The disclosure landscape is ever evolving. Individual and organizational stakeholders around the world want to better understand the oil and gas sector and the impact of its activities, risks, opportunities, and trade-offs. One of the ways companies are responding to these requests is through sustainability reporting.
The International Environmental Conservation Association for the Petroleum Industry (IPIECA), is an international association that aims to promote environmental and social issues in the oil and gas industry. IPIECA was established following the UN Environment Program (UNEP) request for the oil and gas industry to form channels of communication with UNEP.
In 2020, IPIECA, in partnership with the American Petroleum Institute (API) and the International Association of Oil and Gas Producers (IOGP), released the fourth edition of “Sustainability Reporting Guidelines for the Oil and Gas Industry” (the Guidance). The Guidance is a key tool for assisting companies in shaping their sustainability report structure and content.
The Guidance covers 21 sustainability issue areas and 42 performance indicators that fall under five modules. These issue areas and indicators were selected based on industry consensus and significant insights and suggestions from an independent panel of stakeholders with expertise in the sector and in sustainability reporting.
Using the Guidance helps demonstrate companies’ efforts in the oil and gas sector to apply good reporting practices. The Guidance is divided into five modules:
- Governance and business ethics: it covers issues of governance and management systems, business ethics, and transparency issues.
- Climate change and energy: it covers climate strategy and risk, technology, emissions, energy, and flaring.
- Environment: covers issues of water, biodiversity, air emissions, spills, materials management, decommissioning.
- Safety, health and security: It covers issues of workforce protection, product health, safety and environmental risk, process safety, security.
- Social: It covers issues of human rights management, labour practices, community engagement, local content.
Benefits of reporting
Energy helps economies grow, improve health and quality of life. Meeting the world’s future energy needs through a transition to low-emission energy sources is important to achieving sustainable development. Therefore, it is necessary that the oil and gas industry clearly communicate how it supports the energy transition.
While reporting on sustainability strategy and performance matters to many stakeholders, its importance continues to increase for investors. Climate change in particular has become a major topic for investors who themselves receive demands from their clients and other stakeholders (including regulators) to demonstrate their portfolios’ climate-related impact and climate resilience.
High-quality reports can make a difference in gaining valuable contracts and working with companies of similar values. Likewise, companies can mitigate supply chain risks of poor social and environmental practices by encouraging transparency in their procurement processes.
The UN Sustainable Development Goals
Oil and gas companies play an important role in the global economy. While all of the SDGs are potentially relevant, their activities can contribute to achieving the SDGs.
According to the IPIECA Annual Sustainability Report Survey results, 92% of Guidance users reported or referred to the SDGs in their reports. 88% felt that their companies were most material to SDG 8 (Decent work and economic growth) and 85% to SDG 7 (Affordable and clean energy) and SDG 13 (Climate action). At the same time, 81% of companies supplement their reports with additional communication on specific topics such as climate change risks and opportunities.
The figure below shows the connection between the five modules and the SDGs and guides companies to demonstrate their contributions to the SDGs.
Many oil and gas companies report their contribution to the SDGs and usually do so in one of two ways:
- Use SDGs as a framework to define their overall contribution to sustainable development.
- Mapping and discussing the material issues against the SDGs which are most applicable to their activities.
Guidance assists companies with one of these two options, provides the data and other evidence for the assertions the company makes about its contribution to the SDGs. It is important to note that the company’s contribution include positive contributions to the SDGs as well as activities that challenge the achievement of a Goal. To help, Guidance also refers to tools like the SDG Compass and IPIECA SDG Atlas provide guidance on how to align strategies and measure and manage contributions to the SDGs can be used.
This reporting Guidance has been developed to provide oil and gas industry-specific information on good practices in sustainability reporting. The guidance takes into account other sustainability reporting frameworks. Since there is no single set of agreed-upon disclosures, this guidance aims to reflect other good practices and understand the frameworks that are important to key stakeholders as it adapts them to the context of the oil and gas industry.
The Guidance has listed the five frameworks most used by IPIECA members in 2019 to guide their reports, and they are:
- Global Reporting Initiative (GRI)
- Task Force on Climate-Related Financial Disclosures (TCFD)
- UN Global Compact
- UN Guiding Principles on Business and Human Rights
- UN Sustainable Development Goals (UN SDGs)
In addition to a number of other well-established frameworks that are frequently used:
- International Organization for Standardization (ISO)
- Principles for Responsible Investment (PRI)
- Sustainability Accounting Standards Board (SASB)
- The Organization for Economic Co-operation and Development
- WBCSD / WRI
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