Managing sustainable development risks

Our commitment to sustainability includes identifying, assessing and managing sustainable development (SD) risks through a process that is a mandatory, auditable, annual requirement for business units (BUs) and select corporate functions. Input and guidance are provided by our corporate Long-Range Plan (LRP) and SD Risk Management Standard. The output informs the corporate enterprise risk management (ERM) system and key business-planning processes for the company, including our overarching corporate strategy.

Read more about how we manage climate, nature and social-related risks.

LRP and corporate strategy

We integrate climate-related risks into our corporate strategy via the LRP, which enables us to test our portfolio against climate-related risk scenarios to support informed decisions. Our LRP forecasts key data related to portfolio development and performance, production, costs and cash flow. We also forecast greenhouse gas (GHG) emissions, carbon cost, low carbon capital spend, planned or possible GHG reduction projects and water volumes. This data serves as a critical input for understanding our environmental footprint and the potential risks associated with planned business activities as well as emissions reduction opportunities.

The objective of our Climate Risk Strategy is to manage climate-related risks, optimize opportunities and equip the company to respond to changes in key uncertainties, including government policies around the world, emissions reduction technologies, alternative energy technologies and changes in consumer trends. This strategy outlines choices around portfolio composition, emissions reductions, targets and incentives, emissions-related technology development, and our climate-related policies and finance sector engagement. To better understand long-term risk and mitigation options during the energy transition, we utilize four main energy transition scenarios that incorporate a wide range of possible outcomes for energy and carbon emissions to help shape our analysis and consideration of potential policy, technology and market risks. Read more about our Climate Risk Strategy.

SD Risk Management Standard

The SD Risk Management Standard supports a consistent approach to identify social and environmental risks, conduct risk ranking and develop mitigation action plans. The scope of the SD Risk Management Standard includes physical and transition risks for climate change and nature. It also encompasses both operational and transition-related social risks associated with stakeholder engagement, human rights and social investment, as well as supply chain risks. To facilitate consistent risk identification and categorization across BUs and functions, the standard is supported by a guideline and risk assessment tool to evaluate potential consequence severity, likelihood, and near (0-5 years), mid (5-10 years) and long-term (10-25 years) timing for each risk.  Potential financial consequence severity assumes cumulative impacts over a 10-year period. The standard mandates developing action plans for risks ranked “significant” or “high” and summarizing them in the corporate SD Risk Register. Risks and action plans are tracked and managed at the BU, function or project level.

Action plans

The SD Risk Management Standard requires an assessment of potential sustainability risks associated with company activities. Significant and high risks are documented in a corporate register with mitigation actions identified. Risks and mitigating actions are assessed at minimum annually by the business units and corporate. The SD Risk Register and action plans are used to guide goal setting and track performance. Read more about Performance and Compensation.

Action plans are managed at the BU level. Overarching risk management actions, such as greenhouse gas (GHG) target setting, prioritization of global emissions abatement projects and disclosure and reporting, are managed at the corporate level.

Enterprise risk management

Items on the corporate SD Risk Register are shared with owners of relevant enterprise risks, including climate, capital markets, public perception, operational matters, corporate strategy and policy. These enterprise risk owners, who are ELT or senior managers, are also briefed on associated mitigation activities. Enterprise risks are presented annually to both the Audit and Finance Committee (AFC) of the board and the full board of directors.

Key SD management processes

Our management system supports our policies and principles and is based on mandatory and auditable corporate standards, practices and guidelines aligned with how we make business decisions to ensure the consistent global identification and assessment of SD risks. This includes integration into key business-planning processes for the company, from business development activities and exploration to developing major capital projects and managing our day-to-day operations.

We perform due diligence on acquisitions, divestitures, trades, exchanges and farm-in/farm-out agreements. This process is designed to ensure that past, present and potential HSE and SD risks and liabilities are clearly identified, understood and documented. This due diligence standard applies to ConocoPhillips and global subsidiaries, and we strive to influence all affiliated companies and joint ventures to conduct due diligence before undertaking binding business transactions.  

While the majority of ConocoPhillips oil and natural gas reserves and production are within Organization of Economic Cooperation and Development (OECD) nations, some of the world’s most resource-rich areas are in countries that pose risks associated with political instability, inadequate rule of law or corruption. Before entering a new country — or for other new developments, when warranted by the geopolitical environment — we have adopted comprehensive risk management tools to evaluate and manage these types of risks. A preliminary due diligence assessment is conducted to identify significant risks, including social, environmental and political concerns, and define how they will be managed. 

As operated and non-operated projects are developed and put forward for internal approval, consideration is given to environmental and social risks and their mitigation. For qualifying projects, our management system also requires assessment of climate, water, biodiversity and social risk for investment approval.

In managing our day-to-day operations, the HSE management system standard addresses operational risk and helps ensure that business activities are conducted in a safe, healthy and environmentally and socially responsible manner, aimed at preventing incidents, injuries, occupational illnesses, pollution and damage to assets. We believe incidents are preventable and that HSE considerations must be embedded into every task and business decision. We also provide guidance to address specific activities in our operations including waste management. This standard ensures all our assets have detailed plans to manage waste streams, minimize where possible, and ensure waste is directed to facilities that have been evaluated and approved by the company.

Corporate Environmental and Social Standards, Practices and Guidelines*

_{*Unless noted, standards and practices apply to ConocoPhillips and its subsidiaries globally, including all affiliated companies and joint ventures.}