Transparency Rating of Environmental Responsibility

 

RATING

The Project was initiated in 2014 with the goal to environmentalize the oil & gas industry, to promote nature conservation as a priority for oil & gas companies, and also to develop regulatory activities of the relevant government bodies in the Russian Federation.

At present it is the only Project in Russia instrumental in assessing the level of environmental responsibility of every oil & gas company producing over 1.5 mln tons of oil annually. During the four years of interaction with experts from environmental organizations and oil & gas companies, we developed a set of criteria for calculating the Rating that provides unbiased information on the environmental responsibility of the companies. This is the experience that has no examples globally. For the first time ever, we developed the methodology that allows comparing the companies. Calculation of the Rating is based on data available in public domain, which excludes bias or corruption, and also promotes the level of environmental risks management and decreases the impact on environment. The Environmental Responsibility Rating of Oil & Gas Companies has proved to be an efficient tool to influence the industry.

The significance of the Rating is confirmed by the Concept of Developing Public Non-Financial Reporting adopted by the Government of Russia on May 5, 2017. This document states that “…the most widespread instruments of independent external assessment in the sphere of sustainability, corporate responsibility and public non-financial reporting initiated by a third party include indices, ratings, rankings, – assessment of organization’s activities based on a formalized methodology…”.

The positive trend in the Project is the involvement of the companies being rated: not only have they accepted the methodology and the Rating itself, but also are not afraid to disclose information anymore. Through interaction and annual meetings with oil companies, the Rating is constantly developing, while the methodology is being corrected depending on real changes taking place in the industry. The competitive nature of the Rating provokes companies to perform better and to improve their standings, which in turn increases the overall results in the industry.

The research like this helps positively motivate oil & gas companies to implement best environmental practices, and it improves the dialogue between the business and the society in terms of environment protection. Meanwhile, the openness and transparency of the Rating assists in building the positive image of oil companies and of the Russian oil & gas industry as a whole.

The Project is aimed at the widest audience possible. The announcement is held every year and has become an important event for the oil & gas ecology sphere. The ceremony of announcing the results of the Rating is traditionally widely attended by representatives of federal and regional governments, Ministry of Natural Resources and Environment, Ministry of Energy, Federal Service on Customer’s Rights Protection and Human Well-being Surveillance, representatives of the European Union, embassies of the United Kingdom, Germany, Denmark, Canada, Poland, Sweden, leading Russian and international environmental organizations and funds, financial institutions, analytical centers, consulting companies, leading universities and media.

FUNDAMENTAL PRINCIPLES OF THE RATING

  • The rating is performed on the basis of the criteria specified, first and foremost, in the Joint Environmental Requirements of the Public Interest Environmental Groups to the Oil and Gas Companies (https://new.wwf.ru/upload/iblock/4ac/oil_demands.pdf).

  • The rating methodology shall be discussed with all the interested parties. Face-to-face and distance consultations dedicated to improving rating methodology are held annually with the rating participants. 

  • The rating is calculated considering all the segments: production, processing and transportation. 

  • The rating is based on the data related to the companies’ operations in Russia, available in public domain. Availability in public domain is understood as being accessible to public in the form of annual business or socio-ecological reports, including reports on environmental protection measures (including regional ones). Also, for the purpose of this rating, any information is deemed to be publicly available if it is displayed on the official Internet sites of the relevant companies (including subsidiaries) with the necessary inclusion of references to the relevant pages in the site menu, or if it is provided through interviews of the companies’ official representatives for republican or regional media.

  • The rating calculation shall be performed by the professional rating agency, which is chosen on the basis of tender.

  • List of the companies for the rating in 2017: please refer to Appendix to the document.

  • The rating is performed on the annual basis. This allows for estimation of the oil & gas companies environmental indicators dynamics.

RATING METHODOLOGY

The Rating consists of three sections: Environmental Management, Environmental Impact, and Disclosure / Transparency

 

Section 1 (Environmental Management) assesses the quality of eco-management in the company. The criteria included in this section are in most cases substantially more rigid compared to Russian legislation on environment protection. However, these criteria correspond to the best global standards and practices in oil and gas business.

 

Section 2 evaluates the scale of impact of oil and gas companies on the environment. In particular, the damage level is revealed for air, water and land during the implementation of projects, as well as the ecological performance of the industrial operations. In most cases the criteria are based on components of state statistical reporting devoted to environment protection. This Section includes quantitative values that are being transformed to qualitative scale by comparing to industry-average indicators for every criterion. The industry-average indicators, when not available from official sources, are calculated as an arithmetic mean value for companies participating in the Rating. For comparative analysis across the companies, the data are used per production unit by dividing gross indicators into the volume of hydrocarbons produced and processed. In 2015, the range of specific indicators are also analyzed for transported hydrocarbons.

 

Section 3 evaluates the extent of companies’ readiness to disclose information with respect to environmental impact of their industrial activities. Historically, Russian oil and gas business was considered as a rather non-transparent community not least because of the unwillingness to publish ecological information. The recent trend is a growing transparency of the companies.

RATING RESULTS CALCULATION

The Rating is calculated as follows. Each company is assigned color flags for each of criteria – Red, Yellow or Green. When a criterion is not relevant for the given company (for example, the company does not produce fuel or does not operate in the territories of Small Indigenous Peoples of the North), no flag is assigned. When the information related to the criterion is not available publicly, red flag is assigned. For the purpose of this rating, any information is deemed to be publicly available if it is displayed on the official Internet sites of the relevant companies (including subsidiaries) or if it is given through interviews (for federal and regional mass media) of the companies’ official representatives.

 

At the next stage, points are assigned for every criterion. Red flag counts as 0 points, Yellow as 1 point, and Green as 2 points. For each section, companies are assigned a normal average of their points for criteria in the corresponding section. In this calculation, only those criteria that have been assigned color flags are taken into account, i.e. criteria that are not relevant for the given company, are not included in the calculation. As a result, every company is assigned final points for EcoManagement Section, Environmental Impact Section and Transparency Section. Final points vary from 0 to 2. At this stage, the leaders are chosen in every of the following areas: Management, Operations, Information, respectively.

 

In order to ensure that no data used in calculation of previous ratings is replaced or goes missing, the organizers proposed the following motivating solution. Retrospective assessment of each company is performed over the period of preceding 3 years. In case certain data is no longer available in the public domain, the company is requested to provide reasons for these changes. In case adequate explanation is given (new site, new methodology, etc.), the data changes are taken into account  However, if no reasonable explanation is provided, red flags are assigned to criteria where previous years data is missing or has been changed. Thus, section and overall rating points will be lower for the companies that have not issued proper comments on lack or change of respective data on their sites.

 

The final Rating is calculated for every company by averaging three values assigned in accordance with the previous stage.

 

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