In an earlier blog post we wrote about ESG and the environmental considerations that inform pipeline operations.
This week we delve further into the concept of ESG reporting, exploring why and how it helps pipeline operators ensure accountability and transparency.
What is ESG?
ESG is the term used to define the Environmental, Social and Governance issues affecting the operations of all companies in all industries.
“ESG is an evolution of the concept of social responsibility, commonly used since the 90s,” said Rosa Rivero, principal of Responsibility Matters, “It still includes a component of community relations, but it is much broader and also includes environmental, social (including safety), and business practices, and considers how those practices work together to reduce risk and create value for the business.”
About ESG reporting
An ESG report is a detailed document that outlines the performance of a business in how it impacts the environment, its relationships with employees, stakeholders, Indigenous communities, etc., and how it is governed, including policies, practices and systems.
There is no mandatory requirement for ESG reporting, but there are several reasons why it has become an increasingly common practice, especially in the natural resource sectors, and among larger organizations and those that are publicly traded:
- Today’s investors, particularly the large institutional investors, have high expectations in terms of the ethics, environmental and social practices and operational standards of the businesses in which they invest. An ESG report is a must-have to demonstrate those best practices.
- It is hard to attract loans, insurance or any other form of capital without an ESG report.
- ESG reporting is a great way for any company to provide access to information about their safety record, how they are working with Indigenous communities, spills records, etc.
“Pipeline companies, perhaps more than any other companies, have environmental and social considerations top of mind,” said Rivero. “An ESG report is a way for them to provide accurate, truthful information about their performance that is available to anyone.”
Although it is typically larger organizations who produce ESG reports, there is an increasing trend for pipeline companies to request reports from their own vendors and suppliers. That’s one reason why smaller companies, including those in the pipeline supply chain, are now producing them.
What’s in an ESG report?
There is no standard format for an ESG report, but they typically include:
- An analysis of the data and metrics that point to performance in environmental and social factors; for instance, inspections and maintenance, spills, greenhouse gas emissions, diversity metrics and safety.
- Operational processes and activities.
- Safety programs.
- Environmental programs.
- Social programs
An ESG report for a large organization could comprise 200 pages or more, while a simpler report for a small company might include as few as 10 pages. It depends entirely on the complexity of operations and the purpose of the report.
ESG reporting fosters improvement
“The process of creating an ESG report has the added advantage of motivating improvement,” said Rivero. “For instance, the process of reporting might flag the fact that your water usage is increasing, and that can motivate the company to discover why, and find ways to reverse the trend.”
Businesses must keep in mind that ESG is not static and new issues get added to this umbrella term every year. Cybersecurity is now a huge concern to pipeline operators and their suppliers; employee mental health is another issue that is now recognized as an important concern for businesses of all sizes.
It’s possible that in the future ESG reporting could become mandatory and standardized, but in the meantime it’s a useful tool for companies across the pipeline supply chain wishing to provide public information on their operations, environmental and social performance. It’s just one more way the industry is demonstrating its commitment to accountability and transparency.
