More Training Needed To Successfully Integrate ESG
Environmental, social and governance (ESG) risks are coming to the forefront in the oil and gas industry as companies across the supply chain work to successfully navigate the changing energy landscape. In late 2020 the Daily Oil Bulletin, in partnership with law firm Bennett Jones, surveyed executives and ESG professionals to understand the progress being made in integrating ESG into business operations, and what is needed to push ESG forward. This five-part series outlines those survey results.
While the vast majority of Canadian oil and gas companies are working to integrate ESG into their businesses and supply chains there are knowledge gaps in many areas hindering success, according to a Daily Oil Bulletin survey of executives and ESG professionals sponsored by the law firm Bennett Jones.
The survey, completed in late 2020, shows a split in the industry when it comes to ESG training. Around half of respondents said they often or almost always had access to the training and professional development needed to implement their ESG strategy, while the remainder said training was sometimes or almost always lacking.
“Companies further along on their ESG journeys are more likely to have put in place the training and professional development systems,” says Bemal Mehta, Senior Vice President, Energy Intelligence, JWN Energy. “But ESG integration is in its early stages and has a lot of moving parts that are continually evolving. Government legislation and regulation is being updated, with changing compliance and reporting standards. Right now investor focus is on climate change mitigation and adaption risks, but social risks over income inequality and unemployment are growing rapidly. Local issues evolve as projects move from the development to production to reclamation. Key priorities and the materiality of ESG risks shift through time. Even organizations with training and development programs in place need to continually be upgrading those programs.”
“One area in particular that is undergoing change is voluntary disclosure,” adds Mehta. “There is a major push under way in the investment community to integrate the various disclosure frameworks and standards to simplify comparisons and benchmarking. Many large institutional investors like the Canada Pension Plan and Blackrock are leaning towards the use of the TFCD standards for climate-related disclosure and SASB for everything else. But investors are only one of many key stakeholders and many companies see a need to use other voluntary disclosure frameworks to help integrate their ESG concerns into company strategies and to disclose on their efforts.”
Some survey respondents said training in understanding the different voluntary disclosure tools, which tools to use, and how to use them is a priority in their organization. But the vast majority of respondents want training in integrating ESG principles into their business strategies and operations to drive tangible results.
“What these internal stakeholders are telling us is that ESG has to be more than a reporting exercise. It has to lead to positive environmental, social and governance progress in the real world. It has to have financial benefits, whether these accrue in higher revenues, net income or company valuations,” says Mehta. “To make that happen, they are saying ESG priorities need to filter throughout the organization so all employees are pursuing the same goals. And that requires broad-based training so everyone has the same playbook.”
Shawn Munro, Co-Lead of Bennett Jones' National Energy Industry Team, notes: “Training on environmental ESG initiatives can progress to more complex technical innovation and systems change, but at a more basic level can start with straightforward measures such as waste reduction, recycling initiatives, and increased energy efficiency. The benefit of these types of ground-up environmental initiatives is that employees at all levels are involved and they help ingrain sustainability into an organization’s culture.”
When asked to identify specific gaps in current training, the survey respondents pointed to a few urgent environmental priorities.
“The major environmental training gap relates to greenhouse gas emissions measurement and mitigation,” says Mehta. “Many respondents expressed concerns about a lack of standard processes around emissions measurement. Many also said they need more training in the various environmental technologies/services available to address emissions priorities. A significant number of respondents expressed similar concerns around measuring water use and pollution.”
There was broad consensus from survey respondents that there was not enough training in understanding and managing social risk, with an emphasis on stakeholder relations.
“The demand here is for training on more than just consultation processes and standards,” says Mehta. “Employees want to learn negotiation techniques to help come to terms with various stakeholders. They are also looking for training in how to better empathize with their counterparties in negotiations to better understand their needs. Teaching these sorts of soft management skills is very difficult but extremely important for managing project approval risk and reputational risk.”
Executives and ESG professionals are taking a variety of approaches to fill in knowledge gaps hindering successful implementation of their ESG programs. One strategy is to bring in outside help. Over half of respondents said they used consulting services in developing their ESG strategy. Around one-quarter of respondents said their organization had tapped into legal and accounting services for advice, while around 30 per cent brought in outside engineering support.
Almost half of ESG professionals said they regularly interacted with professionals from other companies to share best practices.
“It’s always important to engage with professional services who can offer different perspectives and insight when embarking on major initiatives like integrating ESG throughout an organization,” says Mehta. “It can confirm you are on the right track, or help you alter course towards a better result. But survey respondents told us ultimately ESG is too important to the future success of the company to be outsourced. They want the skill sets needed to develop and adjust strategy and integrate that strategy throughout operations internalized.”
The Daily Oil Bulletin ESG Executive & Professional Survey was sponsored by Bennett Jones and completed from Oct. 15 to Nov. 20, 2020. There were over 150 responses, with 35 per cent executives/board members; 30 per cent senior managers/managers; 25 per cent ESG professionals and specialists; and the remainder consultants and related occupations.
Fact Box: What industry said
- We need training on emissions methodologies — there’s too much self-training and trying to figure it out as we go.
- Focused third party training specific to the elements of ESG and even the "triple bottom line" is required. There are not many folks out there building that teaching capacity.
- Training on how to integrate sustainability/ESG into day-to-day operations and how sustainability helps elevate the bottom line is missing.
- Overall education of the company in environmental matters is required. Regulations are especially challenging right now as they seem to change frequently.
- There needs to be more sharing and collaboration within the industry of ESG activities that are working, not working, should work and need to be worked on.
- ESG professionals talk to each other a lot. They need to spend more time educating and working with non-ESG professionals.
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Bennett Jones is one of Canada’s premier business law firms and home to more than 400 lawyers and business advisors. With deep experience in complex transactions and litigation matters, the firm is well equipped to advise businesses and investors with Canadian ventures and connect Canadian businesses and investors with opportunities around the world.
Bennett Jones provides complete ESG-related advice using our deep knowledge and wide experience garnered from advising clients on domestic and international business law relating to corporate governance, securities disclosure, corporate reporting, environmental law, climate change, indigenous relations, project development, supply chain management and crisis management. For more information, please see the Bennett Jones ESG practice page.