Shell Oil Corporation’s Profitable Conservation Strategies for Biodiversity and Wildlife Conservation

August 20, 2018 By Mark Aspelin

Today we’ll look at the profitable conservation strategies for the #5 company on the Fortune Global 500 list – Royal Dutch Shell.  Headquartered in The Hague, Netherlands, Shell has 86,000 employees that are located in over 70 countries around the globe.  These employees support the company’s 43,000 gas stations and 23 oil refineries which produce 3.6 million barrels of oil equivalent for 30 million customers each day.

Shell’s operations are focused on the production, refining, and marketing of oil and natural gas, which is summarized nicely in the graphic below from Shell’s 2017 sustainability report.

Shell CEO, Ben van Beurden, states that if the Company wants to be the best, it must focus on four, equally-important things:

  • Create value for its owners, the shareholders
  • Be the most valuable company in its industry
  • Make its portfolio fit for the future in terms of carbon intensity
  • Create shared value with society

For that last point, create shared value with society, Ben van Beurden elaborated in an interview with the following: “We have to be seen by society as a force for good. This may mean different things to different people.  It may mean we should invest in communities living close to our operations, do social investments.  But it’s not enough.  Create employment, pay taxes, develop local supply chains, help build institutions, and so on.  True, all important, but not enough.  What we need to do on top of all that is to go back to our core mission: to provide more and cleaner energy solutions.  We must be seen as a force for good because we deliver better products that society really needs.  And that’s why I reject the comparisons that people make of oil and tobacco, and oil and weapons.  With those industries you cannot argue that the product drives something intrinsically good.  It doesn’t drive societal prosperity.  It doesn’t drive improvement in life.  Ours does. But we have to demonstrate that it does, while always acting to reduce environmental impact.”

For its 2017 Sustainability Report, Shell used GRI version 4 reporting guidelines.  In selecting content for its Report, Shell engaged with a variety of stakeholder groups to identify which topics to include in the Report, which topics to include on the company’s website at shell.com, and which topics to exclude.  Note that the topic of biodiversity was identified as a topic to include in the Company’s Sustainability Report.  Here’s a diagram that shows the criteria that Shell uses to determine which topics to include and exclude from the company’s Sustainability Report and website.

Now that we have our introductions out of the way, let’s see what profitable conservation activities Shell is engaged in across the world, particularly in the areas of biodiversity and wildlife conservation.  In this post, I’ll focus on the various activities that Shell is pursuing to address the following four major threats to biodiversity and wildlife: habitat destruction, invasive species, pollution, and overharvesting.  Get comfortable, because this is going to be a long post … Shell is engaged a wide variety of activities related to biodiversity and wildlife conservation.

Habitat Destruction

To address the biodiversity threat of habitat destruction, Shell follows the strategies of avoidance, minimization, restoration, and biodiversity offsets.  In the words of the Sustainability Report, “In our projects and operations, our primary aim is to avoid impacts on biodiversity and ecosystem services.  Where avoidance is not possible we aim to minimize our impact.  Where our operations have affected biodiversity and the communities who rely on biodiversity for their livelihoods, we take measures to help restore habitats or ecosystems.  We look for opportunities to make a positive contribution to biodiversity conservation in the communities where we operate.”  Let’s look at some examples of each of these strategies.

Avoidance: Avoidance refers to the strategy of avoiding development or operations in areas with a high-quality habitat for species that are classified as endangered, threatened, or vulnerable to extinction.  An avoidance strategy may also be extended to high-quality habitat for species that are classified as “species of concern,” depending on the health of those populations and the degree and types of potential impacts.  Since 2003, Shell has made the commitment that it will not explore for, or develop, oil and gas resources in natural World Heritage Sites.  In addition, Shell conducts biodiversity assessments for any new major project or large expansions to existing operations, with the aim of avoiding and minimizing impacts on biodiversity and ecosystem services.  

Minimization: Minimization refers to a broad range of strategies that are designed to reduce the duration, intensity, and extent of impacts to habitat for biodiversity and wildlife.  There are a wide variety of different minimization strategies to consider – anything from implementing policies and procedures to creating wildlife corridors, installing green roofs, restoring land, and pursuing biodiversity offsets or other voluntary compensatory actions.  Here are some of the key minimization strategies that Shell has implemented, along with examples.

Policies and procedures: Shell has a variety of policies and procedures in place to minimize impacts to biodiversity, particular in areas that are designated as critical habitat.

Creation of a Biodiversity Standard: In 2001, Shell became the first company in the energy industry to launch a biodiversity standard to guide its operations.  The Company’s biodiversity standards are designed to be aligned with relevant international standards, including those set by the International Finance Corporation.  The standard reads as follows:

“We recognize the importance of biodiversity. We are committed to work with others to maintain ecosystems, to respect the basic concept of protected areas, and to seek partnerships to enable the Group to make a positive contribution towards the conservation of global biodiversity.  Shell companies will conduct environmental assessments, which include the potential impacts on biodiversity, prior to all new activities and significant modifications of existing ones; and bring focused attention to the management of activities in internationally recognized hotspots, including the identification of, and early consultation with, key stakeholders.”

Conduct biodiversity assessments: As we mentioned in the Avoidance section above, Shell performs biodiversity assessments for any new major project or large expansions to existing operations, with the aim of avoiding and minimizing impacts on biodiversity and ecosystem services.  These biodiversity assessments are part of a larger environmental assessment that considers the potential environmental impact of its activities and how local communities may be affected before, during and after operations.

