Sustainable Development: Unlocking Growth Published January 8, 2015
At the 2014 SPE Annual Technical Conference and Exhibition (ATCE), a panel of global experts shared perspectives on a topic of increasing strategic importance to the Society’s global members: sustainable development. Titled “People, Profit, Planet: Advancing Practices That Balance Economic Growth, Social Development, and Environment Today and in the Future,” the session was moderated by Johana Dunlop of Schlumberger, chairperson of the SPE Sustainability Task Force.
As stated in the ATCE session abstract, the desired outcome of the panel discussion was to promote discussion on topics that are becoming increasingly relevant to the exploration and production industry in the areas of stakeholder engagement, local content, and strategic investment. Organized with the help of Michael Frederik Ellekjaer, head of corporate social responsibility (CSR) strategy and relations at Maersk Drilling, the panel included the following panelists: Alyson Warhurst of Maplecroft; Stephen Newton of Equitable Origin; Egbert Imomoh, 2013 SPE President; and Annette Stube of Maersk.
An earlier article in HSE Now, titled “Panelists Urge Industry To Take Sustainability Seriously,” was posted on 4 November 2014 and gave a high-level overview of the panel, which was introduced by Jeff Spath, 2014 SPE President. HSE Now plans to feature each of the panelists individually to share their perspectives with those unable to attend the panel at ATCE.
The first in this series is from Stube, group head of sustainability for Maersk, a global transportation and energy conglomerate with operations in 135 countries. In 2008, she established a new headquarters-based CSR unit that eventually turned into a group sustainability unit that includes environment, climate, health, safety, and social responsibility. The mission of the new group is to systematize the approach to sustainability at Maersk and turn it into a business advantage by integrating economic, social, and environmental considerations into business strategy and decision making.
As is true of many other business objectives, an important prerequisite for CSR in adding value is to anticipate and respond to changes in society and adapt proactively. As shown in Fig. 1, legality and legitimacy are moving targets. There is nothing new in this societal dynamic; what is new is that the pace of change from when a new issue arises until it is anchored in law is much faster today than 10 years ago. This means that we must be able to detect and understand what is going on in the field in which expectations are formed, identify what is relevant to our business, and put it into action.
With Maersk, we conduct an annual exercise to create a materiality matrix, which focuses on what is important to our business and to our stakeholders. This matrix is then used to guide our efforts and is reflected in our sustainability report.
The primary objective of Maersk’s CSR journey was to focus on getting its own house in order. Sustainability should never be an appendix to the business and core processes, rather it should be integrated to create value. When we started on this journey in 2008, it was important for us not just to jump on the bandwagon of the time. We acknowledged the developments around us and did our own analysis. We started our CSR journey behind the scenes with a focus on getting order in our own house. Different group programs and standards (e.g., anticorruption, labor, and responsible procurement) were developed to help integrate sustainability into our business processes.
An important consideration is to remember also what this journey means internally to our employees; it created engagement, and high employee engagement supports company performance. However, this is also something we can do much better, and we need to put more effort into communicating our CSR agenda and our values internally going forward. It is important to realize that senior leadership in all companies, regardless of size, is instrumental for this journey by showing commitment, living the values, and focusing on the opportunities this entails.
Today, all businesses within Maersk are focusing on areas in which sustainability creates the most value, such as reducing costs related to carbon dioxide, developing enhancements in safety culture, developing local talent, and finding innovative ways to fight demands for bribes and facilitate payments of crews at sea.
The next challenge is how to establish a solid internal governance structure that is well anchored at the highest levels. Fig. 2 summarizes how Maersk is addressing this challenge.
Governance is important for any strategy. At Maersk, top management at the group and business levels is accountable for sustainability progress. The Sustainability Council has been and continues to be an important factor for driving progress. It oversees compliance, approves strategies and standards, and provides overall guidance. It reports to the executive board and is made up of senior executives from the business. With this setup, sustainability has been anchored in the business and creates a solid basis for decision making and alignment. Approximately 89% of employees agree with the statement, “My company is making a genuine effort to be socially and environmentally responsible,” which is a statistic that any company should be very proud of.
