Social Performance Indicators Evolve in Update to Sustainability Reporting Guide
To assist oil and gas companies with reporting on nonfinancial performance, the Oil & Gas Industry Guidance on Voluntary Sustainability Reporting was published in 2005 as a framework for improving the quality and consistency of voluntary sustainability reporting. The guidance was revised in 2010 and again in 2015. This paper discusses the value of sustainability reporting, the motivation behind the most recent update, and the changes made and provides an overview of social performance indicators in the third edition.
The Value of Sustainability Reporting
Oil and gas companies were among the earliest businesses to adopt sustainability reporting and, since it gained traction in the mid-1990s, have provided some leading examples of reporting practices. Key business drivers identified by companies in support of sustainability reporting include
Enhanced business and brand value as investor and financial market confidence grows in response to evidence that the company is managing material risks and positioning itself to take advantage of emerging opportunities in the market
Improved internal operations, recruitment, and morale as employees develop a clear understanding of the company’s sustainability imperatives and as the more systematic management of data, knowledge, and insight helps improve operational performance and decision-making—all serving to attract and retain employees and helping to secure long-term competitive advantage
Strengthened relationships as local community leaders, civil society representatives, government officials and regulators, and other key stakeholders learn how the company responsibly manages sustainability issues
Enhanced trust, credibility, and license to operate as customers, suppliers, and the wider society understand the company’s brand, operations, and products
Through communication on sustainability issues, a company’s report becomes a reliable source of information for its stakeholders. By transparently describing its biggest challenges, reporting underpins stakeholder engagement and represents the company’s values in action.
Oil & Gas Industry Guidance on Voluntary Sustainability Reporting
First and Second Editions. To help member companies develop or improve their sustainability reporting, IPIECA, the International Association of Oil and Gas Producers (IOGP), and the American Petroleum Institute (API) jointly published the Oil & Gas Industry Guidance on Voluntary Sustainability Reporting in April 2005. The document was produced to assist companies across the oil and gas industry in reporting on environmental, health and safety, social, and economic performance measures by providing sector-specific guidance. The aim of the document was to assist oil and gas companies in developing and enhancing the quality and consistency of their reports.
The publication was revised in 2010 with changes to improve the comparability of reports and help companies establish and communicate their strategic approaches to sustainability.
Changes to the Third Edition. The 2015 update was designed with the aim of preserving continuity with the previous edition and to facilitate implementation of improvements by minimizing changes to the overall structure and core content.
The third edition addresses feedback from subject-matter experts and improvements in reporting practices.
Key changes within the 2015 update include
New guidance on strategic reporting for the industry’s most common sustainability issues to help companies report information on management approach and strategies beyond key performance indicators
A new issue area on water, with comprehensive updates to two water indicators
A new indicator covering planning and execution of decommissioning activities
Alignment of the social and economic issues area with United Nations general principles (UNGPs)
Upgrade of a range of reporting elements, reflecting improved maturity and consistency of reporting by companies
Additional or improved reporting elements for nine of the existing indicators
Unchanged since the first edition are the expressed principles that any company should keep in mind as it develops content for a sustainability report (i.e., the principles of relevance, transparency, consistency, completeness, and accuracy). While debates about sustainable development and society’s expectations of the oil and gas sector may change, these principles provide a foundation for how companies engage in reporting.
Changes to Social and Economic Indicators. The 2015 update reflects the ever-changing landscape of social responsibility reporting and expectations. Recent years have been characterized by an evolution in existing frameworks on voluntary sustainability reporting, the emergence of new voluntary initiatives, and mandatory sustainability reporting requirements in some countries. These varying expectations and different definitions of how and what companies should report have led to challenges for many oil and gas companies.
For this reason, IPIECA, API, and IOGP believe that it is essential to continue providing this robust industry-developed framework to help companies shape the structure and content of their sustainability reporting and better respond to the evolving expectations of society.
The UNGPs were a key development that motivated the update. Endorsed by the United Nations in 2011, the UNGPs encompass the following three pillars outlining how states and business should implement the framework:
The state duty to protect human rights
The corporate responsibility to respect human rights
Access to remedies for victims of business-related abuses
Aligning the document with the internationally accepted standards of the UNGPs was an important goal of the revision.
Social and Economic Issues and Indicators in the Third Edition
The guide provides direction on narrative and strategic reporting on five social and economic issues likely to be material for companies. These five issues are supported by 18 indicators that reflect the evolution of social and economic reporting.
Community and Society. The oil and gas industry operates all over the world, often in remote regions and diverse communities. Understanding and addressing the interests of societies, different social groups, and communities that may affect, or be affected by, oil and gas operations is often an important component of designing and executing successful and sustainable oil and gas projects. It is recommended that companies report on
Their systematic approach to managing interactions with societies and communities
Mechanisms to address community grievances and concerns, with remedy provision where appropriate, in line with the UNGPs
The four recommended indicators for this issue are local community effects and engagement, indigenous peoples, involuntary resettlement, and social investment.
Local Content. Local content has emerged as a key aspect of social performance for oil and gas companies, and opportunities to add local value arise across operations.
As part of a company’s reporting on how it sustainably addresses issues in its supply chain, it is good practice to include descriptions of corporate policy, procurement strategy, or other measures that specifically address local content.
The general approach to systematic implementation may also be described, including stakeholder engagement, analysis, workforce development, supplier development, tendering and contractual mechanisms, and monitoring to measure and sustain progress.
Companies then may report on countries where local content aspects are of significant concern to the business, its sustainability objectives, and its effects.
Three indicators are recommended for this issue—local content practices, local hiring practices, and local procurement and supplier development.
Human Rights. The oil and gas industry operates in some of the most challenging locations in the world and can face complex human-rights-related issues. The following types of narrative may be included:
At the corporate level, a description of any relevant processes, positions, or policy principles to ensure respect for human rights through the life cycle of activities and within the supply chain
At the regional, country, or asset level, a discussion on the relevance of human rights to their operations
For companies operating in locations where there is a heightened risk to human rights, a discussion of the importance of being proactive with due-diligence measures to ensure human rights are respected
Highlights of initiatives to improve the company’s overall approach to human rights
The three indicators recommended for this issue are human rights due diligence, human rights and suppliers, and security and human rights. These indicators are primarily qualitative.
Business Ethics and Transparency. Using bribes to obtain business advantage, in addition to being illegal in most countries, can distort international competitive conditions and negatively affect the economic and political progress of societies. Transparency is an important aspect of this issue, particularly with respect to revenue payments to host governments and any advocacy or lobbying activities. In their sustainability reports, companies should
Explain how they address this issue through governance, policies, and systems of internal control
Provide information on how anticorruption and business ethics policies are implemented and monitored
The four indicators recommended for this issue are preventing corruption, preventing corruption involving business partners, transparency of payments to host governments, and public advocacy and lobbying.
Labor Practices. Companies are expected to treat all workers with respect and dignity and promote diversity in the workplace. The workforce is a key stakeholder group and provides a foundation for the success of a company. It is essential that systems are in place to bring forward grievances without fear of retaliation.
Companies should describe their approach to implementation of labor practices, including policies if applicable. It is helpful in the report, when discussing policies and corporate practices, to highlight any changes, initiatives, or new processes that the company has put in place to address particular challenges or opportunities that were material during the reporting year.
When discussing company policies and practices, it is helpful to make reference to, or state alignment with, relevant national or international laws, standards, or guidelines.
The four indicators recommended for this issue are workforce diversity and inclusion, workforce engagement, workforce training and development, and non-retaliation and workforce grievance systems.
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20 May 2020
20 May 2020