the level of diversity and attempts to maintain the gender balance of employment. At present the company employs more women than men ( 60.1% vs. 39.9%) that clearly indicates that this is a women friendly company.

The PKP S.A conducts a policy to limit its negative impact on the natural environment. Following the responsible practices in the area of environmental protection that company achieves its goals.
The main goals are:
1. The soil and water protection from the oil substances pollution
2. Limiting the emission of pollution resulting from energy fuel combustion in boiler houses and fuel combustion during the work of machinery, appliances and means of transport
3. Conducting of rational waste management in order to limit its quantity and to minimalize its negative impact on natural environment, with particular emphasis on hazardous waste ( lubricants, used screens, neon lamps, cells and batteries)
4. Subsequent withdrawal from the use of facilities, parts of constructions and building containing asbestos and eternite to be replaced by tin.
5. Introduction of community waste segregation at the Premium level stations and its further introduction in administrative buildings housing the company and its subsidiaries.
6. Construction of ecological Innovation Systemic Stations
7. Maintaining the green areas, trees, “tree doctoring” in the tree canopies.
8. Limiting the paper use by introducing the principle of double sided printing and the electronic documents circulation within the company
9. Behaving according to the existing rules and norms and the internal regulations in the area of environmental protection

In addition the PKP adheres to the environmental protection in the areas of :
• handling the hazardous waste to the companies that are certified to dispose of them
• purchasing the solid and liquid fuels for the local boiler houses requires each time to confirm its quality on the basis of the attached certificate
• collecting statistics and reporting to of the Main Statistical Office and the National Center of Emissions Balancing and managing,

Also the company adheres to:
• The instruction on handling the waste created within the company (including the hazardous waste) that regulates the principles of preventing the waste production and limiting their number and the negative impact on the environment, and recycling or liquidating waste
• The instruction on handling the materials containing asbestos, that was prepared to the subsequent elimination of asbestos products from the constructions managed by the PKP S.A.
• The Book of Maintaining Cleanings Standards that specifies the cleanliness maintaining standards and the way of controlling with the SLA method (Service Level Agreement)- being the constant perfecting of the performed service to achieve the desired, agreed level of cleanliness
• To maintain the cleanliness at the objects and areas managed by the PKP S.A. the safe chemicals are used with the specified PH level of the solution ( depending on the cleaning surface), alkaline water solution of non –ionic surface active substances and organic solvents)

The described below activities require very high financial resources that are limited in the company, therefore all the activities need to be thoroughly planned and contained in the financial budget created for a given year.

1. Modernization of boiler houses- solid fuels (coal and coke) to be converted to gas and oil high performance boiler houses, use of electrical heating or connection of the object to municipal heating network. Over the last 2 years over 40 such objects were modernized.
2. 2. The company subsequently removes asbestos from the used objects and appliances – the total removal of all products containing asbestos will be completed by December 31, 2030 at the latest. The asbestos that can be found in the objects managed by the PKP S.A is usually contained in form of asbestos-cement plates, flat and corrugated, known as Eternite or KARO and it is to be replaced with tin, covering the roofs of the stations, housing and stores.
3. In 14 out of 17 Premium category stations a system of communal waste segregation was introduced as a pilot solution. This, next to the visible financial results of the lower costs of waste handling impacted positively at the image of PKP S.A. to be seen by external clients as a “trendy” and pro-ecological company, where one of the priorities and the business strategy is the natural environment protection. The pilot was ended with a communication campaign, that was using posters. It is planned that the next group of station (the strategic stations) are to be included in waste segregation.
4. At present there are preparations under way to introduce the selective waste collection in 7 office and administration buildings. A key group of building was selected- the Company’s HQs and 6 real estate management departments that employ over 65 % of the employees.
5. The key elements of the Innovation Systemic Stations (ISS) Projects are the modern infrastructure and the dialogue based investments. The PKP S.A has planned to construct the ISS in such localities where at present are stations too large and ill-fitting the local needs. The investments will include demolition of the existing buildings and construction of new, smaller stations offering higher standards of passenger services. The idea of creating ISS includes the technical improvements, energy efficiency, better esthetics, lowering of the maintenance costs, and introduction of environmentally friendly solutions. The single floor buildings are constructed with the recycled elements, are of environmentally friendly and economic. During the construction the ecological solutions are used: heat pumps, solar panels, dynamic illumination. Every ISS consists of three modules: station, urban and parking. The ISS is the own concept of stations modernization prepared itself by the PKP S.A. The first stations are planned to be opened in mid-2015.

Over the last 2 years some 63 stations were rebuild and modernized. Both in the new and in the modernized stations the modern solutions are used to significantly reduce the electric energy use. The work was completed on facilitating the selective waste collection at the 14 Premium stations. The stations were equipped with waste baskets and containers individually selected to fit the décor and design of each station.

