Esg, Innovation and Compliance

During the qualification stage (art. 58 of Law 13.303/16) we assess the requirements that suppliers (bidders) must achieve in order to prove the quality, technical suitability and capacity to carry out the object of the bid. If necessary, we can apply the procedure known as pre-qualification before starting the bidding process in cases where the object of the bid requires a more detailed technical analysis. We can also adopt the Contractual List of Suppliers (local acronym is LCF), which is as an additional requirement to be met by our contracted suppliers containing the list of sub-suppliers previously qualified according to high-performance technical requirements.
 

Supplier ESG Management System

Our ESG management system encompasses the entire process of category management, supplier evaluation and development, and the implementation of our consequences system, as described below:

Management of Purchasing Categories: as presented in the "Supplier Monitoring" section, we address the market at different levels of relevance by segmenting it into "strategic", "critical", "operational", or "simplified" categories, considering criteria such as economic impact and level of criticality. The latter encompasses the level of market concentration, difficulties in continuous supply, predominantly international market, level of competition, HSE risks, compliance risks, occurrences of contractual or regulatory violations, operational impacts, distribution channels, and inventory impossibility, industry innovation level.

Identification of Significant (Relevant) Suppliers: in order to focus the actions of monitoring, communicating and managing the supplier base, we have adopted the classification of suppliers based on their commercial relevance, periodically categorising our suppliers through an ABC analysis, with critical suppliers being those included in group A of the ABC analysis. In addition, we identify significant suppliers by mapping the companies that participate in the markets of the strategic and critical categories and that had the greatest commercial relevance for Petrobras in the previous year, aiming to identify potential ESG risks. In 2024, we developed and applied a new methodology for identifying suppliers that are relevant in terms of ESG aspects, as explained in the ‘Supplier Monitoring’ section.

Supplier pre-selection: our supplier assessment has been continually optimised and simplified. We have developed assessment mechanisms to ensure that our suppliers have the appropriate technical, economic-financial, legal and HSE practices, as well as an ethical profile in their relationship with society and the environment. In this way, we keep our supplier base active, aiming to evaluate, prior to signing contracts, the companies in terms of their fulfilment of the technical, economic-financial, legal, integrity risk and HSE requirements, as presented in the section ‘Evaluation Criteria’. Specifically in relation to the Integrity criterion, as explained in the ‘Integrity Due Diligence’ section, suppliers classified with a high Integrity Risk Level (local acronym is GRI) cannot take part in bidding procedures with Petrobras, with the exceptions provided for in our internal regulations.

Supplier Evaluation during Contractual Management: As previously mentioned, our suppliers are assessed in various ASG aspects during our bidding procedures (before signing contracts), with evaluation criteria determined according to the category of goods and/or services. Categories classified as "strategic" or "critical" have more stringent technical and HSE requirements. However, after the contract is signed, we verify compliance with contractual clauses regarding HSE and social responsibility, including labor-related obligations. These analyses are conducted based on our internal standards and guidelines for goods and services’ contractual management and supervision, aiming to ensure compliance with established contractual clauses, such as compliance clauses, prohibition of slavery and child labor, adherence to the Petrobras Ethical Conduct Guide for Suppliers, Petrobras Code of Ethical Conduct, and Petrobras Social Responsibility Policy.

Additionally, every service contract includes an HSE Appendix specifying the requirements to be fulfilled by contracted companies. The compliance with these obligations is monitored through contractual management and evaluations known as “PAG-SMS”, which includes mechanisms for assessing and improving HSE performance across the company. The higher the HSE risk quadrant, the more stringent the standards and processes for contract management and supervision. Contracts classified as high HSE risk are monitored monthly, prior to each payment, through document analysis, on-site visits, audits, and other evaluation methods. All contracts classified as high HSE risk must include specific HSE requirements during the procurement process and monitor the supplier HSE performance according to the criteria defined, taking necessary measures to correct any non-compliance and fostering suppliers and partners to adopt best HSE practices.

As established in our Quality Guide, we establish, communicate, monitor and evaluate the level of performance required of our suppliers of goods and services. The aim of this process is to identify best practices, deviations and needs for adjustments, provide input for assessing effectiveness, support decision-making and enable alignment with the company's business objectives. This performance assessment is represented by the following indicators: a) Supplier Performance Index – SPI (local acronym is IDF); b) Supplier Quality Index – SQI (local acronym is IQF); c) Supplier Performance Concept.

