Information on the classification of activities in accordance with the Taxonomy

The technical screening criteria for determining whether a given economic activity qualifies as environmentally sustainable are set out in the Commission Delegated Regulation (EU) 2021/2139 of June 4th 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Councilby establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to climate change mitigation or climate change adaptation and for determining whether that economic activity causes no significant harm to any of the other environmental objectives (”Technical Screening Criteria”). The obligation to disclose Taxonomy-eligible economic activityin the consolidated non-financial statement has been specified in detail in the Commission Delegated Regulation (EU) 2021/2178 of July 6th 2021 supplementing Regulation (EU)2020/852 of the European Parliament and of the Council by specifying the content and presentation of information to be disclosed by undertakings subject to Articles 19a or 29a of Directive 2013/34/EUconcerning environmentally sustainable economic activities, and specifying the methodology to comply with that disclosure obligation (“Regulation 2021/2178” ).²

In accordance with Article 10 of Regulation2021/2178 , the disclosure obligation coversthe proportion of Taxonomy-eligible and Taxonomy non-eligible economic activities in an undertaking’s total turnover, capital and operational expenditure (‘key performance indicators’, ‘KPIs’). Taxonomy eligible economic activities are the activities described in the Technical Screening Criteria, covering 13 sectors of economy. The disclosure obligation with respect to Taxonomy-eligible economic activities arises irrespective of whether that economic activity meets any or all of the Technical Screening Criteria.

¹ Pursuant to Article 3 of Regulation 2020/852, an environmentally sustainable economic activity is an economic activity that contributes substantially to one or more of the environmental objectives set out in the Regulation, does not significantly harm any of the environmental objectives, is carried out in compliance with the minimum safeguards (including with respect to human rights), and complies with technical screening criteria

² Regulation 2020/852, the Technical Screening Criteria and Regulation 2021/2178 are referred to below as the ‘Taxonomy’

In accordance with Article 8 of Regulation 2020/852 and Article 10(2) of Regulation 2021/2178, PKN ORLEN, being a non-financial parent undertaking, is only obliged to disclose the proportion of Taxonomy-eligible and Taxonomy-non-eligible economic activities in its total turnover, capital expenditure (CapEx) and operating expenditure (OpEx), and the qualitative information.

The ORLEN Group has determined which of its activities qualify as Taxonomy-eligible and Taxonomy-non-eligible based on the description of activities contained in Annexes I and II of the Technical Screening Criteria, and using the NACE³ codes provided there as ancillary information.

The fact that a given activity qualifies as Taxonomy-eligible does not imply that it meets the Technical Screening Criteria and contributes substantially to one of the two environmental objectives of the Taxonomy. Whether the ORLEN Group’s Taxonomy-eligible economic activities contribute substantially to one of the two environmental objectives, namely climate change mitigation or climate change adaptation, will be determined in the next reporting period.

The information on various activities of the ORLEN Group presented here is not an exhaustive account of sustainable activities undertaken by the Group in 2021.

The Taxonomy provides specific regulation on sustainable activity areas and thus not all of the ORLEN Group’s activities could be included.

³ NACE codes are business activity codes introduced by Regulation (EC) 1893/2006 of the European Parliament and of Council of December 20th 2006 establishing the statistical classification of economic activities NACE Revision 2 and amending Council Regulation (EEC) No 3037/90 as well as certain EC Regulations on specific statistical domains.

The ORLEN Group consistently pursues its hydrogen strategy, thus contributing to CO₂ emissions reduction, develops electric vehicle charging infrastructure, and implements other projects to reduce GHG emissions; however, due to the progress status and small amounts of expenditure incurred in 2021, these initiatives are not accounted for in the present information. The projects will be continued and the related capital expenditures should be included in the ORLEN Group’s sustainable activities reported in the subsequent period.

Importantly, the European Commission has adopted an act supplementing the Taxonomy, laying down Technical Screening Criteria for specific activities in gas and
nuclear sector. The list of Taxonomy-eligible economic activities will continue to expand. At present, work is under way on the Technical Screening Criteria for the next four environmental goals, namely sustainable use and conservation of water and marine resources, transition to a circular economy, pollution prevention and control, protection and restoration of biodiversity and ecosystems, which may result in more ORLEN Group’s activities qualifying as Taxonomy-eligible.

In order to calculate the proportion of turnover, capital expenditure (CapEx) or operating expenditure (OpEx) that is associated with Taxonomy-eligible economic activities, the same accounting principles were applied as those used to prepare the ORLEN Group’s consolidated full-year financial statements. The calculation of the key performance indicators for the Group took into account the relevant consolidation exclusions applied in the preparation of the financial statements.

The presentation of KPIs excludes intra-group sales and turnover resulting from own consumption. It should be noted that no portion of revenue, capital expenditure or operating expenditure was double counted. With respect to turnover, the basis for calculating the KPI was the ORLEN Group’s consolidated revenue for 2021 disclosed in the consolidated financial statements under Revenue, described in Notes 13.1, 13.2, and 13.3.

With regard to capital expenditure, the basis for calculating the KPI was the ORLEN Group’s capital expenditure including increase in property, plant and equipment, intangible assets, investment property and right-of-use assets, together with capitalisation of borrowing costs, and decrease due to penalties received or receivable for delayed contract performance, recognised in the consolidated financial statements for 2021 and described in Note 11 Revenue, expenses, financial results, increase in non-current assets.

