Oil and gas industry guidance on voluntary sustainability reporting

Transcription

1 Oi and gas industry guidance on vountary sustainabiity reporting A Reporting 2015 THE GLOBAL OIL AND GAS INDUSTRY ASSOCIATION FOR ENVIRONMENTAL AND SOCIAL ISSUES

2 LEGAL NOTE This vountary guidance document is designed to serve as a resource for interested companies; the indicators and information referenced in this work do not estabish an industry standard as to the nature of a company s pubic reporting practice. The recommendations in this Guidance on how to report on a particuar issue are addressed to those companies who choose to incude that issue in their vountary sustainabiity reporting, and terms such as the reporting company shoud are to be understood in this sense. The terms and definitions used in this document are not necessariy the same as terms and definitions used in various statutes, rues, codes or other authoritative ega documents. Users and readers of this document shoud refer to reevant ega sources or consut their own ega counse for expanations as to how the terms and definitions used in this document may differ from the ega terms and definitions (e.g. spis and hazardous wastes) used in their particuar areas of operation. Anything in this document regarding vountary reporting of indicators is not intended to impy that any of the indicators are required to be reported under any nationa, oca or other aw. Furthermore, it is not intended to serve as a substitute for existing pubic reporting requirements and reguations. Any company reporter that has a question as to whether or not reports that foow the information contained herein wi meet any specific reporting requirements appicabe to their particuar operations shoud consut with the reporter s own ega counse. A CAUTIONARY NOTE REGARDING PERFORMANCE INDICATORS Aggregated, company-eve, non-financia performance data, deveoped using the indicators in this Guidance, can be informative for comparing reative performance among different companies, such as benchmarking safety incident statistics across the oi and gas industry. A company can use such comparisons to evauate its own performance reative to peers, and identify areas for potentia improvement. However, imitations to comparabiity exist due to various factors incuding the different methods companies may use to measure, normaize and report specific indicators. Athough efforts have been made throughout the Guidance to improve comparabiity, report users are advised to exercise caution when using data from sustainabiity reports to compare performance. For exampe, comparing two companies that report greenhouse gas emissions on a different basis (e.g. equity share vs. operated, as described in Appendix A) coud be miseading regarding actua performance. Specific indicators from simiar operations can sometimes be usefuy compared to hep performance management. However, the company-eve, aggregate data typicay reported in sustainabiity reports may not provide adequate comparabiity for some metrics. Where this Guidance mentions comparabiity, it is not intended to impy that data in sustainabiity reports, and therefore companies performance, are aways directy comparabe. Separate from company sustainabiity reporting, industry associations and others may choose to impement specific performance benchmarking studies, which may buid upon the indicators in this Guidance. It is aso recognized that it may take a number of years for companies to begin to report new or revised indicators and/or reporting eements. This is particuary important for socia and economic indicators that are sti evoving within company sustainabiity reports. IOGP Report 437 IPIECA/API/IOGP 2015 A rights reserved. No part of this pubication may be reproduced, stored in a retrieva system, or transmitted in any form or by any means, eectronic, mechanica, photocopying, recording or otherwise, without the prior consent of IPIECA, API and IOGP.

3 Oi and gas industry guidance on vountary sustainabiity reporting 3rd Edition, 2015 The goba oi and gas industry association for environmenta and socia issues 5th Foor, Backfriars Road, London SE1 8NL, United Kingdom Teephone: +44 (0) E-mai: Internet: The American Petroeum Institute 1220 L Street NW, Washington DC, , USA Teephone: Internet: Internationa Association of Oi & Gas Producers 5th Foor, Backfriars Road, London SE1 8NL, United Kingdom Teephone: +44 (0) E-mai: reception@iogp.org Internet:

4 IPIECA API IOGP OIL AND GAS INDUSTRY GUIDANCE ON VOLUNTARY SUSTAINABILITY REPORTING Contents Lega and cautionary notes Inside front cover Improving our transparency: a foreword 2 from the oi and gas industry associations Joint statement of the independent 4 Stakehoder Pane Acknowedgements 6 Section 1 7 Setting the context: why report? Benefits of reporting 8 About the Guidance 9 Using the Guidance 9 Section 2 11 The reporting process: how to report Genera reporting principes 12 Process overview 12 Engaging stakehoders 13 Step 1: Articuate vision and strategy 15 Step 2: Describe governance and management systems 16 Step 3: Determine and prioritize materia 18 issues for reporting Step 4 Seect indicators and coect data 21 Step 5 Anayse data and incorporate into narrative 23 Step 6 Provide assurance 27 Section 3 29 Issues and indicators: what to report Vaue chain 30 Life-cyce considerations 31 Overview of issues and indicators 31 Issue reporting 33 Indicator reporting eements 33 Data management 35 Data normaization 36 Standard issue and indicator format 38 Section 4 39 Environmenta issues and indicators Environmenta issues and indicators: an overview 40 Cimate change and energy 41 E1: Greenhouse gas (GHG) emissions 42 E2: Energy use 46 E3: Aternative energy sources 49 E4: Fared gas 51 Biodiversity and ecosystem services 53 E5: Biodiversity and ecosystem services 54 Water 57 E6: Fresh water 59 E7: Discharges to water 63 Loca environmenta impact 65 E8: Other air emissions 66 E9: Spis to the environment 68 E10: Waste 71 E11: Decommissioning 74 Section 5 77 Heath and safety issues and indicators Heath and safety issues and indicators: 78 an overview Workforce protection 79 HS1: Workforce participation 80 HS2: Workforce heath 82 HS3: Occupationa injury and iness incidents 84 Product heath, safety and 87 environmenta risks HS4: Product stewardship 88 Process safety and asset integrity 90 HS5: Process safety 91 ii