The Supplier Performance Concept considers four parameters simultaneously to assign a performance concept to the supplier - the Global SPI (Supplier Performance Index); the SPI for each macro-criterion (HSE, Management, Term and Quality); the number of occurrences with high severity; and the number of occurrences with medium severity. As presented in the "Supplier Performance Evaluation" section, the Global Performance Concept ranges from one to five stars. To achieve five stars, the supplier must have a Global SPI and all other IDF dimensions greater than or equal to 5.50, as well as no occurrences of high or medium severity.

We also actively monitor the supplier market by using external databases. Together, these data sources provide financial information, credit ratings, corporate structure, national and international sanctions, environmental, social, and governance aspects, and media monitoring of our suppliers. These tools allow us to conduct a more comprehensive and strategic analysis of the supplier market, enabling closer relationships and risk mitigation. External and internal information is consolidated in internal dashboards which allows the suppliers’ monitoring. These insights are used in various processes involving the supplier market interactions, such as category management, procurement, negotiation, contract management, supplier market events, among others.

Petrobras Consequences System: as presented in section 6 of our Quality Guide, the Petrobras Consequences System for suppliers encompasses the following instruments:

Notice of Divergence Occurrence – NOD (local acronym is COD), applied in the case of non-conformities in the delivery of goods or execution of services (critical or strategic), NOD procedure formalizes the occurrence of technical nonconformity, aiming to lead the supplier to make corrections, to identify the root cause(s) and to implement corrective actions in its Quality Management System (QMS) to prevent recurrence of non-conformity. The NOD can be classified as moderate, severe, or critical, by assessing the Operational Impact of Failure (OIF), which considers the value of the equipment and the operational failure, the risks of personal accidents and the environmental impact of the identified technical divergence.

Public Notice Measure, which is a measure applied in cases where the bidder, by action or omission and in an unjustifiably way, causes its elimination from the bidding process, as forecast in public notice and in the scenarios specified in our Quality Guide, such as failure to present the authorization documents, or their delivery in disagreement with the public notice, even after the deadline for correction of inconsistencies or defects found.

Administrative Sanction, provided for in Brazilian Law No. 13.303/2016 (Articles 82 to 84), which may have its guidelines applied to companies or professionals who negotiate and contract with Petrobras, for the practice of illegal acts or acts that cause or have the potential to cause losses to the company. In accordance with the gravity of the act, the following types of administrative sanctions may be applied: formal reprimand, administrative penalties, and temporary suspension from participating in bidding processes. If the potential existence of an act liable to an administrative penalty is identified, the Commission for Analysis of Sanctions Application – CASA (local acronym is CAASE) should be nominated to receive the information concerning the act, as well as carrying out the investigation and analysis in a duly constituted administrative procedure. One of the measures adopted in the consequences system is the suspension of suppliers through administrative sanction, as provided in Article 83 of Law No. 13.303/2016 (after granting the supplier ample right to defense). As presented in section “Supplier Performance Evaluation”, companies that are administratively sanctioned may demonstrate the overcoming of the reasons that caused the restriction imposed on them, with a view to being excluded from the list of debarred companies through self-cleaning, by presenting all measures already implemented to demonstrate such overcoming. For more information, please access our  Self Cleaning Handbook.

Penalties provided for Article 6 of Brazilian Law No. 12.846/2013, related to penalties arising from the practice of prejudicial acts defined in art. 5th. of Brazilian Law 12.846/2013, which will be determined through the establishment of an Administrative Process of Responsibility of Legal Entities at Petrobras – APR (local acronym is PAR-PB).

We expect our suppliers to use the lessons learned from nonconformities associated with the supply of goods and services to continuously improve their production or execution process and prevent the recurrence of failures. In addition, we request the implementation of Corrective Action Plans (CAP) derived from nonconformities identified in quality audits at the supplier's facilities and monitor them, according to procedures and terms described in the Petrobras Quality of Goods General Requirement, available in section “Standardization Catalog”, aiming to implement corrections, analysis of causes and corrective actions and to verify their effectiveness, to prevent the recurrence of failures and nonconformities.

Supplier Development: the engagement with the supplier market is carried out through relationship actions aimed at the entire supplier base, considering that our Supplier Channel is the primary communication channel. Through this website, we provide institutional information to our suppliers of goods and services, disseminate our contracting rules, provide guidance on the registration processes, qualification and pre-qualification of suppliers, technical specifications, contract templates, as well as clarify the functioning of bidding processes and contracts. Additionally, we communicate our procurement strategy and actions focused on compliance and sustainability, which can be accessed in the section “ESG Management for Suppliers”. Therefore, all information that our suppliers and potential suppliers need to know about our contractual procedures is publicly available on our Supplier Channel. In addition, our suppliers can access this channel through the section “Supplier Service” to clarify any doubts about the registration process and how to participate in procurement processes. They can also seek assistance regarding order receipt, delivery scheduling, invoice information, and other related matters. A virtual assistant is available on this website to help our suppliers obtain the necessary information or seek assistance from our supplier team.