The main document is the Code of Ethics adopted by the PKP S.A. Board of Management on 2013. Its aim is to promote the behavior to conform with the law and the standards that are in force in the PKP Group and it is one of the main elements of the system that supports the process of creating and developing the desirable organizational culture in the PKP S.A. The use and interpretation of the principles included in the Code of Ethics is supervised by the Chief Ethics Officer who is directly responsible before the President of the Board of Management, while closely cooperating in the areas of infringement with the Departments of Internal Audit, and Security and Defense.

The accepted by the Board of Management in 2013 the policy to combat fraud and corruption stipulates that the use of high standards of honesty and ethical conduct in every activity, and in particular in the activities related to the execution of daily duties at the PKP S.A is the key element of building credibility, trust and care for the company’s image. It shows the responsible way of managing the company and it is one of the sources of its success.
The policy that promotes The “zero tolerance” level towards corruption and bribery, identifies the risks of corruption or those directly infringing the responsible economic activities and presents the system of the anticorruption activities assessment.
The policy includes the anti-corruption goals and specifies the concrete tasks, such as:
1. Defining of potential dangers and their constant monitoring,
2. Education of staff in the business ethics area,
3. Current solving of problematic situations
4. Encouraging to inform about the existing problems, increasing the consciousness and unconditionally combating the irregularities
The policy includes the description of the employees actions in case of the corrupt incidents, the lists of good practices, and the legal consequences in case of the proven discovery of corrupt activities.

The ethical principles in force in PKP S.A were also communicated to the services and goods suppliers and subcontractors.

In 3014 the Board of Management has accepted the Rules of managing of conflict of interest in PKP S.A. that describes the principles of behavior of the PKP employees to prevent conflict of interest and to eliminate or limit is negative impact of the company’s functioning, and also the Principles of giving and accepting benefits or gifts by the employees of PKP S.A.

The Chief Ethics Officer of the PKP S.A and the PKP group is responsible for the implementation of the Code of Ethics and other related procedures. The Chief Ethic Officer in the performance of his duties is directly responsible to the President of the Board of Management of PKP. In addition in the daughter companies there are nominated Ethics Officers who are responsible for the implementation of the Code of Ethics and the policies, for initiating the investigative proceedings, and for the employees education.
The Chief Ethic Officer of the PKP Group the t Ethics Officers coordinate their activities through their participation in the Ethics Commission.
Aa far as the fraud and corruption policy is concerned its implementation in their units is the responsibility of the departments and units managers. They also have the duty to enable their employees to familiarize themselves with the policies in force, to conform to the rules included in the policies and to constantly cooperate in the area of corruption prevention with the person responsible for the policy implementation.

The introduction of the Code of Ethics was followed by the information campaign, that used both printed and electronic media. There was a lot of information and interviews published in internal media and newsletters. The text of the policies and the Code of Ethics are available in the Intranet and the Code of Ethics is also available in the internet website www.pkpsa.pl.

Presently over 90 % of the PKP S.A. employees received the training on the Code of Ethics principles. All the companies employees had the duty to familiarize themselves with the above policies and procedures. In the second half of 2015 the compulsory e-learning training will commence for all the employees in the areas of corruption and fraud and conflict of interest prevention, and also in the principles of accepting benefits or gifts.

Simultaneously with the Code of Ethics the system of informing on infringements and breach of Code of Ethics and the related policies was introduced. The special internet platform and the dedicated telephone lines were activated to allow the employees easy and safe (anonymous) reporting of fraud or infringement in case of the breach of the Code of Ethics stipulations. The system is also used presently by 10 daughter companies of the PKP Group. As the result the company’s management has received several dozens of reports on irregularities, including the information on fraud and corruption. Following the investigations conducted by the Department of Internal Audit and other internal units some persons were charged, and after the charges were proven, the legal and regulatory consequences followed.
Following the initiative of the PKP S.A. under the auspices of the UN Global Compact Poland the Coalition of the Ethics Officers of the Polish companies was established. One of its goals is to popularize anticorruption activities and good practices in the area of anticorruption. The Coalition also aims at working out the set of ethical standards for the Polish companies.

In case a corrupt activity is noticed it is the duty of all the employees to convey the information:
1. Using the official channels, in case the activity has a character of a crime, and also when it negatively impacts the dignity of a profession, infringes the ethical principles and is connected with the breach of employment duties
2. Outside the official channels by informing the top management, in case the incident concerns the immediate superior
3. By informing the enforcement services ( public prosecution, police) if the case could be of a criminal character.
4. In anonymous way in the particularly warranted cases, by informing the management of the company, the ethics officer, though the dedicated telephone line, email address, electronic form, etc.
As it is stipulated by the policy in force after receiving the information about the possibility of a corrupt activity it is the duty of the PKP management to commence the investigative activities or directly informing the enforcement services, and after the analysis- to introduce the necessary changes in order to prevent such incidents in the future.
The investigative activities are to be conducted by the employees of the Department of Internal Audit and Control, and the employees of the Security and Defense Department in cooperation with the Legal department.
The Management of the Department of Internal Audit make the annual reports on their activity to the Company’s Management. Also, the Ethics Officer makes the reports on his activity to the Board of Management.