Develop biodiversity action plans: Before Shell begins a project in a sensitive environment, the Company creates a biodiversity action plans to help it identify and minimize impacts during planning, operations, and decommissioning.  Biodiversity action plans include measures that are taken to restore habitats or ecosystems that are located near the Company’s operations.  For example, to minimize the impacts of a new pipeline in Ireland, Shell decided to construct a pipeline tunnel under an estuary to minimize the impact on land and water habitats.  Below is a photo of the landscape in Ireland that the pipeline crosses. 

Publicly report on activities in IUCN Category I-IV protected areas: Shell looks for opportunities to further improve the way it operates in International Union for Conservation of Nature (IUCN) Category I-IV protected areas, and areas of high biodiversity value.  For your reference, here’s a brief summary of the IUCN protected area categories and definitions:

Category Ia: Strict Nature Reserve.  Category 1a protected areas are strictly protected areas set aside to protect biodiversity and geological/geomorphical features, where human visitation, use and impacts are strictly controlled and limited to ensure protection of the conservation values.

Category Ib: Wilderness Area.  Category Ib protected areas are usually large unmodified or slightly modified areas, retaining their natural character and influence without permanent or significant human habitation, which are protected and managed to preserve their natural condition.

Category II: National Park.  Category II protected areas are large natural or near natural areas set aside to protect large-scale ecological processes, along with the complement of species and ecosystems characteristic of the area, which also provide a foundation for environmentally and culturally compatible, spiritual, scientific, educational, recreational, and visitor opportunities.

Category III: Natural Monument or Feature.  Category III protected areas are set aside to protect a specific natural monument, which can be a landform, sea mount, submarine cavern, geological feature such as a cave or even a living feature such as an ancient grove.  They are generally quite small protected areas and often have high visitor value.

Category IV: Habitat/Species Management Area.  Category IV protected areas aim to protect particular species or habitats and management reflects this priority.  Many Category IV protected areas will need regular, active interventions to address the requirements of particular species or to maintain habitats, but this is not a requirement of the category.

Category V: Protected Landscape/ Seascape.  Category V is a protected area where the interaction of people and nature over time has produced an area of distinct character with significant, ecological, biological, cultural and scenic value, and where safeguarding the integrity of this interaction is vital to protecting and sustaining the area and its associated nature conservation and other values.

Category VI: Protected area with sustainable use of natural resources.  Category VI protected areas conserve ecosystems and habitats together with associated cultural values and traditional natural resource management systems.  They are generally large, with most of the area in a natural condition, where a proportion is under sustainable natural resource management and where low-level non-industrial use of natural resources compatible with nature conservation is seen as one of the main aims of the area.

Partner with conservation organizations: Shell has formed active partnerships with conservation organizations such as the International Union for Conservation of Nature (IUCN),  The Nature Conservancy, Wetlands International, Earthwatch, and the National Fish and Wildlife Foundation to better understand how to protect areas that are rich in biodiversity (critical habitats), develop nature-based solutions to address the global climate challenge, and to engage employees in conservation projects.  Shell has been partnering with environmental NGOs for nearly twenty years.  As Shell points out on its website: “Since 1999, Shell U.S. has contributed to 19 key environmental NGOs to protect more than 13 million acres of wetlands, converted old rail lines into hiking trails in state parks, cleaned shoreline with Shell volunteers removing 600,000 pounds of debris, and conserved more than 1.8 million acres of land.”  Here are some examples:

The International Union for Conservation of Nature: Shell has partnered with IUCN on more than 50 initiatives over the past 15 years, with an emphasis on conserving and managing biodiversity in its operations and improving the way that Shell manages protected areas.  For example, Shell and IUCN have been working together since 2004 to minimize the impacts on western gray whales at Shell’s operations in Sakhalin, Russia by taking steps such as rerouting a pipeline away from the feeding grounds of the whales.  Here is a photo of an oil and gas platform off Sakhalin Island.

The Nature Conservancy (TNC): Shell has partnered with TNC for about 15 years on a variety of efforts.  Here are a few examples:

Natural climate solutions: Shell is working with TNC to better understand how investing in natural climate solutions, such as large-scale reforestation, can help address the global climate challenge.  These projects also provide Shell with carbon credits to offset emissions that it generates elsewhere.

Online tool to monitor migratory species: In 2017, Shell partnered with TNC to launch an online tool to monitor migratory species in the Gulf of Mexico and the Caribbean Sea, both areas where Shell has operations.  This monitoring tool provides information on migration patterns and possible threats to fish, sea turtles, mammals, and birds.   

Reducing the cost and rate of erosion of pipelines:  In the Louisiana, Shell and TNC are working together to develop nature-based approaches to reduce the cost and rate of erosion along pipelines in the Louisiana coastal zone.  To accomplish this, Shell and TNC plant vegetation and build oyster reefs to create living shorelines that restore wetlands, improve coastline resilience, and enhance local biodiversity.

Mapping biodiversity of watersheds in Colombia: In 2015, Shell and TNC completed a pilot project to map critical biodiversity in three watersheds of the central Magdalena River Basin (pictured below) in Colombia in an effort to better understand the potential impacts that Shell’s operations may have on local biodiversity.  

Wetlands International: Shell has partnered with Wetlands International for about 10 years to identify ways to avoid or minimize biodiversity impacts, as well as identify opportunities to make positive contributions to wetland biodiversity and the services it provides to local communities.

Creating a biodiversity monitoring plan for Majnoon: Majnoon is Arabic for “crazy”, and in this case it refers to the large amount of oil in the Majnoon field in southern Iraq.  The field covers nearly 500 miles and is estimated to contain 38 million barrels of oil, making it the third largest oil field in the world.  The Majnoon field also happens to overlap with the Mesopotamian Marshlands (pictured below), the largest and most important wetland area in the Middle East, with more than 200 species of birds and at least 40 species of fish.  Shell partnered with Wetlands International on a project that aims for sustainable oil field development and a positive contribution to marshland restoration, people’s livelihoods, and the institutional strengthening of Iraq.

