Context
Ecopetrol is a national-scale mixed-economy company from Colombia, affiliated with the Ministry of Mines and Energy (MME). It combines both public and private participation, functioning as a commercial entity involved in competitive endeavors alongside private enterprises. Ecopetrol’s primary objective is to undertake industrial and commercial activities, either in Colombia or internationally, associated with or connected to the exploration, exploitation, refining, transportation, storage, distribution, and marketing of hydrocarbons, their derivatives, and related products. This encompasses the research, development, and commercialization of both conventional and alternative energy sources. Furthermore, Ecopetrol is engaged in the production, blending, storage, transportation, and marketing of oxygenating components, as well as port operations and the execution of any associated, complementary, or beneficial activities contributing to the advancement of the operations.
Ecopetrol recognizes the multitude of dependencies, impacts, risks, and opportunities associated with nature, which are particularly relevant when operating in a megadiverse country like Colombia. These impacts can lead to significant effects for business operations and relationships, including social conflicts, asset damage, financial implications, reputational risks, community effects, among others.
To address these challenges, Ecopetrol adopts a proactive approach from project inception, implementing a mitigation hierarchy to identify biodiversity-sensitive areas and prevent adverse impacts. Furthermore, the company's Environmental Strategy incorporates a dedicated pillar focused on preventing and mitigating potential environmental impacts from hydrocarbon spills and other hazardous substances resulting from operational and process safety incidents in operational zones.
Ecopetrol's biodiversity reporting journey
Ecopetrol started producing its Integrated Management Report in 2009, and integrated the GRI Standards to its reporting in 2012. Since then, the company included the versions of indicators EN11 (Description of land located in protected areas), EN12 (Description of significant impacts on biodiversity), EN13 (Protected or restored habitats) and EN14 (Strategies for managing impacts on biodiversity). Currently, Ecopetrol continues to report the indicators that GRI has updated as information requirements to know the performance and management of biodiversity change, as is the case of GRI 304: Biodiversity 2016.
This process allowed the company to efficiently communicate the strategy that defines its commitment to biodiversity for the protection and restoration of habitats located in the areas where it operates. In addition to responding to stakeholder expectations regarding biodiversity management, the requirements of GRI 304: Biodiversity 2016. contributed to strengthening the methodology for identifying and addressing impacts. Reporting based on GRI 304: Biodiversity 2016. has helped the company to be better prepared for the challenges associated with specific standards and frameworks related to nature issues. The completeness of the GRI requirements has facilitated the collection of traceable and comparable metrics that are articulated with corporate risk management, laying the groundwork for responding to new specialized information requirements.
Ecopetrol developed its materiality assesment in five steps:
- The update of the company's stakeholders was carried out with the objective of determining the impact materiality.
- Information from internal and external sources was analyzed to identify the actual or potential impacts that Ecopetrol generates or could generate on the environment and/or society, as well as the risks and opportunities that the environment presents and that have or could have an impact on the company's ability to generate economic value.
- Based on the impacts, risks and opportunities identified, 14 ESG issues were selected and defined as potentially material for Ecopetrol, which were validated with different areas of the company, including "Biodiversity and Ecosystem Services".
- In order to identify Ecopetrol's main impacts on biodiversity, it was necessary to analyze various sources, such as the company's risk management system, the environmental impact studies required by Colombian law for operating in the territories, the environmental assessments carried out at Ecopetrol's operating sites, and the guide to human rights in relation to nature.
- Once the issues were identified, they were evaluated. The assessment considered the financial risks and opportunities identified in the exercise, and looked at various stakeholders to qualify and prioritize each potential ESG element, considering Ecopetrol's impacts on the environment and society.
In its double materiality analysis, Ecopetrol identified risks and opportunities related to nature, such as business activities related to biodiversity protection, undesirable events of operational or natural origin that may impact the environment, inadequate responses to biodiversity challenges, and deviations from mandatory investment obligations. The process also allowed the identification of the most significant impacts related to Ecopetrol's upstream operations such as land use change, intervention in 4.36 hectares of land and exploitation of 446m3 of wood from forests.
Lessons learned
Including "Biodiversity and Ecosystem Services" as a material issue in the double materiality analysis recognizes the dependencies that Ecopetrol has with respect to ecosystem services, facilitates disclosure of the direct drivers of biodiversity loss and/or change and their impacts on communities, and emphasizes the need to report comprehensive location-specific information; as conceived in GRI 101: Biodiversity 2024, the new Topic Standard for Biodiversity. Although double materiality is not yet mandatory in Latin America, the fact of being linked to the value chain of European organizations motivates companies to start adopting this approach at earlier stages.
One of the main challenges for Ecopetrol in the process of identifying and consolidating biodiversity impacts is undoubtedly the geographical context in which it operates; Colombia is a megadiverse country, also classified as the most biodiverse per square kilometre. This means that the territorialisation of impact assessment is fundamental to the effectiveness not only of the identification but also of the remediation of impacts related to nature.
Challenges such as these will continue to be present in a methodology that is evolving as companies incorporate financial and risk visions more directly into sustainability management, while understanding how the ESG priorities they have defined contribute to leveraging their own strategy.
