14 Jan 2016
Growing Expectations Prompt New Edition of Guidance for Sustainability Reporting
Louise Tyson, Head of Corporate Reporting, BP
Mark Granquist, Corporate Safety, Health, and Environment Reporting and Analysis Advisor, ExxonMobil
This year, IPIECA, the global oil and gas industry association for environmental and social issues; the American Petroleum Institute (API); and the International Association of Oil and Gas Producers (IOGP) released the third edition of the Oil and Gas Industry Guidance on Voluntary Sustainability Reporting. What follows are questions and answer about the new edition, why it was necessary, and what is new in it.
As a result, a cross-company task force was set up and the external stakeholder panel that had been involved with the development of the 2010 edition of the Guidance was re-engaged. After discussion with the panel and input from industry specialists and technical groups in IPIECA, API, and IOGP, it became very clear that the scale of the proposed changes justified undertaking a new edition of the Guidance and not just an update. The outcome was a 2-plus-year effort involving experts from across the IPIECA, API, and IOGP membership, which represent more than 60% of global oil and gas productions.
What were the overall objectives for updating the Guidance?
Primarily, the task force wanted to ensure that the guidance provided to the oil and gas industry was reflecting the most recent international, regional, or national guidelines relevant to reporting. These include the UN Guiding Principles on Business and Human Rights, the Intergovernmental Panel on Climate Change’s fourth and fifth assessment reports on climate-change risks, and the Global Reporting Initiative’s (GRI’s) G4 Guidelines, together with alignment improvements in areas such as fresh water, biodiversity, cultural heritage, facility decommissioning, process safety, and transparency of payments to governments.
The task force also wanted to provide guidance that focused on issues, not just indicators. It could be seen that the industry’s stakeholders were looking for more strategic and forward-looking reporting, as well as more transparency on management systems, impacts, and performance. Significant effort was put into this new aspect of the Guidance, and it will be interesting to see how it affects reporting.
It was important to ensure that companies covered the breadth of issues and effects related to their activities, such as nonconventional energy sources, the supply chain, and other indirect or lifecycle factors. Users will see further guidance on reporting across the value chain in the new edition.
Furthermore, materiality has been a key part of the evolving external standards. Therefore, this Guidance goes into more depth about the process for companies to determine what the issues of the most strategic importance and greatest impact are. More detail has also been provided on how to give these issues appropriate attention and prominence in reporting.
Finally, it was important to keep the same structure as the 2010 edition. This would encourage companies to strengthen their reporting practices and not focus their efforts on responding to ever-changing approaches as has been seen from some of the external frameworks. This continuity also allows stakeholders to follow a company’s progress over time.
What is new about the 2015 Guidance?
The 2015 edition of the Guidance is unique in that it provides both the background building blocks of good process in reporting as well as a set of issues and indicators that can be incorporated by any level of reporter. This reflects the different degrees of experience in sustainability reporting and practice within the industry. The importance of the engagement process for sustainability reporting has been emphasized, encouraging companies to report on those issues most important to their stakeholders.
The Guidance focuses on 12 broad issues that are likely to be important for oil and gas companies and, therefore, have higher priority in terms of materiality for reporting. In the 2015 edition, water was separated out as an issue in its own right.
In order to encourage consistency of reporting, each issue is provided with guidance and one or more supporting performance indicators. A new indicator was added on decommissioning, and many of the existing indicators were improved.
The Guidance continues to take a three-tiered approach; each indicator has three levels of reporting—common, supplemental, and other—which allow for differences in materiality and reporting maturity for individual companies. With the 2015 edition, several of the indicators were upgraded from “other” to “supplemental” or from “supplemental” to “common.” The opportunity was also taken to further ensure increased alignment of the indicators to international industry standards and expected norms, as well as to issue-specific international guidelines.
What are the benefits of sustainability reporting?
Reporting can bring companies recognizable business benefits. Through communication on its most important 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.
For oil and gas companies, reporting provides a robust platform for describing how strategic issues—such as climate change and energy—are being addressed through long-term plans and current initiatives. For example, the report can explain how the company is managing the social and economic effects or environmental, health, and safety risks of operating in different locations. Once published, this information enables further communication and engagement with stakeholders. In the longer term, the benefits can provide:
- Enhanced business value as investor confidence grows in response to evidence that the company is managing important risks and positioning itself to take advantage of emerging opportunities
- Improved operations as employees develop a deeper understanding of a company’s sustainability values and performance indicators provide insight to support continuous improvement
- 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 and credibility as customers, suppliers, and the wider society understand the company’s brand, operations, and products
- Using an external framework to structure their reporting, such as the industry reporting guidance, or indeed those provided by the Global Reporting Initiative, allows companies to develop reliable, relevant, and comprehensive information to help inform key business decisions and communicate with external stakeholders.
I am a new reporter. How do I get started?
The 2015 Industry Guidance features front sections that set the strategic context for reporting, providing the foundation for good practice through sound principles and describing a six-step reporting process. The Guidance has been specifically developed to offer comprehensive guidance for mature reporters while imparting practical help to those just getting started.
The design of the Guidance encourages new reporters by presenting mechanisms for determining their relevant issues and impacts and then provides scalability on performance indicator reporting by offering various reporting elements depending on the level of company sophistication and maturity of data systems. Companies are encouraged to use a stepwise process for reporting by
- Setting the context for the report by outlining the company’s high-level vision and strategy together with governance and management systems
- Determining the most important topics that will have prominence in the report, using the concept of materiality to identify the complete set of issues and impacts of relevance to both the company and its stakeholders
- Establishing relevant indicators and collecting complete, accurate data within the company’s reporting boundary for incorporation into the narrative
The objective of each step is to build a transparent and concise report as part of stakeholder engagement. The process helps the company to describe its strategic intent, management approach, and current performance on all important issues and impacts while avoiding unnecessary and time-consuming reporting of extraneous text and data, which can obscure relevant information.
You can download the Guidance here and can learn more about this emerging domain at the SPE Sustainable Development Technical Section website and at the 2016 SPE International Conference and Exhibition on Health, Safety, Security, Environment, and Social Responsibility in Stavanger, where one of the four sustainability panels will address the topics of reporting and disclosure in relation to sustainability performance.
Please contact the IPIECA Secretariat if you have any questions relating to use of the Guidance.