Earthwatch Institute: For nearly two decades, Shell has partnered with Earthwatch on an employee engagement program called Project Better World.  Through this volunteer program, Shell employees can take part in scientific expeditions at different locations around the world and then share their knowledge with colleagues and generate increased awareness of environmental and sustainability issues.  Over the past 19 years, over 1,000 employees have participated, contributing around 49,000 work hours to environmental research.

The National Fish and Wildlife Foundation, and other conservation organizations in the US:  Over the past 20 years, Shell has funded around 270 projects with various conservation partners in the US, including the National Fish and Wildlife Foundation, to support the protection, restoration and management of habitats in the Gulf of Mexico.  These projects included the use of wetlands, reefs, marshes, and outer island barriers to reduce coastal erosion.  In 2017, Shell joined the Killer Whale Research and Conservation Program, a public-private partnership to help the killer whale population recover in the Pacific Northwest by supporting projects that improve food supply and the quality and management of habitats.

Academic partnerships to protect oceans:  Shell acknowledges that the biodiversity of the world’s oceans is at risk from a range of factors, including overfishing, climate change, and pollution from plastics.  Shell gathers scientific data and knowledge from local communities to better understand the marine ecosystems in which it operates, and trains people in the community to help protect marine mammals in countries where the company operates.  For example, in the Gulf of Mexico of the U.S., Shell collaborates with academic scientists by providing them with Shell’s expertise and technology – such as remotely-operated vehicles – to explore the depths of the ocean.  This has led to sightings of rare species, including the discovery of what is thought to be a new species of octopus.

Green Infrastructure

Creating green infrastructure: As mentioned in the partnerships section with The Nature Conservancy, Shell looks for opportunities to integrate natural systems into the design of its projects.  For example, Shell provided funding for the Coalition to Restore Coastal Louisiana to support an effort to collect hundreds of tons of oyster shells from local restaurants to help rebuild oyster reefs and restore the state’s coastline.  The oysters are clumped together to form reefs which trap sediment and help create shallow marshes and estuaries that serve as nurseries for one of the country’s largest commercial fisheries and a refuge for more than 5 million migratory birds.  Humans benefit from this effort as well, since the reefs help shield homes, businesses, and ports from storms on the Louisiana coast.  Below is a photo of collected oyster shells from the Shell-funded program to help restore Louisiana’s eroded coastline.

Green Building

Site SelectionIn Pennsylvania, Shell decided to build a petrochemicals facility on an existing industrial site that was used for about 100 years for zinc smelting.  Shell  decommissioned the old plant, recycled old equipment and waste products, and covered the site with special industrial liners and caps to protect groundwater, surface water, and construction crews.  When areas of water on-site could not be protected, Shell created wetlands elsewhere that have now grown into healthy habitats for fish and vegetation.  After consulting with local residents and community leaders, Shell also planted native trees along the nearby river to improve the appearance of the site.  Shell is investing $80 million to mitigate the environmental impacts of converting the old zinc smelting site into a plant that will produce polyethylene.

Rehabilitation and Restoration: A third major strategy that Shell uses to address the biodiversity threat of habitat destruction is to rehabilitate and restore habitat.  One of the largest restoration efforts is taking place in Nigeria where Shell Petroleum Development Company of Nigeria and its joint venture facilities are partnering with the Nigerian government and other operators to clean up sites that have been contaminated by illegal activities and operational spills.  In 2011, The UN Environmental Programme report on Ogoniland recommended the creation of a US$ 1 billion Ogoni Restoration Fund to be co-funded by the Nigerian government, Shell Petroleum Development Company of Nigeria and its joint venture facilities, and other operators in the area.  Since 2012, Shell has also worked with the IUCN to protect biodiversity and improve remediation techniques at sites that are affected by oil spills in Shell’s areas of operation in the Niger Delta.  This has led to the creation of new initiatives, such as a Niger Delta biodiversity strategy and toolkit which provides guidance on restoring mangroves that will help strengthen its remediation and rehabilitation efforts.  

Biodiversity Offsets and Voluntary Compensatory Actions: The fourth major strategy that Shell pursues to address the biodiversity threat of habitat destruction is the use of biodiversity offsets to compensate for development impacts.  For example, in Australia, Shell acquired the Valkyrie property in 2015 as a biodiversity offset to compensate for clearing vegetation and habitat while developing gas resources.  The Valkyrie property (pictured below) is located next to the Dipperu National Park in Queensland, and it contains large areas of eucalyptus woodlands, endangered brigalow woodlands, semi-evergreen vine thickets, riparian vegetation, and wetlands.

Invasive Species

There is no mention of any efforts to address invasive species in Shell’s various reports and website.  However, I am aware of the following example:

Invasive species monitoring and eradication in Puget Sound: In 2017, Shell’s Puget Sound Refinery in Washington awarded a US$ 10,000 grant to Northwest Straits Foundation to support efforts to monitor and eradicate local invasive species by the Skagit County Marine Resources Committee and its project partners.  The grant is being used to purchase equipment to monitor European green crabs.  European green crabs are an invasive species that is considered a threat to Puget Sound shellfish fisheries because it feeds on juvenile crabs, oysters, clams, and other shellfish, and it may compete with native fish and birds for food.  The equipment will help “citizen scientists” monitor for green crabs in Padilla Bay and Fidalgo Bay near Shell’s refinery and at other sites in adjacent counties.

Pollution and Climate Change

Not surprisingly, Shell is engaged in a wide variety of pollution prevention and energy saving initiatives.  Since this blog post is already running long, I’ll provide just a few examples to give you a  sense of how Shell is addressing the biodiversity threats of pollution and climate change.

