Intrinsically linked

How might clearing a mangrove for oil and gas infrastructure change local lives? Environmental economist Petrina Rowcroft and socio‑economist Mary Zsamboky talk us through the innovative process helping operators understand how their environmental impacts affect human wellbeing — and why it’s so important to connect the two.

Thousands of coastal communities throughout the world depend on mangroves for subsistence fishing. Mangroves also help make coasts less vulnerable to extreme weather events like storms and floods. Their rot- and insect-resistant wood is a valuable source of timber for housing and fuel.
Mangroves are also rapidly degrading, according to UNESCO, which has identified oil and gas developments and oil spills as two of the most common threats to wetland forestation across Africa, the Middle East and Australasia.

Joining the dots

The very nature of exploring for oil and gas means operators both depend on and have an impact on the environment. As the industry becomes more environmentally responsible, and the social licence to operate becomes critical, it’s worth looking at the relationship between the two.

A new approach

Nature provides benefits to humans that are essential for our existence. Also known as ecosystem services, these include fresh water from lakes and rivers, carbon storage from trees, crop pollination from insects and recreation from green spaces.

The four types of ecosystem

Knock-on effect

By taking what’s known as an ecosystem services approach to environmental and social impact assessments, operators can better understand the knock-on effect their ecological footprint can have on human wellbeing: how might clearing a forest for infrastructure affect local people who rely on the forest’s fruits and trees for food and shelter? Can greenhouse gas emissions from a large natural gas project impact on efforts to regulate global climate?

Under pressure

In 2012, the International Finance Corporation (IFC) mandated that all projects it funds must ‘maintain the benefits of ecosystem services’. Multiple other lenders, including all the banks that have adopted the Equator Principles risk management framework, have similar requirements. For oil and gas operators looking for investors, this means facing tougher rules and regulations around reducing their impacts on human wellbeing.

Knowing what matters

A big part of the ecosystem services approach involves speaking and listening to local communities to better understand how they interact with the environment and which ecosystem services are most important to their health and wellbeing.

Looking to the future

An ecosystem services approach also considers what an oil and gas company needs from the environment to run effectively, such as water for extraction processes and timber for construction — and how these ecosystem services might change in the future and how this could affect business operations. For example, a company that depends on the constant supply of clean water may consider how this supply might change as a result of climate change or demand from nearby developing populations.

Scoping and scoring

AECOM has developed an Excel-based tool, called ESIVI (Ecosystem Services Identification, Valuation and Integration) that helps identify ecosystem services relevant to a project in different environments, such as forest, grassland, marine or coastal, and then takes users through a process where they can score potential impacts of the project on the ecosystem services. Scoring considers how much local communities and the project itself depend on particular ecosystem services, how resilient the services are and if there are any alternatives.

On the ground in Gabon

We used the ESIVI tool to help an operator in Gabon understand how their activities, which included clearing large areas of mangroves, may have impacted negatively on the ecosystem services that people in the region rely on.

By using ESIVI and talking with local communities, we discovered that clearing the mangroves had had potentially far-reaching effects on their lives.

For example, fishermen on the other side of the peninsular to the mangroves believed that their fish catches had been declining since the mangroves had been cleared. This could be because the mangroves provided a nursery for fisheries.

The mangroves also provided flood protection and fuel for smoking fish and were also used by local communities in spiritual rituals.

Following our investigations, our client is offsetting the carbon storage and sequestration once provided by the mangroves by investing in mangrove rehabilitation programmes nearby developing a livelihoods restoration plan.

A big part of the ecosystem services approach involves speaking and listening to local communities to better understand how they interact with the environment.

Benefits and trade-offs

Because anyone from subsistence farmers growing crops on private land to the commercial fishing industry can benefit from ecosystem services, it can be difficult to fully account for and quantify every impact an operator may have on the environment. Also, there are no universal metrics that we can use to measure less-tangible impacts, such as the loss of cultural significance when a forest is cut down. This is where discussions with local communities are paramount to gaining an understanding of the nature and significance of trade-offs such as how much they value employment opportunities and potential income from an oil development versus the potential impact on particular ecosystem services.

Pragmatism counts

It’s important to realise that there’s often a rift between theories on what should be done to protect and restore the environment, and what can be done in practice. Sometimes investment simply isn’t there, or logistics get in the way. Companies that show a genuine commitment to industry best practices should, however, be able to overcome most challenges.

A shift in thinking

There’s a strong link between the environment and human wellbeing. For oil and gas companies to fully understand and account for how they affect people’s lives and the natural resources they depend on, a shift in environmental and social risk thinking is needed. This will help oil and gas operators ensure they’re doing all they can to contribute to a more sustainable future.

Why an ecosystem approach?

By understanding and measuring how an oil and gas project affects human wellbeing, operators can:

1. Build a case for funding

Big oil and gas developers often rely heavily on external funding to finance project construction. To access this funding, operators face increasingly stringent environmental and social standards that they have to comply with, such as the IFC’s Performance Standards.

2. Stay productive

Operators may themselves depend a lot on natural resources and ecosystem services, such as large volumes of water required to extract natural gas. Through ecosystem service assessments, companies can better understand their dependencies and put strategies in place to help maintain and protect the things they need to continue operating.

3. Stand up under scrutiny

Consumers, governments and organisations are increasingly holding big companies to account for their impact upon the environment and society. Ultimately, the opinions of those affected by oil and gas operations matter — even the perceived lack of credibility and reliability can make it difficult for a company to operate locally or could affect their market share.

4. Be compliant

Operators are under increasing pressure from regulators to consider how they affect human wellbeing. If operators fall behind on industry best practices and fail to anticipate regulatory change, it can lead to costs and delays down the line.

Through ecosystem services assessments, companies can put strategies in place to maintain and protect the things they need to continue operating.