Market Drivers: A solution that 'sticks' for social and environmental progress
The market incentivizes better business decisions regarding people and the planet, proving to be more effective than simply doing "the right thing." The reason? It sticks.
In Canada, terms like triple-bottom line, the trilemma, and multidimensional energy transition have become common when discussing company activities related to stakeholders and the environment, including carbon management, gender diversity, and Indigenous investing. While many of these issues are extensively discussed and often mandated by the government or driven by public pressure, there’s an opportunity to shift the narrative and the intent for the better.
Highlighting the market-driven positive business impacts could deepen accountability and firm-up better returns, providing a compelling reason for companies to adopt these practices. This approach would also help the public understand that businesses need to prioritize decisions that benefit their shareholders, with other “right thing to do” benefits often interconnected and flowing naturally.
Let’s explore three areas gaining increasing attention for natural resource companies and their market-driven connections: gender diversity, carbon management, and Indigenous investing.
Gender diversity: At the 24th World Petroleum Congress in Calgary last year, BCG published a report titled “Untapped Reserves 3.0: Advancing Diversity, Equity, and Inclusion in the Energy Industry” to assess progress made towards improved female representation within the oil and natural gas sector. Over the past three years, the sector has seen a modest increase in female representation, growing from 22% to 23%. While representation remained idle in the oil and natural gas sector, that same year the World Economic Forum found that companies from a variety of sectors with more diverse management teams experienced 19% higher revenues than those with less diverse management teams. The reason? Diverse management teams balance risk better, leading to stronger business decisions. This undoubtedly presents a strong business case to improve representation while simultaneously strengthening returns.
Carbon management: According to S&P Global, GHG intensity of the oil sands has dropped 23% since 2009 and the absolute emissions have stayed stable despite the increase of production since 2021. Why? It’s economically efficient to have lower emissions and drive production. Take for example a reservoir that uses steam-assisted gravity drainage (SAG-D) to extract oil from the reservoir. Over time, producers have improved their extraction processes using less steam (and therefore less natural gas = less cost and less emissions), developed mines without GHG intensity equipment (i.e., upgraders), and are increasing the production of less GHG intensive barrels that are also – for the most part – less capital intensive. The result? A better (less intensive) carbon molecule at a lower cost.
Indigenous investment: There are several Indigenous-focused loan guarantee programs in Canada – the program supported by the Alberta Indigenous Opportunities Corporation, the Ontario Aboriginal Loan Guarantee Program, and the more recent Federal Indigenous Loan Guarantee Program. The opportunity for Indigenous communities? A transition mechanism to get to true equity in a project through debt-backed loans. In doing so, the internal rate of return is critically important as communities cannot readily sell the asset and are mostly interested in long term growth and returns for their community. The benefit to a company interested in a partnership? Access to capital and lower cost money to fund capital projects. A win-win.
Focusing on market-driven positive business impacts, companies can foster accountability, improve returns, and achieve sustainable practices that benefit both shareholders and society at large.
Let’s make it stick.