Recently, an oil company was building a line through Northern Alberta in order to tie-in one of their fields. The right-of-way (ROW) ran through Crown land that was covered with boreal forest, beaver ponds and bog, but it was also a traditional hunting ground for a nearby First Nation group. “Instead of just sending out the geotechnical team to work out the most economical route, they consulted with local trappers to talk about their concerns,” says Trevor Hindmarch, a corporate social responsibility (CSR) consultant. “Then, they took their recommendations and came up with a solution.”
The oil company is one of a hundred firms that belong to Canadian Business for Social Responsibility (CBSR), a non-profit, member-based consultancy that offers CSR advice. “CSR is a company’s commitment to operate in an environmental, social and economic manner, and their responsibilities in that context,” says Andrea Baldwin, Vice President for membership and advisory services for the CBSR.
An expanding trend
A decade ago, few people in the corporate sector had heard of CSR, which focuses on the non-financial performance of a company. “Traditionally, companies have not been held accountable for their social and environmental impact, as the financial world did not measure these externalities,” says Baldwin. The expansion of socially responsible investing (SRI), which now accounts for approximately US$ 5 trillion in value in the US and Europe, has obliged many corporations to examine how they influence the community around them. “The growth in companies reporting on the details of their social and environmental activities in their annual reports has grown from 30% to 80%, in the last five years,” says Baldwin.
Enbridge: an example
Enbridge Inc., based in Calgary, is one of North America’s largest crude pipeline operators, with 13 500 km of line delivering 2 million bpd of crude and liquids in Canada and the US. Its gas distribution subsidiary also supplies 2 million customers in Ontario, Quebec and New York.
Prior to 2004, many of the aspects of CSR were managed separately through Enbridge’s Environmental, Health and Safety (EH&S), Aboriginal communication, and community engagement programmes. In 2004, Enbridge’s board of directors formed a CSR committee in order to bring everything under one umbrella. “Essentially, it was created to provide direction and oversight for Enbridge’s non-financial performance,” says Paul Hunt, Corporate Director of Sustainability at Enbridge.
Enbridge sees CSR as a lens through which it does business. “It’s built on a foundation of values such as transparency, stewardship, honesty, and trust,” says Hunt. “This foundation supports five key pillars; business ethics, environment and H&S, stakeholders, communities and human rights. All of this supports our mission of being a force for good and ensuring a sustainable future through the integration and balance of environmental, social and governance practices associated with business activities.”
In practical terms, Enbridge instructs its various business units to look beyond simple economic factors. “As an example, let’s say we are building a pipeline from point A to point B,” says Hunt. “We try to design the ROW to avoid environmentally sensitive areas, such as wetlands, which are very important ecologically. New techniques such as horizontal directional drilling allow us to string pipe under streams and rivers, which avoids any impacts to water bodies.”
While it may add more costs to doing business in the short term, CSR serves the bottom line in the medium and long term through a variety of strategies. One of the biggest advantages to CSR is risk management. The oil and gas sector faces two types of risk, commonly categorised as below-ground risk and above ground risk. The former includes the odds of finding oil in a given number of wells drilled; the risk is relatively easy to quantify. The latter involves social and political risk and is much harder to classify; indigenous tribes in the Amazon forest, for instance, protesting the development of a new oil field on their traditional lands. “You are seeing more and more empowerment of communities through social media,” says Baldwin. “Before, their voice was local, but now, their concerns are having impact globally.”
Transportation companies face significant above-ground risk due to their geographic exposure. “Pipeline companies are linear, stretching from coast to coast,” says Hunt. “We have hundreds of thousands of neighbours, and we need to earn and then maintain our social licence to operate.”
Companies with CSR programmes open up dialogues with affected communities long before formal applications are made to regulatory bodies. “If you work with stakeholders at the early stages of a project, you can come up with a design that meets your needs and also establishes the social license to operate in that community,” says Hindmarch. “It makes it much easier to gain regulatory approval.”
While risk management carries uncertainty, creating and adhering to a CSR programme brings significant financial benefits. When SRI funds look to invest, they rely on a wide array of agencies and indexes, such as the Global 100 and Dow Jones Sustainability Index (DJSI), to help guide them. “DJSI is a very reputable index, it’s considered the gold standard,” says Baldwin.
A CSR programme also helps companies identify and deal with the potential cost of environmental impacts. The world is expressing a growing concern regarding the climate changing effect of Greenhouse Gases (GHGs), such as CO2 and methane. Governments around the world are working to establish cap and trade or tax systems that will place a price on the cost of emitting carbon. As part of their CSR programmes, companies are not waiting for legislation, but are seeking out ways to reduce their GHG footprint through the capture of fugitive emissions, the increase of energy efficiency, offsetting carbon sinks (such as new forests) and alternative clean energy (such as wind power).
In the next decade, CSR will continue to prosper. In the long-term, CSR may help the oil and gas industry, including pipelines, evolve in a whole new direction. “In Alberta, we’ve got lots of money, we are well paid, and we’ve got lots of capability to invest in the future,” says Jeremy Hall, a professor of Strategy and Business Ethics at Simon Fraser Institute and a Fellow of the TransCanada International Institute for Resource Industries & Sustainability Studies. “But we also have a lot of problems. We need a big vision to transform the industry to the next generation of energy. We need to do what others won’t. We need to vastly reduce our GHG emissions and catapult ourselves into a world-class sector. Otherwise, we’re a dead technology.”
Read the full article in the July 2011 issue of World Pipelines.