June 2007 Issue
Sustainability
Sustainability Reporting Offers New Area of Accountability
Public awareness of sustainability is at an all-time high. As one of the more visible sectors, Canada’s upstream petroleum industry is taking heed — and now should standardize its reporting, new research suggests.
Editor’s Note: The following is part of a continuing PEGG series on sustainability, featuring articles submitted through the APEGGA Environment Committee.
BY GEOFF ZAKAIB, P.ENG.,
WAYNE PATTON, P.ENG. & Others
A quick scan of the headlines reveals a growing public awareness of sustainability issues. By the high-profile nature of its extractive operations and its significance to the Canadian economy, the upstream petroleum industry is at the forefront of much of this discussion.
This makes it all the more important for companies in the industry to foster constructive dialogue with their diverse stakeholders. The industry needs, in fact, to openly respond to requests for information on sustainability and be as proactive as possible.
Investors, financial analysts, employees, customers, community members, advocacy groups and others throughout society have recently sought more information about companies — information that goes beyond traditional financial data disclosures. As a result, sustainability reporting has emerged as an important way for companies to provide stakeholders with a broader range of information on the economic, environmental and social aspects of their performance.
Given this growing demand for information on sustainable performance, a project at the University of Calgary and funded by the Institute for Sustainable Energy, Environment and Economy investigated four reporting guidelines that Canadian upstream petroleum companies could use in the preparation of sustainability reports. These four guidelines are
-
Enhanced Business Reporting Framework
-
Global Reporting Initiative
-
Guidelines
-
Sustainability Reporting Guidelines by the International Petroleum Industry Environmental Conservation Association and the American Petroleum Institute
-
Stewardship Benchmarking Guide produced by the Canadian Association of Petroleum Producers.
The research objective was to compare the guidelines for similarities, differences and gaps, and to identify obstacles for preparers and users of sustainability reports. The researchers also investigated ways to streamline the reporting process and to make it easier for stakeholders to access sustainability information.
To gather the necessary data, researchers requested interviews from report preparer companies, user groups, and other subject matter experts associated with sustainability reporting. In all, 25 such experts participated.
In the preparer category, eight companies that had either prepared or were planning to prepare a sustainability report were interviewed, along with an additional two companies not intending to prepare stand-alone reports but participating in the stewardship program of the Canadian Association of Petroleum Producers.
One industry association representative who prepared the industry’s stewardship
report and a consultant who helps prepare sustainability reports were also interviewed
in the preparer category.
In the user category, 11 subject matter experts participated. This list comprised
investment analysts (both mainstream and specialists in socially responsible
investing), representatives of regulatory agencies, and organizations that promote
corporate responsibility. Additionally, two auditors who provide assurance statements
on sustainability reports provided their perspectives.
-
Research conclusions and recommendations are
-
Currently there are too many guidelines, making it confusing and inefficient for preparer companies and users.
-
The Global Reporting Initiative Guidelines provide the best umbrella framework and the most credible general system for reporting. An upstream petroleum industry sector supplement should be developed for more specific performance benchmarking and sector-specific comparability.
-
The sector supplement should be based on the same multi-stakeholder principles on which the global guidelines are founded. That is, the sector supplement should be developed in collaboration with a wide variety of stakeholders, not just by industry members.
-
The sector supplement should provide standardized indicators that apply to petroleum companies worldwide, allowing for international comparability and lowering the cost of third-party verification of the data. In addition, regional indicators should be added to the sector supplement to address the specific context in which Canadian corporations operate and the needs of local stakeholders.
-
A system should be developed for easier reporting of, and access to, sustainability information. Sustainability reports should be accessible over the Internet in an interactive format. To accomplish this, the Global Reporting Initiatives Guidelines could be enabled with eXtensible Business Reporting Language. These reports would then be made available in a system similar to SEDAR or EDGAR, which are used to access financial data.
-
Institutional investment organizations and other stakeholders who analyze sustainability performance should be encouraged to use the standard global reporting guidelines as the basis for their analyses. The savings preparer companies would achieve from the reduction of non-standardized reports could then be used to offset the cost to engage auditors and stakeholder groups, which would provide additional assurance on both data quality and indicator accuracy.
The results of this study provide the direction for future research into the development of a more streamlined and efficient standard method for sustainability reporting in the upstream petroleum industry in Canada. Future project phases would include soliciting input from a broader scope of stakeholders; testing the proposed methodology with report preparers and users; and making the resulting sustainability reporting framework available for public use.
Geoff Zakaib, P.Eng., and Wayne Patton, P.Eng., are part of a research team working at the University of Calgary on a study on sustainability reporting in the upstream petroleum industry in Canada. Phase I of the study has been funded by the Institute for Sustainable Energy, Environment and Economy at the U of C, as part of the Alberta Energy Futures Project. Working papers from the project are available on the ISEEE website (see More Info box).
Mr. Zakaib is president of Zakaib Strategies Inc., Calgary. Mr. Patton, P.Eng., is director, program development, at ISEEE at the U of C.
Other authors who collaborated on the article, all involved in the research, are Dr. Irene Herremans, Mark Brownlie, Monica Heincke, Rookman Maharaj and Jamal Nazari.
More info
A sustainability reporting workshop
is being planned for early fall 2007. If you are interested in participating
or would
like more information on this research study, contact
Geoff Zakaib, P.Eng.
403-861-2490
Institute for Sustainable Energy, Environment and Economy
www.iseee.ca
Working Papers — Alberta Futures Project
www.iseee.ca/whatsnew/reports/reports.shtml
Enhanced Business Reporting Initiative
www.ebr360.org
Global Reporting Initiative
www.globalreporting.org
International Petroleum Industry Environmental Conservation Association
www.ipieca.org
American Petroleum Institute
www.api.org
Canadian Association of Petroleum Producers
www.capp.ca
eXtensible Business Reporting Language
www.xbrl.org
Environment Committee Sustainability Series
www.apegga.org/environment/news.html