It isn’t easy striking the right balance on local content policies in the oil and gas industry
I’m intrigued by local content policies and the dance that takes place between a community and industry to find a “sweet spot” where natural resources are developed profitably, and communities with resources can experience sustainable growth and prosperity. As supply chains become more global and margins for profitable development are constantly challenged, the sweet spot can be hard to find.
Opinions about local content can be divisive. As a former oil company communicator and negotiator, who is a proud Newfoundlander, I’ve heard all sides. I recall someone implying I was “unfaithful” to the local cause, while at the same time, another calling me “too local” and lacking impartiality. I joked that if both sides were critical, I was likely in the right place.
Considering that 97 per cent of Newfoundland and Labrador businesses are SMEs, I wonder if we could do more so these companies can better compete?
Some argue local content is a policy of the past. In 2017, nothing could be further from the truth. The World Bank states: “Local content in the extractive industries is being given ever higher priority by host governments through a wide array of policy instruments. And oil, gas and mining companies now rate local content among the most significant expectations in the communities in which they operate.” Australia, Africa, Europe, South America, and Mexico all have local content requirements.
There is a space where companies can have successful developments while communities benefit. But it requires openness, collaboration and skill to find that space. I believe we could be a world leader in finding that space, and it is something the world needs.
But we still have some work to do before we get there. One example that springs to mind is from last year when I was contracted to open doors for female entrepreneurs in the petroleum industry. Despite benefits agreement language promoting female enterprise, these businesses remain seriously under-represented in the industry.
And no, I’ve not turned against the industry. I believe bringing in more female-led businesses will create a stronger, better industry. It’s been proven that companies embracing diversity outperform the rest. Supply chains will experience higher competition for contracts with a wider base of suppliers, leading to better value for money for contracting organizations (i.e. a higher return on investment).
A large part of the issue is that many female-owned businesses are small, micro-businesses and often lack the know-how, networks and experience to access the industry’s procurement opportunities. Globally, small to medium-sized enterprises (SMEs) often struggle to compete for natural resources opportunities, despite local content requirements. In fact, most large supply chains, including corporations, the public sector and industry, frequently challenge SMEs. Size matters.
Considering that 97 per cent of Newfoundland and Labrador businesses are SMEs, I wonder if we could do more so these companies can better compete? Are they experiencing what I have seen with many female-owned businesses? Do they understand how supply chains work? Are they accessing financing? And why are so many of our businesses staying small or not growing to scale?
By unlocking supply chain opportunities, businesses can grow. Research suggests that seven in 10 SMEs experience an increase in revenues and size within two years of becoming part of a corporate supplier base. If most of our businesses are SMEs, shouldn’t leaders ensure their corporate procurement practices align with and are accessible to this community? Most multi-national companies actually have global supplier programs aimed at supporting SMEs. By improving SME access to potential opportunities, they are better able to compete with local knowledge, expertise and innovative solutions.
We also need to ensure SMEs are stronger and knowledgeable about supply chain opportunities. They often need mentors, more incubators and access to financing. Supplier development should be an ongoing priority.
SMEs are the backbone of the economy. By fostering their growth, our business community will be better positioned to compete. We may also open more doors for female businesses. SMEs, once they scale, will then be able to compete on a national and international stage, and that will bring further prosperity to our region.
Caron Hawco, ABC, PMP, is a communication and business strategy consultant specializing in natural resources, public affairs, diversity, business development, facilitation and media relations.