Companies in the oil and gas sector are no stranger to external scrutiny of their impacts on the environment and the communities – but they now face increased attention on how workers are treated.

Companies face multiple challenges in managing ‘worker welfare’, including spotting hidden issues (e.g. workplace discrimination), addressing systemic practices (e.g. exploitative recruitment processes), engaging with vulnerable workers such as migrants, building meaningful worker dialogue in an industry where this has not been the norm and ensuring that their standards are implemented throughout their projects and in often complex sub-contracting chains and supply chains.

With the increased attention and numerous challenges in mind, the Society of Petroleum Engineers (SPE), included a special session on labour welfare standards and global best practices at their annual conference and exhibition (reportedly the first time it was on the agenda). Fittingly, this took place in Abu Dhabi, in a region known to have issues with worker welfare. I was invited to present some of the work that Ergon is currently doing for IPIECA – developing labour rights guidance for the sector – along with some lessons from our experiences working with clients in other sectors.

A due diligence approach

Our first point of departure is that companies should approach the management of worker welfare by adopting a human rights due diligence (HRDD) framework consistent with the UNGPs.

This is particularly useful for companies with a large number of projects and long supply chains, where there is often a need to prioritise resources and focus on the key risk issues rather than chasing compliance among all parties. Taking a HRDD approach helps companies identify their most “salient issues“ and also helps align company practices with developing legislative requirements, investor standards and the expectations of civil society.

An important initial due diligence step is to assess the risk of negative impacts on worker welfare, through focusing on indicators that may point to where these risks are higher. These can include looking at the likely characteristics of workers on a project (e.g. lower skilled migrants), the degree of subcontracting and capacities of those contractors, and the contextual risks associated with the project’s location (e.g. remotely located, in a country with few legal protections for workers or where particular groups are widely discriminated against).

One key cluster of risks is associated with how vulnerable migrant workers are treated in their recruitment and employment journey, and these were usefully set out by Greg Ross, Head of Social Performance at Petrofac who also spoke at this session.

Taking action

Once risks or issues are identified, these should of course be addressed, and there are good examples from oil and gas companies demonstrating good practice in this area.

Some good practices may seem relatively simple – such as including workplace rights and grievance procedures as a standard component in worker inductions– but this is absolutely vital to empowering anyone to exercise their rights. Others require more consideration and investment, for example, developing labour cost models that a procurement team can use to identify contractor bids during the tendering process that are too low to ethically recruit, employ and accommodate workers.

Worker welfare good practices also extend outside the workplace to employer-provided accommodation and significant consideration at some projects has gone into developing facilities that offer workers a space in which they can rest and relax comfortably, and which are clean and sanitary. Improvements in worker accommodation can also be linked to improved productivity and workforce retention.

In regions where there is little collective worker organisation, there are also increasing efforts to improve oversight of workplace conditions and to improve access to grievance mechanisms using some innovative solutions. Examples from some Engineering, Procurement and Construction (EPC) companies include: hiring worker welfare officers – not too dissimilar to community liaison officers’ roles on community issues – to act as a trusted contact point for workers to raise issues, give feedback etc., and for companies to communicate their responses and other important messages with the wider workforce. Using mobile technology to do this is something many sectors are looking into, and whilst yet to prove their effectiveness, there has been considerable investment and testing by CH2M to develop a tool for the industry, and it will be interesting to see how this works when it is fully rolled out.

Drivers and opportunities

From our research and engagement with companies, and from listening to sector practitioners, I’ve identified four key drivers and opportunities for the sector.

Regulation is building: There are a number of legislative reporting requirements that are likely to get senior management more engaged and there are also a number of industry and multi-stakeholder initiatives addressing on these issues with enhanced expectations on transparency and delivery of higher standards for workers.

Meet lender expectations: Project financing from lenders and export guarantee agencies continues to play an important role in the sector. Since most of these institutions have performance standards on labour issues and are increasingly aware of the labour risks in the sector, demonstrating good labour practices can improve access to finance.

Engage and educate: This opportunity is four-fold: engage with colleagues across different disciplines on the subject (e.g. procurement and HR have vital roles to play, not just the social performance team) and work to get senior-management buy-in; use relationships with NOCs and public bodies to open dialogue on legal protections for workers in countries of operation, if necessary; engage with peer group companies to share experiences and learnings, and; set standards and leverage your business partners to adopt and implement these effectively.

Build on existing practice: More so than most other sectors, the oil and gas sector is well-placed to incorporate human rights due diligence practices into its existing processes and systems. There are important learnings from work on community engagement and health and safety – where the sector has vast experience and where there continues to be innovation to overcome issues –  that can be taken and applied to labour rights. Thus improving management of worker welfare issues isn’t necessarily about creating entirely new systems and processes but instead adapting and adding to existing ones.