SECTORAL SUSTAINABILITY & SUSTAINABILITY ASSESSMENT
METHODOLOGIES:A review of methodology in light of collaboration with the UK oil
and gas sector
Professor Paul Ekins Robin Vanner
Policy Studies Institute
Offshore ForumDTI, January 24th, 2006
Contents
1. Introduction to the project2. Sectoral Sustainability strategies3. Application – Decommissioning4. Methods of assessment
Background to studyUKOOA
[UK Offshore Operators Association]
James Firebrace
Policy Studies Institute
Material flow and sustainable development work
Paul Ekins & Robin Vanner
Study objectives:1. Direct benefit to oil and gas sector
• Four industry issues covered2. Develop a methodology for sectoral sustainable
development strategies more generally. This presentation reports results against this objective
Collaborative two year study under DTI LINK programme funded by EPSRC
Industry case studies1. Decommissioning of offshore structures
Material value of recycling, combined with implicit social valuation of non-financial outcomes
2. Produced Water Material implications of end-of-pipe cleanup technologies, stakeholder perception of harm and the precautionary principle
3. Energy use offshoreLife of field view of energy use and material flows leading to indicators and ultimately efficiency measures
4. Corporate relationshipsThrough a number of case studies, seek to understand stakeholder issues and relationships in the context of an industry in transition.
Approaches used•Material flow analysis (environmental)•Energy flow analysis (environmental)•Environmental impact and sustainability analysis (environmental)•Value chain analysis (economic)•Relationship analysis (social)
•Four industry issue ‘case studies’
•No attempt to value/weight and aggregate different impacts
Types of corporate responsibility/sustainability
1. Charitable type giving – Often motivated by the ethical stance of the chairman. Does not build relationships
2. Sponsorship type giving – Primarily to promote positive image of corporation. Relationship with range of stakeholders
3. Sustainability strategies – Embedded and central part of the operations of the business. Essential for a businesses ‘licence to operate’ and brand through relationships.
Sustainability strategies
• UK Government’s 1999 Sustainable Development strategy, Trade Associations encouraged to:– develop Sectoral Sustainability strategies which would
provide a framework for “integrating action and setting priorities to improve business performance on economic, environmental and social aspects” (DETR 1999, p.35)
• Pioneers Group established– 18 strategies posted on website– 11 reviewed for this work
A range of sustainability strategies
Strategy shaped by the sector which produced it
• Small homogeneous sectors (e.g. Brick)– strategy with a short supply chain focus
• Large heterogeneous sectors (e.g. food and drink)– Wide scope but limited commitment due to limited
shared interest (food safety is different)• Large homogeneous sector with brand (e.g. cars
and oil)– wider scope and deeper commitment
Motor manufacturers (SMMT)[A generic approach]
Oil and gas (UKOOA)[Stakeholder approach]
The UKOOA Wheel
“The Wheel captures the full range of current key sustainable development issues for the industry; it provides a format to enable industry leaders to debate trends, it points to where
action needs to be taken and most importantly signals which players need to be involved to improve performance”.
Personal correspondence with: James Firebrace, UKOOA consultant working on sustainability issues.
• Four concentric circles reflecting industry influence– Industry determined– Partnership– Contribution– Broader issues
The decommissioning challenge (1)
• 266 structures on the UKCS • 33 large fixed structures (topside, jacket,
footings, drill cuttings, pipelines)• Post Brent Spar, OSPAR presumption of
removal of structure• Estimated total real term costs of £8.8
billion (UKOOA in 2002) • UK tax payer to pay ~50% via offset
revenues
The decommissioning challenge (2)• Such debates are based on stakeholder values. Numbers
can only ever inform such debates• Rank order depends on stakeholder perceptions,
preferences and priorities
Technical
feasibility
Safety
CostEnvironmental impacts
Regulatory
framework
Political environme
ntReputati
on
Methods for (SD) assessment
• Four possible methods of assessment:1. Cost benefit analysis (the SAM model)2. Weighting of
– Money values to reflect distributional concerns– Impact dimensions according to their perceived importance
3. Implicit valuation (the ‘PSI methodology’)4. Indicator framework (e.g. as developed by Arthur D Little)
• Three named methods were presented at the 3rd Annual Conference on Sustainable Development in the Oil & Gas Industry held in Aberdeen on the 1st of December 2003
Sustainable Assessment Model [SAM] & SAMi
• Developed by Genesis Oil & University of Aberdeen• Places a monetary value on all costs• Uses 4 SD pillars (Social, economic, environment and
resources)• Generates a SAM ‘Signature’ which presents an
assessment for each of the 4 SD pillars• Sum of percentages generates a SAM indicator (SAMi)
– A SAMi of 100% would indicate that a project has no negative assessment results for the 4 SD pillars
– Can also be applied to overall sectors to track progress over a number of years
SAM ‘signature’ for hydrocarbon use
The PSI methodology• Developed with UKOOA and DTI• Uses material flow analysis to track
environmental, resource and value outcomes• Places these within a framework of stakeholder
relationships• No attempt to value/weight and aggregate
different impacts– Implicit valuation of non-financial issues– i.e. if the social preference is for a given regulatory
measure, this implies a certain minimum social valuation
– Allows for a range of stakeholder values
Reference - Typically no or minimum actionFinancial cost of reference £
t toe £ t toe £Material 1 Material 1Material 2 Material 2Material 3 Material 3
Totals Totals
Scenario one - e.g. Business as usual or regulatory complianceFinancial cost of scenario £
t toe £ t toe £Material 1 Material 1Material 2 Material 2Material 3 Material 3
Totals TotalsCost £ OR Minimum Social Implicit Value (MSIP)Cost to tax payer £
Scenario two - e.g. Full cleanupFinancial cost of scenario £
%t toe £ t toe £
Material 1 Material 1Material 2 Material 2Material 3 Material 3
Totals TotalsCost £ OR Minimum Social Implicit Value (MSIP)Cost to tax payer £
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Input material Output material Non financial outcomes
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Non financial outcomes Input material
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Output material
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The Arthur D Little framework• Developed by Arthur D Little (consultancy) for
BP• Aim: to provide a way for project managers to
translate the statements made by their organisations “into action at the project management coal face” (Thompson 2003)
• Project team assessment of impacts based around 69 indicators under the 4 SD pillars
• Used as much as a management tool as it identifies areas for mitigation
• Intended to be used throughout the project cycle
The assessment output
4 ‘pillars of SD
69 indicators
37 Sub criteria
Score for project phase Overall score
e.g. Design Supply Construction Operation Decommissioning Taxes Economic Jobs Health Social Safety Waste Environmental Risk Energy Natural
resources Water
Score for each indicator: The scoring is done using a scale from 1 to 5, where 1 represents weak, and 5 represents strong alignment with the principles of
sustainable development.
For e
ach
sub-
crite
rion
What lies behind the assessments?
• SAM – Valuation techniques• PSI – Non-commensurable assessment
allowing different stakeholders to come to different conclusions, but giving implicit valuation of different social choices
• Arthur D Little - Project team and professional assessments
When are the different techniques appropriate?
• SAM – non-controversial valuations, i.e. simple contexts mainly involving monetary values
• PSI – complex contexts characterised by a range of stakeholders with deeply-held and differing values
• Arthur D Little - expert project team assessments across four SD pillars, seeking to ensure alignment of decisions with corporate values
www.psi.org.uk