In order to disseminate, guide, and raise awareness among suppliers and other stakeholders about initiatives, opportunities, and procedures related to the procurement of goods and services, aiming to increasing competitiveness, quality, and supplier performance, while preserving compliance requirements and expanding the impact of strategic ESG drivers in the supply chain, we engage our suppliers in the following ways:

ESG Supplier Questionnaire: Implemented since 2023, this questionnaire, based on an online self-assessment, is completed by suppliers from various sectors and sizes. It allows us to monitor the level of engagement and development of our suppliers in ESG matters, acting as a "thermometer" that enables more effective management of our actions with the supplier market. The questionnaire is available to be accessed and completed by suppliers on our Supplier Channel, through the section "ESG Journey for Suppliers”.

ESG Journey for Suppliers: In order to strength the relationship and partnership focused on continuous improvement and enhancing sustainable procurement practices and supplier management, we initiated the ESG Journey for Petrobras Suppliers in 2022. In 2023, we continued this initiative, aiming to engage our suppliers in ESG topics through online training associated with themes such as Human Rights, Compliance, HSE, Climate Change, among others. Currently, we offer 10 courses in Portuguese and 2 courses in English, which can be accessed through the section "ESG Journey for Suppliers”.

Petrobras Best Suppliers Award: We annually hold the Petrobras Best Suppliers Award, where we recognize suppliers who stand out in their sectors for their high performance in supplying goods and services to us. In its 6th edition, held in October 2023, we evaluated national and foreign companies that supplied goods or provided services in 2022. A total of 23 companies were awarded in various categories, including eight special categories: Environment, Safety, Health, Innovation, Research and Development, Quality Management, Human Rights, Governance, and for the first time, Decarbonization. In 2023, we presented the awards during the Brazilian Offshore Technology Conference (OTC), which took place from October 24th to 26th in Rio de Janeiro. On the last day of the event, the winning companies presented their cases, allowing our suppliers to access best practices in quality and ESG management. Additionally, the results of the award were widely disseminated through various media channels, including our Supplier Channel in the Supplier Performance Evaluation section, providing access to previous editions' results and the award's regulations.

Monthly Virtual Meetings with Petrobras Suppliers (lives): in order to expand the capillarity of our communication actions, we hold monthly meetings through live broadcasts with a variety of topics of interest to the supplier market, and these events are recorded and publicized on our Supplier Channel. We invite all our suppliers to these meetings, mainly aiming to establish direct and frequent communication, as well as sharing relevant information about our procurement (bidding) processes and other topics related to the supply chain, including those associated with ESG. The schedule of upcoming lives and recordings of the lives already made this year are available on our Supplier Channel, in the “ Livestream - Meeting with Suppliers” section.

Regional In-Person Events: since 2023 we have held a series of face-to-face events across the country in roadshow format, seeking to get closer to regional supplier markets, aligned with Petrobras' strategy of developing local production chains. At these events, we present Petrobras' opportunities and projects for the region, the initiatives related to decarbonization, the financing programs available to our suppliers, as well as explaining how to do business with us.

CDP Supply Chain: since 2022 we have been part of the CDP Supply Chain initiative, aiming to map the emissions of a sample of our main suppliers, selected based on criteria of financial representativeness and critical role for our operations. In the first year, more than 240 suppliers took part and shared information on their greenhouse gas (GHG) emissions. In 2023, more than 250 suppliers effectively participated and shared information on their GHG emissions. Of these, 18% reported for the first time, 67% reported using some climate scenario in their business strategy and 85% engage their own suppliers on the subject. We highlight that we were recognized for our leadership (A rating) in the ‘Supplier Chain Engagement’ criterion of the CDP's Supplier Engagement Rating (SER). In 2024, we will conduct the third cycle of the CDP Supply Chain on Climate Change, and for the second time, we will include the topic of Water Security. Additionally, our suppliers can express their interest in participating in the CDP Supply Chain through the email address: cc-suprimentosasg@petrobras.com.br.

