While the energy world remains gripped in COVID-19-related angst, a group of Alberta-based businesses is pushing toward a post-pandemic horizon in which ESG-related pressures will once again be top of mind for Canadian companies.
Its objective: to create a flexible and scalable ESG best-practices framework to help all western Canadian energy companies map toward their own ESG strategies. The framework will also include a toolkit and roadmap to help users navigate what is an increasingly complex and bewildering array of global standards, ratings and players, noted JWN Energy CEO Bill Whitelaw.
The key will be to help companies “find their own place” within that complexity – and begin contemplating the best path forward. “It’s extraordinarily complicated to understand all the moving elements on the ESG landscape, especially if you’re trying to access global capital,” Whitelaw noted. “It’s doubly difficult to pay attention when your balance sheet is under tremendous pressure. Yet as we know, these forces of change are not going away, however in the background they may seem at the moment.”
JWN Energy, GLJ Petroleum Consultants, Taylor Energy Advisors and Cumulative Effects Environmental are collaborating to develop a toolkit from which companies large and small can find common ground and workflows that enable them to think through their own ESG strategy while contributing simultaneously to a collective industry ESG narrative, explained Whitelaw.
The group expects the tools within the framework will be more attractive to small- to medium-sized operating companies, but that one dimension of the effort will be a best-practices exchange via which smaller companies can potentially benefit from the efforts of their larger counterparts. Another key element is an assessment process that allows companies to understand where they currently sit on the ESG spectrum, he added.
ESG reporting shouldn’t necessarily be viewed as a dramatic departure from existing reporting and measuring processes – tools companies have long used to improve operational performance and create transparent external reporting. But those measures are changing, noted Mark Taylor, president of Taylor Energy Advisors. As safety, for example, has become more of a focus with goals of zero incidents, new metrics have emerged.
“Many companies are measuring processes and collecting data…but not necessarily thinking about how the results might fit into an ESG scorecard,” noted Taylor. “But yet these same companies are also already driving operational excellence in a way that can translate effectively into something investors and other stakeholders consider important.”
Part of the group’s effort will be to help operating companies and their suppliers approach ESG reporting more collaboratively, based on a best-practices approach, in a way that brings sector-wide consistency in communication around metrics which are currently relevant and those which may no longer be, added Taylor.
The group has also created a larger steering committee involving individuals and organizations which each bring expertise and perspective to the ESG narrative. The committee includes financial organizations, industry associations and public policy and research groups. As well, the group plans extensive consultation and engagement with key indigenous communities.
Collectively, steering committee membership provides both breadth and depth within the ESG space – and ensures as many bases as possible are covered. The steering committee’s guidance to date has been invaluable in ensuring both breadth and depth in assessing how best to create a framework, added Taylor.
The group’s next step will be a comprehensive multi-stage survey process that will launch within the next few weeks. The survey will include a variety of tools to establish a baseline from which to build the framework and beta test its various tools. Concurrent to that process, the group plans an “open source” communication program to both keep stakeholders aware of progress but also to continually seek input.
ESG, of course, stands for three words: environmental, social and governance. Individually and collectively they represent an array of measures and ratings standards by which companies are measured, largely by investors, but increasingly, other stakeholders. In an energy context, coming to terms with ESG pressures, will be critical for companies seeking support from the financial markets. But the differences between existing frameworks and ratings tools are both stark and nuanced. Smaller companies typically lack the resources to know even where to start.
“Many of the larger operating companies are well down the path already; they have on-staff expertise and are better equipped to manage complexity…but for smaller operators, it can be a daunting proposition to even start contemplating an approach. Yet we believe many are further down the path than they might be aware”, said Taylor.
For GLJ Petroleum Consultants, formalizing ESG thinking within the organization is actually an extension of sustainability work the consultancy is already performing for its customers, noted Caralyn Bennett, EVP and GLJ chief strategy officer.
“We see an important opportunity here for industry to come together to inform ESG reporting best practice in ways that enable and improve corporate comparability by identifying key data sets and performance indicators that allow companies to, first, characterize their unique risks and opportunities and, second, credibly track progression towards their goals,” said Bennett.
Bennett also cited the recent vote by the University of Guelph’s board of governors to divest from fossil fuel companies in its endowment portfolio.
“This decision underscores the need for Canada’s energy-related companies to find better ways to communicate our efforts, innovations and achievements with clarity, completeness and transparency. A well-designed ESG scorecard can set Canadian firms up to be recognized as leaders, independent of the size or type of energy company, and ultimately, thoughtfully showcase Canadian performance against a global backdrop,” said Bennett.
The group hopes its framework approach will create tools that are simultaneously universal as well as customizable to specific corporate and operating contexts, noted Dr. Monique Dubé, President of Cumulative Effects Environmental.
“The ESG paradigm requires a shift that better reflects and communicates the investment operators are making while recognizing that investors and stakeholders expect consistent and transparent reporting of core metrics that get to the heart of the environmental, social and governance nexus. We believe there is a gap between actual and perceived ESG efforts that improved, consistent ESG reporting can help to address while simultaneously driving improved ESG performance in a changing energy landscape,” said Dubé.
Please email Bill Whitelaw for further information: firstname.lastname@example.org