Novatek

Currently, Novatek has only set short-term targets to reduce its scope 1 emissions. It aims to reduce its emissions per unit of production by 6% by 2030 and to reduce emissions per ton of liquified natural gas (LNG) produced by 5% by 2030 (both compared to 2019). To improve, the company should develop a long-term target that aligns with its 1.5°C pathway and covers its scope 1, 2 and 3 emissions. Additionally, the company should set intermediate targets at gaps of no more than five years to incentivise near-term action on longer-term goals.

Novatek’s scope 1, 2 and 3 emissions intensity have remained static between 2017 and 2021 and is projected to continue to be static between 2021 and 2026. However, to align with its 1.5°C pathway the company needs to decrease its scope 1, 2 and 3 emissions intensity by approximately 4% annually. Also, the company does not disclose its expected revenue over the next 5 years, and more importantly, the share of revenues it expects to originate from low-carbon products. Reporting this information would allow the company to demonstrate its financial commitment to transitioning to a low-carbon future.

Novatek’s 2030 strategy assumes that LNG will play an important role in replacing coal in power generation and will also gain wider acceptance as a marine fuel. To achieve its goals the company is promoting gas to its customers. However, the company has not created a strategy to influence clients to reduce their greenhouse gases (GHG) emissions. Novatek should develop a strategy which includes client emissions reduction targets, a range of action levers to drive change and measures to monitor the impact of this engagement quantitatively. The company should also expand its client engagement strategy beyond gas.

Novatek reports that it is exploring new business opportunities such as hydrogen and ammonia production for the shipping industry. However, both remain linked to its gas operations and therefore are not considered low-carbon. The company is also testing the viability of and carbon capture and storage (CCS) technologies and using renewable energy sources in the Arctic. However, as Novatek does not disclose the profitability, growth potential and deployment schedule of these activities it is not clear that they would enable the company to decouple financial results from greenhouse gas emissions.

Novatek has unambitious targets to reduce its scope 1 emissions per unit of production by 6% by 2030 and to reduce emissions per ton of LNG produced by 5% by 2030 (both compared to 2019). The company has also set a target to reduce the methane emissions per unit of production in the production, processing and LNG segments by 4% by 2030 compared to 2019. However, the company has not set a long-term target for any scope or a target for its scope 3 emissions.

Novatek has identified short-term plans to improve energy efficiency, expand methane emissions measurement and leak monitoring, and increase the use of renewable energy within company operations. The company also reports that it is exploring the viability of CCS and of using renewable energy sources in the Arctic. However, it is clear that Novatek still sees gas as a key part of its future. Its remaining new business models, hydrogen and ammonia productions, are linked to its gas operations and therefore not considered low-carbon by this assessment.

Novatek reports that it spent USD 23 million on capital expenditure (CapEx) for low-carbon technology in the reporting year. This is less than 1% of its total CapEx. Novatek discloses intentions for low-carbon business models, including wind power and CCS, but does not provide sufficient details about their deployment or profitability. In contrast, the company recently announced plans to build a new plant to produce 20.4 million tonnes of liquefied natural gas.

Novatek has been increasing its gas production since 2017. The company’s scope 1, 2 and 3 emissions intensity have remained static between 2017 and 2021 and is projected to continue to be static between 2021 and 2026. However, to align with its 1.5°C pathway the company needs to decrease its scope 1, 2 and 3 emissions intensity by approximately 4% annually.

Novatek is not committed to the low-carbon transition. The company has set unambitious targets, which don’t apply to the bulk of its emissions. The measures the company has implemented to date have not impacted its emissions intensities. It is spending less than 1% of its CapEx on low-carbon technology. Further, the company continues to expand its production and as a consequence is predicted to exceed its scope 3 emissions budget between 2022 and 2050 by over 70%.

The company publicly discloses a commitment to engaging in social dialogue with workers and unions. However, no relevant disclosure was found regarding the categories of stakeholders it engages with on a just transition. Nor was there any evidence to show the company’s ongoing social dialogue and meaningful engagement with affected stakeholders. No evidence was found of the company undertaking just transition planning to mitigate the social impacts of the low-carbon transition on workers, affected stakeholders and its business relationships. Additionally, no evidence was found to demonstrate the company’s engagement in social dialogue and with stakeholders in its just transition planning.

No public commitment by the company was found stating its intention to create and support access to green and decent jobs as part of the low-carbon transition. Moreover, no evidence was found of the company’s action to promote these jobs in a way that ensures gender balance and inclusion of vulnerable groups. Additionally, no relevant disclosure was found of the company’s assessment of employment dislocation risks. The company discloses the actions it takes to provide training and educational opportunities for workers and affected stakeholders. For instance, it has educational and internship programs for young people, as well as training programs for staff development. However, no relevant disclosure was found of the company embedding equality of opportunity for women and vulnerable groups in these actions. Furthermore, no evidence was found of the company having a process for identifying skills gaps for workers and affected stakeholders or a public commitment to help workers displaced by the transition to re- or up-skill.

No relevant disclosure was found to show if the company identifies impacts of the low-carbon transition on social protection for workers and affected stakeholders, nor how it contributes to social protection. Additionally, no evidence was found that the company expects its business relationships to contribute to the social protection of their workers and affected stakeholders. No relevant disclosure was found to show how the company identifies any misalignment of its lobbying activities with policies and regulations that support the just transition, nor of the measures it takes to address misalignment. Furthermore, no evidence was found that the company lobbies for policies and regulations for green and decent job creation; retention, education and reskilling; and social protection for workers.

The company commits to respecting human rights, expects its business relationships to respect the International Labour Organisation fundamental rights at work. Additionally, it has engaged with stakeholders whose human rights may have been affected by the company’s activities. However, the company can strengthen its performance and disclosure in relation to human rights due diligence.

The company commits to respecting the health and safety of its workers and expects the same commitment of its business relationships. The company discloses some information about the diversity of its workforce. However disclosure can be strengthened on these topics and other key decent work issues, including living wage and working hours practices.

The company has a policy prohibiting bribery and corruption, and includes corresponding clauses in its contracts with business relationships. The company states that it does not make political contributions. The company can strengthen its disclosure on these and other key ethical business topics, including personal data protection and responsible tax practices.