5 OIL AND GAS INDUSTRY GUIDANCE ON VOLUNTARY SUSTAINABILITY REPORTING Section 6 95 Socia and economic issues and indicators Socia and economic issues and indicators: an overview 96 Community and society 97 SE1: Loca community impacts and engagement 98 SE2: Indigenous peopes 100 SE3: Invountary resettement 102 SE4: Socia investment 104 Loca content 106 SE5: Loca content practices 107 SE6: Loca hiring practices 109 SE7: Loca procurement and 110 suppier deveopment Appendix A: Detaied guidance on 131 deveoping a reporting boundary Appendix B: Practica guidance on 139 impementation of a materiaity process Appendix C: Summary of key changes 145 since 2010 and mapping against the GRI G4 Guideines Appendix D: Measurement units and 157 conversion factors (from IOGP) Appendix E: References and 161 source materias Appendix F: Gossary 167 Human rights 112 SE8: Human rights due diigence 114 SE9: Human rights and suppiers 116 SE10: Security and human rights 117 Business ethics and transparency 118 SE11: Preventing corruption 120 SE12: Preventing corruption invoving 121 business partners SE13: Transparency of payments to 122 host governments SE14: Pubic advocacy and obbying 124 Labour practices 125 SE15: Workforce diversity and incusion 127 SE16: Workforce engagement 128 SE17: Workforce training and deveopment 129 SE18: Non-retaiation and workforce 130 grievance system 1

6 IPIECA API IOGP Improving our transparency A foreword from the oi and gas industry associations Brian Suivan, IPIECA Executive Director Jack N. Gerard, API President and CEO Michae Enge-Jensen, IOGP Executive Director We are peased to introduce the third edition of the Oi and Gas Industry Guidance on Vountary Sustainabiity Reporting (hereinafter the Guidance ). IPIECA, the goba oi and gas industry association for environmenta and socia issues, the American Petroeum Institute (API) and the Internationa Association of Oi & Gas Producers (IOGP) have been providing sustainabiity reporting guidance for the industry since This third edition marks over ten years of sharing, assessing, debating and consensus buiding for our three associations. The update was undertaken recognizing that industry sustainabiity reporting is continuousy progressing, with issue areas that mature and deveop at different paces. To maintain continuity, the revisions are not intended to effect extensive changes to the 2010 Guidance, but to address feedback received from subject matter experts, both within and outside the industry, as we as improvements in reporting practices. IPIECA, API and IOGP beieve that it is essentia to continue providing this robust industry-deveoped framework to hep companies shape the structure and content of their sustainabiity reporting, particuary for new reporters. Recent years have been characterized by an evoution in existing frameworks on vountary sustainabiity reporting, the emergence of new vountary initiatives and mandatory sustainabiity reporting requirements in some countries. These varying expectations and different definitions of how and what companies shoud report have ed to chaenges for many oi and gas companies. The membership of our three associations incudes companies that are eaders in sustainabiity reporting, as we as new reporters. This revision brings together their coective weath of technica expertise and refects the reporting chaenges that some companies continue to face. The industry s commitment to this project is evidenced through the substantia participation in the update, as noted in the Acknowedgements on page 6. EXPANDING ENGAGEMENT The third edition refects feedback and improvements in reporting practices from many sources within and outside the industry. As in 2010, we engaged an externa Stakehoder Pane of eading experts to advise us on both the process and the content of the Guidance. We retained the same individuas and organizations from the 2010 Pane where possibe, and added an additiona member representing a human rights perspective. We hed a diaogue session in Apri 2014 to provide the Pane with information on uptake and feedback for the second edition, discuss drivers for the update, share our future pans and ambitions, and review improvement opportunities under consideration. We ooked cosey at materiaity, how companies are identifying and addressing the impacts of their business and communicating the main sustainabiity issues they face, and how this process coud be improved. 2

7 OIL AND GAS INDUSTRY GUIDANCE ON VOLUNTARY SUSTAINABILITY REPORTING The Stakehoder Pane engagement for the 2015 update resuted in comprehensive outcomes incuding: ROGER HAMMOND ( ) We woud ike to recognize the contribution of Roger Hammond, the founder of Living Earth Foundation, into the deveopment of the second edition of the Guidance. In his roe as a member of the Stakehoder Pane, Roger provided key insights into sustainabiity issues which ed to significant improvements. We continue to vaue Roger Hammond, Living Earth the inputs he provided, as we as the work he undertook with the industry more broady through Living Earth. new guidance on strategic reporting for each of the 12 sustainabiity issues; this is intended to hep companies report information on their management approach and strategies to address the sustainabiity issue and its reated impacts this extends reporting beyond key performance indicators and numerica responses, for exampe, in reation to cimate change mitigation, adaptation and strategy; expanded guidance on materiaity that aims to hep companies identify and prioritize impacts and issues, incuding a new appendix to provide practica guidance on impementation of a materiaity process; and new guidance on reporting across the vaue chain and ife-cyce considerations to hep ensure that a reevant business activities are addressed when reporting on materia sustainabiity issues. ENCOURAGING CONTINUOUS IMPROVEMENT THROUGH THIS UPDATE The oi and gas sector continues to provide essentia energy for society s deveopment. Our member companies aso recognize that managing sustainabiity impacts associated with producing energy is an important responsibiity, incuding addressing the chaenges associated with cimate change risks, human rights and operating in remote and sensitive areas of the word. The Guidance continues to cover a range of sustainabiity issues reevant to the oi and gas industry, based on industry consensus. It aows companies to seect from reated indicators that offer a choice on the depth and detai to be communicated. By providing fexibiity and consistency, the Guidance aims to serve both new and experienced reporters whie avoiding the pitfas of formuaic reporting. The Guidance remains vountary and does not set minimum requirements or predetermine stakehoder requests. Instead, we encourage a consistent how-to approach, with companies determining what to report based on a materiaity process and stakehoder expectations. Key changes within the 2015 update incude: a new issue area on water, with comprehensive updates to two water indicators; a new indicator covering panning and execution of decommissioning activities; aignment of the Socia and economic section with the United Nations Guiding Principes on Business and Human Rights; upgrade of a range of reporting eements across the three categories within each indicator, common, suppementa and other refecting improved maturity and consistency of reporting by companies; and additiona or improved reporting eements for nine of the existing indicators. For a more detaied ist of changes see Appendix C. LOOKING AHEAD Our industry wi continue to address mutipe sustainabiity chaenges as it seeks to provide the energy essentia for societa deveopment. Throughout this journey, communication and engagement with stakehoders wi be essentia. It is our hope that the Guidance wi continue to support the momentum we see within our industry to pubish sustainabiity information. Our aim is that the Guidance, as the primary industry reporting framework, supports companies across the goba oi and gas industry to improve the quaity and consistency of their sustainabiity reporting. IPIECA, API and IOGP wi continue to encourage our members and others in the industry to report on their performance in addressing sustainabiity issues. Our associations pan to continue supporting our member companies through sharing good practices, and deveoping and maintaining our guidance on sustainabiity reporting as evidenced through this update. 3

8 IPIECA API IOGP Joint statement of the Independent Stakehoder Pane Matthias Beer, F&C Asset Management Tom Defgaauw, Independent Margaret Jungk, UN Working Group on Business and Human Rights Judy Kuszewski, Independent, Pane Chair Janet Ranganathan, Word Resources Institute Trevor Rees, Living Earth Robin Sandenburgh, IFC To improve externa engagement as part of the Guidance revision process for both the second and third editions, the IPIECA Reporting Working Group (RWG) convened a Pane made up of independent stakehoders with expertise in sustainabiity practices reating to the oi and gas industry. As knowedgeabe members of the reporting community, the Pane represented views of typica report reader groups: business and industry; environmenta and community-oriented NGOs; investors; UN bodies; and mutiatera institutions. At the onset of this engagement, the Pane was asked to assess the quaity, credibiity and effectiveness of the revision process and to provide ideas for improvement. Through ongoing communications during the revision process, incuding a face-to-face diaogue in 2014, the Pane provided candid, significant and chaenging input on the RWG s proposed updates to the second edition. For the RWG s initia update proposas and the fina draft, the Pane provided high-eve feedback and detaied suggestions, which were a reviewed and most were incorporated as improvements within this third edition. The foowing is the joint statement from the Independent Stakehoder Pane. We are peased to offer our comments on this third edition of IPIECA s sustainabiity reporting guidance. Our roe as a pane has been to offer our guidance to IPIECA as experts and stakehoders in reation to the industry s sustainabiity impacts. Our purpose in doing this has been two-fod: first, to hep ensure that the new edition of this sustainabiity reporting guidance adequatey captures the sustainabiity andscape, from impacts to risks and opportunities, reevant to the oi and gas sector and its stakehoders; and second, to hep ensure that the guidance is designed to produce transparent, honest and informative reports that advance sustainabiity strategy and practice. At a technica eve, the updates to the guidance have been thoughtfu and highy competent, responsive both to stakehoders recommendations and to wider trends in sustainabiity practice and reporting. We are especiay peased to see significant improvements in particuar to the sections on water, biodiversity and ecosystem services and human rights, a of which hep bring IPIECA s guidance more cosey in ine with internationa best practice in reporting. We aso wecome the improvements to the guidance on how to describe sustainabiity issues and impacts in reports beyond measurement protocos and indicators. The new guidance is more consistent and specific in terms of how reporters are asked to discuss the nature and significance of issues, how they reate to the company s strategy, vision and future pans, and their genera approach to managing the issues. We hope this improvement wi resut in reports that are cearer and more strategic, and that enabe greater accountabiity over time. The guidance has aso improved with respect to the process of reporting. This incudes identifying and prioritizing reported content using the principe of materiaity. Whie the materiaity guidance is technicay robust, it wi not in itsef 4

9 OIL AND GAS INDUSTRY GUIDANCE ON VOLUNTARY SUSTAINABILITY REPORTING guarantee that companies wi impement it as intended. We encourage companies to invest in high quaity stakehoder engagement across the many aspects of their operations to ensure that the concerns of those most affected by the company s operations are invoved in reporting decisions. There are areas in which we woud have preferred the guidance to have gone further. We beieve the future sustainabiity of the oi and gas sector wi be strongy infuenced by three interconnected factors: 1) society s need to imit goba average atmospheric temperature rise to two degrees above preindustria eves; 2) rapidy faing prices for cean energy aternatives; and 3) the transition to eectric vehices. As a resut, stranded assets may pose a significant risk to both the economic vaue and performance of the industry in the near future. Whie the guidance makes reference to this chaenge, we fee it coud have advanced the state of reporting by strengthening recommendations on the risk management approaches that companies are impementing to anticipate this chaenge. Oi and gas companies face other risks to their viabiity. Operating in regions that are insufficienty democraticay mature eads to confict, socia strife, bribery and corruption. We expect companies to acknowedge these risks and demonstrate how their operations fit into that wider human perspective. We hope that future editions of the guidance wi inspire reporting in that direction. We woud prefer the guidance to give cearer instruction to reporters on how their reports might be improved in the future, and what woud constitute a path of progress. The framework s emphasis on common, suppementa and other reporting eements might drive a degree of conformity, but may do so on the basis of the owest common denominator rather than encouraging eadership in reporting. We regret that there are severa significant areas in which the pane s comments and suggestions in 2010 have not been addressed. These remain important and shoud be addressed with urgency: Greater emphasis on targets: targets are essentia for driving performance and creating a basis for accountabiity and trust among stakehoders. The 2015 Guidance does itte to advance the setting and reporting of targets and progress against them compared with the 2010 version. The absence of minimum reporting standards: the Guidance does not estabish any basic requirements for what woud constitute an acceptabe sustainabiity report for an IPIECA member company. Today, as in 2010, members are free to choose whether or not they wi report at a. We encourage IPIECA to do more to encourage and measure members uptake of the Guidance, and provide assurance that vountary reporting is making a materia difference. This incudes ensuring that members: produce pubic sustainabiity reports; use the IPIECA reporting Guidance as the basis for their reports; and report a common reporting eements at a minimum. The time has come to move beyond sustainabiity reporting as a vountary exercise driven by idiosyncratic corporate circumstances, towards a sector that recognizes its responsibiity to account for its activities and performance, and to defend its strategies and insti confidence and trust among stakehoders through robust reporting to a minimum agreed eve through this Guidance. Utimatey, technica reporting chaenges cannot take pace in a vacuum without the cear support of company eadership. We therefore encourage IPIECA to strengthen its roe in driving change within the oi and gas sector by harnessing the voice of CEOs and board eve eaders to chart a vision for the industry s key sustainabiity chaenges. Now, more than ever, this eadership voice is required to enabe the industry to reconcie the twin chaenges of energy security and cimate change, whie managing and mitigating a broad range of increasingy compex sustainabiity risks. 5

10 IPIECA API IOGP ACKNOWLEDGEMENTS The information contained in this document was deveoped jointy under the auspices of IPIECA, API and IOGP. It represents the work of a Reporting Working Group (RWG), composed of 80 representatives from 28 companies and 4 trade associations. The document benefitted significanty from the input and review of a Stakehoder Pane, which met formay with the RWG in Apri 2014 and aso contributed throughout the process. IPIECA, API and IOGP woud aso ike to thank the organizations and individuas that responded during the pubic consutation period in December The comments received were of substantia vaue to the revision. Particuar thanks are given to Tamara Bergkamp, from the Goba Reporting Initiative (GRI), for her contribution to the mapping document between the Guidance and GRI G4 (pages ). In addition to input from many technica groups within IPIECA, API and IOGP, experts from the foowing companies contributed substantia persona effort to the Guidance update: Anadarko BG Group BP Chevron ConocoPhiips Eni ExxonMobi Hess Husky Energy Maersk Oi Nobe Energy Petrobras Repso Schumberger She Statoi Tota For the 2015 edition, the IPIECA Secretariat project manager was Heen Murphy. Consutant support was provided by Bi Boye (IPIECA senior associate) and Nige Jones (design). Photographs reproduced courtesy of the foowing: cover (upper eft, ower eft and ower right) and pages 11, 15, 29, 39, 58, 65, 66 (bottom), 70, 77, 90, 95, 100, 102 and 104 (top): Shutterstock.com; pages 13, 16, 18, 23, 27, 49, 53, 54, 57, 63, 66 (top), 79, 84, 87, 89, 103, 114, 119, 125 and 127: istockphoto.com; cover (centre eft) and page 106: BP; page 107 (bottom): Chevron; page 34: Larry Lee Photography/Corbis; cover (bottom centre) and pages 25, 85, 97, 98, 104, 107 (top) and 112: ExxonMobi Corporation; pages 36, 80 and 110: Marathon Oi. 6

11 OIL AND GAS INDUSTRY GUIDANCE ON VOLUNTARY SUSTAINABILITY REPORTING Section 1 Setting the context: why report? 7

12 IPIECA API IOGP Section 1 Setting the context: why report? Section 1 Setting the context: why report? The oi and gas sector is a fundamenta part of today s word, providing essentia energy and raw materias for goba deveopment. A dynamic and innovative business, the industry constanty seeks to adapt to new situations and chaenges. It invests not ony in the search for new oi and gas, but aso in faciities, infrastructure, technoogy, oca communities, heath and safety, and the environment. The sector continuay examines opportunities to meet growing energy demand around the word, whie seeking to mitigate adverse impacts of its activities as we as to address the potentia risks associated with cimate change. Not surprisingy, many peope and organizations wordwide want to understand the oi and gas sector s business and participate in diaogue with companies on the effects of their activities the impacts, benefits, risks and trade-offs. In addition to annua reports on financia performance and other communication initiatives, sustainabiity reporting aso known as corporate citizenship, corporate responsibiity or environmenta, socia and governance (ESG) reporting is an important way for companies in the sector to engage with stakehoders and hep foster informed diaogue and understanding. Oi and gas companies have been among the pioneers of sustainabiity reporting and have provided eading exampes of good reporting practices. This Guidance has been deveoped to share good practice across the industry and to encourage companies, both current and new reporters, to keep their stakehoders informed about their performance. The Guidance represents industry consensus on the most prevaent sustainabiity issues and indicators, and aims to support continuous improvement of sustainabiity reporting and performance across the sector. BENEFITS OF REPORTING Reporting can bring companies recognizabe business benefits. Through communication on its most important sustainabiity issues, a company s report becomes a reiabe source of information for its stakehoders. By transparenty describing its biggest chaenges, reporting underpins stakehoder engagement and represents the company s vaues in action. For oi and gas companies, reporting provides a robust patform for describing how strategic goba issues such as cimate change and energy are being addressed through ong-term pans and current initiatives. The report can aso expain how the company is managing the socio-economic impacts and environmenta, heath and safety risks of operating in different ocations. Once pubished, this information enabes further communication and engagement with stakehoders. The ong-term benefits of reporting incude: enhanced business vaue as investor confidence grows in response to evidence that the company is managing important risks and positioning itsef to take advantage of emerging opportunities; improved operations as empoyees deveop a deeper understanding of a company s sustainabiity vaues and performance indicators provide insight to support continuous improvement; strengthened reationships as oca community eaders, civi society representatives, government officias and reguators, and other key stakehoders earn how the company responsiby manages sustainabiity issues; and enhanced trust and credibiity as customers, suppiers and the wider society understand the company s brand, operations and products. For many companies, sustainabiity reporting is ony one of the channes used to engage stakehoders. For exampe, a company may aso produce an annua report for its sharehoders, ESG fiings for investment funds and research houses, an integrated report for providers of capita, statutory stock market fiings in different countries, and reguar pubications for empoyees, customers or communities. Generating a sustainabiity report using a consistent, robust 8

13 OIL AND GAS INDUSTRY GUIDANCE ON VOLUNTARY SUSTAINABILITY REPORTING process aso provides reiabe, verifiabe information and data that can underpin other reports and communications. ABOUT THE GUIDANCE This third edition of the Guidance repaces the second edition pubished in December This revision is based on industry experience, feedback on the 2010 document, and significant insights and suggestions from an independent pane of stakehoders with expertise in the sector and sustainabiity reporting (see pages 4 5). The Guidance aims to assist oi and gas companies in deveoping and enhancing the quaity and consistency of their sustainabiity reporting. It is designed for use by any oi and gas company operating nationay, regionay or internationay. The Guidance deiberatey provides choices, not ony for experienced reporters, but aso to enabe new reporters or smaer companies to focus on their most important issues at a eve appropriate to their business and stakehoders. It recognizes that whie some reporters are mutinationa pubic corporations, others may be state- or privateyowned companies, where oca reporting taiored to individua stakehoders may be more important than aggregated reporting at the goba eve. The Guidance may aso serve as a reference to hep readers of company reports, incuding onine information channes, to understand the basis for reporting in the oi and gas sector. USING THE GUIDANCE The Guidance is a reference too aimed at heping company sustainabiity managers, communications professionas and environmenta, heath and safety or socio-economic speciaists to deveop corporateeve reporting for interna and externa stakehoder audiences. It can be used to report performance to different audiences in different ways for activities in a singe country, for arge projects or for a singe operation. The Guidance is designed to offer fexibiity in support of new reporters, who may initiay focus on a imited number of key sustainabiity issues, geographica ocations or specific audiences, and then, over time, graduay increase coverage of their reporting. This Guidance is vountary. It does not set minimum requirements or predetermine stakehoder needs. Instead, it encourages companies to make informed choices on what is important for reporting by engaging with their stakehoders and understanding their needs. Then, to support these choices, reporters can incude reevant data and information that benefit from the consistency of industry consensus on the issues, indicators and reporting eements detaied in the Guidance. With effort focused primariy on those issues of significance to the individua company and its stakehoders, reporting time and cost can be better managed. The Guidance provides two types of assistance by heping companies decide: how to report, by describing a process for reporting; and what to report, by providing options for deveoping the content of the report. Process In Section 2, companies are encouraged to empoy a stepwise process for reporting by: setting the context for the report by outining the company s high-eve vision and strategy, together with governance and management systems; determining the issues to incude by using a materiaity process that identifies the compete set of issues of reevance to both the company and its stakehoders; and seecting indicator data to be coected within the company s reporting boundary and incorporated into the narrative. Section 1 Setting the context: why report? 9

14 IPIECA API IOGP Section 1 Setting the context: why report? The objective of each step is to buid transparent and concise reporting as part of stakehoder engagement. The process heps the company to verify which issues and indicators are not materia and thus avoid unnecessary and time-consuming reporting which can obscure the reevant issues. Content Sections 3 to 6 provide direction on the content of a typica oi and gas industry report. The Guidance provides a set of performance indicators appropriate to sustainabiity issues in the industry. Each indicator provides a choice of reporting eements depending on the depth or accuracy required (i.e. depending on the materiaity of the issue for the company). The reporting eements incude measures that are common, being the most estabished and consistent across the industry today. Section 3 provides guidance (incuding on reporting boundaries and data normaization) that is broady appicabe to the performance indicators provided in Sections 4, 5 and 6, covering (respectivey) environmenta, heath and safety, and socia and economic issues. The breadth and depth of the reporting content may vary significanty between companies depending on the extent of business activities and reated impacts across the vaue chain, as we as the materiaity of sustainabiity issues to the company and its stakehoders. Listed beow are severa basic components that are commony incuded within an oi and gas sustainabiity report or website: CEO statement: this introductory statement from the company s most senior executive emphasizes the importance of reporting to the company, provides stakehoders with a strategic overview and context for the sustainabiity issues, and highights performance chaenges and progress for the reporting year. Addressing cimate change risks: this issue continues to be regarded as the sector s primary ong-term environmenta issue, and companies typicay provide information on their position, strategy and actions reated to the issue, as we as discosure of greenhouse gas (GHG) emissions and other performance indicators. Managing risks of accidents: the oi and gas industry has inherent hazards throughout the vaue chain that must be responsiby managed to prevent events that coud potentiay resut in harm to peope, damage to the environment, and socio-economic impacts. Companies typicay describe their systems to manage safety and reated risks, and openy discose their annua performance record incuding any significant incidents. Loca impacts and benefits: oi and gas companies often operate in paces where their activities can have significant benefits, at community or nationa eve, but may aso have oca impacts which affect peope or the environment. In addition to describing corporate poicies and processes, reported content can draw attention to operations in deveoping countries or sensitive environments, where issues may incude respect for human rights, transparency of payments to host governments, access to fresh water, or protection of biodiversity. Reporting process: companies generay expain their reporting process, incuding how stakehoders are engaged, how issues are prioritized for reporting, how information is prepared and vaidated, and whether any nationa or internationa reporting guideines are used. Whie the Guidance addresses many other components of reporting content, the stakehoders engaged during the deveopment of this edition have highighted these five components as basic expectations. Referencing the Guidance Companies who use the process and/or the content sections are encouraged to reference the Guidance, acknowedging IPIECA, API and IOGP, since doing so demonstrates a company s efforts to report consistenty by appying oi and gas industry good practice. Within their reports, companies may wish to incude an index of the Guidance indicators used, which woud signa that their reporting meets the intent of the indicator description and foows at east one reporting eement. 10

15 OIL AND GAS INDUSTRY GUIDANCE ON VOLUNTARY SUSTAINABILITY REPORTING Section 2 The reporting process: how to report 11

16 IPIECA API IOGP Section 2 The reporting process: how to report Section 2 The reporting process: how to report This section provides the foundation for good practice through sound principes and a sixstep reporting process. GENERAL REPORTING PRINCIPLES The foowing genera reporting principes 1 provide constructive concepts for consideration as companies deveop content for sustainabiity reporting: Reevance: The reported information shoud appropriatey refect the sustainabiity issues of the company and meet the needs of stakehoders both interna and externa to the company. Transparency: Information shoud be reported in a cear, understandabe, factua and coherent manner, and shoud faciitate independent review. Transparency incudes discosure of the processes, procedures, assumptions and imitations affecting report preparation. Consistency: For reports to be credibe, information-gathering processes and definitions must be systematicay appied. Consistency in what is reported and how it is reported enabes meaningfu review of a company s performance over time, and faciitates comparison internay and with peer companies. Competeness: Information shoud be incuded in a manner that is consistent with the stated purpose, scope and boundaries of the report. Accuracy: Information shoud be sufficienty precise to enabe intended users to understand the reevance of information with a suitabe eve of confidence. Figure 1 The sustainabiity reporting process The five principes isted were drawn from the reporting principes stated within The Greenhouse Gas Protoco (WRI/WBCSD, 2004) and their use has evoved here to provide wider appicabiity for this Guidance. These principes have aso been adapted for specific appication in other IPIECA/API/IOGP documents, incuding the Petroeum Industry Guideines for Reporting Greenhouse Gas Emissions (2011). 12