UN Global Compact Human Rights and Company Track: in November 2022, we entered into a partnership with the UN Global Compact to offer the Human Rights and Company Track tool to a group of the company's suppliers, an initiative of the UN Global Compact aimed at providing member companies with a strategy for self-evaluating their human rights performance, based on a tangible understanding of each company's situation. The work was carried out by applying a tool, a thermometer, which allowed companies to obtain an initial self-diagnosis of their governance on critical human rights issues. As part of the efforts to involve our supply chain to promote Human Rights and Companies themes, through the agreement it was possible to offer the application of the Human Rights Track to 135 suppliers, on a pilot basis, who were also able to be trained in human rights due diligence, as well as receiving individual feedback from the Global Compact on weaknesses in human rights management and opportunities for collective improvements and feedback with global results.

Petrobras Excellence Programs: as presented in the “Sustainability” section, in order to contribute to our strategic goal of zero fatalities and the prevention of occupational and environmental accidents in our operations, we encourage service providers to invest in improving their operational performance. To this end, we have developed several excellence programs that regularly assess compliance with best practices and standards in Quality, HSE and Legal Requirements, such as PEOTRAM (Operational Excellence Program for Air and Maritime Transport), PEO-SONDAS (Operational Excellence Program for Maritime Rigs), PEOTER (Operational Excellence Program for Land Operations) and PEOTO (Operational Excellence Program for Ocean Terminals). The companies' scores in these excellence programs are used as a competitive edge in tenders, ensuring that companies with the best results and differentiated safety standards are contracted, valuing the suppliers with the best performance.
 

Supply Chain Funding Programs

In order to support the supply chain and promote improved contract performance, we offer two development programs for the oil and gas industry – “Progredir” and “Mais Valor”, as presented in the section “Access to Financial Solutions” and on page 41 of our Sustainability Report, summarized below:

• PROGREDIR PROGRAM: Launched in 2012 and restructured in 2020, this program aims to provide credit in volume and competitive conditions to our supplier chain, with defined rules of engagement between credit providers and borrowers that minimize risks. Progredir currently has more than 80 financial institutions and 1,860 registered suppliers, enabling Petrobras suppliers to access resources more efficiently and competitively, playing an important role in supporting the growth of the oil and gas industry in the country. This program underwent a restructuring at the end of 2020 and, since then, BRL 12.2 billion in financing has been secured by December 2023. Notably, in the last year alone, BRL 4.8 billion was secured, an amount 130% higher than in 2022.
• MAIS VALOR PROGRAM: Launched in 2020, this program allows suppliers to advance invoices with Petrobras. Registered companies verify the invoices for delivered goods and services and have the option to receive early payment using a digital platform. The program currently involves around 40 financial institutions that participate in a daily reverse auction of rates on the platform, where the lowest offered rate is considered for the operations. Suppliers who choose to receive early payment have the funds deposited into their bank accounts on the same day. This solution has expanded companies' access to resources with more competitive rates from financial institutions, using our company's payment risk (drawn risk). This program completed three years with BRL 22.3 billion in credit granted to Petrobras suppliers, with over BRL 6.2 billion in transactions in 2023 alone. During this period, approximately 170,000 invoices were advanced and 2,801 suppliers were registered.

RefTOP - World Class Refining Program

With the objective of being among the best oil refining companies in the world, since 2021 we have had a specific program for this purpose, known as RefTOP Program. RefTOP consists of a set of initiatives that seek to improve reliability, productivity, operational and energy performance. In 2023, following the revision of our refining portfolio strategy, the Program has expanded to all refineries.

In 2023, the utilization factor in our refineries was 92%, the highest yearly utilization since 2014. We have been focusing on analytics solutions, consistently promoting the integration of maintenance, inspection, engineering, and operation systems, allowing for more accurate diagnoses, less time for decision-making and reduction of equipment failures through the prediction of anomalous behavior.

We keep implementing new projects and OPEX opportunities to increase energy efficiency, which are leading to a consistent reduction in GHG emissions intensity, energy intensity, flaring emissions, and natural gas consumption. The GHG emissions intensity has fallen from 37.9 kgCO2e/CWT in 2022 to 36.8 kgCO2e/CWT in 2023, considering all refineries. This GHG intensity reduction corresponds to a natural gas consumption decrease of 490,000 m³/day (while maintaining production levels). This achievement was due to the RefTOP initiatives.

We expect to invest approximately US$1.1 billion in all refineries up to 2030.
 