Spill response and prevention in the Niger Delta: The vast majority of oil spills in the Niger Delta are caused by crude oil theft, sabotage of pipelines, and illegal oil refining.  In 2017, nearly 90% of the number of oil spills from Shell Petroleum Development Company of Nigeria joint venture facilities was due to illegal activities.  The remaining 10% were due to operational reasons.  Regardless of whether the oil spills were due to illegal activities or due to operational reasons, Shell takes steps to clean up and remediate areas impacted by spills that come from its facilities.  If the spill is due to an operational issue, Shell also pays compensation to people and communities impacted by the spill.  Shell works with government agencies, NGOs, and communities to prevent and minimize spills from illegal activity.  Shell also conducts air and ground surveillance and installs anti-theft mechanisms on equipment and pipelines to mitigate illegal activities and to ensure that spills are quickly detected and addressed.  Despite these efforts, the number of sabotage-related spills has increased from 48 in 2016 to 62 in 2017.  

Managing water: In water scarce areas, Shell develops water management plans that describe the long-term risks to water availability and define measures to minimize the Company’s use of fresh water or prescribe alternatives to fresh water, such as recycled water, processed sewage water, and desalinated water.  Shell treats its wastewater prior to discharge into the environment and, where appropriate, looks for ways to treat wastewater using natural solutions such as constructed wetlands.  This approach helps Shell reduce the energy use associated with its water management operations.  Shell has a water research laboratory in Bangalore, India that collaborates with NGOs, academic institutions, and technology firms to advance the development of technologies that increase rates of water recycling and reuse.  Shell also advocates for common water management practices in the industry and has published, together with the University of Utrecht, an accounting methodology for water used in oil and gas operations.

Climate change and renewable energy: In 2017, Shell announced its goal to cut the net carbon footprint of the energy products it provides by around half by 2050.  Shell adds that “this is an industry-leading aspiration that may need periodic recalibration in line with the pace of change in broader society and the wider energy system.”  As an interim step, Shell is targeting a 20% reduction by 2035.  These reduction targets include emissions from Shell’s operations, emissions from third parties who supply energy for that production, and its customers’ emissions from their use of the products it sells.  In order to achieve these targets, Shell plans to invest in hydrogen and advanced biofuels for transportation, invest in electric vehicle charging, generate more renewable power, and advance technology to capture CO2 emissions and store them safely underground.  Shell will also use natural solutions, including forests and wetlands, to naturally absorb emissions from uses where alternatives do not yet exist or will take time to reach commercial scale.  Shell plans to produce more natural gas, which is the cleanest-burning hydrocarbon, and focus on reducing leakage of methane from its gas operations.  Roughly half of Shell’s energy supply is derived from natural gas.  To help ensure that greenhouse gas emissions are considered in the Company’s investment decisions, Shell uses a greenhouse gas screening value as part of its project planning and evaluation process.  Finally, Shell plans to encourage countries and industries to switch from coal to lower-carbon natural gas, and shares best practices on how to keep CO2 out of the atmosphere.

Overharvesting

There isn’t much discussion around the topic of overharvesting in Shell’s various reports and website.  Shell’s primary strategy to address overharvesting is to encourage supply chain sustainability through the Company’s General Business Principles.    

Supply Chain Sustainability: Shell works with its 33,505 suppliers to ensure that they follow Shell’s General Business Principles.  These General Business Principles include a commitment to balancing short-term and long-term interests, and integrating economic, environmental and social considerations into business decision-making.

Profitable Conservation

In its sustainability reports and company website, Shell doesn’t provide much in the way of return on investment data.  Instead, the Company provides some data on how much they spent on certain initiatives.  Here are some examples:

Energy efficiency: Between 2009 and 2015, Shell achieved a 6% decrease in the energy intensity (amount of energy consumed for every unit of output) of its refineries through improvements in equipment reliability and operating processes.  Downstream energy savings, combined with changes in the refining energy mix to lower-carbon alternatives, has reduced Shell’s refining CO2 emission footprint by approximately 1.5 million tons each year.  In terms of cost savings, these efforts reduced the total annual energy cost for 13 refineries by $2.5 billion.  Between the years 2009 to 2015, Shell’s energy efficiency efforts reduced costs by approximately $100 million each year.  In 2017, the overall energy intensity for the production of oil and gas increased slightly compared with 2016 data.

Maintain and Monitor an Artificial Reef: In the Gulf of Mexico, Shell decommissioned the Cougar platform, which produced more than 31 million barrels of oil over the last two decades.  In 2017, Shell used a specially-designed vessel to lift the top part of the platform and deck and place it on a barge to be transported to shore for cleaning and recycling or disposal.  The same vessel was then used to move the platform’s 345 foot-tall and 6,000,000 pound support structure across 50 miles of open water to its resting place as an artificial reef.  Shell donated the structure to the Louisiana artificial reef program and made a $619,000 contribution to help maintain and monitor the reef, which will provide habitat for a variety of marine life such as red snapper and amberjack fish.

Community Skills and Enterprise Development: In the Philippines, Shell supports a community-based enterprise development and biodiversity program called Tourism and Business Through Protecting Nature.  This program supports sustainable tourism through community involvement and creating alternative income opportunities that also protect and conserve the biodiversity of Palawan.  In 2017, the program provided 67 local jobs and generated more than $90,000 in revenue from supported enterprises.

