Since joining Hess Corporation seven years ago as its first Vice President of Corporate Social Responsibility, Paula Luff has seen the global company transform itself from an integrated oil-and-gas company to a pure exploration and production company. In 2013, Hess began to shed its downstream businesses, including its retail, energy marketing and energy trading units, in order to focus on higher growth, lower risk assets.
While its business model may have changed, Hess’ stated commitment to transparency has remained constant, with a goal to be the top quartile in its sector for the quality of its sustainability disclosures
. Hess has a solid foundation for that, having published GRI-compliant, assured or verified reports annually since 2002.
Under Luff’s leadership, Hess has advanced its non-financial reporting, issuing externally assured reports that comply with the Global Reporting Initiative and as oil and gas industry frameworks.
Prior to joining Hess, Ms. Luff was Senior Director of Global Philanthropy for Pfizer Inc. where she set strategy and led the teams that developed Pfizer and the Pfizer Foundation’s flagship programs in global health.
We recently spoke about the impact Hess’ transformation on its sustainability programs, some of its controversial practices and challenges, and insights from Luff’s career in corporate social responsibility.
Cindy Mehallow: Hess has demonstrated its commitment to transparency through its strong performances in sustainability reporting. What drives that commitment and how does it pay off for the company?
Paula Luff: We’re really proud of our 15 plus years of sustainability reporting. It’s ingrained in the company’s DNA to be not only a good corporate citizen but also, on the business side, we want to be the most trusted energy partner to our stakeholders. It’s part of the company’s history − our handshake is our word and integrity is terribly important.
To that end, balanced and transparent disclosure is critical. If you want to be trusted, you have to be balanced in what you say. You have to talk honestly about some of your challenges and how you’re approaching them. We really believe that sustainable practices enhance our business performance and that’s what I think the driver is.
Cindy Mehallow: How has the recent restructuring of Hess from an integrated oil-and-gas company to a pure E&P company affected the way that it approaches sustainability? How has that shift affected your role as head of CSR?
Paula Luff: Our approach to sustainability hasn’t changed despite the changes in the portfolio, such as the sale of downstream or exiting the assets in Russia and Indonesia. I say that because sustainability at Hess is really about how we operate and how we identify and manage our social and environmental impacts. It’s not about where we operate or how we spend our profits.
That said, our model for organizing the company has changed a bit. Prior to this, it was more of a value-chain focus and now it’s much more asset-centered. From my group’s perspective, this has enhanced our connection to the field and also facilitated greater integration and collaboration with other functional groups, including Environment, Health & Safety, Enterprise Risk Management and Value Assurance. We’re much more connected and much more focused than we were before, and I think that’s because the company is more focused.
Cindy Mehallow: Hydraulic fracturing, or fracking, is an extremely controversial practice and some environmentalists oppose it outright. How does Hess reconcile that with responsible business? Is it possible to frack responsibly?
Paula Luff: In a short answer, yes, we frack, and we have for decades. We believe that done properly, it can be done responsibly. Hydraulic fracturing is not a new technology. It’s been used in the oil and gas industry actually since the 1940s, and I believe about a million wells or so have been fracked since then. The change is that with new technology and horizontal drilling, we have resources in the United States in the shale and tight oil-and-gas space that were not economical to produce before.
A number of industry groups, whether it’s API or IPIECA (the global oil and gas industry association for environmental and social issues), and the International Oil and Gas Producers Association, have issued good practice guidance that covers a range of issues germane to shale and tight oil and gas development, such as water protection, management of waste, well integrity, emissions and stakeholder engagement. There’s been a lot of good dialog in the industry and with stakeholders around what good practice looks like.
At Hess, we recognize the potential impacts that shale energy operations can have on the environment and public health and safety and, as you point out, a number of stakeholders are concerned about a number of issues around shale gas, including ground-water protection, water use, frack fluid composition and other issues. We believe that groundwater resources are protected by sensible on-site operating practices, including robust spill-prevention plans. We have to manage those surface impacts very carefully.
