Despite the COVID-19 crisis consuming the immediate attention of oil and gas companies, with prices that crashed and plunging demand roiling business plans, the industry recognizes that pressure to report on ESG strategies will continue. In sum, companies are continuing to include ESG into their strategic planning.
That’s one of the key insights offered by energy executives and investor relations professionals in an ESG survey recently conducted by the Daily Oil Bulletin — although more than half who responded are not yet producing sustainability reports. The challenge is particularly apparent for smaller and mid-size companies, which often lack the resources and expertise to mount and execute a robust ESG strategy — even though they know it is increasingly central to the way investors and other stakeholders contemplate how to engage with companies and their performance across a wide spectrum of environmental, social and governance measures.
The executive survey is the first in a series of surveys to be launched by a coalition of Alberta-based businesses seeking to define new and innovative ways to create a pan-Canadian approach to ESG strategy. And while it affirms much of what is already known, the survey’s results point out that much of the Canadian energy sector is in danger of slipping behind — particularly when it comes to messaging and "story telling.” That’s despite increasing performance improvements across a spectrum of measures, including clean-tech investment and emissions reductions.
Subsequent surveys will engage investors, board directors, Indigenous communities and sustainability practitioners to ensure as many ESG-driven perspectives as possible are accounted for as the coalition explores how best to create a flexible and dynamic ESG toolkit for smaller and mid-size companies — tools and processes that allow them to understand and adapt and align where appropriate with the existing ratings and measurement frameworks.
“It’s important to understand we’re not looking to re-invent the ESG wheel. The ESG ecosystem globally is unwieldy and complex but it’s reasonably well established and it’s our sense that we just need to do a better job synchronizing with existing processes,” noted Bill Whitelaw, CEO of JWN Energy, one of four companies that founded the coalition. “This will be especially critical to ensure Canada remains a credible place for investors to place capital.”
The business coalition’s efforts are supported by a broader steering committee of other organizations and companies including industry associations, regulators, First Nations representatives and policy groups. Companies in the coalition include JWN Energy, Taylor Energy Advisors, Cumulative Effects Environmental and GLJ Petroleum Consultants. Other firms have signaled a desire to join the effort, noted Whitelaw. JWN Energy also operates www.evaluateenergy.com, which offers global ESG services.
Survey results confirmed what coalition members already suspected — larger companies are well-positioned from a staff and expertise perspective, but smaller operators lack those resources.
"We were keen to get these granular insights," noted Whitelaw. "It's readily clear that companies particularly, and the industry generally, need to move assertively forward in what is an incredibly complex, dynamic and fluid ESG space. Our sense is that it’s also important to close the reporting gap between the larger corporations and their smaller peers.”
The survey of executives and investor relations professionals yielded some interesting insights — particularly when the current pandemic complexities are accounted for, he added.
While there is often a prevailing belief that environmental performance trumps other ESG measures, governance principles actually ranked higher (52 per cent) than environmental performance (39 per cent) in terms of what surveyed companies indicated investors ask about, survey respondents indicated.
Other results included:
- Nearly 70 per cent of respondents said ESG principles are embedded within their strategic planning in order to access capital and reduce risk.
- Nearly 60 per cent have interacted with investors whose policies potentially exclude oil and gas investment. Most of these investors use ESG principles as a critical component of the investment review process.
- Nearly all respondents agreed that messaging and communications are central to conveying the importance of ESG-driven performance.
- Yet, 55 per cent of companies surveyed still do not prepare an annual sustainability report.
“Our goal with the business coalition is to create a talented bench of companies that each offer services along the ESG spectrum — individually or in tandem — providing services to companies looking to launch or accelerate their ESG strategies. With the broader advisory committee's guidance, ideally, what will emerge is a framework that allows companies to map their own strategies, but do so within a pan-Canadian framework that allows for measures that are more unique to the Canadian energy experience and still align with global frameworks.”
Over the next several weeks, the group is planning other surveys and a series of webinars to continue to amplify the importance of coming to terms with the need for synchronized action in developing an overall ESG framework via which companies can continue their existing efforts, but potentially complement them with other tools.
“We will be engaging directly and deeply with other stakeholders such as Indigenous communities, a wide array of investors and sustainability practitioners through our surveying and consultation processes,” noted Whitelaw. “We hope to be able to tease out important nuances that will contribute to building out an inclusive framework from which companies can draw both practical guidance and inspiration.”