As climate change becomes an increasingly unavoidable concern across the world - and particularly within the oil and gas industry - Swire Energy Services has taken swift action to reduce carbon emissions as part of its comprehensive sustainability strategy. What has emerged from its carbon reduction efforts is the uptake of ‘green contracts’ between Swire and its customers - where reducing greenhouse gas emissions has become not just a ‘nice to have’, but a business KPI.
In this blog post - the first instalment of our two part series on green contracts - Matt Nicoll, Commercial Director for Swire Energy Services, shares his perspective on what green contracts and KPIs are, and why they have become a core focus at Swire Energy Services…
What do green contracts mean at Swire Energy Services and what do they involve?
“A green contract refers to the contracts we have with our clients, where there’s a KPI that relates to the CO2 performance associated with the work we do for them. In the past, most KPIs would have been related to factors such as delivery timescales, prices, availability of rental equipment, however, now we're starting to see more contracts that relate back to, or have at least one KPI from, a CO2 reduction perspective.”
When did green contracts come into force at Swire Energy Services, and what was the catalyst behind this change?
“Back in 2020, we made an ambitious commitment to become carbon neutral by 2030. From there, we created an in-depth strategy to push us towards this goal and appointed a Group Sustainability Manager to ensure we could be leaders in sustainable development for the industries we operate in.
“Building on this, we’ve also started to report on our CO2 emissions as a business both locally and globally. We conduct a monthly review, where senior management from each region discusses the business performance over the past month, with internal KPIs that relate to our carbon reduction efforts.”
How has Swire’s uptake of green contracts been received by clients?
“We’ve been quite ahead of the curve on green contracts, which has ultimately given us a real advantage. In the early days, we didn’t really talk about our sustainability efforts with our customers, as the subject didn’t seem to garner much interest. However, we continued to reference it during our customer meetings and, over time, it became clear that the subject was attracting more and more interest as many of our customers were increasingly committed to reducing their emissions. We now see green contracts and KPIs regularly in tenders.
“An initial challenge for us has been encouraging customers to see the environmental benefit over and above the financial cost involved in reducing their carbon emissions. We have invested quite a lot of money in certain areas of our business in order to reach our own environmental goals, and what we've started to see is that the majority of our customers favour working with a business that is proactively reducing CO2 emissions as part of their own efforts.
“We are starting to see clients’ perspectives on this shift, with more willingness to invest in adding that reduced carbon footprint in their supply chain. That being said, we are mindful that it doesn’t work to be great at reducing CO2 emissions whilst being weak, for example, with HSE or ability to supply in a reasonable lead time. It is interesting to see that sustainability is becoming a major factor in why clients renew their contract with us, and I think the interest in it is only going to increase.”
Do you incorporate green contracts in every project now? Or does it only apply if the client asks for it?
“Since we're aiming to be carbon neutral by 2030, reducing carbon emissions in the work we do for our clients comes about naturally anyway, regardless of whether they're stipulated in a KPI or not. For example, we've switched over our fleet of diesel forklifts to electric forklifts, which have entirely replaced their diesel predecessors, so all of our customers are benefitting from the associated emissions reduction”
“In some of the tenders we’ve received in recent years, carbon emissions and sustainability has now been added to the weighting, alongside other (existing) key service parameters. For instance, some of the recent tenders had at least a 20% weighting on this area, so it's becoming a pretty substantial factor for our clients.
How have you made green contracts a focus at Swire Energy Services?
“We report our CO2 emissions on a monthly and quarterly basis to the Executive Committee within Swire and they, in turn, have to report the overall results to our board. If, for example, we were significantly behind our financial budget, this would become an area of critical focus to address, just as you'd expect in any business - a recovery and action plan would be required. With the regular reporting and analysis of our greenhouse gas emissions, the same would hold true if we had underperformed from a CO2 emissions perspective.
“For us, the importance of carbon reduction sits alongside the financial performance of the business, and will arguably become an even more important metric in the future.”
Swire Energy Services is committed to the sustainable development of its businesses and aims to create long term value for its shareholders with a target to be carbon neutral by 2030.
Learn more about our sustainability strategy here.