Research & Development: Shell spends about $1 billion each year on research and development to turn ideas into commercially viable technologies.  This includes the development of fuels and lubricants that help customers use less energy, and technologies that improve the energy and water efficiency of Shell’s operations.  Since 2009, Shell has invested over $1.1 billion in low-carbon R&D, primarily through investments in companies and technologies that are complementary to Shell’s existing business.  For example, in 2015, Shell invested in GlassPoint for solar technology, Aquion Energy for energy storage (produces saltwater ion batteries that can store solar power for use at night), and Next Step Living – a company that helps homeowners improve energy efficiency and use more renewable energy.  Shell also supports the global Carbon XPRIZE to foster new ideas in the areas of carbon capture and use, and is actively researching new transport solutions that include hydrogen technologies, advanced biofuels, and energy storage for electric vehicles.

Tailings: Over the past ten years in Canada, Shell has invested $355 million to develop technologies that speed up the drying process for fluid fine tailings that are generated when separating bitumen from sand.  These tailings are stored in ponds, where the sand is allowed to settle at the bottom so that the water can be recycled and the solids can be used for reclamation.  These processes are carefully managed to prevent contamination of local surface water and groundwater.

Charitable Giving and Local Investment: In 2017, Shell spent $189 million on social investments worldwide.  Of that amount, 41% was required by government regulations or contractual agreements.  Shell spent $111 million on voluntary social investments: $57 million of that amount was invested in initiatives that are aligned with Shell’s global themes of enterprise development, road safety, and energy access; $54 million was spent on local programs for community development, disaster relief, education, health, and biodiversity.   The Company also established the Shell Foundation, an independent charity that applies a business approach to the global development challenges of access to energy and sustainable mobility.  Since 2000, the Shell Foundation has given $279 million in grants to early-stage businesses and new market builders operating in Africa, Asia, and Latin America.

Local Procurement: In 2017, Shell spent $42.2 billion on goods and services from 33,505 suppliers worldwide, with $4.9 billion spent in countries that have a gross domestic product of less than $15,000 a year per person, and 80% of that money going to local companies.  In 2015, Shell purchased $56.3 billion of goods and services from 52,000 suppliers worldwide: $37 billion (65%) of this amount was spent in Canada, the Netherlands, Nigeria, the UK and the USA and $5.9 billion (10%) was spent in countries that have a gross domestic product of less than $15,000 a year per person.

Training: In 2015, Shell spent $335 million (600,000 training days) on training and development for employees and joint-venture partners.  This training focused on developing leadership capability, improving skills in technical, safety, and commercial areas, and improving expertise in specialist areas such as cultural heritage and indigenous peoples.

Biodiversity & Wildlife Conservation Performance Assessment

Shell is clearly doing a lot of work to minimize its impacts to biodiversity and it does a good job in sharing this information in the pages of its sustainability report and website.  There are several areas where I think Shell can improve how its addressing the major threats to biodiversity.

First, Shell could set and communicate clear performance targets related to land use and biodiversity conservation.  Shell’s key environmental goals are focused on reducing oil spills, reducing flaring in its upstream business, improving energy-efficiency, and reducing greenhouse gas emissions.  In addition to these goals, Shell should set a target or goal to conserve a certain number of acres of wildlife habitat for every acre of land developed, or adopt a policy of no net loss (or even a positive gain) of biodiversity through its development activities and operations.

Second, Shell should share information about its efforts to address the #2 threat to biodiversity: invasive species.  This is a common gap for most companies.

Finally, Shell could share more information about how it is greening its supply chain.  This could be through the use of supplier scorecards and audits, or other approaches to help ensure that biodiversity impacts are being considered in purchasing decisions and supplier operations.  The supply chain section of its sustainability report is very broad and does not mention how supplier environmental performance is being monitored and measured.

Despite its current focus on tangible cost saving initiatives such as energy efficiency, I was happy to see that Shell is also engaged in a wide variety of less tangible cost saving initiatives, such as the protection of biodiversity and oceans.  It was refreshing to see that Shell has implemented a biodiversity standard to help guide its operations and operational decisions.  However, I didn’t see any tangible goals associated with its biodiversity standard, other than the need to conduct a biodiversity assessment when certain conditions are met.  To be fair, the sustainability report mentions that the goals presented in the report are just a selection of global metrics that are tracked within the company, so Shell could very well have quantifiable metrics and targets related to biodiversity and wildlife conservation.  I will contact Shell to see if I can learn more about these metrics and will update this post with any relevant details.

As Shell expands its exploration and production activities in the coming years, there will likely be a significant amount of conflict between areas that are considered important for biodiversity conservation and areas that have significant amounts of hydrocarbon resources.  It will be interesting to see how Shell resolves these conflicts, and whether or not the Company will factor in the economic value of nature’s services (natural capital) in order to give biodiversity sufficient weight in its operational decision making.  Based on the company’s report and website, it’s good to know that biodiversity and natural resource conservation are considered significant factors in the Company’s operations and decision making.

Coming Attractions

For my next five posts, I’ve been asked by the E.O. Wilson Biodiversity Foundation to highlight the role of business in making “Half-Earth” a reality.  Half-Earth is the bold goal to protect half the land and sea to safeguard the bulk of biodiversity.  To learn more about the Half-Earth Project, visit www.half-earthproject.org

Thanks for reading!

Mark

Sinopec’s Profitable Conservation Strategies for Biodiversity and Wildlife Conservation

June 25, 2018 By Mark Aspelin

Today we’ll look at the profitable conservation strategies for the #3 company on the Fortune Global 500 list – Sinopec Group, the state-owned Chinese oil and gas company formerly known as the China Petroleum and Chemical Corporation.  Headquartered in Beijing, Sinopec‘s 446,225 employees are scattered across the company’s operations in 43 countries.  As of the end of 2017, Sinopec has 30,633 service stations, with its main oil and gas assets located in China, Kazakhstan, Russia, Colombia, and Angola.  The Company engages in the following activities:

  • Oil & gas exploration, production, transportation and marketing
  • Refining and marketing of petroleum products
  • Manufacturing and sales of chemicals, petrochemicals, coal chemicals
  • Petroleum and petrochemical engineering services
  • Technology research

Sinopec’s Mission statement is “Powering Better Life”.  The Company strives to “achieve green growth and contribute to clear waters, green land and a blue sky” and is guided by a principle of “Making Every Drop Count”. 

