Sustainable and inclusive leadership in the oil and gas sector: A Canadian perspective

In this podcast, Heidrick & Struggles’ Emilie Johnson, a principal and member of the global Industrial Practice, speaks to Marty Proctor, the vice chair of ARC Resources, a leading Canadian energy company, about the challenges and opportunities currently facing the oil and gas industry. Proctor shares the leadership strategies he believes are essential in driving organizations to embed sustainability throughout operations, as well as how leaders should approach attracting and retaining talent in an industry that has experienced a lot of societal backlash. He also discusses how Canadian industrial companies can be more responsible actors in promoting diversity, equity, and inclusion, particularly with regard to the Indigenous population, and offers his insights into how Canadian industrial leaders can help their companies compete on the global stage.

Some questions answered in this episode include the following:

• (1:38) The oil and gas industry has clearly been a lightning rod for environmental scrutiny. Based on your experience, what leadership skills and strategies do you think are essential in driving organizations to embed sustainability throughout their operations?
• (5:06) Can you share some of the strategies you've used to both attract and retain talent in the face of these types of challenges? 
• (6:44) What guidance would you give to other business leaders who want to drive a better approach to engaging with Indigenous rights holders?
• (8:46) Do you see any opportunity for knowledge sharing and learning between industrial sectors?
• (11:08) Given your international experience, what do you believe are the pitfalls Canadian industrial leaders should avoid and what particular advantages can they capitalize on in order to best compete on the global stage?

Below is a full transcript of the episode, which has been edited for clarity.

Welcome to the Heidrick & Struggles Leadership Podcast. Heidrick is the premier global provider of senior-level executive search and leadership consulting services. Diversity and inclusion, leading through tumultuous times, and building thriving teams and organizations are among the core issues we talk with leaders about every day, including in our podcasts. Thank you for joining the conversation.

Emilie Johnson: Hi, I'm Emilie Johnson, a principal at Heidrick & Struggles and member of the global Industrial Practice. Our H&S Canada leadership series shares timely and relevant leadership insights on what organizations and leaders should be thinking about to stay competitive, both in Canada and on the global stage.

In today's podcast, I'm excited to be talking to Marty Proctor. Marty is the current vice chair of ARC Resources and an independent director for GreenFirst Forest Products. From 2014 to 2021, Marty was president and COO, and then president and CEO at Seven Generations Energy. He led the company through exponential growth to become a top 10 oil and gas producer in Canada, and earlier this year, through a strategic combination with ARC Resources, forming what is now the third largest natural gas producer in Canada.

Marty has over 30 years of experience in the oil and gas industry, both in Canada and internationally, having worked for companies such as Baytex Energy Corp., Murphy Oil, BP, and Husky Energy.

Marty, welcome, and thank you so much for taking the time to speak with us.

Marty Proctor: Well, thank you, Emily.

Emilie Johnson: Marty, let's start with one of the biggest issues facing our world in the industry right now. And that's, of course, climate change. The oil and gas industry has clearly been a lightning rod for environmental scrutiny.

Seven Generations was viewed as a real leader in the industry from an emissions intensity and communication perspective. Based on your experience, what leadership skills and strategies do you think are essential in driving organizations to embed sustainability throughout their operations?

Marty Proctor: Well, first, organizations must acknowledge that climate change, including humans’ contribution to climate change, is a serious issue that matters to stakeholders. Energy consumption and emissions generated in the production of oil and gas are part of the problem. Organizations must do what we can to minimize emissions while still building a business that creates value for shareholders.

Solving the issue of climate change requires an honest, transparent, and scientific approach that considers all aspects of the issue. Climate change is a global challenge and it's important that the dialogue surrounding it include factors such as energy consumption in the developed world, energy poverty in the underdeveloped world, jobs, economy, and the environment.

I acknowledge that emissions created by hydrocarbon production and their consumption are part of the problem. We also need to consider emissions created by other industries, such as forestry, construction, and manufacturing, as well as and emissions created by natural events, such as forest fires. My friends at Tudor, Pickering, Holt & Co. recently made me aware of research from the Salk Institute, which quantified humans’ contribution to greenhouse gas emissions and the calibrated human contributions relative to the Earth's natural carbon emissions and carbon capture. The Earth naturally immense about 727 gigatons of CO₂ per year. Humans add about 37 gigatons of CO₂ per year for a total planetary emission of about 764 gigatons of CO₂ per year. The Earth naturally captures about 746 gigatons per year. Therefore, the imbalance is about 18 gigatons of CO₂ per year. So, what if, in addition to minimizing emissions from energy production and consumption, we worked on reducing the Earth's natural emissions or work to increase the Earth's ability to capture CO₂, essentially augmenting nature-based solutions?

For example, the British Columbia forest fires in 2017 and 2018 emitted about double the CO₂ that was admitted by all of Canada's all oil sands producers in those years. Perhaps better forest management practices can reduce natural emissions and optimize the forest’s ability to capture CO₂, and other industries will also develop more efficient ways to reduce emissions and increase CO₂ capture.