For example, in North Dakota and Ohio, we are employing hydraulic fracturing to stimulate production. We employ closed-loop fluid containment systems for drilling fluids. Frack fluid flowback is stored in closed-top tanks with secondary containment. Not only do these kinds of practices prevent potential surface and groundwater impacts, but they also have the added benefit of allowing for the recycling of drilling materials and reducing the overall volume of waste. We make water quality monitoring for both surface and groundwater − both prior to drilling and completion activities − a priority.
Another criticism centers on water use. Fracking does require a fair amount of water and at Hess we understand that it’s terribly important to manage resources responsibly. Fresh water, like many resources, is precious and finite, and we’re striving to reduce our use of fresh water.
We are actively pursuing alternatives to fresh water including the use of non-potable water sources, whether that’s treated domestic waste water or saline sources. In fact, last year we conducted a pilot in North Dakota using brackish groundwater. The results were positive.
Regarding frack fluid, although we don’t ever expect our fluids to come in contact with groundwater, aquifers or surface water, we know that stakeholders are very concerned about the composition of these fluids. We do not use diesel, toluene, ethylbenzene or xylene in frack fluids, period. We require our hydraulic fracturing contractors to provide non-proprietary individual well data for fracture stimulation and chemical use, and this information is publically available on the FracFocus website. Frack fluid often has biocides to kill any bacteria that may be in the fluid and we’re looking at reducing the use of those as well. Where possible we’re trying to make sure that whatever chemicals are in there are as safe as possible and we’re reducing our use.
Cindy Mehallow: How do you answer critics who say that an energy company inherently cannot be sustainable or socially responsible?
Paula Luff: We are in the business of extracting hydrocarbons. A company that does that in a way that minimizes its environmental and social impacts to the extent possible, that makes wise investments, and that manages its capital and resources well is going to be a sustainable company.
The reality is hydrocarbons are going to be in the fuel or energy mix for a long time. Lots of people would love to see us exit coal tomorrow and get rid of oil and gas, but the reality is hydrocarbons are used for power generation and transportation and there aren’t immediate alternatives that are going to phase them out in the next five to ten years.
So the question is: What kind of energy policy can we have as a global society working across industry, government and civil society that is mindful that, over time, if we want to combat climate change, we need to have a strategy that includes everything for now, and yes, invests in renewables?
Whether or not a company is sustainable over time depends on – and I don’t care what industry you’re talking about – how they manage and how they’re governed, not necessarily what kind of business they’re in.
How do we do our work in a way that meets the requirements, really meets the expectations of stakeholders and allows the business to get done? For example, in any office, there are a lot of plastics and products that are petroleum-based. It’s going take a lot of innovation and investment in innovation to change.
Another example is, how many people work in the coal industry?
How many jobs are linked to that industry and what happens to displaced workers? Are we prepared to retrain them or prepare them for other industries? There are those kinds of knock-on effects that I think people aren’t thinking about. It’s not just turn-off-the-switch. It’s very, very complicated and there’s a big human element both ways. We need a lot of smart folks willing to collaborate across sectors to solve this issue. It’s going to take time.
Cindy Mehallow: How is Hess dealing with water scarcity?
Paula Luff: That’s a big issue for our stakeholders, and it’s something that we’re really looking at: How can we reduce our fresh-water use? Last year our water use decreased by about 12 percent and that’s largely due to the closing of the Port Reading Refinery.
In hydraulic fracturing, there’s a fair amount of water use and we’ve already talked about some of the ways that we’re exploring to decrease the use of fresh water there. We have begun a feasibility study to look at the current water sources, the quality/quantity requirements of our processes across our portfolio, and then we’re trying to figure out efficiency measures and replacement measures.
We know that, for example, there are two places where we use the most water. One is the Seminole Gas Plant. The other is in North Dakota, where we’re proactively exploring a whole range of opportunities to reuse water for cooling and alternatives to fresh water. Hopefully we’ll have more to say as this work matures, but it’s something we’re very focused on.
Cindy Mehallow: As VP of CSR for Hess, what is your most pressing concern and how you are tackling it?
