In an industry full of ever-present hot topics and buzzwords, how do we know what is a fleeting notion and what is meaningful to our business and to our stakeholders? As ideas come and go, one topic that is surely here for the long haul is Environmental, Social, and Governance (or more simply “ESG”) tracking and reporting. These categories represent non-financial topics that have become increasingly important to investors as they analyze corporations and make decisions across industries.
So, what does it mean to the energy industry and how can we apply it in our daily operations? While the individual topics in each category can vary between industries, and even companies, based on stakeholder wants and needs, the basis of each is similar.
The “E” stands for “environmental” and addresses the impacts on the physical environment in which we live. The most common topics that companies report on in the oil and natural gas industry include air quality, water resource management, effluents and waste, climate and emissions, biodiversity, and land management. Tracking metrics around these topics and publicly disclosing them can demonstrate a company’s performance in each area, and when applicable targets or goals are set, it also shows a willingness and desire to enhance their commitment to environmentally responsible operations.
The “S” stands for “Social” and can cover a wide variety of topics including occupational health and safety, emergency response and community safety, overall community impacts, workforce development, landowner relations, talent attraction and retention, and diversity and inclusion, among others. The “S” can be one of the most important factors that both internal and external stakeholders can easily recognize without much effort, as this category allows companies to highlight the positive impacts on their workforce and in their communities, ultimately striving to make a difference to those most affected by their operations.
And finally, the “G” stands for “Governance” and while sometimes it can be considered the most mundane topic, it can also be considered the most important to keep a company in good standing on all fronts. Governance applies to the leadership of companies and centers around internal controls, audits, leadership structure, executive pay, and stakeholder outreach.
As a company determines its approach to ESG disclosures, there are a multitude of standards they can choose to adhere to, based on their industry and sector. These include Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), Task Force on Climate-Related Financial Disclosures (TCFD), and Disclosing the Facts (DTF), among others. In a similar manner, there are many rating groups that take the publicly disclosed information provided in company ESG reports and rank them based on predetermined criteria chosen by that individual entity. It is the responsibility of the company to determine which disclosures and ranking groups are most important to them and to their stakeholders in order to provide the most efficient and accurate reporting structure for their operations.
To learn more about Coterra Energy’s sustainability efforts, please visit the A Sustainable Future portion of our website.