Implementation of ESG Requirements in Procurement of Goods and Services

As presented in this document, we have implemented various ESG requirements our procurement processes and in the management of our supplier base over the years. We have developed mechanisms to apply these requirements starting from the pre-selection stage of our suppliers, ensuring that they have the appropriate technical, economic-financial, legal, and HSE capabilities, as well as an ethical profile in their relationship with society and the environment. In order to enhance the compliance in the procurement of goods and services and mitigate potential risks in our relationship with suppliers, we conduct Integrity Due Diligence (local acronym is DDI), which supports the assessment of specific criteria and results in the assignment of an Integrity Risk Level (local acronym is GRI). Companies with a high GRI cannot take part in bidding procedures with Petrobras, only allowed in exceptional situations that are duly justified and subject to the adoption of mitigating measures for the identified risks.

We are committed to the highest ESG standards regarding integrity, social responsibility, and ethical conduct, and we expect the same commitment from our suppliers, as established in the following documents - Petrobras Compliance Program, Petrobras Ethical Conduct Guide for Suppliers and Supplier Quality Guide. Additionally, our contracts include standardized clauses and appendixes that establish technical, legal, compliance, HSE, and Social Responsibility requirements. Compliance with these requirements is periodically verified by contract managers, contract inspectors, auditors from the supplier evaluation and registration department, as well as quality management evaluators for goods.

Over the past years, we have been intensifying collaboration to accelerate the maturity of our suppliers in decarbonization, focusing on knowledge sharing, encouraging emissions measurement and disclosure, and evaluating effective technologies for reducing operational emissions. We recognize that the development of this maturity begins with the assessment of GHG emissions and the establishment of clear objectives for their reduction. This process evolves with the implementation of initiatives and incentives that lead to efficient emissions performance, aligning with ESG requirements that can be incorporated into procurement processes.

In this context, we have implemented various sustainable procurement initiatives. For example, we contribute to the Carbon Neutral Program in the Supply Chain dimension, aiming to engage suppliers and expand the impact of decarbonization. In addition to this initiative, we have also cascaded our PE 24-28+ guidelines to the supplier chain, assessing opportunities, engaging the market, and providing contractual solutions that facilitate the development of new technologies aligned with our emissions neutrality ambition, such as HISEP, All Electric, low fugitive emission equipment, and other innovations that enable greater efficiency and energy transition.

We have also implemented contractual mechanisms that incentivize emissions reduction. For instance, in the operation of vessels and drilling rigs, we focus on fleet efficiency, including the CO2 factor in route schedules, optimization, and the use of emissions and carbon intensity indicators. We expect significant GHG reductions in planned actions to be incorporated in the coming years, such as the introduction of new vessel propulsion technologies, reduced fuel consumption by contracted vessels, electrification of ports, and the use of renewable fuels.

We apply bonuses in tenders related to the procurement of drilling rigs, helicopters, and offshore support vessels. These contracts are remunerated through a daily charter rate, and the applied bonuses refer to "virtual" reductions in these rates when offered in tenders.

• In the case of drilling rigs, the bonus refers to the difference, in value, between the maximum target rate for diesel supply informed by Petrobras and the declared diesel consumption by the bidder. During contract management, fuel consumption is measured, and if a deviation from the tender presentation is observed, the excess consumption is charged to the company.
• Regarding offshore support vessels, the bonus ranges from 1% to 3%, referring to the classification of the proposing company in the "Operational Excellence Program for Air and Sea Transportation" (local acronym is PEOTRAM), and from 0% to 5% for vessel diesel consumption. It is worth noting that fuel economy is strongly associated with the reduction of CO2 emissions, in line with Petrobras' decarbonization objectives and targets.
• In the case of helicopter procurement, bonuses between 1% and 3% are applied, based on the classification of the proposing company in PEOTRAM.

Additionally, considering that we have set a goal to "evaluate the expansion of ESG requirements in 100% of strategic categories hiring by 2028" as defined and disclosed in our PE 24-28+, in 2023, we enhanced the processes for incorporating sustainable procurement requirements, prioritizing those that provide dual resilience - economic and environmental. We have also developed the following procedures to support this governance:

• Managing Sustainability in Procurement (internal standard PP-2SBS-00059).
• Guidelines for implementing sustainability requirements in procurement of goods and services (internal standard PE-2SBS-00199).

Therefore, we have developed new procedures for assessing and potentially incorporating sustainability requirements in procurement processes. This includes conducting ESG risk analysis during the contract strategy development phase. Additionally, we have included a procedure to consult the supplier market to assess their respective levels of maturity, as shown in the figure below: