Why Oil And Gas Companies Must Invest In Sustainability

Sustainability is no longer a buzz word; it is becoming more important for many companies, especially in the oil and gas industry. For competitive advantage, executives now make it an essential part of their business strategy. We catch up with Dr Uwem Ite, a sustainable development expert to discuss the importance of sustainability in oil and gas industry and why companies should invest in it. Dr. Ite has more than 25 years’ experience including roles in leading and shaping sustainable development thinking and practice both at academic (University) and corporate (oil and gas industry) sectors in the United Kingdom and Nigeria. He is a recognized thought leader on Corporate Sustainability and Responsibility with several high-profile publications and presentations at various global fora and platforms.

What is sustainability in oil and gas industry?

The starting point is to fully understand the dimensions of sustainability, based on the three key principles of social, economic and environmental sustainability.Social sustainability is rooted on the premise of equity and understanding of the human community’s interdependence to achieve acceptable quality of life, which is the aim of development. Therefore, sustainable social development is concerned with equity in the distribution of wealth, resources and opportunity to all citizens at all levels.

It implies access to minimum standards of security, human rights, social benefits e. g. food, health, education, shelter and opportunities for self-development. It requires active political participation in decision-making and public accountability. In other words, social sustainability places emphasis on distributional and gender equity, provision of social services, population stabilization, as well as political accountability and participation.

On the other hand, Economic sustainability, require societies to generate an optimal flow of income while maintaining their basic stock of man-made, human and natural capital. It advocates for the internalization of all external costs, including the societal and environmental costs associated with the production and disposition of goods, thereby implementing the full costs principle. Economic sustainability is therefore about sound macro-economic management, poverty alleviating growth, appropriate agricultural policies, role of the state, and cost internalization.

The third and final principle, Environmental sustainability, is predicated on the maintenance of long-term integrity and productivity of the planet’s life-support systems and environmental infrastructure. Environmental sustainability requires the use of environmental goods and services in such a way that their productive capacities are not reduced, nor their overall contribution to human well-being diminished.

In practical terms, environmental sustainability hinges on sustainable use of resources, maintenance of sink functions of environmental processes, ensuring the increase in the quality and quantity of natural capital, adopting the precautionary principle and the establishment of adequate and suitable institutional frameworks for environmental protection.

Based on the above, sustainability in the oil and gas industry requires making business decisions which take into consideration the social, economic and environmental principles of sustainability. It also requires an understanding of how the United Nations Sustainable Development Goals (SDGs) interact with economic, social and environmental realities at the local, national and global levels. Consequently, effective contribution to the SDGs requires actors in the industry to manage complex interactions between the SDGs and their sub-targets.

Why is it so important in the industry?

The oil and gas industry already contribute to sustainable development through in several ways including CSR programmes. However, industry operations and products potentially have negative impacts on a range of areas covered by the SDGs, including communities, ecosystems and economies.

As such, there is ample opportunity for Nigerian oil and gas companies to fully integrate SDGs into their CSR strategy and programmes through collaboration with other stakeholders. Achieving an individual SDG will often rely on or have implications for some or all other SDGs and the related supporting conditions. Similarly, CSR initiatives designed and implemented to achieve the SDGs will also cut across and have impacts on the economic, environmental and social spheres or dimensions of sustainability.

How can the oil and gas industry in Nigeria be more sustainable?

To be more sustainable, the oil and gas industry in Nigeria must take a critical look at key issues in the process of making contributions to the achievement of SDGs. The industry has the potential to advance all the 17 SDGs, either directly or indirectly. However, only ten SDGs can be considered as priority areas where companies in the oil and gas sector have the most influence or ability to respond to societal needs by driving innovation and impact in its own operations and across the value chain. These are SDG 3 (Good Health and Well-being); SDG 6 (Clean Water and Sanitation); SDG 7 (Affordable and Clean Energy); SDG 8 (Decent Work and Economic Growth); SDG 9 (Industry, Innovation and Infrastructure);SDG 12 (Responsible Consumption and Production); SDG 13 (Climate Change); SDG 14 (Life below Water); SDG 15 (Life on Land); and SDG 16 (Peace, Justice and Strong Institutions).   In addition, SDG 17(Partnerships for the Goals) is considered as cross-cutting and essential to all impact opportunities.

The scope and nature of typical oil and gas activities point to ample opportunities for oil and gas companies to integrate SDGs into their Corporate Sustainability and Responsibility(CSR) strategies and programmes. This will involve proactive alignment of the SDGs with the CSR strategy and programmes of individual companies within the industry. This can be achieved by increasing the robustness levels of existing business processes and systems including corporate policies and standards; sustainability reporting; risk assessment and management; stakeholder engagement as well as project due diligence.

To ensure success, individual oil and gas companies should not aim to achieve the SDGs alone. Various forms of partnerships and dialogues are necessary, as well as critical assessment of the possibility of obtaining inputs from various key stakeholders, such as government at various levels, oil and gas industry groups, civil society groups, advisory groups, development partners, contractors, suppliers and local communities. Given that oil and gas companies interact with the SDGs through their operations as well as goods or services they produce, their contributions to sustainable development can be significantly improved if the focus is fixed on nexuses of integrated SDGs, rather than treating the SDGs as isolated silos.

What is the impact of sustainable development in the oil and gas industry? 

The oil and gas industry is central to sustainable development at the global level because it serves as a key pillar of the global energy system as well as critical driver of economic and social development. In Nigeria, the upstream oil and gas industry has played pivotal role in the Nigerian economy for over four decades, accounting for a predominant proportion of Nigeria’s export earnings and driving economic activity at various levels of government and society.

With a proper sustainability strategy, what are the opportunities for investors and experts?

There are opportunities for investors and experts to contribute to sustainability in the oil and gas industry. Clearly, the primary responsibility for implementation of SDGs rests with the government of the respective countries. However, investors and businesses are expected to be proactive in understanding the priorities of their host nations and to seek to align with the priority SDGs they feel they can make strong and meaningful contributions.

On the other hand, given that the SDGs are frequently interlinked and indivisible, sustainability experts have opportunity to support investors by developingsustainability strategies and approaches which ensure synergies and management of trade-offs. Given the existence of the basic institutional framework for SDG delivery in Nigeria, effective collaboration and partnership between the oil and gas industry and other relevant stakeholders would be a step in the right direction.