Sinopec has focused its recent efforts on promoting growth and efficiency, while fulfilling its social responsibility mission.  To help prioritize where to focus its CSR and sustainability efforts, Sinopec sends a survey to internal and external stakeholders that includes representatives from government, investors, employees, consumers, NGOs, and the media.  The results help the Company identify the highest priority issues in terms of their significance to stakeholders and their impact on Sinopec’s sustainability.  The prioritized survey results from the 2015 CSR are summarized in the graph below.

sinopec-graph

As you can see from the list above, Sinopec ranked biodiversity protection and ecosystem remediation as number 14 (out of 25) on its list of priorities.  However, it also ranked Clean Energy Supply as number 11, Climate Change efforts as #12, and Water Management as #13, all of which play a role in biodiversity and conservation.

In the 2017 CSR, Sinopec went through a similar exercise, but also aligned its business operations with 17 Goals (SDGs) in the 2030 Agenda for Sustainable Development (The UN 2030 Agenda) and referred to the Recommendations Report issued by Task Force on Climate-related Financial Disclosures.  From this analysis, Sinopec outlined 13 material issues to include in its report, which included climate change, energy conservation and emission reduction, and biodiversity.

With that brief introduction, let’s take a look to see what profitable conservation activities Sinopec is undertaking in the areas of biodiversity and wildlife conservation.  We’ll focus on the steps that Sinopec is taking to address four of the biggest threats to biodiversity: habitat destruction, invasive species, pollution, and overharvesting.  Even though climate change is a major contributor to habitat destruction, we’ll cover that topic in the pollution section, since the actions that companies take to address climate change are similar to other pollution prevention initiatives.

Habitat Destruction

Avoidance and Minimization: Avoidance refers to the strategy of avoiding development or operations in areas with a high-quality habitat for species that are classified as endangered, threatened, or vulnerable to extinction.  Minimization refers to a broad range of strategies that are designed to reduce the duration, intensity, and extent of impacts to habitat for biodiversity and wildlife. Sinopec is putting avoidance and minimization strategies into practice through the following means:

  • Taking steps to avoid environmentally fragile areas and ecological conservation zones.
  • Integrating biological diversity protection in the assessment, decision making, production, and operation of project construction.
  • Evaluating the impact of proposed projects by assessing ecological reserves, forests, wetlands, fauna, and flora, and formulating measures to mitigate or eliminate the impacts during the preliminary project appraisal process, construction, and operation.
  • Focusing on the requirements of biodiversity conservation in the working areas, taking various measures to protect local ecosystems.
  • Strengthening the identification and analysis of environmentally sensitive areas and environmental risks.
  • Promoting clean production.
  • Restoring and rehabilitating habitat around abandoned oil and gas wells and along oil and gas pipelines to reduce the environmental impact of the Company’s production and operations.

Here are a few examples of how Sinopec puts avoidance and minimization strategies into practice.

  • YASREF protects local mangroves:   The Yanbu Aramco Sinopec Refining Company Ltd. (YASREF) is a joint venture between Saudi Aramco and Sinopec in Yanbu, Saudi Arabia.  YASREF spent additional time and money to modify the direction and construction of pipes and other infrastructure to avoid harming local mangroves in natural reserves that are located near its production area along the Red Sea.  The Red Sea mangrove image below is from Saudi Aramco’s 2014 Facts and Figures document.
  • Soil remediation and land restoration: Sinopec and its subsidiaries create ecological impact prevention and treatment plans which may include a variety of soil remediation and land restoration efforts.  For example, Sinopec’s Fuling Shale Gas Company used a pad drilling design that reduces the amount of occupied land by 30% compared with normal operations.  After completing platform construction, the Company implemented a variety of plantation restoration, water and soil maintenance, and soil restoration initiatives that resulted in a land conservation rate of 57%.
  • Quingning Gas Transmission Pipeline project: When Sinopec’s natural gas branch deployed a 553-kilometer gas transmission pipeline connecting Shandong
    and Jiangsu province, they analyzed fauna and flora in national reserves, nine city and county-level reserves, seven water conservation districts, and 51 ecologically vulnerable rivers, Ecological Red Line Areas, and areas within 500 meters of the project. The Company then assessed pipeline routes and widths to identify the approach that would have the least adverse impact on local plants and wildlife.

Invasive Species

There is no mention of any efforts to address invasive species in CPNC’s various reports and website.

Pollution

In 2013, Sinopec launched its Clear Water and Blue Sky Campaign, which focused primarily on the control of air pollution, water contamination, and solid waste.  In 2014, the campaign won the “Care for Climate and Environmental Protection Best Practice” from the China Network of United Nations Global Compact.  The Clear Water and Blue Sky Campaign is no longer mentioned in the Company’s 2017 CSR so it appears to have come to an end, but Sinopec is still actively pursuing a variety of pollution prevention and energy saving initiatives.  Here are a few examples:

