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The Suncor Energy logo at their head office in Calgary on April 17, 2019.CHRIS WATTIE/Reuters

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Suncor Energy Inc. SU-T chief executive officer Mark Little is regarded as a leader in Canada’s oil industry when it comes to taking environmental, social and governance, or ESG, issues to heart.

Mr. Little was instrumental in the formation of the alliance of major oil sands producers that is aimed at dealing with the biggest problem stemming from the sector – chronically high carbon emissions.

If successful, the efforts of this group, called the Oil Sands Pathways to Net Zero, could prove to be an important step in helping the country meet its global commitments on the climate front. Also, if investors are convinced the initiative is a credible one, it may help the industry maintain access to capital to develop and deploy the necessary technology for slashing emissions.

Old assets, safety issues: Why a hedge fund is focusing on Suncor

That’s important stuff, and tens of billions of dollars are at stake. But now Mr. Little and Suncor face a more immediate challenge in a campaign by U.S. activist investor Elliott Investment Management LP to force change at the company, install five new directors and possibly oust Mr. Little himself.

Elliott, which said last week it had amassed a 3.4-per-cent stake in Suncor, has pointed out that the stock has lagged those of its peers and it blames what it calls “a slow-moving, overly bureaucratic corporate culture” for a series of operational problems and blown production targets.

To be clear, Elliott has no beef with Suncor’s environmental initiatives such as Oil Sands Pathways or efforts to use less energy in operations and to reclaim mine sites. In fact, the hedge fund is complimentary on the energy company’s record in the “E” – environmental – category of ESG.

A top criticism, though, involves the “S” – social – part, and specifically Suncor’s recurring trouble preventing employees from getting hurt in operational mishaps.

That makes this activist flare-up fascinating in an industry where ESG-related friction has lately focused on carbon emissions. Last year, for instance, the fund Engine No. 1 made headlines when it succeeded in getting three nominees onto the board of Exxon Mobil Corp. after arguing that the oil major refused to take sufficient action to deal with climate-related risks.

Elliott, by contrast, says improving Suncor’s safety record is a big part of its prescription for improving returns. The message is resonating with other shareholders.

“At a high level, the issues that Elliott are raising, whether it’s safety or whether it’s the operational side of things, are real. Those are material issues, and from an ESG perspective they’re material,” said Jamie Bonham, director of corporate engagement for NEI Investments, a fund-management firm focused on responsible investing. “What they’ve identified really could have come from, in many ways, an ESG investor. So I think what they’ve brought to the table is probably going to be valuable.”

Elliott points to a dozen worker fatalities in the past eight years – the most among large oil sands producers – and equipment failures at its mines and plants as reasons for lagging market performance. It’s a matter of degree: Suncor shares have nearly doubled since the oil prices crashed in the spring of 2020, but its main competitors, such as Canadian Natural Resources Ltd. and Cenovus Energy Inc., have performed better by wide margins.

In its latest management proxy circular, Suncor lists Mr. Little’s key results for 2021, including restructuring the top management team to “strengthen operational excellence and safety performance” and setting up a centralized risk management organization. But it also reported a fatality occurred in early 2022.

Workplace health and safety is not an issue that Elliott has cherry-picked just to emphasize negatives for its campaign, said Bonnie-Lyn de Bartok, founder of the S Factor Co., a Toronto-based provider of social impact data. It has material impact on the financial performance of companies in the form of lost-time employee hours, the need to shut production down after incidents, risk to corporate reputation and the potential for legal action. Companies track and disclose heath and safety measures to gauge long-term trends and use the data to determine if changes are needed to prevent costly incidents from recurring.

“At the end of the day, it results in a bottom-line number of lost-time costs, so when you quantify ‘social’ it’s usually around the probability of disruption of the operations,” Ms. de Bartok said.

Elliott has said it is not necessarily gearing up for a proxy fight at Suncor (though it may come to that), and has offered to “engage” with the board “constructively” to discuss its proposed changes to the company’s leadership. Suncor has responded by saying it “appreciates the views of its shareholders and will take the time to carefully assess the recommendations and materials provided.” It also said it was confident in its strategy.

As a company that often says ESG is a key part of how it operates, this will be a case of showing how Suncor can bring “G” – governance – to bear to solve the problems that Elliott has made into a very public issue.

Jeffrey Jones writes about sustainable finance and the ESG sector for The Globe and Mail. E-mail him at

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