ESG An Opportunity For Industry Associations To Lead
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.
Oil and gas industry associations are well placed to take a leadership role in helping their members integrate environmental, social and governance (ESG) standards into their operations if their memberships can come together to address shared risks, according to the results of a Daily Oil Bulletin survey of executives and ESG professionals sponsored by legal firm Bennett Jones.
The survey respondents also see an expanded role for their respective associations to work together to reach out to the broader public and share the progress industry is making on sustainability issues.
“It’s been a difficult last few years for many associations as — like their membership — they struggle through the financial downturn,” says Bemal Mehta, Senior Vice President, Energy Intelligence at Glacier Resource Innovation Group, the parent company of the Daily Oil Bulletin. “They are all looking for ways to better serve their members. Our survey suggests ESG could be that opportunity.”
The survey respondents said up to now industry associations have not been active enough on the ESG file, both in helping individual members understand and implement ESG programs and in telling the industry’s sustainability story to external stakeholders. Members of the Canadian Association of Petroleum Producers (CAPP), the Explorers and Producers Association of Canada (EPAC) and the Canadian Energy Pipeline Association (CEPA) were referenced in the survey.
Survey respondents ranked the ESG performance of the association their companies are affiliated with, but the responses were almost identical for each association.
Only around 20 per cent felt their association was very or extremely effective at supporting industry-wide ESG efforts, with 40 per cent saying they were sometimes effective, and the remaining 40 per cent saying their association was slightly effective or not effective at all.
“This response is interesting for a number of reasons,” says Mehta. “We have extensive experience working with associations and it has always been clear to us these organizations are driven by the expectations of their membership. The members set the agenda. What these results tell us is the members, themselves, may not be united on what role they want their association to play in the ESG space.
“This is likely because individual companies are having difficulty sorting out where they need to collaborate to meet ESG goals, and which areas of ESG integration are competitive in nature,” Mehta adds. “We know that investors are leading the push for ESG integration, and many companies are using their ESG performance as a market differentiator. We also know that oil and gas investment is being squeezed out as investors use exclusionary strategies on the entire sector. Associations are faced with balancing these issues.”
The survey respondents, however, did identify a number of areas where they believed collaborative action between association members could take place immediately. This includes promoting ESG integration to members, providing guidance to members on best practices, and providing training on compliance reporting and disclosures.
“These are common challenges facing all companies,” says Mehta. “Helping members address these issues individually could improve the overall investment climate for the industry by giving it a better story to tell.”
The same challenges limiting effective collaboration around ESG integration within associations are impacting collaboration between associations, the survey respondents said. While there was strong consensus that associations need to work together to change the narrative surrounding oil and gas development, no clear path forward was identified. Representatives from gas and tight oil focused companies said their ESG risks are different than those of larger heavy oil producers, making it difficult to align interests. Smaller and intermediate companies agreed with this assessment, pointing out they have different issues than large integrated companies.
The Daily Oil Bulletin’s 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…
- Associations need to actually promote ESG as critical to the future of industry and lobby governments to support industry efforts.
- They need to highlight best practices, and simplify the selection of tools and resources. There are currently way too many options for SMEs to effectively wade through.
- Education is important. Associations need to set up shared learning sessions, offer training courses, and create material handouts and presentations.
- We need to make sure there is alignment between the associations. ESG is already lacking in standards, so having associations working in silos isn’t effective or productive.
- We need a Canadian oil and gas commitment and standard for ESG similar to what the mining industry has created. And we need it yesterday.
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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.