The Potential impact of ESG spending on public perception of the Canadian oil sands

Thibeault, Al, Taylor, Ivan W., Koul, Saroj, Falebita, O. A. and Coppus, George (2023) The Potential impact of ESG spending on public perception of the Canadian oil sands. In: Managing complex tasks with systems thinking. Understanding Complex Systems . Springer, Cham, pp. 347-379. ISBN 9783031406355

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The “Oil Sands in Alberta”, Canada, are facing transformational change due to national and global pressure for greenhouse gas abatement. For Oil Sands (“the industry”) to survive, it must achieve a ‘new normal’, where the business of supplying energy is conducted within a framework of increased regulation of its environmental, social, and regulatory governance (ESG) framework. For the ‘new normal’, post-transition state to become a stable basis for business operations, the perception of the industry must be neutral at a minimum and ideally positive. The quantitative metrics of perception reflect the many complex dimensions of ESG: the current levels of CO2 emissions, performance toward Net Zero, and regulatory compliance. Since the approach that a single perception metric is not possible, we propose four metrics that collectively have the greatest influence on Oil Sand’s industry decisions regarding ESG investments and spending—First Nations, the Environmental Lobby, Investors, and the General Public. The factors driving each perception metric are both exogenous and endogenous and linked, creating behaviours amenable for study using system dynamics. This study comprehends the potential of reinvesting profits from Oils Sands into Environmental, Social, and Governance (ESG) to improve its public perception with the effort to lead to net-zero emissions and the industry’s survival. First, a System Dynamics (SD) model to portray oil production using mining and in-situ drilling features is built. Next, the calibrated model analyzes the emissions produced in the process, the use of land and water, and the impact on wildlife and fish in the surrounding area. Finally, these effects are simulated for the well-being of First Nations people in Northern Alberta by showcasing the potential of investment in emissions abatement technology and through social services and infrastructure to determine if this investment might influence environmentalists’ and First Nations’ perceptions. As a result, for economic aspects, the model reveals past/future prices and profits of the Oil Sands. In addition, the model examines collected royalties and taxes that can support government programs by the province or the country and the jobs created and the workers’ productivity. The major findings evaluate perception as a complex and synergistic combination of values we describe as well-being: “economic well-being, social well-being, and environmental well-being”, as well as specific sub-values related to emissions, wildlife, fish, land, and water. Of particular importance is the impact of public perception on investor perceptions. Investors are central to the well-being of the industry. To our understanding, this is the first validated SD model of the Oil Sand industry visualizing perceptions. The current model excludes the influence of “supply and demand” relationships on the future potential of the Oil Sands industry. Determining other controllable influencers, such as Albertan and Canadian government policies, must also be considered in future work. The SD model could inform the practical ESG policy approaches for adoption by the policymakers, practitioners, and researchers on the achievement of Oil Sands in Canada, thereby convincing First Nation people and the country at large. It can also be adapted for countries where Oil Sands are investigated. The study recommends that the industry make a concerted effort to reach “net-zero emissions by 2050” to reverse declining perception of the industry by many of its stakeholders. Thus, this quantitative model of stakeholder perceptions fills a crucial methodological gap in studying Oil Sands

Item Type: Book Section
Keywords: Oil sands | Public perception | System dynamics (SD) model | Environmental social and governance (ESG) | First nations | Northern Alberta | Environmental standards | Conventional oil | Canada Stakeholders | Fossil fuel reserves | Surface mining | GHG emissions
Subjects: Physical, Life and Health Sciences > Computer Science
Physical, Life and Health Sciences > Engineering and Technology
JGU School/Centre: Jindal Global Business School
Depositing User: Subhajit Bhattacharjee
Date Deposited: 18 Nov 2023 17:28
Last Modified: 20 Nov 2023 14:46
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