Can you discuss an overview of McDermott’s approach to sustainability?
Our starting point is that sustainability equals opportunity — the opportunity for everyone at McDermott to collaborate with our colleagues, partners, customers, and communities to improve environmental and social performance in our industry, support the energy transition, and leverage innovation to create a value proposition that is both technically and commercially sustainable.
Every single employee in McDermott has a role to play in achieving our sustainability goals. In line with our ‘One Team’ core value, the implementation of our sustainability program is founded on collaboration across all our business lines and functions. As leaders for the Global Sustainability function, we firmly believe that a truly sustainable business only can be achieved through company-wide involvement of every person, yard, vessel, project site, and office.
Following the announcement of our strategic Sustainability goals in 2021, a key 2022 priority for us has been to fully integrate Sustainability across our company. By integrating Sustainability throughout McDermott’s global organisation, we build engagement that becomes engrained in the business and allows us to harness the synergies of operational, commercial, and financial benefits – in addition to knowing that we are doing the right thing for the environment, people, and communities that are touched by our operations.
On that note, as the world demands more energy, how is McDermott working with operators in balancing sustainability initiatives with increased E&P activity?
As a large, fully-integrated EPCI contractor, we are uniquely positioned to influence an entire value chain of GHG emissions including our own fabrication, construction, and marine operations, our suppliers and – ultimately – the operating facilities we design and build for our customers.
We believe the construction industry has a critical role to play in reducing global emissions, and we are committed to working with our customers to achieve our net zero project delivery ambition. In 2021, we signed an MoU with Shell to decarbonise the EPC industry and have since ventured into identifying pain points within the industry and working together towards building a suite of solutions focused on renewable power, alternative fuels, digital technologies, and marine decarbonisation. We recognise that the pathway to net zero construction comes with many challenges, but we are committed to identifying opportunities to reduce the carbon intensity of our own operations and in doing so pave the way for low carbon EPC project delivery.
Our pursuit of low carbon project execution led us to a focus on implementing renewable power throughout our onshore operations. In 2021, we operated Batam, our largest fabrication yard, entirely on renewable power and a biofuel blend, reducing emissions by almost 33,000 tonnes CO2e. We are building on that success and actively working towards employing renewable power through all our major fabrication yards by 2024.
Embodied carbon constitutes a significant portion of the carbon footprint for any EPC project. Therefore, consideration of scope 3, supply chain emissions, is an essential step towards achieving low carbon project delivery. We acknowledge the constraints in accurately tracking and reporting Scope 3 emissions, as they remain outside of McDermott’s direct operational control, and our integrated approach to reducing the emissions of our supply chain means we liaise with our key suppliers, such as steel suppliers, to support them in reducing the emissions intensity of their manufacturing process. Through provision of engineered or technology-based solutions, we are looking to create a roadmap to decarbonise hard to abate sectors.
Social responsibility is another critical component of sustainability, as the ‘S’ of ESG. How is McDermott working towards achieving its social responsibility targets, in the Middle East and elsewhere?
Between our Middle East locations in Saudi Arabia, Qatar, and the UAE, a large, migrant workforce forms the backbone of our fabrication and marine operations. We take Human Rights very seriously and have implemented an expansive Social Responsibility framework to ensure fair and appropriate treatment and prevent any form of forced labor, harassment in the workplace, and similar concerns.
We continuously evaluate Human Rights performance at our yards and significant project sites around the world through internal assessments and participation in client audits, and we strive to identify opportunities to improve working and living conditions for our people.
From social investment perspective, our project locations often offer great opportunity for meaningful and mutually beneficial collaboration with the communities where we operate. For example, in Uganda – where McDermott is executing EPCC scope for the Tilenga project, we are investing in a locally-owned manufacturer of personal protective equipment to foster and develop in-country supply chain capabilities and create meaningful job opportunities.
In India, we have sponsored a renewable energy project since 2020, for installation of 8 kW solar power plants and solar-powered reverse osmosis water systems to provide clean electricity and drinking water for schools around Gurgaon and Chennai, where our main offices in India are located. These are good examples of how our social responsibility initiatives today create permanent impact that is sustainable into the future.
Technology plays an important role in achieving sustainability goals. Can you talk about McDermott’s technology-driven approach to address climate change?
We pride ourselves on fostering and maintaining a culture of innovation that positions us to quickly adapt and respond to shifts including toward new energy technologies and low carbon delivery. Through partnering with our customers in achieving their net zero commitments, we truly believe we will have the greatest impact towards curbing the effects of climate change.
Our ArborXD carbon footprint calculation tool, developed entirely in-house by our Engineering and IT teams and launched earlier in 2022, utilizes years of project data and experience to identify low emission pathways at the design stage. Built on a substantial repository of past project data and low carbon solutions, ArborXD provides a consistent approach to carbon footprint calculations for a project’s lifecycle emissions, from EPC through to facility operations. Through utilisation of ArborXD at concept stage, customers are informed and empowered to make decisions that can reduce the ultimate operating facility emissions by up to 85%.
Our commitment to providing sustainable solutions is centred around a belief that a variety of solutions are necessary to decarbonise capital infrastructure at the scale and pace required to support climate resiliency, whilst still maintaining accessibility and affordability. Broadly speaking, we focus on five areas of Energy Transition projects in which we believe we will have the most meaningful impact: hydrogen, CCUS, offshore wind, circular economy, and net zero solutions.
Oil and gas companies are increasingly announcing their net zero goals. What steps is McDermott taking toward reducing emissions and achieving net zero?
In 2021, we established a series of strategic sustainability goals aligned with the UN Sustainable Development Goals. Our goals touch every area of sustainability, emissions, waste reduction, social investment and human rights.
On the emissions side, our strategic goals lead the way to our net zero target for Scope 1 & 2 emissions by 2050, with an interim 50% reduction target by 2030. Our journey to net zero also includes targets for waste reduction, zero waste-to-landfill, and a 35% carbon footprint reduction across 10 key supply chain categories by 2030.
To support the achievement of our strategic sustainability goals, we set annual targets that ensure continuous progress. For example, in 2022, we have a company-wide renewable energy target.
What are some of the key factors that are pushing companies toward sustainability?
In our view, the increased focus on sustainability within the energy industry is driven by several factors which overlap and interact with each other in an evolving ecosystem.
We are seeing how the industry, including our clients, is preparing for increasingly-stringent regulations and reporting requirements, and shifting towards solutions that incorporate sustainable technologies, materials, and processes. We have been happy to see sustainability capabilities and offerings become an important commercial and technical differentiator when our clients select a contractor for material projects.
From talent acquisition, development, and retention perspective, employees – current as well as prospective – expect McDermott as a leading EPCI contractor to make sustainability a genuine and intentional priority. In an increasingly competitive job market, we find that we attract people looking to work for a value-based company, where sustainability is organically integrated in the mindset and culture of the entire organisation. Our leadership development programs, continuous management education, career development process, and Employee Resource Groups are all important elements of our culture and how we ensure that our workforce remains engaged with opportunities to learn, develop, grow, and contribute. We also see sustainability factors having increased importance in the areas of project financing and insurance. Know-Your-Customer and other due diligence processes now incorporate extensive requirements for effective sustainability programs well beyond simply having a set of policies in place.
All taken together, these factors establish sustainability as a key strategic priority for any company that wants to be part of this industry and the Energy Transition – today and in the future.