For example, in agriculture, no-till farming enhances CO₂ capture and reduces water requirements. At Seven Generations, we made everyone in the organization aware of our environmental footprint, and we made deliberate investments to reduce our greenhouse gas emissions. We recognize that the best performers will have an opportunity to participate in the policy development that makes sense for the industry, and progressive companies will have an opportunity to develop solutions that create value for stakeholders, including shareholders. For example, Seven G's leadership position in ESG performance and our open and transparent approach to our business enabled us to earn the Equitable Origins EO100 certification as a responsible developer. This accreditation facilitated a natural gas supply agreement with Énergier, the largest natural gas distributor in Quebec, that was rewarded with a premium price for the gas.

Emilie Johnson: Thanks, Marty. That's a fantastic accomplishment.  Another challenge that we keep hearing about from leaders across the oil and gas sector and other resource industries, is that it can be really difficult to attract and retain talent in an industry that has experienced a lot of societal backlash and, of course, cyclicality. Can you share some of the strategies you've used to both attract and retain talent in the face of these types of challenges?

Marty Proctor: Well, at Seven Generations, we built a team that created a workplace where we were proud to work together for the purpose of serving our stakeholders. We developed a culture of respect and collaboration, trust, love, support, humility, hard work, taking responsibility, diversity and inclusion, differentiated service and innovation—essentially doing business the right way. Communication was frequent and clear; we communicated mission, vision, values—essentially the purpose of the company.

We held all-company offsites, at least annually, to communicate and seek alignment on strategy. And we celebrated the successes of the organization, including recognition for good service to our stakeholders and partners. I'm very proud of the team that we built at Seven Generations Energy and the way we serve our stakeholders. I'm particularly pleased with how we delivered what we've promised to our shareholders, especially for the last three years of our existence, in which we met or exceeded production, costs, and cashflow guidance for at least 11 consecutive quarters.

And I'm proud of the way our team put our shareholders first when we decided to combine our company with our resources; we did the right thing for the shareholders, even if it meant losing our own jobs. We built a brand we were proud of and worked together to serve our stakeholders. I think our behavior was differentiated and that it helped us attract and retain exceptional talent.

Emilie Johnson: You touched on diversity and inclusion. It’s a topic that industries across the globe are focusing on, and Canada, in particular, is of course facing the significant issue of reconciliation with the Indigenous Peoples. Now, many industries, including oil and gas, have not always been responsible actors in this area and have a real opportunity to play a major role. This was another area of major strength for Seven Generations. In fact, as we know, even the name itself came from the Iroquois philosophy that decisions we make today should result in a sustainable world seven generations into the future.

What guidance would you give to other business leaders who want to drive a better approach to engaging with Indigenous rights holders?

Marty Proctor: Well, first, in our work with Indigenous communities, it's important to look through the lens of partnership, seeking win-win outcomes. This requires actively and deliberately listening to what our Indigenous partners need and want so that together we can create those win-win opportunities. I have tremendous respect and admiration for our Indigenous partners. I value and appreciate what I’ve learned from them. In the most challenging times of the COVID-19 pandemic, I reached out to the leaders of each of our Indigenous partners and received many uplifting words of wisdom. I also felt the pain they were feeling as they work through the challenges of COVID. I think we developed a relationship in which we respect each other and care about each other.

Consistent with the purpose of the organization, the entire Seven Generations organization was trained to understand and respect our Indigenous partners. We had an excellent Indigenous relations advisor on staff, a gentleman named Francis Erasmus. I worked with Francis at a previous company, and I am pleased that he joined us at Seven Generations a few years ago. Francis is Indigenous and he is a good teacher and advisor. Francis brought us important perspectives and he conducted Indigenous awareness training with the vast majority of our staff and our board. With this training, I believe our project leaders were able to provide great support and feedback to the Indigenous partners to ensure our expectations were understood and to offer suggestions to help our Indigenous partners grow their businesses.

Emilie Johnson: Thinking more broadly across the whole industrial sector, are you seeing any other areas of opportunity for knowledge sharing and learning, from a leadership perspective—between pulp and paper, for instance, where you've recently joined a board, and oil and gas?

Marty Proctor: Well, I've always entered new situations by putting aside what I know and really listening for opportunities. Of course, good governance and social and environmental stewardship are important in every business and every sector. Oil and gas and forestry are both engaged in a resource development business where having the lowest cost of supply will ensure survival. Low supply costs are a result of having the best raw materials and low capital and operating costs.

So, whether it's oil and gas development or forestry, the successful companies will also be focused on reducing their environmental footprint and creating value through low emissions intensity. And I think both industries will have opportunities to create value through capturing and sequestering carbon.

In oil and gas, the rock, or reservoir quality, differentiates the best raw material. Seven Generations and ARC Resources are focused on the monotony, which is a world-class hydrocarbon resource. Seven G and ARC both implemented deliberate environmental management strategies to reduce emissions, which resulted in the new ARC having the lowest carbon intensity out of all reporting oil and gas companies in North America.

