Abstract

Canadian Natural Resources Ltd., the largest standalone producer of

natural gas in Western Canada and prime producer of heavy crude oil in
Canada. The company faces considerable challenges related to CSR,
EDI, Sustainability, and Indigenization, including environmental
degradation, greenhouse gas emissions, and climate change risks. To
address these issues, the report recommends investing in advanced
data analytics systems, carbon capture technologies, and exploring
renewable energy sectors to reduce environmental impact and attract
green investments. Promoting diversity and inclusion within the
organization, involving Indigenous communities in decision-making,
adopting digital oil fields, and continuous land reclamation efforts will
further enhance sustainability and align with stakeholder expectations.
Implementing these recommendations will help Canadian Natural
Resources Ltd. address its challenges while maintaining profitability and
encouraging a more socially and environmentally responsible future.

Challenges Related to CSR, EDI, Sustainability, and Indigenization

In the year 2023, with a USD 66.37 billion (Market capitalization of

Canadian Natural Resources (CNQ), n.d) market capitalization on the
NYSE, Canadian Natural Resources Ltd. is the largest standalone
producer of natural gas in Western Canada and the prime producer of
heavy crude oil in Canada, previously known as AEX Minerals
Corporation. The head office of the company is in Calgary, Alberta. Its
primary operations are widespread around western Canada; other than
that, it operates in the UK and Offshore Africa (“Canadian Natural
Resources”, 2023)

The company produces natural gas, synthetic crude oil from oil sand
mining, light and medium crude oil and natural gas liquids, and bitumen.
The company's primary CSR, EDI, sustainability, and indigenization
challenge is related to natural environment degradation, greenhouse gas
emissions, and corresponding global warming issues due to the
operation of oil and gas fields in the functioning areas. Moreover, climate
change risk and global warming-related intense activism and trends
toward the reduction of fossil fuel usage, related carbon compliance
costs, and emission regulations are listed as global scale sustainability
challenges for Canadian Natural Resources Ltd. For example, in 2017,
the Council on Ethics endorsed that Canadian Natural Resources Ltd be
excluded from investment by the Government Pension Fund Global
(GPFG) due to an intolerable hazard resulting from the company's
actions or omissions leading to an undesirable level of greenhouse gas
releases (The Council on Ethics, 2020).

In Canada, the company's oil sand mining business division severely

alters land architecture, and the area's biodiversity is also compromised
due to toxic gas emissions such as methane and carbon dioxide. The
intensity of freshwater usage in the same oil sand mining is also
incredibly unsustainable. In 2011, the Office of the Auditor General
announced that environmental data monitoring systems are needed to
understand the changing cumulative environmental effects of oil sands
projects in that region (Report of the Commissioner of the Environment
and Sustainable Development, 2014). In terms of Equity, Diversity, and
Inclusiveness, the organization states that the board contains 30% plus
women independent directors (Diversity Policy CN, n.d). However, it is
true that the position of independent directors is not the same as any
executive director of the organization, as it is merely a supervisory or
counseling position. The organization's indigenization process mainly
embraces investing in the community needs, having business contracts
with local indigenous businesses to support their continuity, and scaling
up, and a two-way dialogue with community leaders to obtain the input of
Indigenous societies and communities to develop and support
responsible natural project operations.

Analysis of Identified Challenges Related to CSR, EDI,

Sustainability, and Indigenization

Canadian Natural Resources Ltd. faces undeniable environmental

degradation and contributes to comparatively excessive greenhouse gas
emissions. Any impactful CSR initiatives might fundamentally work
against the company's global demand management and profit
maximization strategies. Therefore, taking significant steps to be socially
responsible comes in the form of damage mitigation and restoration of
sites that have reached the end of their production cycle. The company
should also invest more in research and development for new
technologies, such as carbon capture technologies, GHG emissions
reduction integrated management processes, and freshwater usage
level reduction management in oil sand fields and thermal management.
Especially, the organization should consider setting year-on-year
incremental reduction targets for freshwater, CO2, and methane.
However, upon reviewing the 2020 stewardship report, it becomes
evident that the primary global warming contributor, CO2 emissions, has
plateaued since 2018 in both direct emissions and oil sand mining and
thermal GHG emission intensity. Additionally, the 2022 report shows an
increase in freshwater usage compared to 2020, with no nominal
downward trend. These factors raise concerns about whether Canadian
Natural Resources Ltd. is actively implementing an effective strategy to
achieve its self-set targets. Furthermore, the absence of production-
based reduction measures makes it difficult to establish a strong positive
correlation between production and related emission volume ranges,
casting doubt on the organization's genuine commitment to addressing
its generated externalities.

When evaluating Canadian Natural Resources Ltd based on Carroll's

four-part pyramid of CSR definition, the company claims to fulfill its
economic responsibilities by being profitable. In the first half of 2023, the
company's funds increased by approximately 11% (NYSE: CNQ), and
CNQ shares gained 13.08% of their value over the last 52 weeks
(Eswaran, S., 2023). Simultaneously, the company aims to deliver
foremost Environmental, Social, and Governance (ESG) execution
among the leading crude oil exporting countries. According to the 2020
stewardship report, the company has improved indigenous businesses'
representation in its workforce demographic by 7.4%. Additionally,
inclusiveness and diversity metrics are linked to the executives' incentive
pay to drive ongoing progress. Furthermore, in 2021, Canadian Natural
Resources Ltd worked with 144 indigenous businesses and awarded
more than 571 million CAD in sustainability efforts to abandon inactive
wells, pipelines, and facilities. This initiative also aimed to reclaim sites
and access roads in collaboration with many First Nations and Métis
communities in Alberta, Saskatchewan, and British Columbia (Canadian
Natural, 2020).

