Strategy and Governance

Strategy

SWN’s approach to corporate responsibility (CR) is integrated into our business strategy through our Formula, which guides how we operate every day.

As part of our CR strategy, we collaborate extensively with governmental, nongovernmental and industry stakeholders to help move our business and our industry forward on corporate responsibility issues. We seek to be transparent and proactive on the issues that matter most to our shareholders, customers and communities, which we believe isn’t just the Right Thing to do, but helps drive our business and operational success.

SWN’s Corporate Responsibility Goals

The following goals provide a foundation for our CR strategy and drive our performance on key environmental and safety issues:

  • Maintain our commitment to being Fresh Water Neutral, by offsetting or replenishing every gallon of fresh water we use through water-quality improvement projects or treatment technologies that return fresh water to the environment in the same area as our operations. We have maintained this industry-first achievement every year since 2016.
  • Continue our industry-leading methane leak/loss rate. In 2018, we achieved a rate of 0.056 percent,1 more than 96 percent lower than the industry average of 1.62 percent.2 For the fifth straight year, we also continued to surpass ONE Future’s methane leak/loss goal of 0.36 percent; we helped develop this science-based goal as a cofounder of ONE Future, an industry coalition working to reduce methane emissions across our industry.3
  • Aim for zero safety or environmental incidents for our workforce. We recognize this is a challenging goal, but we believe it’s possible. In 2018, we had no environmental incidents that resulted in fines. And we’ve reduced our safety incidents by 45 percent over the past four years, including reducing incidents among our contractors, a key focus of our ONE Team culture.
  • Maximize our positive impacts on the communities where we operate. We have removed 1.3 million truckloads from roads since we began operations in Appalachia in 2010 by using pipelines instead of trucks to carry water, and we eliminated 3.2 million miles of truck travel in 2018 alone through careful logistics planning, thereby reducing congestion and the possibility of accidents.

In addition to the goals described above, we are focused on improving our environmental performance by managing produced water responsibly, protecting water quality and minimizing our impacts on ecosystems, infrastructure and landscapes. This includes reducing hazards associated with our fracturing fluids; though these are already 99.9 percent water and sand, we work hard to reduce any hazards associated with the 0.1 percent of fluids that are chemical additives.

Protecting the health and safety of our employees, contractors and communities is foundational to the success of our business. To help achieve our goal of zero safety incidents, we have comprehensive training and performance improvement programs. We also are actively reducing the number of vehicles on public roads by transporting water with pipelines rather than trucks.

SWN’s workforce is key to our success. To support employee engagement and retention, we focus on placing the right people in the right positions and providing them with the training and tools needed to be successful. We also value diversity and fairness in opportunity and pay. We are focused on building a ONE Team culture among our employees and contractors to help us achieve our goal of zero health, safety or environmental incidents.

Being a good neighbor in the communities where we operate is vital to SWN’s success. We cultivate open and productive relationships with stakeholders in these communities (e.g., government officials and other leaders, businesses, nonprofit organizations, emergency responders, land/mineral owners and involved citizens) to help us be aware of and address local needs.

Corporate Governance

Strong corporate governance4 is a cornerstone of being a responsible corporate citizen. SWN follows many best practices in corporate governance, including regular shareholder engagement on key issues, an annual “say on pay” vote, the annual election of all Directors, and no supermajority voting standards. We also seek Board members who bring a diversity of perspectives and backgrounds. As of August 2019, four of our eight Directors were diverse in gender, ethnicity or nationality. The average tenure of our Board members is less than five years, which we believe helps to ensure fresh thinking and awareness of emerging issues.

In 2019, SWN adopted a Human Rights Policy that formalizes and enhances our existing policies and commitments for labor rights, community and stakeholder engagement and protection of health, safety and the environment. The new policy is consistent with international principles, including the Universal Declaration of Human Rights. It specifically includes prevention of discrimination and harassment, our support for fair wages and rights to freedom of association, prohibition of child or forced labor and human trafficking, protection of indigenous peoples and cultures, and complaint procedures and resolution processes, as well as providing further support for our health, safety and environmental and community engagement commitments.

Health, Safety and Environmental (HSE) Management

SWN’s management and performance evaluation systems require that CR and HSE issues always be considered along with financial and/or operational matters. This commitment extends to our Board of Directors, which is actively involved in providing oversight and risk management of these issues through its Health, Safety, Environment and Corporate Responsibility Committee. This committee – which meets regularly to address CR issues such as climate change, water resources, workforce safety and community concerns – holds senior management accountable for the company’s HSE performance and assists the full Board in discharging its HSE-related responsibilities.

Our head of HSE, who reports to our Chief Operating Officer, directly manages HSE issues and presents regularly to the Board. The responsibilities of the head of HSE include overseeing SWN’s dedicated HSE team to ensure they develop effective policies and programs, monitor compliance, have the appropriate tools, and implement training related to employee and contractor health, safety and environmental issues. HSE employees are embedded within each operating division to support day-to-day HSE activities at the site level and ensure that all employees comply with applicable safety and environmental standards as well as identify hazards and mitigate risks. We actively engage our third-party contractors in HSE management and require them to meet our HSE standards. But HSE performance is not the sole responsibility of dedicated HSE managers: Every SWN employee and contractor is accountable for safety, and HSE managers ensure they have the tools they need to contribute to a safe work environment.