17 OIL AND GAS INDUSTRY GUIDANCE ON VOLUNTARY SUSTAINABILITY REPORTING PROCESS OVERVIEW The pubication of a sustainabiity report, or onine content, is generay the resut of interna corporate processes combined with externa diaogue. Athough each company wi have its own approach, Figure 1 iustrates how stakehoder engagement underpins six typica process steps, which are discussed in detai in the rest of this section. ENGAGING STAKEHOLDERS Stakehoder engagement has an important roe throughout the reporting process. Stakehoder viewpoints and diaogue can hep to ensure that the report is reevant, accessibe and credibe to externa audiences. Feedback on the competed report can provide vauabe insight to improve future reports and to initiate diaogue on issues. Thus, as an integra part of the reporting process, companies coud consider proactivey soiciting stakehoder views at different stages: Starting out: stakehoder opinion on the company s vision and strategy, governance, management pans and approach, reevant issues and performance can be gathered directy through diaogue or indirecty through media artices, pubic reports and surveys. During production: stakehoders can be invited to comment on reporting expectations or to review drafts. Stakehoder input can aso hep to confirm the reevance of the proposed content. Post-pubication: stakehoders can be given opportunities to review the competed report, indicating how they might make use of it, and what they woud ike to see in the future. Section 2 The reporting process: how to report 13

18 Section 2 The reporting process: how to report IPIECA API IOGP Many channes exist to further engage stakehoders on the report, incuding focus groups, surveys, panes, web forums and socia networking. It is important to take care to ensure consistency with the primary messages contained in the report. The process of reporting and reated engagement is typicay annua, providing a periodic opportunity for stakehoders to assess progress over time. Reported information may be provided in different formats, from standaone printed reports to internet-accessibe formats that can aow a greater eve of detai, timey updates and onine feedback. Identifying the priority stakehoders for engagement on reporting can be a chaenge for companies, and different approaches can be used to do this. Figure 2 describes a simpe anaysis technique known as stakehoder mapping. Figure 2 Stakehoder mapping Positive Keep these stakehoders informed and give them the opportunity to input Low Reationship with company Wiingness to engage Understand issues and expore ways to engage (incuding via third parties) Wiingness to engage Reationship with company Negative 14 Activey maintain and buid direct reationships and understand how these stakehoders can hep outreach to others Activey deveop insight into these stakehodersõ views and expore ways to engage directy (or via third parties) High Companies often find it usefu to prioritize the diverse range of stakehoders, who may be interested in their sustainabiity report or particuar aspects of it, to ensure that they have considered a important audiences and perspectives. The range of stakehoders may, for exampe, incude investors, campaigners, academics, businesses, thought-eaders, oca communities, Indigenous Peopes, customers, government representatives, reguators, empoyees, contractors and suppiers. Stakehoders may be categorized into broad groups (e.g. community, government, NGO, investor and workforce) to guide further engagement. The mapping may consider the expressed opinions of the stakehoders, the nature of their reationship with the company and the nature of current or previous engagement activities.

19 OIL AND GAS INDUSTRY GUIDANCE ON VOLUNTARY SUSTAINABILITY REPORTING Step 1: Articuate vision and strategy A sustainabiity report shoud set out how a company s sustainabiity priorities are integrated into its overa vision and business strategy. These priorities shoud cover both current operationa issues, such as heath and safety, environmenta compiance, socia/cutura requirements and abour practices, as we as onger-term considerations, such as cimate change risks or access to new energy resources. Section 2 The reporting process: how to report DEFINE SUSTAINABILITY Reports generay describe a company s understanding of what sustainabiity, corporate responsibiity or corporate citizenship means to their company, and indicate the main impications and opportunities for its core oi and gas businesses. For exampe, a company may wish to discuss how its ong-term success depends on suppying necessary products and services; but at the same time, how it recognizes the need to respect and contribute to the communities where it operates and to safeguard the environment and cutura heritage. Such a statement of intent heps to set the scene for describing the company s forward vision and strategy. REVEAL VISION A company s vision statement can ook to the sustainabiity opportunities and chaenges of suppying energy into the future. The vision wi often be presented in the context of existing corporate vaues, principes and poicy commitments with reference to: quaity of products; safety and reiabiity of operations; care for the environment and communities; engaging stakehoders; respect for others and their rights; and innovation and pioneering soutions. EXPLAIN STRATEGY A company can expain how its strategy and pans create vaue for its sharehoders by means of its current performance and in that context describe its principa sustainabiity issues and its approach to addressing them. The high-eve vision and strategy are often set out in an executive management or chairman s etter at the opening of the report. This introduction to the report serves to demonstrate top-eve persona commitment to sustainabiity and invovement in eading the business to achieve the company s vision and strategy. The introduction is aso an opportunity to show how management is taking responsibiity for any difficut chaenges, decisions or diemmas faced by the company, and to set out how these wi be addressed, for exampe, through new investments, initiatives or goas. The description of the strategy can be deveoped further throughout the report content or on the company website with more detai as appropriate. 15

