ESG for the energy sector: why a local workforce matters

Before we go much further, it’s worth defining what we mean by a local workforce. In the past, some energy projects have hired a local contingent to satisfy local laws, but in primarily non-technical roles such as security, janitorial or food preparation. The reasons for this can vary from poor hiring policies to a shortage of qualified applicants.

Today, the value of employing skilled and technical workers locally is increasingly recognised. Alongside the macro level of boosting economies and sharing wealth more evenly, there are tactical benefits too:

• Long-term cost savings as the comprehensive development of a local workforce will reduce reliance on foreign employees
• Keeping industry-relevant skills in-country rather than losing them at the end of a project
• Local knowledge – US federal regulations for offshore wind, for example, require consideration of ‘local content’, but there are many other scenarios in which a ‘local’s eye view’ is helpful 

Related read: this article discusses balancing local and international standards in offshore wind development in Korea.

• Reduced carbon footprint and transport costs – for example, training locals to complete technical re-assessment and follow-on visits cuts the need to deploy international staff, while supporting the development of the local workforce
• Avoiding pressure from employees themselves, such as in this recent example from Nigeria. Local workers of an independent oil company accused a senior executive of favouring foreign workers. They petitioned the Ministry of Interior and the executive’s work visa was withdrawn. On the day of this announcement, shares of the company fell by 4.4%.
• Supporting the ‘just transition’ of local workers
• Enabling countries to take advantage of incentives for energy transition and support for climate resilience
• Local and community stakeholders may be more likely to listen to local leaders and managers. Being represented by people from their own community, tapping into local knowledge, cultures and practices, can enhance the workforce, their productivity and effectiveness. Equally, a sense of ‘ownership’ and seeing benefits of the project to the local community can increase the security of the site, operations and workforce, particularly onshore.

Local workforce requirements should be of particular interest to companies operating in regions and sectors looking to establish and maintain a social licence to operate, in cooperation with both regulators and local stakeholders. That could mean emerging economies seeking more control over local development or emerging technologies such as the renewables sector. Both have opportunities to set the tone with a fresh look at ESG and employment practices.

There are various answers to this question in relation to energy projects. The key message is to be aware of (or take advice on) the requirements, as they could impact project timescales and success. Examples are:

• Legislation from local governments that want to bring their constituents into the workforce
  
• Governments, national companies and regulators looking to impose formal, structured regulations to enforce their stated employment goals. These might include:
  • Countries that have had local workforce goals for some time, but at a high level and not necessarily being adhered to
  • Those at the beginning of their energy development journey, who have the chance to start “on the right foot”
• The World Bank Group’s IFC performance standard 2 (labour and working conditions) requires open and fair treatment of workers without discrimination. Project financiers may hold developers and operators accountable to this standard even if it doesn't directly apply in-country.
  
• The forthcoming EU Corporate Sustainability Reporting Directive, which includes social and equality standards, is likely to be followed and adopted elsewhere
  
• Workforce requirements could be written into contracts and finance agreements. For example, the use of training budgets to develop the local workforce are often specified in PSCs (Production Sharing Contracts)
• Even where requirements have previously been relaxed, you will likely see them becoming more prescriptive, with short, medium and long-term objectives (that may tie into national goals). There will also be a need for tighter evidence and reporting requirements, so that you’re ready to show proof of who you employ and in what positions.

One key action is completing various forms of ‘audit’ – to understand, document and plan to extend the relevant technical skillsets available locally. This goes hand-in-hand with a second key action: providing competency-based training, to bridge gaps where a lack of qualified people prevents wider local hiring. Developing workers’ skills also grows the pool of future managers from within local teams.

The competency assessment framework

This assessment and documentation process is similar to a ‘gap analysis’. It might explore the skills needed for various types of role, and what relevant training is available locally (and to what standard). It may also cover organisational needs.

Find out more:
Capability and capacity development
Competency analysis and development

A local workforce development plan

This type of plan is focussed on the make-up of the workforce itself. It’s a robust assessment that takes into account relevant policies and procedures for hiring locals and provides statistics on how each vacancy has been filled. Assessors then explore how jobs that haven’t been filled by local workers could be localised over time, such as with external or on-the-job training.

In some cases, investors or lawmakers will require evidence of why hirers can’t supply a local workforce. This document can help you prove what hiring practices you’ve put in place. More importantly, a workforce development plan can support you in building a structure for a sustainable business. It goes further than simply putting ‘bodies on seats’ to boost the percentage of locals employed. Instead, it forms a competency register that also shows a pathway for the development of your workforce.