  • Pollution prevention: Sinopec pollution prevention efforts include implementing de-sulfur, de-NOx, and dust removal projects for boilers, improving the recycling of drilling fluid and reduced solid drilling waste by 31,000 m3, installing vapor recovery projects for 265 oil tanks and 17,600 service stations, and significantly reducing the sulfur content of Sinopec gasoline from < 800ppm in January 2003 to a target of < 10ppm in December 2016.  The Company is also engaged in research of development of cutting-edge technologies that support its green development goals.
  • Chemical product design: Sinopec’s Chemicals segment is actively developing products that focus on high-end, eco-friendly materials.  Here are a few product development examples from 2017:
    • Green propylene and butene copolymer products.
    • Eco-friendly, high-crystallized and high-impact polypropylene products.
    • Non-dyed fibers to alleviate textile dyeing pollution at the source and reduce wastewater discharge.
    • Performance improvement for non-heavy metal polyester catalysts.
    • Increased production and sales of eco-friendly polyester and the development of high-performance fiber.
  • Saving energy and reducing emissions and carbon intensity: Sinopec has created clean production processes that save energy, reduce emissions, and decrease carbon intensity.  For example, in 2014, Sinopec launched its “Doubling Energy Efficiency” Program which commits the Company to doubling its energy efficiency by 2025.  The program is expected to save 42 million tons of coal equivalent (equal to planting 900 million trees) and reduce 81 million tons of CO2 emission (equal to the annual emission of 20 million economy cars).  In 2015, Sinopec implemented 484 projects under the “Doubling Energy Efficiency” initiative, which saved 980,000 tons of coal equivalent, and the Company also launched efforts to encourage energy efficiency among its subsidiaries.  In 2017, a total of 452 programs were implemented with an expected annual energy savings that are expected to equal to 949,000 tons of standard coal.  In addition, Sinopec’s oilfield and refining & chemical subsidiaries captured 270,000 tons of carbon dioxide, of which 190,000 tons were used by oilfield subsidiaries for flooding.
  • Recycling and Reusing Resources: The Company looks for opportunities to recycle and reuse resources such as waste heat and pressure, slurry, refinery gas, flare gas, hydrogen, used catalysts, and oilfield gas.  In 2015, these efforts enabled Sinopec to recover 200 million cubic meters of methane, equivalent to cutting 3 million tons of CO2 emission, and recover 70 tons of noble metal.  In 2017, Sinopec reduced methane emission in pipeline storage and transportation by 4.26 million cubic meters.  The Company’s oilfield subsidiaries implemented recovery measures for natural gas during production and testing processes, casing gas and oil tank gas when necessary and possible.  This resulted in the recovery of 220 million cubic meters of methane, which is equal to a reduction of 3.3 million tons of carbon dioxide emissions.
  • Renewable energy: Sinopec is exploring and experimenting with the industrial application of solar power.  In 2017, the Company completing three distributional photovoltaic
    power generation projects. Sinopec is also making progress on developing non-grain bio-fuels as it strives to become a leader in the bio-fuel industry in China.
  • Protecting Water: Sinopec has improved its water use efficiency by strictly enforcing practices that reduce water use and avoid water loss and waste during production and auxiliary production processes.  From 2010 – 2015, Sinopec reduced its industrial water consumption by an average of 1.22%, with a 1% drop in water use year-on-year in 2015.  In 2017, Sinopec’s industrial water intake declined by 1.27 % from 2016 levels, saving an additional 12 million cubic meters of water.  In one success story, Tianjin Petrochemical has been using desalinated sea water as supplement to circulating water, using 10 million tons of desalinated water since the program started in 2010.  By the end of 2015, the total value of enterprise output increased nearly four times, while the overall fresh water consumption was reduced by 50%.  In addition, the company takes a number of different measures to protect groundwater during drilling.  For example, Sinopec took the following steps in one project that involved the exploration and development of shale gas:
    • Before constructing the drilling platform, Sinopec conducted hydrologic explorations of subterranean rivers and caves 100 meters below the earth’s surface so that well locations could be optimized, and contamination could be avoided.
    • Storage tanks of sewage and other wastes were built according to the local conditions. Environmental protection utilities, including diversion ditches and intercepting ditches, were put into use after penetration tests and pressure tests.
    • Casing pipes for cementing were of high quality, and cement was paved up to the ground, effectively isolating the boreholes from natural waters and shallow rocks.
  • Technological innovation in pollution treatment: Sinopec was one of the first companies in China’s petrochemical industry to recycle industrial sewage.  For example, Sinopic Zhenhai has constructed three sewage recycling units, with a total capacity of 31,200 cubic meters per day.  As of the end of the 2017, the site recycled over 76 million cubic meters of discharged sewage.  Sinopic Zhenhai has been awarded eight national invention patents related to its pollution treatment efforts.

Climate Change: Sinopec is committed to taking proactive steps to tackle climate change through the following means:

  • Energy conservation and efficiency: The Company has determined that energy conservation and efficiency improvement are the most important carbon reduction measures given the nature of its operations.  Sinopec measures the consumption of comprehensive energy per RMB 10,000 of production value and looks for opportunities to reduce that amount.  The company reduces greenhouse gas emissions by reducing flaring emissions and through carbon dioxide capture and methane recovery in its oilfield, refining, and chemical subsidiaries.
  • Carbon Accounting and Trade: Sinopec has been involved in carbon accounting and verification activities for five consecutive years, and it has become the leading company in China for carbon asset management.  Over the past 5 years, Sinopec has completed full carbon accounting for over 100 oil field gathering and transportation stations, 2,000 petrochemical facilities, and 30,000 service stations under 89 subsidiaries.  In December of 2017, China announced the launch of a national carbon market, and the power generation industry was selected as the first industry to participate.  In the future, its expected that the trading system will be expanded to include the refining and chemical industries, which will encompass all of Sinopec’s refining and petrochemical subsidiaries.  Sinopec is taking steps to prepare for this by implementing a carbon assets information system, completing carbon accounting and verification for subsidiary equipment, measuring carbon emissions data, and identifying which enterprises to include in the market.  In 2017, some of Sinopec’s subsidiaries participated in a pilot carbon trading program.  Each of these subsidiaries completed the carbon quota in time, with a carbon trading volume of 1.35 million tons, and a carbon trading turnover of RMB 19 million.

