Strategies Shareholder engagement Suncor & Petro Canada

In 2002, NEI sent a letter to Suncor on climate change and energy efficiency issues, encouraging the company to disclose plans for its transition away from fossil fuels, and towards alternatives. In this letter NEI applauded Suncor for the initiatives it has already undertaken to address the issue of global climate change. NEI indicated an interest in learning more about Suncor’s efforts in the area of emissions trading and carbon offsets, seeing as these initiatives will become increasingly important for Suncor, particularly as the higher emissions associated with oil sands development slows progress on the company’s overall energy efficiency measures and efforts to reduce overall greenhouse gas emissions. NEI acknowledged that transitioning from a fossil fuel company to an alternative energy company is a long-term project, and asked the company how or when it is developing quantified targets and a clear time schedule to achieve concrete objectives. A similar letter was sent to Petro-Canada.

In 2003 NEI filed two shareholder proposals with Petro-Canada.
The first asked for a report quantifying the climate change-related risks facing the company. Specifically, NEI asked the company to detail the range of potential financial liability associated with its greenhouse gas emissions, its strategy to reduce this liability, including an estimate of the costs and benefits of substantially reducing annual greenhouse gas emissions under a range of reasonable carbon pricing scenarios, with special reference to the possible role of investments in renewable energy.

The second shareholder proposal asked the company to establish a policy to ensure auditor independence. The proposal went to vote, however at that meeting NEI was able to make contact with key personnel which led to subsequent meetings and a positive relationship with Petro-Canada.

In 2004/2005, NEI filed a shareholder resolution with Petro-Canada asking for a report detailing the company’s evaluation of market opportunities in wind, solar and other renewable sources of energy and the business risks associated with a strategic focus on a single technological solution in the renewable energy industry. The company responded and NEI met with them in 2005 to discuss this issue.

In 2005 NEI engaged Petro-Canada on the climate change issue, a continuation of a four-year dialogue with this company. In previous years NEI focused on basic greenhouse gas disclosure, action plans to reduce emissions, and the necessity of climate risk scenario building, to help the company think about transitioning from an oil and gas company to an energy company with a diversified portfolio of renewable energy technologies. NEI filed a proposal asking Petro-Canada to describe how the company evaluated market opportunities in wind, solar and other renewable energy sources. Petro-Canada had had a long focus on producing fuel ethanol from waste by-products of the agricultural industry, through a partnership with Iogen. Fuel ethanol is a controversial renewable energy source, and some experts maintain that more energy is consumed in the production than the amount of energy it would generate once produced. NEI wanted to make sure Petro-Canada was aware of these risks, in case fuel ethanol turned out to be a bust.

In February 2005, NEI met with Petro-Canada and agreed to withdraw the proposal in exchange for analysis demonstrating that the ethanol technology they are developing is environmentally and socially superior to traditional ethanol. Petro-Canada also agreed to disclose its framework for assessing new opportunities in renewables.

Later in the year, Petro-Canada established a Climate Change committee to evaluate climate change reduction strategies and business development opportunities.

NEI also agreed to withdraw a second shareholder proposal, asking Petro-Canada for disclosure of its human rights policy implementation. The company agreed to disclose this implementation, including specification of board and management responsibilities, staff allocation and training opportunities, integration of policy implementation into the staff compensation plans, monitoring, and public reporting.
It agreed to report on human rights management systems for 2006, and the adoption of a formal security policy in late 2005.

Protecting Canada’s boreal forest was a key theme in NEI dialogue with Petro-Canada in 2006. The company has been active in this area, as it leads a working group of the Canadian Association of Petroleum Producers (CAPP) that focused mainly on preserving caribou populations in the boreal. In recognition of Petro-Canada’s expertise and leadership on boreal issues, NEI encouraged the company to learn more about the Canadian Boreal Initiative (CBI). In 2006, Petro-Canada met twice with CBI representatives.

Petro-Canada enhanced its existing environmental management system to more fully address biodiversity issues. NEI has suggested they consult a guide for integrating biodiversity policies published by the Energy and Biodiversity Initiative (EBI). The company also followed through on its 2005 commitment to implement a comprehensive human rights management system,

In 2007 NEI published a benchmarking report on oil and gas company climate risk, entitled Head in the Oil Sands?

Suncor, Petro-Canada, EnCana and Penn West requested a private presentation of NEI research findings in regards to their own corporate performance. NEI presented to each company the assessment of the strength and weaknesses of their response to climate change risks and opportunities, and shared with them NEI recommendations for each company.

As such, NEI deepened their dialogue with Suncor as a member of a stakeholder team, a group of external stakeholders that had a range of expertise in social and environmental issues. The group provided specific feedback to the company on their own Sustainability Report, Climate Change report, and general feedback on where the stakeholder team thought the company should be heading. With this forum and through our ongoing dialogue with the company NEI raised concerns about the social and environmental impacts resulting from the pace of growth of the oil sands in Alberta. Specifically, NEI encouraged the company to establish GHG emission targets, which would set a positive example for the entire industry.

Suncor is in the process of establishing such targets. The company supported a public declaration of business leaders calling for comprehensive federal regulation on the issue.

