By Megan Bowen, Coordinator, Environment and Sustainability | Strathcona Resources Ltd.
As an engineer, I have always enjoyed the opportunity to creatively solve problems. In the world of Environmental, Social, and Governance (ESG) practices, the problems that need solving have become increasingly complex. From Company A focusing on cutting operating greenhouse gas (GHG) emissions, to Company B surprising its workers with an extra week off to help with burnout, it can be difficult to know where to start, let alone where to focus. As the environment and sustainability coordinator at Strathcona Resources I get to assess how technical aspects of our operations affect non-technical pillars of the business. While I will focus on the ‘E’ aspects of my role for this article, it isn’t to the exclusion of the ‘S’ or ‘G’ pillars.
First and foremost, materiality identifies which metrics and variables to home in on. Restauranteurs and brewing companies should be concerned with food and beverage safety, but that doesn’t really apply to an oil and gas exploration and production (E&P) company. Environmental emissions, especially carbon dioxide and GHG emissions are instead at the forefront. That makes the next step completely and transparently quantifying where GHG emissions are coming from, and which variables are driving changes to emissions intensity. For example, steam oil ratio (SOR) and resulting operational changes at a steam assisted gravity drainage (SAGD) operation are important variables to quantify. GHG emissions sources vary by field, making reduction approaches different, which is why initial quantification informs the next steps of forecasting and emissions reduction. Good, bad, or indifferent, a carbon pricing environment creates an opportunity to proactively manage emissions reductions projects. High graded emissions reduction projects double as projects with a large return on investment as we navigate our carbon tax exposure.
Strong ESG driven projects create a positive feedback loop that ultimately adds value to an organization.
Essentially, strong ESG driven projects create a positive feedback loop that ultimately adds value to an organization. Take a new technology application that reduces environmental emissions for instance. Emissions reduction projects tend to lower energy consumption, can sometimes reduce water intake or unnecessary waste, and each of those in turn reduces operating costs (either from direct energy use expenses or lower waste-disposal costs). Subsequently more sustainable facilities, equipment, pad sites, etc. are not only the mark of optimized assets, but they can also mitigate the risks of investments that don’t pay off due to longer-term environmental issues. Consistently investing in best-in-class, efficient projects can prevent stranded asset write-downs. Meanwhile, competitors who haven’t invested and continue with energy hungry projects will fall behind over time as they pay for unnecessary wastage. Especially within the current environment of carbon pricing, emissions reduction projects (and companies that support them) can potentially earn subsidies or government grants. Stronger government relations can then develop and a company demonstrating responsible resource development can realize better access to resources and even strengthen community relationships. Finally, the opportunity to work on new exciting projects boosts employee motivation, keeping employees engaged, and can even lead to attracting new talent. Those engaged and motivated employees, facing favourable community and government relationships, with capital to invest thanks to reduced operating costs, can then assess new emissions reduction projects, completing the positive feedback loop.
It is difficult to predict what changes are coming. The inventor of the internal combustion engine got to work on horseback, and the inventor of the lightbulb worked under the glow of candlelight. People improving the existing energy supply (non-renewable and renewable alike) need to drive cars and heat their homes with what is currently available to them, recognizing full well that participating in the world as it is does not exempt or disqualify them from trying to improve it. Maybe the future holds favourable Canadian tax credit positions for new technology pushes into carbon capture and storage, or blue hydrogen deployment. Maybe international energy operators will be held to the same regulatory and social standards already present in Canadian operations and market shares will shift to meet globally growing demand. Either way, changes are inevitable and integrating ESG practices and sustainability into business practices will position any company to resiliently handle the changing energy landscape.
Originally published in Scovan’s IGNITE Vol. 2
