Environmental scores indicate that the oil and gas industry's path to net-zero greenhouse gas emissions is being blazed by European and Canadian companies, an analysis by S&P Global Commodity Insights showed.

The leading scorers in three of the four subsectors of the oil and gas industry were Canadian or European companies.

The size of companies appeared to play a role, as well. In many cases, companies with large market capitalizations claimed the highest environmental scores from S&P Global.

These environmental scores are one part of the environmental, social and governance evaluations by S&P Global Sustainable1. The environmental scores result from assessments of companies' biodiversity, climate strategy, mix of energy products, and operational "eco-efficiency," or more simply, making more with less.

In general, companies that report emissions control efforts and results do well in the scoring, while firms with low levels of public disclosure perform poorly. Industry averages were calculated from a Sustainable1 database of more than 780 individual company scores.

Europe pulls to the front

"Generally, European companies have been ahead of the curve on emissions reduction and transition planning," said Maeve O'Connor, an oil, gas and mining analyst for the Carbon Tracker initiative. "Policy action has certainly played a role in this: European policymakers have used 'sticks' to force companies to take action on climate for a long time — the Emissions Trading System (ETS), for example, was introduced in 2005, forcing companies to pay for their emissions."

Carbon Tracker is a London-based think tank that examines the financial implications of a lower-carbon future.

"In Carbon Tracker's assessments of oil and gas emissions targets, the Europeans consistently outperform their North American peers in terms of ambition, pace, and scale," O'Connor said in an Oct. 23 email.

The integrated oil and gas sector — home of the behemoths of oil and gas — had the highest average sector score, 48 out of 100, with France's TotalEnergies SE leading the category with a score of 80. Trailing TotalEnergies were two Canadian oil sands producers, Suncor Energy Inc. and Cenovus Energy Inc., with above-average scores of 55 and 52, respectively.

The relatively high environmental score for the integrated sector seemed to bolster the oil and gas industry's conviction that big operators with lots of money and science and engineering skills will be key to reducing emissions. However, behind the high average score, eight of the 11 integrated companies analyzed had scores at or below the industry average of 48, with heavyweight Exxon Mobil Corp. scoring 21, the lowest score in the group.

In contrast to the supermajors, the independent exploration and production sector — home of many US oil and gas brand names — had a lower average score of 26. But all except one of the analyzed E&Ps exceeded the sector average. Top among the E&Ps was ConocoPhillips with a score of 69, reinforcing the advantage of size.

The American Petroleum Institute, the US oil and gas industry's leading trade group, said its members are committed to environmental stewardship and are investing in new emissions-limiting technologies.

The trade group's members "are actively working together to track and improve their sustainability performance while striving for increased transparency with stakeholders," director of climate and ESG policy Jennifer Stewart said in an email.

Stewart challenged the S&P Global Sustainable1 methodology. "It is misleading to draw comparisons between companies based on where they are headquartered," Stewart said. "A majority of the companies surveyed have global operations and disclose information according to the regulatory requirements in each specific location. It is unclear if S&P's analysis takes reporting in multiple jurisdictions into account."

Steven Bullock, managing director and global head of research and methodology for Sustainable1, said the S&P Global ESG Score "reflects the full scope of a company's operations, and the boundaries of the assessment are based on what activities the company has operational control over, irrespective of their location."

EXPLORE FURTHER: See the top oil and gas companies' net-zero and related emissions reduction goals. Click here for the downloadable file.

Regional policy pushes change

The size of companies can indicate how likely they are to pursue emissions control programs, but national policy matters more, said Andrew Logan, senior director of climate and energy, oil and gas at the investor advocacy group Ceres.

"There are things at the margin that explain the difference," Logan said. "European companies tend to be run by Europeans, Canadian companies tend to be run by Canadians, and they have a different sort of cultural conversation on climate. I think in the end, it's policy that sets the playing field for companies.

"Size is a factor, but I think you'd have to be pretty small to not be able to afford the investments that it takes to be a leader on emissions," Logan said in an interview. "If you are talking about a mom-and-pop, maybe that is an issue, but I think once you're in the multibillion-dollar category, it's less about whether you have the resources and more what do you prioritize as a company."

Logan said the E&P independents have scores above the sector average because they do not have the bureaucracy of the majors, so emissions decisions are made quickly in the C-suite. "There is more scope for leadership than you have at an Exxon, where there is just a vast bureaucracy of operational staff managing missions and they don't have that connection to the top leadership."

Oil and gas transportation sector struggles with emissions

The oil and gas sector with the lowest average environmental score was the storage and transportation industry, with a score of 21. Canada-headquartered Enbridge Inc. and US-headquartered Williams Cos. Inc. topped the group with a score of 70. The lowest score went to pipeline giant Energy Transfer LP, which makes few public disclosures on emissions and questions the value of net-zero efforts.

"At this time, we have not established a net-zero emissions goal," Energy Transfer's vice president of corporate communications, Vicki Granado, said in an email. "We believe that net-zero targets are premature at this time given the many unanswered questions that exist in the world of carbon emission calculations and verifiable offsets."

Granado left open the possibility of Energy Transfer setting emissions goals in the future. "Our current approach is an action-based initiative to reduce ALL of our emissions, not just [greenhouse gases], and also to reduce global emissions through our export of clean fuels," such as propane and ethane, Granado wrote.

Continuing the trend of high environmental scores for non-US oil and gas companies, Finnish refining and marketing company Neste Oyj was the leader in that industry sector. It scored 84, compared to an industry average of 23. The three US-based refiners included in the analysis all scored above the sector average, according to Sustainable1.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.