Crafting Your ESG Story

Parkland USA and Hightowers Petroleum share how they approach ESG initiatives and reporting.

Crafting Your ESG Story

September 2022   minute read

By: Jerry Soverinsky

More than 30 years ago, political journalist Michael Kinsley, writing for the New Republic, held a contest among the magazine’s readers to find the most boring newspaper headline. The winner: “Worthwhile Canadian Initiative.” “To this day, I think, it has not been topped,” Kinsley wrote in 2010.

Substitute “provocative” for “boring,” and you have what’s inked above: anything containing the letters E, S and G (in order, mind you. Oh, and that stands for environmental, social and governance).

So, let’s address the controversy from the top by laying out what this piece is NOT. It is NOT prescriptive. It is NOT judgmental. And it is NOT argumentative. Rather, it’s a matter-of-fact assessment of what lenders, investors and the public are collectively looking for when they assess a brand today in terms of its environmental, social and governance impact.

Over the past several years, the major oil companies have faced growing pressures on their ESG commitments. On the legal front, for instance, a Netherlands court ordered one company to reduce its CO2 emissions by 45% by 2030. Another instance involves an activist investor that succeeded in securing seats on an oil company’s board, a concerted effort at steering the company away from its focus on fossil fuels.

Whether those members can help the company reduce its greenhouse gas emissions while still delivering palatable returns for shareholders is yet to be seen, but the message is clear: Environmental concerns are a very public matter, and corporate boardrooms ignore them at their own peril.

 The ESG Integrity program includes an application that captures data and generates ESG reports."

INDUSTRY-WIDE ASSISTANCE

Indeed, times are changing. Expectations are changing. From employees. Shareholders. And the public. And ESG reporting has become the de facto measuring stick of a company’s efforts to align with the public’s perception of what it means to be a good corporate citizen. And it does so by measuring risk.

“ESG is a data-driven approach to assess an organization’s near-term and long-term risks,” said Jeff Hove, vice president of the Fuels Institute. “As we begin to look through the lens of risk management, we note that organizations have internal risks such as workplace injuries/accidents, cybersecurity breaches and human resource risks such as sexual harassment lawsuits. Minimizing these risks will save the organization money and, for publicly traded companies, attract more investors as a sound and proactive company.”

While ESG reporting is currently voluntary, the SEC is moving to codify that publicly traded organizations be required to report and attest (via third-party audits) their ESG efforts. “Under the current proposed SEC rules, this would include reporting the indirect Scope 3 emissions, which are emissions created upstream and downstream of the reporting company,” Hove said. “This means that the publicly traded company will be asking for direct Scope 1 emissions from the companies it is currently doing business with. ... Based upon current proposed SEC language and existing contractual demands being made along the supply chain, all parties in the supply chain (fuel/fleet providers included) will most likely have to develop an ESG plan and report.”

As a result of this likelihood, in 2020, the Fuels Institute Board of Directors and Board of Advisors began assessing the future and potential impacts of ESG reporting demands on the transportation and fuels industries. “Following these meetings and recognizing potential business and compliance difficulties, the boards approved the build-out of industry guidance and tools to assist the fuels and transportation industries with meeting the new ESG expectations,” Hove said. “From these discussions and stakeholder task group convenings, the ESG Integrity program was created.”

ESG INTEGRITY

The ESG Integrity program includes an application that captures data and generates ESG reports. The application is online and allows companies of all sizes to create an ESG report. It guides retailers as to what information to include, along with emissions modeling through the open-sourced Argonne National Labs GREET model.

“By combining all of the above under one program, ESG Integrity provides a seamless third-party program that can be initiated and managed by a single employee while being supported by ESG Integrity staff and the professionals supporting this program,” Hove said.

As opposed to in-house ESG reports that can cost $150,000 to $200,000 to develop, “[o]ur goal was to create a program that is accessible to any size company. Costs for the ESG Integrity application are 10% of what the industry is currently paying for outside consulting and report generation,” Hove said.

Costs are only part of what goes into ESG reporting. We spoke with two NACS members who shared details of their companies’ ESG reporting efforts.

PARKLAND USA: AN IN-HOUSE APPROACH

Parkland USA is an independent fuel distributor with operations across the U.S., Canada and Caribbean. Over the past several years, the Canada (Calgary)-based company had been receiving mounting inquiries from stakeholders, investors and employees about its sustainability efforts. “We had actually been focusing on ESG initiatives but not telling people about it,” said Christy Elliott, senior vice president, chief sustainability officer (CSO), Parkland. “We recognized the importance of coordinating not only our ESG efforts but also our communication efforts.”

"You need board support to make this work, and it needs to be a priority for the executive team."
- Christy Elliott, senior vice president, chief sustainability officer, Parkland USA

As a result, Elliott took on Parkland’s newly created CSO role, enlisting senior leaders across the company’s operations to establish sustainability reporting. “We created an inaugural sustainability report in 2021 and committed to following up this year with baseline data and ESG targets.” Those targets include all aspects touching on ESG, including spills, injury frequency and diversity and inclusion.

While Elliott’s ESG role has been an evolving work in progress, she maintains little could have been achieved without top-down support. “You need board support to make this work, and it needs to be a priority for the executive team. If your boss is not engaged with an issue, employee passions and engagement will also be less than optimal.”

It was a systematic, five-step process for Parkland and unfolded quickly. To spark engagement, Elliott created an internal, 14-person task force (step one) that assessed Parkland’s operations and conceptualized its ESG strategy. “We took a half day and addressed every ESG issue—after all, you can’t boil the ocean—and came up with five issues that were the most important to us” (step two). Those five issues included: climate change, safety and emergency response, product transportation and inclusion, and governance and ethics. “The list helped us focus on what we could move the needle on.”