20 IPIECA API IOGP Section 2 The reporting process: how to report Step 2: Describe governance and management systems Having articuated the vision and strategy, it is important for companies to report on the roe of the board and/or executives with regard to sustainabiity-reated governance and management systems. OUTLINE BOARD GOVERNANCE The report can describe how the board functions, how often it meets and whether specific board members are associated with sustainabiity issues or are members of a reated subcommittee, which may incude independent advisers. The report can aso discuss the roe of the most senior executives and how they manage the business, incuding engaging with stakehoders and integrating sustainabiity considerations into decision making. Because the detais reated to governance and accountabiity do not typicay change on an annua basis, companies may provide such information on their website and have the sustainabiity report refer the reader to the reevant web content. However, when changes occur reated to governance, the company shoud consider whether these have impications reevant to the sustainabiity report (Step 3) and the potentia need to provide prominent coverage of the effects of the changes. DETAIL MANAGEMENT SYSTEMS Robust management systems ensure that the company s vaues, principes and poicy commitments are consistenty appied by management across the company. The status, impementation and effectiveness of such management systems are usuay addressed in a sustainabiity report. Companies typicay state which systems are estabished, refer to major changes as appropriate in their printed sustainabiity report, and may provide more detais about the systems on their website. If reevant, companies shoud expain how they have appied, within their management systems, internationa standards or guidance, e.g. Internationa Standards Organization (ISO) guidance such as the ISO 9000, ISO or ISO series of documents, nationa pubications based on the Occupationa Heath and Safety Advisory Services (OHSAS) standard, or guidance from associations such as IOGP or API. Such management systems aso underpin the continuous improvement cyce of panning, execution, monitoring and review. The monitoring step of this process is generay based on performance indicators, many of which can be incuded in the company s sustainabiity report. Figure 3 shows how the use of management system information provides a foundation that compements and underpins the indicator information in a report. 16

21 OIL AND GAS INDUSTRY GUIDANCE ON VOLUNTARY SUSTAINABILITY REPORTING Figure 3 Using management systems to support reporting Management systems appy across a aspects of sustainabiity and demonstrate how companies are appying an integrated approach to managing operationa activities with the potentia to impact peope or the environment. This approach aso recognizes the common characteristics of many sustainabiity issues and their strategic integration into business management processes. Thus, a company may describe its management systems within its report, whie aso referring throughout to risks or chaenges that are being addressed through specific standards or practices within the system, and discose the resuting progress and performance. The figure shows the ten eements which are underpinned by the four fundamentas within the IOGP-IPIECA operating management system framework (IOGP/IPIECA, 2014). Section 2 The reporting process: how to report Because management systems do not change frequenty, companies may often describe their systems on their website and the annua sustainabiity report can then cross-reference such information. Detais may incude: key eements of the system; accountabiity and resources for its deivery; areas of operation, activities and issues covered; risk assessment, mitigation and management processes; processes for achieving continuous improvement, incuding goa-setting, measurement, benchmarking, training and performance review; and approaches to meeting compiance with appicabe externa requirements, standards or guideines. Specific exampes or short case studies can be incuded to demonstrate how the company s management system is appied in practice. For instance, a company might expain how its system ensures that managers are accountabe for assessing environmenta and socia impacts and communicating mitigation pans with neighbouring community stakehoders before starting major projects in new ocations. 17

22 IPIECA API IOGP Section 2 The reporting process: how to report Step 3: Determine and prioritize materia issues for reporting Given the array of issues that a sustainabiity report might address, it is hepfu to have a simpe and transparent process to determine what to incude in the report. Aigned with the sections on Genera reporting principes (page 12) and Engaging stakehoders (pages 13 14), a company shoud aim to make its report reevant to its users and provide them with compete and transparent information. Most companies use a materiaity process to identify and prioritize sustainabiity issues. This process heps drive the seection of an appropriate set of supporting indicators to provide information on how these materia issues are being addressed. A materiaity assessment ensures that the company is being responsive to the issues of concern to its stakehoders whie avoiding excessive or unnecessary reporting. MATERIAL ISSUES Materia issues for sustainabiity reporting are those that, in the view of both the company s management and its externa stakehoders, affect the company s performance or strategy and/or inform stakehoder assessments or decisions about the company. Management can then articuate in the report why these issues are important and how they address the issues. Materiaity for sustainabiity reporting wi often differ from financia reporting where a threshod such as a percentage of revenue often determines whether information is discosed. USE A SIMPLE PROCESS Companies shoud estabish a simpe process to identify those sustainabiity issues that warrant incusion in their report. In practice, a reguar (typicay annua) review is inked to the company s sustainabiity reporting cyce. Toos for judging materiaity for sustainabiity reporting vary and a company needs to determine its own process. As iustrated in Figure 4, there are typicay four stages to the annua materiaity cyce: 1. Identify materia issues: as a first action, a company shoud gather interna and externa inputs to generate a ist of materia issues that the company may address in its reporting. For exampe, interna inputs can incude information on the company s risks, potentia impacts, management strategies and performance. Externa inputs can incude information from stakehoder engagement, the media and other forms of feedback. Certain risks and their associated impacts such as those associated with cimate change and safety, are ikey to remain materia and be treated prominenty every year in the sustainabiity report, with trends over time documented using a group of consistent indicators. The materiaity process can aso identify new short-term issues, such as major events or changes, or specific aspects of ong-term issues that may be more significant in a particuar year. Section 3 of the Guidance (page 29) introduces 12 issues that are commony materia to companies in the oi and gas industry and can provide a starting point for new reporters. 18