Tip 1: Shift your mindset. See the opportunity.
There is still skepticism among a few people in the oil and gas industry about the value of ESG (Environmental, Social and Governance). Some believe reporting their ESG performance is another cost with no real benefit, while others think it won’t matter what the industry does because the anti-oil activists and politicians will still attack us.
Don’t think of it as checking a box and creating a report once a year; think of it as an opportunity to showcase what your company does well, review what business processes need improvement, and connect with your employees to enhance their pride in your company.
If you’re looking for an answer to the question, “what is it that you are actually doing to ensure your business is sustainable?”, the ESG report helps provide a powerful response to all your stakeholders. It’s a passive way to advocate for the industry, and we all should be doing that!
Tip 2: Collaborate
Now that you see the potential for your own business in creating an ESG initiative, it’s time to take it to the next level – collaboration. We must work together to set the business terms that are most applicable to the success of our industry.
We are all part of each other’s supply chain, and that is why we are seeing ESG criteria applied to procurement decisions. Purchasers can place higher value on service providers with strong ESG performance as a demonstration of their own integrity and commitment.
To set achievable targets, we need collaboration between oil and gas producers, service companies, and industry associations. Together, we can decide what is important for the sustainability of our industry.
Tip 3: Get the right tools… at the beginning
If your company hasn’t begun establishing a sustainability strategy, or if it’s in its infancy, the thought of publicly disclosing your accomplishments and weaknesses can be daunting.
Fortunately, the popularity of ESG has resulted in a goldrush of companies creating software that makes the process easier. There are a lot of options out there, so it’s important to understand your needs and choose a platform that works for you as soon as possible.
There is increasing public pressure for companies to report all emissions, including scope 3, indirect emissions that come from your supply chain. These are the most complicated to calculate; therefore, having a customized software system that understands the Canadian oil and gas business will be helpful.
The ability to report in-house in real time can be a game changer. For a nominal cost, you can report to the board, the executive, your shareholders, or the communities you operate in whenever they need an update, and you can feel confident that you provided accurate, current, auditable information. That’s how we build trust in the industry.
Tip 4: Be agile. ESG developments keep changing.
Non-financial reporting requirements and climate disclosure developments are moving at a rapid, overwhelming pace. Nonetheless, you have to stay on top of them or you’ll get left behind, particularly because there is a move towards mandatory reporting that will impact oil and gas companies of all sizes.
The Canadian Securities Administrators (CSA) have a proposal out for public comment that will, if enacted in its current form, require all publicly traded companies to disclose certain climate-related metrics. based on the Taskforce for Climate-related Financial Disclosure’s (TCFD) recommendations.
Most impactful to the energy sector is the emissions reporting requirement. The CSA is consulting on two different options. One would require mandatory reporting of Scope 1, Scope 2, and Scope 3 emissions and the related risks, or provide an explanation for not doing so. The other option precludes Scope 2 and Scope 3 emissions from the mandatory requirement.
In their words, these requirements demonstrate “the CSA’s commitment in favour of the growing international movement toward mandatory climate-related disclosure standards” and follows in line with IFRS (International Financial Reporting Standards), the accounting standard used by public and private companies globally.
There is wide-spread support for consolidating ESG frameworks and creating international standards to help ensure the data reported is complete, consistent, and verifiable.
Tip 5: Read the free educational material and newsletters
There are a lot of free resources to help you get started or advance your knowledge. I recommend using them to their full advantage; I know I have to great benefit.
I read the free newsletter ESG Today every day as it gives me a quick overview of ESG developments so I can see the trends and hot topics to prepare for where sustainability disclosure is headed in the near future.
The top three international sustainability standards used by Canada’s oil and gas industry are Sustainability Accounting Standards Board (SASB), Taskforce for Climate-related Financial Disclosure (TCFD), and Global Reporting Initiative (GRI). All offer educational material on their websites, along with regular webinars that share best practices and developments.
Non-financial sustainability disclosure requirements need not keep you up at night. I’m confident that your company is already doing what is needed to produce a strong ESG story. Now you have a few tips for how to measure it, report it, and share it publicly. Let’s show them how we do it in oil and gas!
This series is specific to Canadian oil and gas and explores how ESG will impact the industry moving forward, how to embrace it, and what reporting tools are available. This is article six of six.
Deidra is not employed by the companies or organizations referenced in the article.