An important measure has been to track and support the progress made in the businesses. Our sustainability dashboard (Fig. 3), which includes 25 key parameters of sustainability management, shows that the businesses have made considerable progress integrating sustainability into business processes and systems. Today, all our businesses have sustainability strategies and priorities in place, such that they have a strong foundation for addressing key risks and capturing benefits related to their markets and industries.
Our 3-year strategy launched in 2010 provided a framework for actively managing key sustainability issues for the company while turning them into opportunities, anticipating new challenges for society, and identifying ways that Maersk can address them for the benefit of business and society. The strategy outlines five priorities that drive integration of sustainability into our operational processes and ensure order in our own house, with the aim of all business units being able to strategize, innovate, and grasp business opportunities arising from a sustainability approach in each of their markets. This now gives us an opportunity to see how this pans out across the business units.
The five sustainability integration priorities referenced are as follows:
- Business units to follow group standards
- Sustainability as an element in performance management
- Trend spotting and stakeholder engagement as part of doing new business and influencing regulations
- Sustainability is considered in all investment decisions
- Pilots: Sustainability as a source of innovation
Maersk has worked with impact studies since 2010, when it conducted the Apapa terminal study. As part of its strategy, the company has launched a program for measuring and documenting effects across economic, societal, and environmental dimensions. The reason is to understand the type of effects we have on society, mitigate the costs, and accelerate the benefits.
Examples of questions that might be asked as part of this impact study program include
- What does it mean for the Nigerian economy when waiting time for unloading a container goes from 30 days to 1 day?
- How does it affect Brazilian trade and economy if only 4% of the containers currently transported on trucks were transported by coastal shipping?
We take these learnings and use them to gather the relevant stakeholders around the table to have a discussion about the topic and potentially affect decision makers. It is about taking society as the starting point and finding the areas in which we have a role to play to solve some of the problems. With our new strategy, we are moving from an agenda that is about reducing our negative effects on society to an agenda that is about accelerating the positive effects of our business.
So, given that background, what is next? As started earlier, the purpose of our new sustainability strategy is to address significant sustainability challenges in society that, at the same time, constitute bottlenecks to our growth strategy. We have identified the following three areas in which this is most relevant.
Climate and Carbon Dioxide Emissions. Together, these are one of the most important environmental issues to deal with. There is also a good business case. Since 2007, Maersk Line has reduced carbon dioxide by 34% per container, saving USD 764 million in fuel cost in 2013. We will continue to work to make shipping a more energy-efficient way to transport goods. Besides that, we will look further than our own operation at the entire supply chain.
Education and Jobs. Everyone knows there are a lack of jobs and education, especially in developing countries. Education and job creation are important to the individual and for social and economic development in general. In many emerging countries, Maersk is facing a shortage of local expertise and skills, while being faced with the host nation’s expectations to hire locally and procure from local vendors. With an increased focus on education, we will contribute to educate people in emerging countries where the need for local expertise is increasing rapidly. It helps develop needed expertise in emerging markets and creates good relations between us and our host countries.
Trade. Enabling trade contributes to economic development and improved living standards, but various trade barriers make trade more expensive and difficult than it should be. There is a great potential for economic development by addressing some of these barriers. The World Economic Forum estimated in its 2012 Enabling Trade Report that, if nontariff trade barriers were reduced only half way to global best practice, trade would increase by 15% and global gross domestic product would increase by 5%. This would require high-level cooperation with international and governmental organizations, as well as local engagement (i.e., educating companies in developing countries in the opportunities transportation and logistics provide for the durability of their crops and help them get connected to global supply chains). This can result in increased exports and profits and help develop international trade. It is good business for the local companies—and for Maersk.
This new strategic direction addresses systemic challenges outside our own sphere. The approach demands a longer-term horizon, but we are convinced that, when industrywide and social challenges affecting all of us are addressed, the value creation can be exponential. The first 2 years of the strategy will focus on designing and implementing relevant projects; best practices will then be selected, extended to other geographies, and scaled up across growth markets where feasible.