Enbridge tells staff to vote against more thorough emissions reporting

Enbridge is encouraging employees to reject a shareholder proposal that would require the energy giant to report how much pollution is being caused by the fossil fuels it sells to customers. 

On April 22, the Calgary-based gas giant emailed all staff about its upcoming May 8 annual general meeting, which will be held virtually this year. Shared with The Narwhal, the email is titled “It’s important for Enbridge team members to vote on meeting items of business.” One of the main items is a proposal asking the company to measure and report the total emissions output of its business.

The email says staff should oppose proposals such as this one, noting that it originates with “active opponents of Enbridge and the oil and gas industry.” The company’s email says these “opponents” purchase a minimum amount of shares required to submit proposals and then “leverage mainstream and social media to draw publicity to their causes.” 

The email also says staff contributing to the company’s employee savings plan are “most likely an Enbridge shareholder” and would have until May 1 to cast their vote. 

“It’s weird,” Adam Scott, director of Shift Action, a non-profit that works with pension funds and investors on climate issues, told The Narwhal. “It feels overly defensive … It’s a bit off for management to feel like they have to reach out to staff to vote against a [shareholder] resolution.”

In the email, Enbridge highlights a proposal from Investors for Paris Compliance, a group that aims to hold publicly traded companies accountable for their net-zero commitments by purposely buying shares in order to propose and vote on climate issues. The group is an Enbridge shareholder and is calling on the company to disclose what are known as Scope 3 emissions, which are not produced by a company, but its customers. 

In a statement to The Narwhal, Enbridge spokesperson Jesse Semko confirmed the company “shared information with employees, many of whom are shareholders, to remind them of the upcoming [annual general meeting] and to provide information on how they can vote.” 

“We also provided information on the company’s approach to tracking and reporting Scope 3 emissions,” Semko said. 

Experts put the climate impacts of business into three categories. Scope 1 is pollution produced directly from a company’s operations: since Enbridge primarily delivers oil and gas, that would mean emissions created in transporting the fuels. Scope 2 are indirect emissions created by the use of energy to run a business — the emissions created at the utilities Enbridge purchases electricity from to conduct its operations. 

Finally, Scope 3 are indirect emissions created from the use of a company’s products by its consumers. For Enbridge, this means the pollution created by the use of the oil and gas it transports through its pipelines when people and businesses drive their vehicles, heat their homes and manufacture other products. 

“Scope 3 emissions are a reflection of the market you do business in,” Duncan Kenyon, director of corporate engagement with Investors for Paris Compliance, told The Narwhal. “We’re not saying shut down oil and gas. We’re saying be transparent about the risk in your investments.” 

Most Canadian energy firms disclose the emissions they produce in day-to-day operations — so Scope 1 and 2 — but not those created when their products are used. Doing so would likely increase the environmental impact reported to investors and the public. By one estimate, a company’s Scope 3 emissions can be more than 11 times greater than its direct emissions. Investors for Paris Compliance estimates about 80 per cent of Enbridge’s emissions come from the use or combustion of its products. 

Kenyon says Scope 3 emissions show how a company is preparing to do business in a climate emergency, as demand for fossil fuels decreases and the use of renewables increases. He explains investors “will be taking on a financial risk by investing in companies that expect oil and gas demand to go up to justify its business.” 

The message in the internal email is similar to what Enbridge asked other shareholders in public documents filed in advance of the May 8 meeting. A company spokesperson told The Narwhal the email to employees “summarizes” the public documents: both communications argue that Scope 3 emissions are difficult to report because Enbridge cannot “accurately and reliably” track all the ways its products are used. 

This reason is more bluntly reiterated in the company’s April 22 email to staff. “Scope 3 emissions are indirect emissions not produced by the company and not the result of activities from assets owned and controlled by the company,” the email reads, with bolded emphasis. “The reality is that there are significant challenges involved … because it would involve the tracking of products — not owned or sold by Enbridge — that move on and off system.” 

“They’re twisting themselves in a knot to find excuses for not reporting these emissions,” Kenyon said. 

In both the staff email and public filings, the company notes that there are “no clear regulatory guidelines or widely accepted methodologies” that dictate how to report on end-use emissions from products that Enbridge moves but doesn’t own.

Scott says it isn’t so complicated.

