By Julie King
The global oil and gas industry association, IPIECA coordinated a session during World Water Week in Stockholm on water management within the sector from now to 2030. IPIECA works with over 60 percent of the oil and gas industry — majors, mid-sized companies, as well as independents — as a consensus-based organization to build knowledge and develop good practices in water resources management. One of IPIECA’s current initiatives is taking a poll within the industry to try and understand what the future will look like, both for society in general and the industry itself.
There is projected to be a 40 to 50 percent increase in the demand for energy, water and food by 2030. Coupled with other global megatrends such as water scarcity, population increase, urbanization and extreme climate conditions, companies are being forced to take water issues very seriously. To put it bluntly, companies face significant business risks — directly and indirectly — from water-related problems, which are reflected in the balance sheet, shareholder value, and consumer confidence.
Whilst the response from companies has been slow to look beyond the pricing and operational cost of water, this is beginning to change as more and more impact is felt by businesses and the awareness is increasing of tools that have been developed to assist in identifying areas of water risks and how to develop strategies and solutions to mitigate these risks.
Water resource management tools
Organizations such as World Resources Institute (WRI) provide significant data to better inform corporate decision-makers to understand the broader contexts of water stewardship and water resource management. Some of the tools gaining traction in the oil and gas sector include those that allow companies to track their global water consumption and to improve their decision-making processes for more positive outcomes, including social and environmental factors. One tool, which was singled out for discussion was the Integrated Biodiversity Assessment Tool (IBAT). IBAT was developed by Conservation International in collaboration with Chevron and is a decision-support and environmental reporting tool for screening biodiversity risks, including protected areas on the IUCN Red List of Threatened Species. Tool designers continue to add further capabilities to IBAT to assist companies in considering water and broader environmental issues within their business practices.
Some of the other tools mentioned, include the Alliance for Water Stewardship, Water Action Hub from the UN Compact’s CEO Water Mandate, and the Water-Sanitation-and-Hygiene (WASH) and Freshwater Conservation Guidelines. Additionally, the extensive mapping tool, Water Risk Filter, which was developed by World Wildlife Fund and KFW DE, allows companies to secure rapid response, initial assessments, as well as whole facility and commodity portfolio-assessments to link risk assessment with mitigation measures. KPMG has also developed, in working with World Wildlife Fund, a methodology, which allows a company to identify and financially quantify its social and environmental activities and risks and how these can be integrated in assessing the True Value of a corporation for both management and shareholders.
The IPIECA also advocated adapting successful performance-based measurement models to the oil and gas industry, to enable companies and the industry as a whole to aspire to 100 percent site implementation. Such a model might include adapting the Water Accounting Framework from the mining industry to the oil and gas sector. This standard was designed in recognition of “the vital role of water in mining both as an asset that produces value and as a shared natural resource that requires responsible stewardship… [It] allows sites to account for, report on and compare site water management practices in a rigorous, consistent, and unambiguous manner that can easily be understood by non-experts.” This approach was reflected as well throughout the conference.
Another shift, which was consistent with other sessions throughout World Water Week, was the observation made by panelists of how projects are being developed. This shift has moved away from companies exclusively considering financing and operations as the starting point for a project, to project pre-planning, which begins with early-stage engagement of local communities.
Such trends reflect the growing awareness of companies, not only for the need to secure a social license to operate but also how it must behave as key members of the community, in order to retain its social license to operate throughout the lifecycle of the asset. This is particularly acute in water scare areas, which places the company in competition with the local community for use of groundwater. A human-centric approach also helps to facilitate better — and more genuine — regulatory and broader community relationships, which in turn helps in mitigating possible reputation risk.
The takeaway messages from the Oil and Gas sector session on water management are anchored in the fact that water is global, but it also very much local. Companies must take the issue of Water very seriously both in identifying corporate risks and opportunities and in the need to work closely with the local community from the point of project planning, to ensure community buy-in and its own ongoing social license to operate. Finally, water affords the opportunity to unify diverse parties, to create participatory relationships — with communities, regulatory bodies, employees, and shareholders. The tools and resources exist for companies to do this and to more fully understand and identify how water effects business profitability and value, and how to quantify these direct and indirect impacts in integrating a company’s sustainability strategy throughout its business strategy.
The session panelists included Brian Sullivan, Executive Director of IPIECA, Alfio Mianzan, Shell Industrial Environment, Paul Reig from World Resources Institute (WRI), Amy Emmerta from America Petroleum Industry, Marielle Weikel of Conservation International, and Alistair Wyness, Group Water Expert, S&OR Environment at BP International.
Julie King is Managing Director of the Galileo Agency, a boutique agency, which packages and develops projects and commercial opportunities for both for-profit companies and not-for-profit organizations to monetize social impact — particularly in the water, environmental, and education sectors.