Based on the analysis, the above-stated various short, medium, and

long-term measures and initiatives indicate that the organization, while
economically strong with an adequate market share, is also making
noteworthy efforts to transition towards sustainable and environmentally
friendly business models. Despite considerable room for improvement,
these current measures aim to enable stakeholders to benefit from CSR,
EDI, and sustainability principles. Additionally, the global uncertainty
surrounding support for continuous natural resources extraction and the
increasing carbon footprint compel the organization to pursue carbon-
neutral or even net-zero carbon emissions policies to maintain its
attractiveness to shareholders and potential investors. The
recommendations identified below would be assistive in terms of taking
the present progress to a new, higher level to meet the current and
potential challenges.

Recommendations

The Canadian Natural Resources Ltd. should invest in better data

analytics systems and tools to overcome operational complexities and
reduce wastage and accidental oil spills. This will help minimize
ecological impact, especially in thermal and oil sand freshwater usage,
by introducing better recycling technologies to reduce overall freshwater
consumption (“World Future Energy Summit”, n.d.).

Carbon capturing should be taken to the next level and become part of
the primary business sector. The company should work to invent more
reliable and cost-effective tools and engineering systems to make the
venture profitable and economically viable, attracting more green
investments. These initiatives would reduce the ESG Risk Rating from
high 30 (Yahoo Finance, 2022) status to low, between 10 to 20, by
reducing the organization's exposure risk.

Methane leaks at the time of extraction and storage should be controlled

more cautiously using advanced methane emission monitoring systems,
such as satellites to scan wide areas for large leakages, piloted aircraft
with mounted sensors, and unpiloted drones with optical gas imaging
cameras. Vapour recovery units can be installed to capture gas that
would otherwise be released into the natural environment (“Global
Methane Tracker”, 2023).

Greater diversification should be considered by actively including

renewable energy sectors as part of the organization's medium to long-
term strategic shift. Integrating solar and wind farms in old,
decommissioned oil and gas fields and reclaimed lands would lead to
future-oriented energy sources, reducing dependence on diesel and off-
grid gas-based electricity generation.

In terms of equity, diversity, and inclusion, the organization should aim to

have meaningful participation of women and minorities as executive
directors, rather than merely having a percentage of women in
independent director roles. Indigenous communities should also have a
say in the organization's future direction by including them in active roles
where they can represent the thoughts and expectations of their people.

Creating digital oil fields using big data, AI, and real-time cloud
computing technologies will improve decision-making accuracy and limit
accidents and catastrophic events by efficiently monitoring production
and distribution channels in real time (“World Future Energy Summit”,
n.d.).

The Canadian Natural Resources Ltd.'s continuous land reclamation

effort and tree planting should be taken to the next phase with adequate
measures to advance atmospheric carbon reduction naturally. Involving
the support of the indigenous community could be a significant pillar in
this effort, and the company can appoint a steering committee to align
sustainability goals with various stakeholders' expectations (Canadian
Natural, 2020).

References

2020 Stewardship report to stakeholders. Canadian Natural Resources

Ltd.                 https://www.cnrl.com/content/uploads/2023/01/2020-
stewardship-report-to-   stakeholders.pdf

2021-ESG-Highlights. Canadian Natural Resources Ltd.

https://www.cnrl.com/content/uploads/2023/01/2021-ESG-Highlights.pdf
2022 Annual Report. Canadian Natural Resources Ltd.
https://www.cnrl.com/content/uploads/2023/03/2022-Annual-Report.pdf

8 ways the Oil and Gas Industry is making better use of sustainable
technologies (n.d). World Future           Energy
Summit. https://www.worldfutureenergysummit.com/en-gb/future-
insights-blog/8-         ways-the-oil-and-gas-industry-is-making-better-use-
of-sustainable-technologies.html

Brun, A., et al. (2017 October, 31). Why oil and gas companies must act
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https://www.mckinsey.com/industries/oil-and-gas/our-insights/why-oil-
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Canadian Natural Resources Ltd. (2020 May, 12). The Council on

Ethics.    https://etikkradet.no/canadian-natural-resources-ltd-eng/

Canadian Natural Resources (2023 April, 13). In

Wikipedia.                           
https://en.wikipedia.org/wiki/Canadian_Natural_Resources

Chapter 2—Environmental Monitoring of Oil Sands. Report of the

Commissioner of the Environment           and Sustainable
Development. https://www.oag-      
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Company ESG Risk Ratings. Canadian Natural Resources

Ltd https://www.sustainalytics.com/esg- rating/canadian-natural-
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Diversity Policy. Canadian Natural Resources Ltd.

https://www.cnrl.com/content/uploads/2022/08/Diversity-Policy-
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Environment, Social and Governance (ESG) Risk Ratings (August,

2022). Canadian Natural Resources          Limited
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