“The truth is Scope 3 emissions reporting is a little bit imperfect but not that challenging,” Scott said. Enbridge is “misleading” investors by saying it’s not possible or needed, he adds.

By reiterating its reasoning for a no vote in a “pointed” way, Scott believes Enbridge’s email to staff is “a way of weaseling out of showing everyone how exposed their business is to the climate emergency.” 

The Narwhal sent Enbridge a detailed list of questions. The Narwhal asked for the company’s response to concerns it is not giving shareholders enough information to properly evaluate the climate-related risk of investing in Enbridge. The company was also asked to respond to concerns that it is exaggerating the challenges of calculating Scope 3 emissions, as well as for its plan to reduce these emissions. 

In a lengthy response to The Narwhal, Semko repeated the arguments stated in the email to employees and the documents for shareholders. 

The case for Enbridge to report Scope 3 emissions 

Scope 3 reporting gives investors an idea of a company’s total emissions impact. Scott says the accounting of these emissions is “probably the most important measure of the climate-related financial risk for a company because it really signals how dependent the company’s business model is on selling high-emissions products and how exposed the company is to the energy transition.”  

Put another way: without this information, investors cannot properly assess how a company will meet its sustainability and climate commitments, or remain profitable if demand for fossil fuels drops. 

This is the third consecutive year Investors for Paris Compliance have tabled this resolution at the Enbridge annual shareholders meeting. Each time, Enbridge urged shareholders to vote against it, but an increasing number have broken with management’s recommendation. In 2022, 23 per cent of Enbridge investors voted in favour of Scope 3 reporting or abstained, a number that grew to 28.5 per cent in 2023. 

“That’s more than a quarter of the ownership of the company openly disagreeing with management,” Scott said. ‘That’s a pretty substantial problem for Enbridge’s management to deal with.” 

Enbridge did not answer questions about why it’s position hasn’t changed in response to investor concerns. The company said it takes Scope 3 emissions seriously. Since 2009, Enbridge has tracked a limited amount of Scope 3 emissions, measuring emissions created from employees’ business-related air travel and natural gas consumption by utility customers. Both increased in the last two years, according to the company’s 2023 sustainability report. 

But Investors for Paris Compliance says what Enbridge doesn’t report is likely much greater, estimating the company’s Scope 3 emissions have grown by about 76 per cent since 2014. With more pipelines planned or proposed, this number may increase by an additional 27 per cent.

Enbridge told The Narwhal it disputes these calculations, describing them as “simplistic and superficial.”

The company also said the calculations were “highly misleading” since they “contain incorrect estimates and assumptions, as well as unrecognized and inconsistently applied calculation methodologies.”

Enbridge reiterated that calculating Scope 3 emissions that result from an energy pipeline is “an extremely difficult and complex task” but that it still plans to “expand” the number of Scope 3 emissions categories it reports on this year.

“The challenge is magnified on a transportation system like ours which stretches across North America and involves several interconnecting pipelines — some of which are not owned or operated by us — that take product on and off our system at various points. It also involves the tracking of products — not owned or sold by Enbridge — that move on and off our system,” the company said in an email to The Narwhal. “As a result of these and other complexities, it is currently not possible to accurately and reliably track, measure and report this information.”

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Over the last few years, California and the European Union created new financial disclosure policies to compel companies to report Scope 3 emissions to investors. Australia will enforce disclosure rules this year. In March, the U.S. Securities and Exchange Commission opted out of mandating Scope 3 emissions reporting — which Enbridge cited in its statement to The Narwhal, noting the commission’s “concerns about the unreliability of Scope 3 emissions data at this time.”  

Meanwhile, Canada is lagging. The Canadian Sustainability Standards Board, which writes the rules for financial regulators, released new draft regulations in March that would make Scope 3 emissions reporting mandatory for Canadian companies. They could go into effect in 2027 if adopted, though whether that will happen is still uncertain. 

But as a multinational, Enbridge’s reporting practices are guided by four different national and global guidelines — some created by investors actively engaging with companies like Enbridge.

“This is core material financial information, not soft environmental stuff. Will the company be profitable long-term? Is Enbridge reliant on a business model rooted in emissions?” Scott said. “Enbridge is spending more time fighting than it would take to disclose this … It’s a bit of desperation here from Enbridge.” 

— With files from Carl Meyer