Next came delegating the actual sustainability reporting to specific task-force team members (step three). “After all, you can’t draft by committee.” This includes gathering data, interpreting that information, and then assembling it in a format that is digestible by the public. “It’s about telling your story as an organization—your ESG vision and what you’re doing to achieve it.”

The data-gathering process (step four) was the most challenging for Parkland, especially in areas like greenhouse gas emissions, where the metrics can be difficult to measure. “We used full-time consultants for our GHG data gathering,” Elliott said.

Finally, there’s the publication of the report (step five) and complementary public relations efforts. “The report is the main way that we tell our ESG story, but we do many conferences, too. It’s a great way to talk to stakeholders and our communities.”

Parkland released its 2021 Sustainability Report, “Drive to Zero,” in mid-July. “When we launched our enterprise-wide sustainability strategy last year, we set ambitious and measurable targets to help ensure long term success,” Elliott said in announcing the report’s release. “Our pillars of People, Environment, Partners and Responsible Growth are the foundation that allows us to continuously improve and expand our sustainability practices. We are excited to share the work we’ve done over the past several months as we continue to Drive to Zero.”

Although the company has made significant progress on its overarching goals that include achieving zero safety incidents and spills, upholding zero tolerance for racism and pursuing a net-zero emissions goal by 2050, Elliott concedes that ESG work is never done. “It’s an immense amount of work.”

And while Parkland’s management would have pursued ESG goals independently, Elliott said that upcoming SEC rules will require it anyway. “You don’t have the option today not to engage. But when you do, it can make a positive difference on your bottom line and the lives of those in the communities you serve.”

"If we embrace ESG and tell our stories, it’s an opportunity to show that we’re leading the way to a sustainable future."
- Stephen L. Hightower, president and CEO, Hightowers Petroleum

HIGHTOWERS PETROLEUM: WORKING WITH ESG INTEGRITY

Midwest-based Hightowers Petroleum is a national distributor of gasoline and diesel. With much of its commercial business targeted to Fortune 500 companies, it has received increased scrutiny from its customers requiring alignment with ESG initiatives. “In the past year, we began to consider ESG seriously. Especially as our customers began implementing requirements that to continue doing business with them, we had to have ESG standards and reporting,” said Stephen L. Hightower, president and CEO of Hightowers Petroleum.

The company’s ESG pursuit was not one of compulsion. Hightowers has ESG values built into its foundation. “Since our founding, Hightowers Petroleum Co. has embodied the true spirit of corporate social responsibility, and we are committed to the highest standards of corporate citizenship. Our culture and values are rooted in service, integrity and taking personal responsibility for our actions, outcomes and reputation. Given the large span of our clients, suppliers and partners, we recognize the global reach of our business practices and our public accountability.”

At the same time, as a private company, it lacked the bandwidth to pursue ESG reporting in-house, so it turned to the Fuels Institute and its Integrity Program for help. “It’s in the early stages, and we signed up for it. It’s a great way to organize and look at our data points that are part of our plan. At the same time, there’s a thoughtful template that prompts us for input before coming up with an ESG report that we can share with our customers.”

For Hightower, the Integrity Program formalized much of what the company had already begun pursuing informally. “We realized that a lot of the things the program asked for are things that align with our company’s core values,” he said. “We’ve always committed to supporting our employees, volunteering and giving back.”

As a private company, Hightowers Petroleum is nimble enough to continually refine what has been a relatively new project. “We started in 2021 and got things going in early 2022,” Hightower said. “In March, we began working with the Integrity Program and measuring and sharing our information. (They’re awaiting their first report as this goes to print.) The report will include energy efficiency updates on buildings and vehicles, measurements of levels 1, 2 and 3 carbon emissions and accident reporting, among other items.”

We took a half day and addressed every ESG issue–after all, you can’t boil the ocean–and came up with five issues that were most important to us."

Like Parkland, Hightowers Petroleum finds value in sharing ESG efforts with customers. “It’s important that the communities we serve know that we are good citizens and partners,” Hightower said. Especially as gas prices remain high and fuel retailers are stigmatized as culprits, “it’s helpful to demonstrate what we’re doing to give back to our communities. This shows our commitment to behave ethically, while improving the quality of life of our workforce and their families, along with our local communities.”

Hightower says that while his company’s customers do not expect it to be perfect [regarding ESG], they expect transparency and metrics. “If we embrace ESG and tell our stories, it’s an opportunity to show that we’re leading the way to a sustainable future. Something that everyone can appreciate and value. And like many other marketplace trends, if you don’t incorporate [ESG] into your business, you’ll get left behind.”

REPORTING FOR DUTY

Whether ESG reporting remains voluntary or becomes mandatory, Hove said that the pursuit is not about simply checking off an operational to-do list. “...[W]e are finding that employees appreciate the transparency and the corporate goals for improvement by their leaders.

“The ESG program is a top-down initiative that can bring all employees into the discussion of constant improvements that not only reduce risks but also positively impact a company’s bottom line.”

To learn more about the ESG Integrity app, visit www.fuelsinstitute.org.

ESG Resources From NACS and the Fuels Institute    

Download “The Case for Developing an ESG Plan” white paper and learn more about ESG reporting.

Listen to NACS Convenience Matters podcast episode No. 341 “What Retailers Need to Know About ESG Planning” , and episode No. 312 “ESG Planning”.

Jerry Soverinsky

Jerry Soverinsky

Jerry Soverinsky is a Chicago-based freelance writer and NACS Magazine contributing writer. He can be reached at [email protected].

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