Greening Alberta’s Oil Industry
Alberta’s oil sands are at the center of a global dialogue over the future of energy.
Caught between the divergent pressures of soaring demand and environmental concern, the industry must integrate new risks and opportunities to thrive in the 21st century. Through “greening operations”, firms can both diminish environmental impact and generate economic wealth.
Greening Alberta’s Oil Industry: Optimizing Economic & Environmental Performance
Sustainability provides a vital lens through which to examine social, environmental, and economic implications, and find areas of agreement.
Social Return on Investment: The activities of the oil industry - energy extraction, transportation, and distribution – require vast upfront capital and produce social and environmental impacts. These impacts translate into material risks in the form of government regulation, adverse reputation, and environmental and physical threats from severe weather events and ecosystem impairment.
A sustainability framework provides an expanded view of an oil firm’s economics by incorporating environmental and social value, and risks, into the decision-making process.
Enterprise Risk Management: Decision Matrix for Integrating ESG & Economic Risks
In the 21st century, oil firms must assess economic risks in tandem with environmental, social, and governance (ESG) risks to make optimal decisions for stakeholders.
Integrated Reporting: Integrating intangible assets, or natural capital, into financial decisions, allows firms to better mitigate a wider spectrum of material risks, and communicate impacts with stakeholders. The Global Reporting Initiative (GRI) is one such system widely-employed across industries to monitor and share ESG performance.
GRI’s Main Features of G4
The Alberta Context
Social License to Operate: Activities must not only be economically sound, but have social permission, or community support. This is particularly relevant in Alberta, where firms often operate on native lands.
Oil Sands Crude: Life cycle assessments reveal that greenhouse gas emissions from Alberta’s oil sands crude are 8 - 37% higher than conventional crudes. Oil sands crude is heavier and more viscous, requiring additional energy and resource-intensive activities to yield consumable fuels.
Anatomy of the Oil Industry: Sustainability is synonymous with lean business and state-of-the-art technology. Opportunities abound along the supply chain to optimize economic and environmental performance through reducing inefficiencies, carbon impact, and ecosystem displacement.
Diversification: In the long run, investment in alternative energy is a way of hedging depletion and other risks to fossil fuel availability. With increasing pressure on utilities to “green the grid”, the oil industry has the opportunity to remain a key player by growing horizontally into new sectors. Clean technology reduces carbon impact and is at the forefront of energy innovation.
The Bottom Line
Increasing regulation, changing economics, and a tide of public support for clean technology is reshaping the 21st century energy industry. Through accounting for natural capital, making operational improvements, and investing in low carbon technologies, Alberta’s oil sector can remain economically and environmentally sustainable.
Sustainable operations is sound business practice. Investments that reduce environmental impact improve efficiencies and lower maintenance costs, bolstering the bottom line.