In my professional experience: How HSE has evolved into ESG
The depth of expertise within DNV enables any company to identify, understand, and manage ESG and HSSE risks at a corporate or project level.
I have been at DNV for over 15 years and growing within the company has been a great adventure that includes some of my best career experiences. One of those was a project codenamed “Green”, which was my first project involving ESG assessment.
It really opened my mind to pursue environment, sustainability, and governance (ESG) work, something that has now become my passion.
The customer, a global and integrated oil and gas company, was considering acquiring a solar farm developer for USD 322 million. They were confident in the solar farm developer’s technology and project funnel, but wanted to understand if the developer was taking the right steps to protect the environment and human rights.
For a company, any company, a due diligence assessment of ESG and HSSE prior to absorbing another asset is important to understand how company cultures will align, the impact of losing of brand equity, code of conduct, regulations, and legal issues (license to operate).
I was part of a team tasked with assessing the solar farm developer’s approach to ESG and health, safety, security, and environment (HSSE) at a corporate level and performing diligence for projects under development and in the pipeline.
The scope of work included corporate-level assessments and interviews with staff as well on-site inspections of projects in the U.S., Chile, Italy, and Australia to ensure consistency and quality of the project assessments, we developed a HSSE Due Diligence training program for all our DNV team members. This training program was critically important because it allowed us to define a unified and standardized list of what DNV team members needed to look for at each project site. This approach enabled us to complete our site visits and wider corporate assessment in just eight weeks.
Our due diligence provided the customer with confidence that the solar farm developer would be a good fit for their culture and approach to HSSE and ESG management.
After this project, I realized, I wanted to move into this space and work with investors, developers, and other customers to understand and manage their ESG risks. Recently, my colleague Marion Hill touched on the importance of ESG and HSSE in her article about how undisciplined capital is hurting renewables.
As investors and other companies continue to invest in renewables, Marion notes two brig green flags to look for are renewable energy developers that deeply understand how their project affects local communities and have taken every appropriate step to ensure their project is designed to operate safely for the long haul.
With this in mind, it becomes a fairly clear-cut story about how to identify the high-risk opportunities to avoid.
For example, DNV was contracted by a customer to perform HSSE assessments for two biomass power plants they were targeting for sale. My team and I reviewed key health and safety documentation. interviewed the plant management and visited to sites to assess technical issues and health and safety.
We uncovered a significant risk that could jeopardize the plant by potentially reducing its value. We also discovered the plants never recognized or performed any studies on the potential for dust explosions. Dust produced by biomass is a huge risk if it accumulates on the building’s surfaces, and the site visits confirmed accumulation of dust in those areas.
Based on the potential explosion risk for dust accumulation on walls and rafters of the buildings, coupled with a lack of intrinsic electrical systems that could trigger a spark, we recommended performing a dust explosion study and an electrical study to identify the correct electrical protection for the potentially hazardous areas. Candidly, these studies should have been conducted in the design stage to determine which design and investment was needed to mitigate the risk.
If the plants had been purchased without a proper assessment, an explosion could have happened, and this would have created a domino effect cascading through the local community’s electric systems, caused property damage to adjacent structures, damaged animal life and the ecosystem as well as causing potential irreversible damages to the surrounding communities – not to mention a great damage to the companies’ brand and image.
My experiences have shown me, unfortunately, just how easy it can be to overlook ESG and HSSE risks when building, selling, or buying a renewable energy project. What’s more, sellers may not be fully aware of their asset’s safety risks—which I clearly saw in the case of the two biomass plants. My colleagues, Bridget McEwen and Priya Sreenivasan, wrote a blog about how undisciplined capital may result in risks to human rights through supply chain, labor, regulations, etc. "Think risk: the intersection of human rights, capital, and renewable energy" (dnv.com), they put together some great points on how to mitigate potential human rights risks around green energy projects.
Fortunately, the depth of expertise within DNV can be brought to bear to enable any company to identify, understand, and manage ESG and HSSE risks at a corporate or project level. I count myself lucky to be part of a network of experts that can provide due diligence for the most complex topics, with specialized knowledge on climate risk modeling, biodiversity, health, safety, and environmental compliance, human rights, and so much more. Please reach out to me and let’s talk risk!