Methodology of Environmental Transparency Rating of Oil and Gas Companies Operating in Russia, 2020
About the RatingThe oil and gas industries in Russia and Kazakhstan cause some of the highest levels of negative impact on the environment, but they are also the backbone of both countries' economies, which means we all need to find ways to make them more environmentally friendly. For instance, industry consumers and creditors should prioritize companies whose activities have a less negative environmental impact. The Environmental Transparency Rating for Oil and Gas Companies is a project that provides stakeholders with objective and comparable information on the transparency levels of oil and gas companies and the extent of their impact on the environment. We expect this kind of ratings to help improve the quality of environmental risk management during the production, transportation, and processing of hydrocarbon fuels. We also hope that ratings will inspire companies to increase their transparency levels, encourage businesses to cooperate with stakeholders, and ensure openness in future project discussions. Objective -Contribute to efficient use of hydrocarbon resources, environmental protection, and conducting socially responsible business in Russia and Kazakhstan. Tasks -Record the key indicators of the environmental performance of Russian oil and gas companies. -Compare the key players of the Russian oil and gas sector based on: • the level of environmental impact per unit of output; • the degree of openness and accessibility of environmentally relevant information; • the quality of environmental management, considering state requirements and best practices from around the world; • the frequency of violating environmental legislation during project implementation; • mineral resource efficiency. -Monitor the companies’ interannual dynamics on the indicators listed above. Principles -The rating is primarily based on the criteria formulated in the Joint Environmental NGO Requirements to the oil and gas sector (https://wwf.ru/upload/iblock/4ac/oil_demands.pdf). -The methodology is discussed with all stakeholders. -The assessment is performed for all segments, from production to processing, with separate numbers for production, transportation, and processing. -The rating is based on publicly available information on the companies' activities. Publicly available information includes publicly available annual financial and environmental reports and reports on environmental protection (including regional ones); documents published on the company's official websites (including those of the company's subsidiaries and contractors) with links to the relevant pages in the website menu; interviews of the company's spokespeople for federal and regional media. If there is no publicly available information for a specific criterion, the company receives the lowest score for that criterion which affects its overall rating. -The rating is calculated by a professional rating agency, selected during a competition. -The companies are included in the ranking according to their volume of oil and gas production. The lower limit for Russian companies: oil production volume—2 million tons per year; oil transportation volume—30 million tons per year; oil, gas condensate, and petroleum products processing volume—8 million tons per year. The lower limit for companies in Kazakhstan: oil and gas condensate production—0.5 million tons per year. -The rating is calculated annually, which helps monitor the dynamics of environmental indicators for different companies. Background -The project for creating an environmental transparency rating for Russian oil and gas companies was initiated by WWF-Russia and CREON Group (https://zs-rating.ru/) in 2014. The rating for Russian companies has since been published annually. -The results of the first Environmental Transparency Rating for Oil and Gas Companies in Kazakhstan were published in 2018. The rating was organized by WWF-Russia and CREON Group with the support of the Ministry of Energy of the Republic of Kazakhstan and in partnership with UNEP Central Asia, CREON Capital, and National Rating Agency. -In 2019, monitoring of emergencies and conflicts as part of the environmental transparency rating of oil and gas companies was included into the People for Nature project, carried out by WWF-Russia with the support of the European Union.
В таблице указаны объемы производства компаний, кроме значений, отмеченных символами:
Structure of the Rating
The Rating consists of three sections: Environmental Management, Environmental Impact, and Disclosure of Information.
- Environmental Management
assesses the quality of eco-management in the companies. The criteria included in this section are in most cases substantially more rigid compared to the national legislation on environmental protection in Russia, Kazakhstan or Azerbaijan. However, these criteria correspond to the best global standards and practices in oil and gas business.
- Environmental Impact
evaluates the negative impact level for the environmental media (air, water and land) during implementation of projects as well as the ecological performance level of the industrial companies. In most cases the criteria are based on components of state statistical reporting in the field of environmental protection, reflecting environmental impact from activities executed by companies at the respective licensed areas.
This Section includes quantitative values that are being transformed to qualitative scale by comparing to industry average indicators for every criterion. The industry average, when not available from official sources, is calculated as an arithmetic mean value for companies participating in the Rating. For comparative analysis across the companies, specific values are calculated by dividing gross indicators by relevant volumes of hydrocarbons production, transportation and processing.
- Disclosure of Information
evaluates the extent of companies’ readiness to disclose information with respect to environmental impact of their industrial activities.
Each company is assigned color flags for each of criteria – Red, Yellow or Green. When a criterion is not relevant for a given company (for example, the company does not process hydrocarbons), no flag is assigned. In such cases, companies are required to present proof of being irrelevant to criteria. When the information related to the criterion is not available in the public domain а компания не предоставила обоснование нерелевантности критерия на этапе рассылки рабочих материалов,, red flag is assigned.
At the next stage, points are assigned for every criterion and companies are rated in each section. Red flag counts as 0 points, Yellow as 1 point, and Green as 2 points. For each section, companies are assigned an arithmetic mean of their points for criteria in the corresponding section. In this calculation, only those criteria that have been assigned color flags are taken into account, i.e. criteria that are not relevant for a given company, are not included in the calculation. Furthermore, for each criterion with breakdown by production, processing, and transportation (criteria 2.1, 2.2, 2.4 and 2.5) the respective arithmetic mean value is calculated for this criterion only, and afterwards the resulting criterion average value is used for calculation of the final value of the Environmental Impact Section. As a result, every company is assigned final points for Environmental Management Section, Environmental Impact Section and Disclosure of Information Section. Final points vary from 0 to 2. At this stage, the leaders are chosen in each of the following areas: Management, Operations, and Information.
The final Rating is then calculated for each company by averaging three values assigned in the previous stages.
In the course of Rating calculation, preliminary results of data collection are sent out to the rated companies for the purpose of verification and update. Final company profiles become available to general public after announcement of the Rating results.
The Rating organizers reserve the right to apply penalties (up to exclusion from the Rating calculations) in case of proved violations by a company in the field of human rights (e.g. negative assessment by the Human Rights Council or related court rulings), as well as in case of high profile incidents/emergencies of regional and international outreach with considerable environmental damage.
The Rating is calculated as follows.
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