A Message from the CEO
Today, the capital markets are abuzz with the catchphrases of ESG, stakeholder capitalism, net carbon zero, sustainability, and social purpose. Like many popular trends that spread rapidly, everyone wants to stake their claim to being a leader, first adopter, and best in class with respect to these movements.
Yet the stampede of the herd creates inconsistent definitions, lack of transparency, and talk that does not match actions. Instead of the achievement of worthy goals, confusion is the rule of the day. Unfortunately, that appears to be the case when it comes to many businesses who promote their environmental, social, and governance (ESG) credibility.
Be assured that is not the case with CNX Resources. Our ESG philosophy is straightforward and can be summed up in three words: Tangible, Impactful, and Local. We value actions and measurable results. We have absolute conviction that the work we do on behalf of society is noble and that natural gas is the foundational fuel for today and tomorrow.
Many of our tangible, impactful, and local ESG accomplishments in 2020 were continuations from prior years. We were the first mover in the adoption of a long-term commitment for an all electric frac spread in the field and recycled over 90% of our produced water. Our employees worked the entire year accident-free, despite the operational challenges of the pandemic. CNX delivered family-sustaining median compensation levels that exceeded $150,000/yr, top among Pittsburgh region public companies across all industries. Half of the direct reports to the CEO were diverse. We were a large, net provider of tax revenue to local communities and state governments. Long-termism, optimizing intrinsic per-share value, being the low-cost producer of our product, and pay-for-performance culture were the guideposts of our Board of Directors and our corporate governance.
Two thousand twenty also brought three new, crucial ESG deliverables to our roster of tangible, impactful, and local accomplishments:
- We are proud to announce that we are net carbon negative for Scope 1 and 2 emissions. Yes, we are carbon negative, not carbon zero. Today and now, not a vague time in the distant future. We achieved this through embracing the twin pillars of the TCFD methodology: (a) reducing risk by strategically divesting and separating from coal and inefficient conventional gas assets over the past decade and (b) creating profitable opportunities by applying proprietary technologies and practices to eliminate CO2 and methane emissions from our operations and to capture or abate coal mine methane emissions.
- We published, and subsequently updated, a seven-year free cash flow plan that not only presents a compelling path of value creation for owners, but more importantly a long-term, low-risk, sustainable business model that strengthens the balance sheet, returns capital to shareholders, and insulates CNX from capital market volatility. We report and measure ourselves against this plan at least four times each year.
- We have prepared this report in accordance with, and are fully committed to, the Task Force on Climate-related Financial Disclosures (TCFD) framework. To be candid, we were initially quite skeptical of TCFD, concerned that it might be yet another gimmick or ESG veneer. But after analysis, we came to the realization that our company was fundamentally built around the principles contained within the TCFD framework: management of risk and pursuit of opportunity as they relate to our industry, financial markets, customers, and society. We hope you will come away with the same realization as you read about the Tangible, impactful, and local aspects of CNX’s approach to the TCFD framework.
We believe we are the only net carbon negative entity in the natural gas/midstream space. Additional opportunities exist to drive deeper levels of a net negative carbon footprint for Scope 1 and 2 emissions by continuing to reduce fugitive emissions from our operations, expanding our investments in coal mine methane abatement for third party, and developing our extensive surface acreage footprint for alternative energy and carbon abatement projects. Each of these three avenues offers new opportunities for free cash flow generation and per-share value creation. Best yet, these tangible drivers of our net negative carbon footprint are practically non-replicable and unique to CNX; competitors will be hard pressed or unable to do the same.
While most continue to talk about setting future carbon targets, speak in the aspirational abstract, and apologize for their business purpose, CNX has established its primacy by demonstrating leadership and driving innovation. We celebrate our industry, advocate for it with facts and data, and ensure our ESG efforts ultimately aim to increase the per-share value of our company.
Tangible, impactful, and local is our ESG brand. We chart our course to do what is right over the long term for our employees, communities, and shareholders. CNX sits at the confluence of best-in-class ESG, low-cost operations, astute capital allocation, and profitability. My hope is that you will invest time to examine this report and the important ESG information contained within, so that you may come to the same conclusion.