The RECOSI Responsible Sourcing Criteria (“the Criteria”) are a set of corporate-level ESG requirements that RECOSI members may expect of its business partners holding title to natural gas or LNG sold to them. The Criteria help RECOSI members communicate their expectations and understand their business partner’s corporate policies and processes that manage ESG risks across the supply chain. They requirements are tailored to companies that sell natural gas or LNG but do not necessarily own or operate the assets they source from. As such, the Criteria complement the separate RECOSI Gas Responsible Asset compontent which includes a robust on-the-ground assessment process.

The Criteria include different levels from Foundational to Good Practice to Leadership that are designed to meet companies where they are and encourage continuous improvement supported by targeted RECOSI capacity-building. Once a company has completed the evaluation process, they can communicate their participating in RECOSI Gas publicly. The Criteria document is supplemented by the Guidance on the Responsible Sourcing Criteria (“the Guidance”), which provides practical implementation steps and requirements to demonstrate achievement of each level.

REOCSI members collaborate to set a clear ESG baseline of different ambition levels for natural gas and LNG companies aligned with international conventions, best practice frameworks, and emerging regulation. Effective ESG policies and processes can raise awareness of possible impacts on people and the environment linked the gas industy and ensure that risks are mitigated appropriately. The Criteria support companies in evaluating their current practices, improve them going forward and communicate their efforts publicly to their buyers and other stakeholders to show their commitment to raising standards in the gas sector.

RECOSI worked with a team of experts to compare global reference frameworks (including but not limited to UNGPs, ILO core conventions, OECD frameworks, IFC Performance Standards, TCFD, etc.) and embed them into the Criteria and its Guidance, incorporating its members’ expectations. The maturity pathways from Foundational to Leadership were built directly from this review as requirements are systematically anchored in the standards/initiatives.

Aligning with the Criteria can support companies in meeting growing regulatory requirements and stakeholder expectations. The results of the evaluation help participating companies conduct a gap analysis of their existing ESG practices and risk management processes to support continuous improvement and improve the overall ESG performance across gas supply chains. Companies that complete the evaluation process can publicly communicate their participation in RECOSI Gas which can support their engagement with buyers and relevant stakeholders. Moreover, RECOSI offers tailored support and capacity-building initiatives that raise standards through peer learning and collaboration.

The Criteria set overarching expectations for each achievement level, while the Guidance operationalises the Criteria and translates each Criterion into fixed requirements and suggested activities. Alignment with the Guidance should thus be used to assess a business partner’s conformance status with the Criteria (see question 15).

Business partners of RECOSI members, which are entities that hold title to physical natural gas or LNG destined for a RECOSI member or any other interested company.

The Criteria apply to the ESG risk management systems of RECOSI members’ business partners. Achievement of certain Foundational, Good Practice and Leadership criteria will require business partners to assess and manage ESG risks further upstream (extraction, processing, shipping, etc.).

The Criteria are tiered into three levels:

Foundational requirements set the baseline systems and controls a company must have to comply with national law and core international frameworks, specifically the UN Guiding Principles on Business and Human Rights, ILO fundamental conventions and the UN Convention on Biological Diversity.

Good Practice builds on that baseline by aligning policies, due diligence processes and disclosures with widely recognised implementation guidelines such as the OECD Guidelines and Due Diligence Guidance, IFC Performance Standards and TCFD.

Leadership goes further and asks business partners companies to match or exceed the best performers in the sector and to drive collective action or innovation that advances responsible sourcing practice beyond current norms.

EVALUATION PROCESS

1. Communication of Criteria

RECOSI member shares RECOSI Gas Responsible Sourcing Criteria with relevant business partners.

2. Commitment

Business partner formally commits to align with RECOSI Gas Responsible Sourcing Criteria. The Guidance document provides specific requirements to meet the Criteria.

Deliverable: Signed Commitment Letter uploaded to a designated RECOSI contact person, with a copy distributed to the corresponding RECOSI member.

3. Independent evaluation

Business partner will be evaluated against the Criteria by an independent third-party assessor, referencing necessary policies, clauses and management systems to demonstrate alignment with the Criteria at desired achievement levels.

4. Capacity building

Considering the results of the evaluation, the business partner participates in targeted capacity building modules. The specific modules will be agreed between the business partner, RECOSI and the RECOSI member. The objective of the capacity building modules will be to address the gaps identified during the review phase.

5. Annual check-in

After a year, RECOSI will engage with the business partner to check in on its progress regarding the gaps identified.

The conformance status is assessed for each Criterion and measures the degree of alignment between the business partner’s olicies/systems/activities and the requirements as stated in the Guidance.

The three levels of conformance status include:

Full: all requirements of the Foundational, Good Practice or Leadership level set out in the Guidance are met and evidenced.

Partial: some or most of the requirements of the Foundational, Good Practice or Leadership level set out in the Guidance are met and evidenced. The descriptions may mention whether the partial conformance is major or minor, referring to the size of the gap and amount/level of corrective actions needed to enable full conformance.

Non-conformance: none of the requirements of the Foundational, Good Practice or Leadership level in the Guidance are met.

Currently there is no need for a business partner participating in RECOSI Gas to commit to meeting a certain level, i.e. Foundational, Good Practice or Leadership across all or selected Criteria. The initial evaluation can be used as a gap analysis to identify a company’s current performance status. Based on the outcome of the evaluation, companies will be encouraged to close the identified gaps and participate in capacity building. RECOSI and its members will initiate annual check ins to ensure progress. Going forward, the participating company may decide to set the ambition of reaching a certain level to demonstrate progress.

A specific achievement level is attained when all its corresponding requirements are fully met.

Because the levels are designed to be additive, participants must meet prior achievement levels before progressing to the next (i.e. meeting Foundational requirements is required to be met in order to obtain Good Practice, and achievement of both is needed to obtain Leadership).

The Participant may disclose its level publicly. Please refer to the RECOSI Gas Claims Guide for more information.

One of the objectives of the RECOSI Gas Responsible Sourcing Programme is to enhance ESG risk management practices and raise standards across the gas value chains of RECOSI members. The evaluation process is designed to help both RECOSI members and their business partners identify areas within ESG risk management that require improvement. As part of this process, participation in capacity building activities represents a key step, enabling participating companies to achieve consistent and measurable progress.

The results of the evaluation will only be accessible for the corresponding RECOSI member, the participating company and the RECOSI team. RECOSI will not make the results available to anyone without the explicit consent of the participating company. An NDA is also signed as part of the onboarding process to the RECOSI Gas Programme.

RECOSI will undertake a formal review of its Criteria at least once every three years to ensure continued alignment with the underlying frameworks, standards and regulations.

Feedback will be accepted on an ongoing basis to ensure continuous improvement of the Criteria, its Guidance and the Evaluation Process.

Please contact Tatiana Kurancheva, Head of ESG Programmes – Gas, tatiana.kurancheva@recosi.com