Both True — Pioneer Raises the ESG Bar Quietly & Relentlessly

Several people sent me Pioneer’s 2020 Sustainability Report the day it came out — a strong indication of what it means for our industry. Pioneer has quietly, systematically, and relentlessly established itself as a leader in sustainability over the last decade (and without generating much fuss). Their low-key yet impressive style comes to life in this report, which should serve as a roadmap for your company.

If you haven’t started on your company’s ESG strategy, Pioneer’s new report will keep you up at night. Pioneer’s leadership looks to have made deep, cultural change within the company — with ESG components at the core of that transformation. This is not ESG as a simple repackaging of your current operations and environmental, health, and safety activities.

If you have started, this report foreshadows the next-level work ahead for your company in 2021. It is the standard ESG investors and other stakeholders will embrace going forward.

Both of these things are true:

  • ESG reporting expectations are changing fast.
  • You can keep up, as long as you get started and integrate ESG into your operational strategy.

The situation

To the uninitiated, Pioneer’s Sustainability Report may look just like any other. Here are the components you might expect:

  • Established targets. Pioneer has set some ambitious targets including reducing greenhouse gas (GHG) emissions intensity by 25% and methane emissions intensity by 40% by 2030.
  • Directly addressed flaring. The company targets limiting annual flaring intensity to less than 1% with zero routine flaring by 2030.
  • Incorporated Parsley. Their report incorporates the acquisition of Parsley into the targets and activities.
  • Included disclosures. Pioneer aligned their disclosures with the Sustainability Accounting Standards Board (SASB), Global Reporting Initiative (GRI), and International Petroleum Industry Environmental Conservation Association (IPIECA), among others.

Pioneer’s report is unique because, instead of just reporting on where they stand on ESG issues, they have a) incorporated these items into their strategy and b) articulated where they plan to improve on them. Here are examples of the components that make Pioneer’s report unique and important to game-changing leaders:

  • Supported federal regulation of methane. Pioneer has consistently taken a proactive approach to engaging on methane reductions. They explicitly opposed the last administration’s rollback of methane regulations and are participating in numerous collaborations with regulators, eNGOs, and academics to innovate around emissions reductions.
  • Exerted positive peer pressure. Pioneer CEO Scott Sheffield has been unusually public and persuasive in advocating for peer companies to address flaring in Texas. This kind of leadership is game changing.
  • Executed groundbreaking water innovation. Pioneer has been building out innovative water operations for years, including most recently their public-private partnerships with the cities of Odessa and Midland to treat and use effluent water in operations to limit freshwater use.
  • Conducted climate risk and resiliency analysis. In this report, Pioneer both committed to the principles of the Task Force on Climate-Related Financial Disclosures (TCFD) and conducted the risk analysis. This is noteworthy because — as I mentioned in my last post on BlackRock — investors will be expecting this analysis for 2021, and Pioneer has provided an excellent example. What makes Pioneer’s assessment impressive? How they are working toward integrating the climate-related risks and opportunities into their enterprise risk management and governance.
  • Demonstrated inclusion efforts. Pioneer’s robust diversity, equity, and inclusion (DEI) efforts, commitments, and investments are bar setting for game-changing companies
  • Upleveled Board governance. Most importantly of all, Pioneer updated the charters for five Board of Directors committees to incorporate climate oversight and risk. Further, the company tied executive compensation to ESG execution.

Seize the day

Game-changing leaders will level up their three-year ESG strategy to address the changing expectations of investors and stakeholders.

  • Update your materiality assessment. Your company’s strategy will be guided by the priorities of your investors, employees, operating areas, and community stakeholders.
  • Think deeply. ESG is no longer the repackaging and reporting of your current operations and EHS accomplishment. Over the next three years, your company will have to meaningfully retool your culture, management, and oversight to put ESG-guided priorities such as climate, decarbonization, equity, and diversity at the center of your risk management strategy and execution.
  • Get started. Adamantine’s Anne Carto laid out your company’s first moves in her two-part series on ESG in Small Steps, Part 1: Developing an ESG Strategy and Part 2: Everyone Needs a Decarbonization Strategy.

A good place to get started may be to lay out the opportunities and risks driving your ESG work — and Adamantine can help you with our Strategy Session.

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