CSR: What oil and gas companies should really focus on

The oil and gas industry sits at the heart of the sustainability debate as it provides more than half of the worlds energy sources. Use of oil and gas is highly energy and resource intensive, in addition its use also leads to significant emissions.

The oil and gas industry has typically two value chains

Producers: Where oil and gas producers make their output available to external refiners.

Producers and internal refiners: Where oil and gas produces make their output available to their own refineries.

The table/diagram below lists the key issues that oil and gas companies need to consider :

OIl-Gas

Exploration is the process of finding out whether commercially viable quantities of oil are available. If found, these wells are drilled. The drilled wells produce oil or gas. Once produced the oil needs to be transported to refineries. owned or third party. Once refined the oil is put in the consumers hands in various forms: petrol, diesel, kerosene, liquefied petroleum gas, compressed natural gas, bitumen.

While there are several key aspects given in the Global Reporting Initiatives, Oil and Gas Sector Disclosure as well as IPIECA guidelines we feel that 5 critical areas could form the core for designing an oil and gas firms CSR and Sustainability strategy for a green and safe India.

1. Policies and safety measures around oil spills

The industry, has several inherent issues that cannot really be ignored. Adequate investments in safety measures and the prevention of oil spills being the foremost. If such an incident should occur policies and frameworks that address all aspects such as impact on flora, fauna, wildlife, marine life, people, water bodies need to be in place.

Questions to be asked – When was the last time we did a risk assessment? Did it cover all aspects? What new risks have emerged and what new policies / frameworks and response systems are needed?

2. Renewables

With the industry’s high impact on GHG emissions and climate change Oil and Gas companies need to move towards a product mix that consists of renewables. However this is not easy to do. Strategic decision making is needed to build a long term framework which focuses of genuine change, product innovation and new avenues of growth with reduced environmental impact.

Questions to be asked – What is our current product mix? Should we change it and if yes, How will it change in the next 5 years? Will we keep investing in externalities as part of CSR of will we move towards more sustainable solutions by redefining ourselves as an energy companies and not just oil and gas?

3. Energy Efficiency

The industry is highly energy intensive and a focus on increasing internal efficiencies while reducing environmental impact should therefore be a key issue for every one operating in this sector. Oil and natural gas companies generate greenhouse gases (GHGs) in almost every aspect of their work, from the finding, extracting and processing of hydrocarbon resources, to the transforming and delivery of these resources to customers. The direct greenhouse gases are emitted from combustion in stationary and mobile internal combustion engines, gas processing equipment, and from venting, flaring, and fugitive methane.
It is therefore essential to disclose and mitigate emissions. There are several global initiatives to measure, manage and reduce emissions – Carbon Disclosure Project, The Global Methane Initiative (GMI) and many more

Questions to be asked – What are our emissions how can we reduce them? Which global initiatives to reduce emissions are relevant to us and which ones should we sign up for?

4. Water

Depending on the extraction technique, operations of oil and gas companies need relatively large quantities of water. Extracting ground water from “water stressed” regions, or the contamination of water bodies from produced water, fracking fluids, methane leaks, and oil or chemical spills may also create water pollution and impact local communities as they would be deprived of drinking water.

According to the UN Global Compact – CEO water mandate once a company understands global water challenges and how they affect and create risk for their business, there are many things it can do to manage these risks. Business future is about incorporating water wisdom at a strategic level and the readiness to pay the full and true ecological and other cost of water.

Questions to be asked – Using corporate water assessment to better understand – How the company uses water and how do the company’s water practices affect communities, ecosystems, and watersheds?

5. Collaborate to change

Energy is an integral part of our lives. Cooking, lighting, transport, manufacturing and thousands of other industries are based on energy generated by the oil and gas industry. For the oil and gas industry to genuinely impact climate change it needs collaborations with other industries as well as customer advocacy. Sufficient effort in this area would go a long way in finding workable solutions.

Questions to be asked – What kind of long term partnerships can be developed? How should we action these engagements?

 

Article coauthored with Utkarsh Majmudar and originally published in Economic Times.

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