At Vermilion, sustainability is integrated as part of our Strategic Plan into all of our activities, and is one of six key Strategic Objectives that drive our business performance. This demonstrates its position as a core element of our long-term vision, the strategy we use to achieve that vision, and how we evaluate our performance.
As a responsible energy producer, Vermilion believes that we can best deliver long-term shareholder value by operating in an economically, environmentally and socially sustainable manner that recognizes the importance of all of our stakeholders. The integration of sustainability principles into our business is not only the right thing to do: we believe it increases shareholder returns, enhances our business development opportunities and reduces long-term risks to our business model.
Responsibility: Vermilion defined our strategic objective as Integrated Sustainability because we believe sustainability impacts every business unit, department and employee in the company – and, in turn, they impact our sustainability. In keeping with this approach, the entire Board has responsibility for Vermilion’s sustainability performance, with individual committees offering expertise and oversight on specific Economic, Environmental, Social and Governance (EESG) factors. In 2018, we also established a Sustainability Committee. 102-18 102-26 102-28
|Committee||EESG Factor Overview|
Internal control systemsAudit processes
|Governance and Human Resources||Board effectiveness and compensation risk
Compensation philosophy and practices
Corporate governance and performancePeople practices, including succession and development
|Health, Safety and Environment (HSE)||Occupational, process and asset safety
Risk managementHSE-related sustainability initiatives
|Independent Reserves||Reserves and resources
ProductionFinding, developing and acquisition costs
Social impacts, including human rights, community investment, and government and other stakeholder relations
To ensure full coverage of EESG factors, our Board skills matrix includes specific sustainability-related expertise, including environmental and social impacts. All of these skills are supported by Board training as required. With specific regard to Sustainability, we also benefit from the expertise of our Board members, including Mr. Timothy Marchant, who is an Adjunct Professor of Strategy and Energy Geopolitics at the Haskayne School of Business at the University of Calgary, and teaches graduate-level courses on corporate social responsibility and related areas. 102-27
Organizational responsibility flows from the Board to our Executive Chairman and our President, and throughout the company via our Executive committee, on which our Executive Vice President, People and Culture is the executive member responsible for sustainability.
Various departments within the company report priorities and progress quarterly to either the full Board or Board committees on sustainability factors, including governance updates, HSE targets and performance, and developments within our strategic community investment program. In addition, our sustainability team provides a Centre of Excellence approach, advising the business on all aspects of sustainability and reporting quarterly to the Board's Sustainability Committee and/or the full Board regarding progress. 102-20 102-26 102-30
We believe this approach clearly communicates, both externally and internally, our commitment to sustainability as a priority throughout the company and positions us to recognize the opportunities it presents. It also supports the proactive manner in which we address external risks that have potential impacts on short and longer-term company performance, including:
Vermilion's Board of Directors, Executive committee and Risk Management Committee regularly review these risks, along with mitigation strategies and associated opportunities (for more detail, view our Risk Management page).
Internal: Vermilion’s long-term vision is founded on six strategic objectives that cover the key elements of success, including: Extraordinary People; Best in Class Health, Safety and Environment; Top Quartile Shareholder Returns; Operational Excellence; Robust Portfolio, and Integrated Sustainability. Each of these has its own goals, supported by an Executive champion along with annual commitments that are reviewed regularly at the Executive and Board levels to assess and confirm progress.
Because sustainability objectives are included in long-term vision, progress on these drives both company and individual staff performance. We connect our performance to compensation through a pay-for-performance philosophy, combining reasonable base compensation with short-term and long-term incentive opportunities that are directly tied to operating and financial results, including fulfilment of sustainability commitments.
In 2019, we added a specific sustainability metric to our long-term incentive performance compensation scorecard. We believe there is a direct link between sustainability performance and overall business performance, including shareholder returns. Moreover, we expect sustainability performance to be a very significant factor in the long-term viability of our economic model, driven by increased emphasis on economic, environmental, social and governance impacts, including both risks and opportunities. As a result, we have introduced a sustainability measure to illustrate to our organization the growing importance of this measure, and to incentivize all members of our staff to focus on sustainability performance in their daily work. We are measuring our performance relative to our peer group in three independent, third-party sustainability rankings: CDP, SAM and Sustainalytics chosen in due to their robust peer benchmarking systems via Bloomberg. As sustainability ranking standards and agencies evolve, we will review our scorecard weighting and agency selection.
Thus, sustainability performance is linked not only to executive but also to employee compensation. We report on this externally through our Proxy Statement and Information Circular each year.
External: Our Board of Directors and our Executive committee continue to recognize our stakeholders' expectations and feedback as critical to Vermilion's success and integrate them into our ongoing processes for governance, strategy and performance. They are incorporated as goals into our strategic long-term vision, identified as commitments for annual planning, and assessed on a quarterly basis for progress against those commitments.
In addition to our stakeholder outreach, our stakeholders can communicate to the Board and to Vermilion in confidence directly and anonymously via our website, and via postal mail and email, dedicated Investor Relations phone and e-mail lines, investor relations presentations and events, and our annual meetings. 102-21 102-29 102-30
When we began our sustainability reporting in 2014, we identified that our focus was primarily internal, and that we would develop our external stakeholder engagement over time. In subsequent years, this external engagement has taken shape, as we have sought input from socially-responsible investment agencies, welcomed engagement from shareholder signatories to the United Nations’ Principles for Responsible Investment, and launched a wide range of engagement via our Public and Government Relations and Community Relations work in our business units. 102-28
Combined with our existing and ongoing sustainability work, this has led to three key areas of focus:
Human rights and supply chain monitoring, which we began to analyze in 2018 through a preliminary assessment of environmental, social and governance approaches by our critical suppliers in each business unit, defined as those with whom we spent more than $1 million. For each supplier, we are assessing public commitment to, policies and procedures regarding Health and Safety, Environmental Stewardship, Human Rights, Labour Standards, Anti-Corruption, and Sustainable Procurement.
This is critical foundational work, and we are investing both the time and the resources required to get it right.