Paula Luff: When I came here seven years ago, the CSR function was brand-new. The company had been doing a lot of great work in environment and in philanthropy, but not looking at the full range of sustainability activities in a unified way. One of the things that we’re focusing on now is high-grading our stakeholder engagement and ensuring it’s always proactive and properly tailored, that we’re following up on stakeholder dialog and acting on that information.
People ask me, “Why is stakeholder engagement so important in your industry?” The answer is that we don’t own the oil and gas. We develop it because a stakeholder has engaged us to work with them on that whether it’s a landowner or a national oil company. The stakeholder and that relationship are terribly important to our ability to operate.
Also, we’re focused on ensuring that we identify and manage our social and environmental risks and that we’re integrating that into our enterprise-risk process. You can’t go to the field and ask them to do 30 different things but you can ask them, “Hey, what are the three things that you’re concerned about?”
Then we need to respond, “We’re concerned about those, too. How can we work together and integrate that into how you operate and into your approach to risk so that it’s not one more thing that New York or Houston has asked you to do, but it’s part of the way you operate?” We’re trying to integrate sustainability into how people operate. Not as an afterthought, but as part of the business plan, so it’s part of the fabric of the way we operate.
Cindy Mehallow: What, if anything, is a significant obstacle that you’ve overcome in your work?
Paula Luff: When I was at Pfizer, I learned that I was not a revenue center. When you’re not a core business function, you have to demonstrate your value to the business. Very quickly I understood that listening, influencing, persuading and supporting were important skills. At the end of the day, you want your business colleagues to say, “That department is helping me do a better job for the company.” I had come out of the NGO sector so I had to figure out that in the private sector, in this kind of role, how I could become and remain relevant and of value to my colleagues on the operations side.
Cindy Mehallow: What’s one accomplishment you’re particularly proud of in your current role?
Paula Luff: We’re beginning to see a real shift in the understanding of what social responsibility is. When I first came here, the company was philanthropy-focused, partnership-focused and not looking as broadly at what it does with its profits. Now I see evidence of that in my business colleagues, and in my interactions with them. Now colleagues call from the field saying, “I have an issue. I want to make sure that we’re in-line with our voluntary commitments. I need you to help me,” which is great because he might not have called me a year ago.
Or, another colleague may tell his boss, “Paula’s team has really helped us this year and we’re grateful for the contribution they have made.” I am really proud of that. They treat us like one of the family and that’s where we want to be. When you approach people and say, “Tell me where I can be useful. Let’s talk about how we do that and in a way that isn’t a burden or an add-on but helps you operate more efficiently,” people respond well. I’m proud of the team here. They’re terrific. We’re small but mighty and it’s been a lot of fun.
Cindy Mehallow: Who’s been your most inspirational mentor?
Paula Luff: My mom is an extraordinarily brilliant woman. My father actually passed away when I was very young, so she was a single mom. She always raised me to be fair, to be kind and generous. She raised me to be an independent woman, to follow my heart and mind, and not listen to anyone who told me, “You’re a girl, you can’t do that” or “You shouldn’t do that.” I am forever in her debt.
She also taught me that when you’re lucky enough to have a good education and a comfortable lifestyle, that you’re duty-bound as a human being to pay it forward. Sometimes I think that being in this kind of role − even though I didn’t ever envision myself working in this way − probably was something I was prepared for from kindergarten by my mom and by her social engagement.
Cindy Mehallow: Finally, what advice would you give to someone aspiring to a career similar to yours?
Paula Luff: If you’re looking for a job in CSR, don’t just look for titles that say “CSR,” or “Sustainability,” or “Environmental Affairs.” You can affect change anywhere in a corporation. Sometimes that job might say “Government Affairs.” It might say, “Integrity,” or it might say, “Marketing.”
Sustainability needs to be infused throughout the operation, so if you bring that lens to your job you’re doing a sustainability job. Quite frankly, the number of jobs that say “CSR” in the title are quite limited and it’s a shame for people to limit their horizons only to something that says “CSR.” Lots of jobs have fascinating activities and responsibilities where a sustainability lens is hugely valuable.
Press release: GREENBIZ