Oil and Gas Sector Sustainability Performance
2017 Solar Eclipse photographed by Danny Smith
GRI is seeking public comments on its proposed sustainability reporting standard for oil and gas companies that are due 6 October 2020. See www.globalreporting.org. One of the purposes of setting standards for high-impact sectors like the oil and gas industry is to bring consistency in how these sectors report their sustainability performance. As proposed: “This Standard applies to any organization that undertakes activities in the oil, gas, and coal sectors, specifically oil, gas, and coal exploration, development, and production; storage, transportation, and distribution; processing and refining; sales and marketing; and decommissioning and closure.” In describing the Oil and Gas Sector standard, GRI draws attention to the fact that most of the sector’s GHG emissions occur through the use of these fuels. As such, these companies are expected to report indirect Scope 3 end-use emissions.
Benjamin Disraeli once said “There are three types of lies -- lies, damn lies, and statistics.”
Without reporting standards, a company can claim all sorts of sustainability statistics in an unchecked manner. For example, what if a fossil fuel energy supplier wished to have a goal of being carbon neutral by some date in the future? That might be viewed as a laudable goal with immediate benefits to its brand image. Would your opinion be the same if you discovered that the goal only related to the supplier’s own direct GHG emissions, completely ignoring the far larger indirect emissions that occur from end-users of the supplied fuel? Those details might be left vague intentionally. It is easy to see how all of this could easily become a marketing or brand image game in a world where consumers and investors might not look too deeply. That is a dangerous game to play because stakeholder knowledge on these matters is growing and investors and customers alike are becoming more socially responsible in their decision making.
As an example, let’s look at natural gas distribution within the oil and gas sector. Under EPA’s Mandatory Greenhouse Gas Reporting regulations, a natural gas distribution company must annually report both (a) the amount of GHG it emits directly from distribution system leaks, and (b) the amount of CO2 indirectly emitted by its customers combusting the natural gas delivered to them. These regulations are codified in more detail at 40 CFR Part 98. You can view all of the reported data via EPA’s website. You will quickly see that the emissions from both categories are significant; however, the indirect CO2 emissions from end-users of the fuel far exceeds a company’s own direct emissions. The total carbon footprint for a natural gas distribution company includes both source categories (direct and indirect emissions) and it is typically quite large. See: www.epa.gov/ghgreporting
So how would a natural gas distribution company mitigate its carbon footprint so as to become carbon-neutral? As a natural gas distribution company replaces old cast iron and bare steel pipe, the amount of methane (natural gas) leaking from its system gradually reduces. The company can then purchase carbon offsets to mitigate the residual balance of its declining direct carbon footprint. However, “the elephant in the room” is the remaining indirect CO2 emissions from end-users of the fuel. So how would you mitigate the company’s indirect carbon footprint? Energy efficiency initiatives can be used to reduce some of the indirect carbon footprint; however, most of the “elephant” will still be in the room and the only way left to achieve neutrality is again, the purchase of carbon offsets. That would undoubtedly drive the cost of the fuel up considerably. It is worth noting that NW Natural, a natural gas distribution company in Pacific Northwest has chosen to do that in a voluntary way. They provide a carbon offset program for their customers who can electively offset the carbon emissions from their end-use of natural gas. This program has been in operation for many years.
Conclusions
Heed the above words of Benjamin Disraeli and communicate sustainability performance and aspirations clearly and transparently. Stay abreast of and involved in the evolution of sustainability reporting protocols. Be honest with your stakeholders. Make sure that your sustainability performance aspirations correlate with your sustainability performance reporting.
Primarium can help.
