Blame Trudeau? Perhaps Canadian execs should blame themselves: Suncor CEO
Kevin Carmichael spots signs firms may be waking up to potential of aiding economy.
You don’t get to see oilmen in the East all that often. They must, of course, visit their bankers and do the rounds in Ottawa, but they tend not to show themselves to the public.
That’s why it was a nice to see Mark Little, chief executive of Suncor Energy Inc., one of the country’s biggest companies, on stage at the Canadian Chamber of Commerce’s economic summit in Toronto last week.
It was fun watching Little put his peers in the Canadian establishment on the spot. He shook up his panel on competitiveness by blaming the country’s chronically weak productivity on something other than the policies of Prime Minister Justin Trudeau, corporate Canada’s preferred whipping boy.
“This is on us as leaders,” he said.
It may not be a trend yet, but there are signs that Canada’s corporate class, a group heavily populated with oligopolists, is waking up to the possibility that it could play a bigger role in shaping the economy’s trajectory.
For instance, the Business Council of Canada’s latest policy wish list released in October added a set of commitments of its own, including a pledge to “meet or exceed” the average level of investment in workforce training by comparable companies in the United States by 2025.
The council represents dozens of Canada’s most powerful chief executives, from Jean-louis Servranckx, the boss at construction behemoth Aecon Group
Inc., to Edward Sims, who steers Westjet Airlines Ltd. If these folks are spending less than their U.S. rivals on training, then Canada’s productivity problem is bigger than just higher taxes and burdensome regulation. It could be that we have an attitude problem.
Canadian companies are also poor at adopting state-of-theart technology. A proxy for this is intellectual property. In the U.S., private investment in IP has increased every quarter since at least 2016; in Canada, business spending on IP peaked at about $41 billion in the second quarter of 2008, plunged to $32 billion a year later, and was $34.1 billion in the third quarter last year, the most recent period for which
Statistics Canada has published data.
“When you start looking at the way technology is being embraced by our biggest trading competitor south of the border, the U.S., people are starting to feel pressure from companies coming in with better digital platforms, better customer experience and such,” Little said in an interview on the sidelines of the chamber conference.
“And so for us to compete, we need to accelerate the pace of our improvement and shift,” he continued. “This is as much self-reflection as anything. This is something we need to embrace as a country, as business leaders across the country. Are we doing enough?”
The next opportunity to evaluate whether Little is doing enough himself could come Wednesday when he releases Suncor’s fourth-quarter financial results.
Suncor is enduring one of its tougher periods: Transportation bottlenecks have resulted in a glut of bitumen, and global investors are increasingly turning their backs on fossil fuels.
The company’s shares on Tuesday were trading at around $40, about seven-per-cent lower than a year earlier, and more than 40-per-cent below their peak in 2008.
It would be easy for Little to blame others for his problems. The Canadian oil industry’s troubles began in 2014 when Saudi Arabia tried to squeeze North American producers by allowing prices to drop.
The Trudeau government made the regulatory quagmire worse by all but freezing new pipeline construction. And, unlike the leaders of other big energy producers such as the U.S. and Australia, Trudeau adopted a carbon tax.
But Little is trying to adapt to the future rather than resist it.
The Financial Times on Tuesday published calculations that should startle everyone in the oilpatch.
The newspaper estimates that carbon-based assets currently worth about US$900 billion would be written off if governments ever get serious about climate change and pledge to limit global warming to 1.5 C above pre-industrial levels. The FT mentioned Suncor specifically as one of the companies that would be most hurt because mining bitumen generates more emissions than pumping oil in the Middle East and elsewhere.
It isn’t evident that politicians take the threat seriously, but Alberta’s biggest oil companies are on notice.
Suncor and others have spent billions on research and technology to minimize their carbon footprint. For example, Cenovus Energy Inc. in January said it would aim to neutralize its impact on the environment by 2050, an aspiration that Teck Resources Ltd. adopted this week. In November, Suncor agreed to let Microsoft Corp. use its giant computing power to search for greater efficiencies that could be hidden in Suncor’s massive trove of production data.
In terms of greenhouse gas emissions, “We used to be grossly out from the average barrel in the U.S.,” Little said. “Our new operations now have full life-cycle emissions equivalent to the U.S barrel. The average industry isn’t there. We need to do better and we need to accelerate that pace. That’s the journey that the industry is on.”
Could Suncor do more? Probably. In November, it said it would spend $2.5 billion repurchasing shares, up from $2 billion previously. And though some global oil-and-gas companies have shifted hard into renewables, Suncor is sticking with its current asset mix. “This coming year, about 10 per cent of our capital is going to these alternate energy sources,” Little said. “The global average in the oil industry is one per cent. It’s quite different.”
At the same time, men and women with fiduciary responsibilities look at risk differently than those of us with no such concerns. Little is doing more than most. We need a greater number of his peers to follow his lead.