In forestry, the quality of the lumber and forest management practices will improve supply costs. GreenFirst Forest Products has a strategy to improve efficiencies, reduce emissions, and increase CO₂ capture from the six mills they will soon acquire. The goal of the company is to plant three trees for every tree harvested to increase forest cover and manage forests in a sustainable way.

Forests absorb carbon. If managed sustainably, the forest cover can grow and absorb even more carbon. Engineered wood products are beginning to replace concrete in more applications. We are learning that concrete buildings have a finite life and that concrete also emits CO₂; we might see opportunities for using engineered wood products and some of those construction applications.

Here's something to consider that really ties a gas and forestry together: oil sands operators have planted tens of millions of trees. The reclamation activities were initially in the name of beautification and reclamation but are now a legitimate means to sequester carbon.

Emilie Johnson: So, the oil and gas industry has, in some ways, taken on aspects of the forestry industry. That's really interesting.

Marty, given your international experience, what do you believe are the pitfalls Canadian industrial leaders should avoid and what particular advantages can they capitalize on in order to best compete on the global stage?

Marty Proctor: Well, that's a great word: global. Global warming is a global challenge that will require global solutions.

Canadians have a good reputation for responsible energy development, as well as technology leadership, agriculture, forestry, construction, and manufacturing. We can influence global climate warming solutions that can include support for Canadian energy and Canadian jobs and environmental stewardship. And we can develop solutions that will help lift underdeveloped nations out of energy poverty.

Global energy consumption will continue to grow as underdeveloped nations seek to improve their standard of living. The quality of life in the developed world has been improved by access to low-cost hydrocarbon energy. Would it be fair to say to the billions of people in less developed nations that they should not use hydrocarbon energy? I assure you that the hundreds of millions of people in the world that heat their homes and cook their food with biomass—including cow dung—care more about improving their quality of life than reducing their carbon footprint.

So, if billions of people on the planet are going to continue to increase their consumption of energy, including hydrocarbon energy, we need to ensure that the energy supply is as clean as possible. Canadian hydrocarbon molecules are among the most responsibly developed molecules on the planet.

Consider the huge advances have been made in Canada to reduce the carbon intensity of the energy that we supply. A great example of the Canadian advantage is the recent alliance between Canada's largest thermal oil producers, Suncor, Canadian Natural Resources, Imperial Oil, Cenovus, and MEG. They are going to develop carbon capture and storage solutions that will contribute to Canada's ambition to be net zero by 2050. Another example of the Canadian advantage is the recent partnership between TC Energy and Pembina Pipeline to build a carbon infrastructure network.

Canada is also in an advantageous position to supply responsibly developed natural gas that can be liquified and efficiently transported around the world to reduce energy poverty and global greenhouse gas emissions.

As I said earlier, solving the issue of climate change requires an honest, transparent, scientific approach that considers all aspects of the issue. This is a global challenge. Global solutions will be required to reduce consumption and emissions in developed nations while supplying clean energy to underdeveloped nations. Collaboration between energy, forestry, agriculture, construction, and manufacturing will lead to reduced emissions and improve carbon capture solutions. And I think nature-based solutions will also be required.

Emilie Johnson: Right. So, it's really that hyper-focus on sustainability that we find in the Canadian energy sector that should be capitalized on. And, in turn, that focus can be hopefully translated to other industrial sectors within Canada as well.

So, as we bring this conversation to a close, I have one final question: as you reflect back and think about the future, what are the most important ways your organizations are building on the lessons of 2020?

Marty Proctor: Well, at Seven Generations energy, we discovered that though our risk and opportunity analysis were comprehensive and included more than 600 line items of potential risks and contingencies, we were not adequately prepared for a global pandemic and negative oil prices.

Seven Generations’ rapid growth from 2014 to 2018 yielded negative consequences of high decline rates and high debt, which was OK at pre-pandemic commodity price levels but problematic when commodity prices plunged. When the pandemic struck, we quickly cut our capital investment program and made other difficult decisions to reduce costs.

We worked hard to improve our balance sheet. We also considered merger and acquisition opportunities that would further strengthen our balance sheet and diversify our product mix and accelerate our ability to implement a program to return capital to shareholders through a dividend. We concluded that a combination with ARC Resources was the best outcome for our shareholders and our stakeholders.

I think additional consolidation in the industry is necessary to improve efficiencies and enable stronger businesses that are better positioned to return capital to shareholders and to collaborate on climate change mitigation solutions.

On the positive side of the pandemic, we found that frequent communication with our teams, business partners, and the communities in which we work brought us closer together and helped us build even better relationships. We communicated very frequently with all staff, holding virtual town halls weekly for months. I had many, many calls with Indigenous leaders, stakeholders, business partners, and competitors. And we also quickly discovered that remote work is possible and should be an element of the way that we work in the future.

Emilie Johnson: Thanks, Marty, I really appreciate you taking the time to speak with us today. And thank you to our audience for listening to the Heidrick & Struggle Leadership Podcast. This has been an episode of our Canada leadership series.

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About the interviewer

Emilie Johnson (ejohnson@heidrick.com) is a principal in Heidrick & Struggles’ Calgary office and a member of the Industrial Practice.