Petro-Canada used our report to help shape their corporate response to climate change. They have taken NEI input into consideration and have worked to strengthen their climate change strategy. The company now includes the price of carbon in all proposed projects. NEI also continued discussion with Petro-Canada in regards to supporting the Canadian Boreal Initiative and the company has responded positively.
Petro-Canada also acted as a signatory to the public declaration of business leaders calling for comprehensive federal regulation on climate change.

Ethical Funds serves on the Boreal Leadership Council (BLC) of the Canadian Boreal Initiative (CBI). The CBI is a multi-stakeholder organization, made up of environmental organizations, resource companies, and First Nations. Suncor is a member of the BLC.

In 2008 NEI continued to engage Suncor on corporate targets for reducing GHG emissions, water strategy and reclamation.

Following the publication of the NEI 2007 benchmarking report on oil and gas company climate risk, Head in the Oil Sands?, Petro-Canada presented a climate change strategy to its board, incorporating carbon costing and efficiency targets. The company also indicated it is willing to endorse the Boreal Forest Conservation Framework.

In 2009, Suncor and Petro-Canada merged.

NEI met with the company twice in 2009 to address risks of their oil sands operations, impact on water quality and respect for First Nations in Alberta.

Suncor has developed a water strategy and has set some targets for water use. The company plans to reduce absolute water use by 12% by 2015 and will be investing heavily in technology to do so.

Suncor has an Aboriginal Affairs policy and has socio-economic agreements with most First Nations the company is working with. Suncor also has a Memorandums of Understanding with 9 Metis groups.

In addition to face-to-face meetings, NEI participated in Suncor’s stakeholder panel for the second year in a row.

Suncor agreed to disclose carbon cost assumptions in any future project as well as future anticipated GHG emissions on a project-by-project basis so that investors can fully understand the company’s climate change risk exposure.

NEI met with the company in November 2010 to present the findings of the NEI oil sands benchmarking report. A follow-up meeting was held in December to discuss carbon costing and scenario planning. They could not reach agreement on carbon cost disclosure so a shareholder proposal was filed with Suncor asking the company to disclose how it is accounting for increasing carbon costs. After numerous discussions the company agreed to disclose projected GHG data for each current operation and actual carbon scenario planning for future projects.

Suncor discloses carbon costs used in business planning ($15 to $50 per tonne) after NEI filed a shareholder proposal on this topic in 2010. The company has also set environmental performance targets for land, air and water impacts.

In 2011 the focus with Suncor was on providing assurance that water sources are protected from oil sands development with strong and independent aquatic monitoring. The company was relying on the Regional Aquatic Monitoring Program (RAMP), which has drawn criticism from credible sources. NEI also sought more transparency about the company’s plans for reclamation funding as well its willingness to show leadership by distinguishing itself from the positions of its industry associations. These issues were raised directly but also by participating in a stakeholder panel for Suncor.

NEI wrote a letter to the Board expressing a desire to see compensation explicitly linked to ESG performance. Suncor has responded and a meeting was held with management in May to convey concerns in more detail. Suncor is open to learning about these expectations and NEI will encourage changes for the next proxy circular.

In 2011 NEI provided feedback on the Suncor sustainability report. In April 2012 NEI met with the company to provide input on its sustainability agenda.

In February 2012 Suncor joined peer companies to launch COSIA, the Canadian Oil Sands Innovation Alliance. COSIA aims to develop collaborative solutions to oil sands environmental challenges. The company continues to show leadership through participation in the Boreal Leadership Council (BLC), but has not committed to free, prior and informed consent (FPIC). However, the company was supportive of the recent BLC report on operationalizing FPIC in a Canadian context.

Although NEI voted against the compensation package at the 2012 AGM, the linkage of compensation to ESG performance in the proxy circular has improved, and disclosure now includes specific indicators and reveals the percentage of pay that depends on environmental performance. But the company still does not disclose the targets against which the performance was judged.

NEI wrote to the Board in the Fall of 2012 to explain concerns with the compensation plan and await a response.

In October 2012 NEI met with the company to discuss its caribou management plans; the impacts of the proposed Fort Hills project on important wetland ecosystems; and to convey concerns about the use of end-pit lakes in the company’s reclamation plans. NEI will be following up on these issues with the company in 2013.

In November 2012 NEI provided feedback to the company on its sustainability reporting, and among other things called for more detail on the company’s efforts to influence government policy on issues such as climate change, land use planning and wetlands management.

In April 2013 NEI provided feedback to the company on its sustainability disclosure strategy, encouraging the company to increase disclosure on lobbying activities and submissions to government consultations.

In May 2013 NEI wrote to Suncor’s CEO, asking the company to actively support the implementation of a significant price on carbon in Canada. In its response, the company agreed with the premise that Canada requires a price on carbon in order to stimulate innovation and drive efficiency. NEI will be meeting with the company in October 2013 to discuss these issues further. NEI will also raise the company’s exposure to the risk of stranded assets in a carbon-constrained future, and how Suncor can mitigate the risk.

NEI was able to vote for Suncor’s executive compensation package for the first time at the 2013 AGM, as the company had adopted many of the suggestions raised in earlier dialogue. NEI wrote to the board in July 2013 to convey appreciation of the changes and suggest further improvements. The chair of the compensation committee responded thanking NEI for the feedback.