Overharvesting

Sinopec doesn’t specifically address the biodiversity threat of overharvesting in its website or reports.

Profitable Conservation

While Sinopec’s CSRs focus primarily on providing data related to the level of investment in specific activities, the Company does provide some return on investment figures as well.  To help put these investment figures in perspective, Sinopec reported total sales revenue of RMB 2,047.3 billion in 2015 and RMB 2,360.2 billion in 2017.

  • Employee Feedback: Under the guiding principle that “every single piece of advice from employees counts”, Sinopec actively engages and motivates employees to provide operations and management improvement suggestions.  This approach has worked well for the organization, with Sinopec employees providing 36,475 pieces of advice in 2015.  The company adopted 26,217 of the suggestions, which resulted in a cost reduction and profit increase of approximately RMB 605 million.  The CSR does not specify what portion (if any) of these suggestions were related to environmental issues.
  • Environmental Protection Investments: In CY2015, Sinopec invested RMB 6.8 billion in environmental protection efforts.  From CY2013 – CY2015, Sinopec implemented 809 “Clear Water and Blue Sky” projects, with a total investment of RMB 21.47 billion.  As an example, Sinopec Yangzi Petrochemical successfully installed a wastewater reuse unit (850 tons per hour) that operates with an annual treatment capacity of 7 million tons, making it the “largest enterprise of high-purity reuse of waste water home and abroad.”  In 2017, Sinopec implemented new standards, completed the treatment of sewage and flue gas, and conducted the comprehensive treatment of VOCs, with a total expenditure of environmental protection of RMB 7.85 billion.
  • Energy Efficiency Technologies: In 2015, Sinopec implemented 128 energy-saving projects in its subsidiaries, which saved 270,000 tons of coal equivalent annually, reduced CO2 emissions by 660,000 tons, and generated RMB 360 million in economic benefits.
  • Diesel Vehicle Exhaust Treatment Liquid: Sinopec created a “Yuetaihailong” Diesel vehicle exhaust treatment liquid for heavy-duty diesel vehicles that reduces NOx and PM emissions for BH-IV standard diesel vehicles and has a good economic return.  Third party inspection data shows that NOx and PM emissions of GB-IV standard diesel vehicles are 41.7% and 89.7% lower respectively than GB-III standard diesel vehicles.  The current price for 10 kg of this exhaust treatment liquid is 50 yuan, which can be used to treat 2000 liters of diesel at a blending ratio of 5%. This translates to an additional average cost of only 0.02 yuan per liter, with the benefits of reducing diesel consumption by 6% as well as significantly reducing exhaust emissions.  Sinopec provided 800,000 barrels of the liquid, free of charge, for heavy-duty diesel vehicles operating within its system.
  • Remediating exhaust emission treatment and electronic data accounting: In April 2017, the Ministry of Environmental Protection detected problems with Sinopec Yanshan’s exhaust emission treatment and electronic data accounting.  An investigation was conducted to determine the root cause, and the employees responsible for the issues were dismissed from their positions.  To remediate the issues, Sinopec invested RMB 600 million to complete VOC treatment projects, which included the construction of 46 automatic VOC monitoring sites.  In addition, Yanshan constructed an 80,000 square meter wetland park in the Niukouyu Ecological Center where the site operations were located.  The park is open to the public for free.
  • Charitable Giving: In 2017, Sinopec’s total “Social Contributions” was RMB 457.4 billion with RMB 151.88 million in donations.  In 2015, Sinopec’s total donations of “charity activities and poverty-lifting work” was RMB 200 million, with a significant part of this amount focused on the Company’s “Lifeline Express” charity project.  The “Lifeline Express” is a unique mobile hospital that was built on a train, traveling to three different impoverished regions within China each year to treat cataract patients, free of charge.  By the end of 2015, Sinopec Lifeline Express had traveled to 29 cities/counties in 18 provinces with a total of 32 stopovers.  In 2015, the program cured 3,286 patients, bringing the total to 34,798 cataract patients cured since its inception in 2004, at a total cost of RMB 127 million.  By the end of 2017, the program had cured over 40,000 cataract patients.
  • Improving local living conditions and building livable communities: In 2015, Sinopec spent RMB 1.7 billion on renovating old communities and shanty towns, relocating remote residential communities, and providing better access to basic necessities and community services.  In 2017, Sinopec invested RMB 128 million in targeted poverty alleviation focusing on infrastructure construction, industrial assistance, educational support, and the provision of healthcare.

Biodiversity & Wildlife Conservation Performance Assessment

Sinopec has come a long way since 2004 when it used dynamite and heavy machinery for exploration and road construction in Loango National Park in Gabon.  Today, Sinopec is committed to using more environmentally friendly methods in its operations and being a leader in China in adopting sustainability best practices.

To strengthen its efforts around biodiversity and wildlife conservation, Sinopec may want to set quantifiable land use and biodiversity conservation goals, address the biodiversity threats of invasive species, and consider voluntary compensatory actions such as conserving a certain number of acres of wildlife habitat for every acre of land developed.  To address the biodiversity threat of overharvesting, Sinopec may have opportunities to green its supply chain through the use of supplier scorecards and audits that include biodiversity as part of the assessment criteria.

Sinopec deserves praise for its efforts to be transparent in sharing its environmental performance information, in the form of CSRs and other media, for the past eleven consecutive years.  I look forward to reading about Sinopec’s continued progress in biodiversity and wildlife conservation in the years to come.

Coming Attractions

For our next post, we’ll still be in Beijing where we’ll take a look at the profitable conservation strategies for the #4 company on the Fortune Global 500 List – The China National Petroleum Corporation.

Thanks for reading!
Mark