To further integrate HSE management across our operations, our head of HSE leads a corporate HSE steering committee – composed of management from all business units and relevant corporate functions – which guides the development and implementation of policies and procedures for compliance and continuous improvement. In addition, each operating division or business unit has its own HSE committee, made up of local management, HSE professionals and field operators, that reports to the corporate steering committee, implements programs and monitors HSE performance and activities within its division.

Our approach to managing HSE topics is governed by SWN’s HSE policy, which underscores our commitment to protecting employees, contractors, communities and the environment in all areas where we conduct business. It is the responsibility of every SWN employee to deliver on our commitment to this policy and help achieve our ONE Team goal of zero incidents.

This commitment is supported by SWN’s comprehensive HSE management system, which covers all SWN operating regions and divisions. The management system has integrated policies, programs, procedures, training and incentives to support HSE performance. It provides clear guidance on actions and processes for protecting health, safety and the environment and maintaining asset integrity. The management system requires recurring goal-setting, evaluation processes and performance metrics to drive improvements. It also requires regular audits of our own and contractors’ operations, as well as implementation of corrective actions when relevant, to ensure compliance with SWN requirements and relevant external regulations.

All SWN leaders – from senior executives to frontline managers – are evaluated on, and held accountable for, the HSE performance of their respective teams. We measure leadership engagement in HSE using a balanced scorecard, which includes both leading indicators (e.g., management participation in site visits) and lagging indicators (e.g., Total Recordable Injury Rate). In addition, safety and environmental performance are included in the performance-based element of every SWN employee’s annual bonus.

Corporate Responsibility Oversight

Enterprise Risk Management

Oversight of our enterprise risk management (ERM) process is led by our Vice President and Treasurer under the direction of our Chief Financial Officer with input from leaders across our operating divisions and functions. This cross-functional group meets quarterly to identify risks that may impact our business over the following two years; assess the likelihood of occurrence, level of potential impact to the business and speed at which the risk may develop; and identify mitigating factors.

SWN’s executive leadership team (ELT) meets at least quarterly with the cross-functional ERM group to review and assess the risks identified and the steps being taken to manage them. The ELT reviews ERM findings with the Audit Committee at least quarterly, and with the full Board at least once a year.

A primary responsibility of the Board is ensuring processes are in place to identify and properly manage risks to the company and its business. Each standing committee of the Board oversees and evaluates risks directly in its sphere – for example, the Compensation Committee reviews compensation and human resources matters; the Health, Safety, Environment and Corporate Responsibility Committee reviews health, safety, environmental and public policy matters; and the Audit Committee reviews financial and overall risks to the enterprise. Each of these committees is composed entirely of independent Directors.

Ethics

SWN’s General Counsel, who is also our Chief Compliance Officer, oversees issues relating to ethics and nonoperational compliance. The Chief Financial Officer oversees Internal Audit Services. To ensure that our employees and Board members conduct their work in an ethical manner and meet applicable laws and regulations, we established detailed business conduct guidelines and hold related employee training at least annually. The guidelines cover topics such as conflicts of interest, bribery and corruption, antitrust matters and insider trading.

A SWN ethics hotline enables employees to anonymously submit issues or concerns.

All complaints received are forwarded to both Internal Audit and an investigations lead in the relevant department. The Audit Committee receives a summary of all complaints. Our Internal Audit group also assesses compliance with ethics requirements across departments on a regular basis.

We have an interactive, web-based ethics training course that tests employees on their knowledge of our ethics requirements and provides additional content on any questions that are missed, to ensure employees are proficient on key topics. New employees are required to complete this training upon joining the company, and all employees must retake it annually.

Also, our Supplier Code of Conduct requires that all suppliers meet our ethics standards. We review supplier performance against these standards before adding new suppliers, and we audit active suppliers’ ethical performance regularly. See the Contractors section for more detail.

Public Policy Engagement

SWN’s senior executives, along with our Regulatory and Government Affairs team, manage the company’s engagement in the legislative and regulatory process. In several cases, we have worked proactively with policymakers and other stakeholders to craft recommendations for laws and regulations that will be effective and workable in practice. For example, SWN has voluntarily participated in a number of scientific studies with regulatory agencies, academia and nongovernmental organizations that have informed science-based regulations. Also, SWN is a founding member of the ONE Future coalition, which developed the methane reduction approach that has been endorsed by the U.S. Environmental Protection Agency and is now a component of their Natural Gas STAR Methane Challenge.

  1. Methane intensity or methane leak/loss rate (mass percentage) is calculated by dividing the gigagrams of methane emissions by the oil and gas gross production (cubic feet converted to gigagrams). In accordance with U.S. Environmental Protection Agency greenhouse gas reporting requirements, assets that were divested in 2018 are not reported.
  2. National Energy Technology Laboratory, Timothy J. Skone, P.E., 2018, Industry Partnerships and Their Role in Reducing Natural Gas Supply Chain Greenhouse Gas Emissions.
  3. See www.ONEFuture.us for more information about the coalition and how the industry segment and company targets are being set.
  4. The Corporate Governance and Investor Relations sections of our company website include a full list of current Board members and executive officers; copies of our corporate governance guidelines, business conduct guidelines and Board committee charters; many of our other policies, including those covering business ethics and anti-corruption; information about how stakeholders can contact our Board of Directors; and links to our annual report and proxy documents.