A focus on ESG and internal company understanding

Oct 31, 2017
Environmental, social and governance issues are highlighted to Shell employees from day one in the company

As ESG issues continue to dominate the investment agenda, we hear from Cerys Reece, an IRO focused on ESG matters at Royal Dutch Shell, who gives us an insight into her ESG experience and highlights the importance of building internal awareness within a company. 

How has the importance of ESG changed in recent times?

Managing ESG and safety risks is fundamental to how Shell manages its business. In our industry, tragic events such as those at the Macondo Prospect [site of the Deepwater Horizon oil rig explosion] have increased the level of scrutiny around the way companies manage these risks. I think the appetite from Shell and other organizations for engagement and discussion on ESG topics outside of the financial ESG community has been noticeable in recent years.

Shell has been publishing an annual sustainability report for 20 years. In recent times, however, the importance of ESG issues has been reflected further in our messaging since our Capital Markets Day in June 2016 where we set out our strategic ambitions. These go further than the financial ambition to be a world-class investment. They cover reducing our CO2 intensity, shared value, and relevance and influence. ESG-related discussions are increasingly filtering into all conversations with investors, and not just because investors are trying to understand the impact on Shell’s bottom line.

Why is it so important for companies to ensure internal awareness of ESG issues?

ESG issues that we see at Shell are usually already well understood within the company, and covered by the Shell control framework (which sets standards for all to follow for health, safety, security, environmental and social performance). It’s important to maintain that awareness to ensure continued transparency around ESG issues and to ensure we in IR can communicate to investors about the actions Shell is taking to manage ESG issues.

We see fluctuating levels of interest in specific ESG issues. For example, an external report, a political change or an issue at a competitor could suddenly trigger a raft of questions on a topic that may have been relatively quiet. That ongoing awareness of the ESG issues the business is managing makes it easier for IR to respond to questions and demonstrate how we manage the risks.

What are the key topics companies should focus on within their organization?

So many factors determine the key topics: people, industry, products, geographies, politics, technology... it certainly isn’t one size fits all. There can also be a difference in the topics companies focus on to manage the day-to-day operations of their businesses, and those that are strategic. In our industry, there is no shortage of ESG topics to focus on and, as Shell has operations in 90 countries, different locations will focus on different risks.

You can see the diversity of the issue reflected in the wide range of topics we cover in our annual sustainability report and in our presentations to SRI investors. We have a structured process to inform which topics are material for inclusion in our sustainability report. At Shell, safety is critical to the business, and the number one risk we need to manage. In our conversations with ESG investors, however, it is obvious that climate change is the topic they want to know more about and understand better, and our communications with the ESG community reflect this.

How can companies best ensure that all employees understand the importance of ESG?

While the term ESG may not be understood by all employees at Shell, environmental, social and governance issues are highlighted from day one in the company. Shell’s general business principles and code of conduct cover many areas of ESG. Our control framework covers the requirements for operational management of many ESG risks. Also, in this digital age, the information that is shared by the company with employees has broad reach within seconds, and so using digital communication to give prominence to ESG matters is an easy way of ensuring ongoing attention.

As an example, Shell’s intranet homepage has a dedicated area for safety, and quarterly financial updates to staff from the CEO, CFO or business leaders always start with an update on safety. We also hold annual safety days for staff.

Do you have any top tips on boosting ESG responsibility throughout a company?

What I see working at Shell is that our leaders set the tone for the rest of the organization about the importance of ESG issues. At Shell we include sustainable development measures in the group scorecard that sets the annual bonus for employees as well as for executives. We also aim to be transparent and have consistent messages across the group. While ESG is a very important area for investor communications, it is also necessary to stay joined up across all IR aspects, so at Shell I get the opportunity to participate in mainstream roadshows as well as specifically ESG-focused engagements.

This article was produced by ELITE Connect and originally published on the ELITE Connect platform

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