In the denominator of the CapEx formula, the ORLEN Group does not include property rights received free of charge, which were presented in the consolidated financial statements in Note 14.2.2 Property rights. The difference between the amount of capital expenditure disclosed in the consolidated financial statements of the ORLEN Group and the denominator of the CapEx formula results from including in the denominator an increase in property, plant and equipment and intangible assets due to acquisition of new companies (excluding goodwill) as at the date of acquiring control. Goodwill is not included in CapEx as it is not defined as an intangible asset under IAS 38. Information regarding the acquisition of material subsidiaries is described in the consolidated financial statements in Note 7.3 Accounting for acquisitions of shares under IFRS 3 Business Combinations, Note 14.1 Property, plant and equipment and in Note 14.2 Intangible assets.

With respect to operating expenditure, the basis for calculating the KPI was the ORLEN Group’s operating expenditure, which includes direct non-capitalised costs related to research and development, building renovation activities, short-term leases, maintenance and repairs, and any other direct costs related to the day-to-day operation of property, plant and equipment. In calculating direct costs related to the day-to-day operation of property, plant and equipment, maintenance costs were taken into account, in particular cost of maintenance and repair of machinery, maintenance materials cost, and IT cost dedicated to plant maintenance and service cost. The OpEx amount includes the cost of maintenance and repair services provided also within the ORLEN Group.

The Parent of the ORLEN Group supervised the process of preparing the key performance indicators, and verified financial data related to the eligible activities in order to avoid double allocation of any amount to the KPIs.

The Taxonomy requires interpretation with respect to both eligible economic activities and the determination of KPIs for those activities. The European Commission’s interpretation⁴ of economic activity focuses on the outcome, indicating that economic activity occurs when resources such as capital, goods, labour, manufacturing techniques, or intermediate products are combined to produce specific goods or services. Accordingly, Taxonomy-eligible economic activities are those activities which result in the production of products or services. In calculating the turnover KPI, the ORLEN Group considered activities that generate revenue recognised in the 2021 consolidated financial statements.

Expenditure and expenses associated with the manufacturing of products that are further processed to obtain final products which are Taxonomy-eligible were included in the calculation of the capital expenditure and operating expenditure.

It should also be added that the ORLEN Group carries out other Taxonomy-eligible activities, but the related financial Schemes are below the materiality thresholds defined by the ORLEN Group for Taxonomy disclosures and therefore these activities are not included in the calculation of the KPIs. These activities represent in aggregate 0.03% of revenue, 0.62% of capital expenditure and 1.01% of operating expenditure of the ORLEN Group.

⁴ Draft Commission notice on the interpretation of certain legal provisions of the Disclosures Delegated Act under Article 8 of EU Taxonomy Regulation on the reporting of eligible economic activities and assets

The turnover KPI was determined by dividing net revenue from sale of products or provision of services associated with Taxonomy-eligible economic activities of the ORLEN Group by the ORLEN Group’s consolidated revenue. The Parent of the ORLEN Group supervised the process of preparing the key performance indicators, and verified financial data related to the eligible activities in order to avoid double allocation of any amount to the KPIs.

The turnover KPI for Taxonomy-eligible economic activities is 12.1% and the proportion of turnover (revenue) for Taxonomy- -non-eligible economic activities is 87.9%.

The following items represent the largest share of the turnover KPI: activities related to production of basic organic chemicals (4.1%), activities related to the production of plastics in primary forms (3.9%), and activities related to distribution and transmission of electricity (3.1%).

The turnover KPI was calculated using financial data on external sales of products and services associated with Taxonomy-eligible economic activities.

The CapEx KPI was calculated by dividing total capital expenditure associated with Taxonomy-eligible economic activities by total capital expenditure of the ORLEN Group.

Calculation of the proportion of capital expenditure associated with Taxonomy-eligible economic activities to total capital expenditure of the ORLEN Group took into account capital expenditure related to activities described in the table above, including capital expenditure incurred for own needs indicated in item 7.6.

Where the same items of property, plant and equipment or intangible assets were also used to produce products or services associated with Taxonomy-non-eligible economic activities or for internal needs, the capital expenditure was disaggregated. In calculating the amount of capital expenditure (numerator), the utilisation rate of the assets was taken into account.

When an asset was used for different Taxonomy-eligible economic activities, the capital expenditure amounts were allocated to the numerator only once. It should be noted that no portion of revenue, capital expenditure or operating expenditure was double counted. The ORLEN Group also operates outside Poland. All its activities were assessed in the same way as the activities carried out in Poland.

The CapEx KPI related to Taxonomy-eligible economic activities is 19.7%.

The following items represent the largest share of this KPI: capital expenditure associated with production of organic basic chemicals: 14.7%, capital expenditure associated with transmission and distribution of electricity: 1.4%, electricity associated with production of plastics in primary forms: 1.2%, electricity associated with production of electricity using solar PV technology: 1%.

The proportion of capital expenditure for Taxonomy-non-eligible economic activities is 80.3%.

The OpEx KPI was calculated by dividing total operating expenditure associated with Taxonomy-eligible economic activities by total operating expenditure.

Calculation of the proportion of operating expenditure associated with Taxonomy-eligible economic activities to total operating expenditure of the ORLEN Group took into account operating expenditure associated with activities described in the table below.

The same disaggregation and allocation rules were applied in calculating the OpEx KPI related to Taxonomy-eligible economic activities as in the case of capital expenditure.

The OpEx KPI related to Taxonomy-eligible economic activities is 9.6%. The following items represent the largest share of this KPI: operating expenditure associated with production of organic basic chemicals: 3.5%, operating expenditure associated with production of plastics in primary forms: 3.1%. The proportion of operating expenditure associated withTaxonomy non-eligible economic activities is 90.4%.