Suncor's safety record in the spotlight as activist investor calls for change

A string of fatalities at Suncor Energy Inc. has caught the attention of investors who view workplace safety breaches as a warning sign of deeper problems within a company.

In a letter to Suncor's board last week, U.S.-based Elliott Investment Management expressed frustration in what it calls a recent decline in performance at the energy producer.

The activist investor, which holds a 3.4 per cent economic interest in Suncor including shares and cash-settled derivatives contracts, pointed to the oilsands giant's lagging share price and recent spate of operational difficulties to make a case for an overhaul of the company's board and management.

But in addition to criticizing the company's financial performance, Elliott Investment Management also repeatedly pointed the finger at Suncor's safety record. Since 2014, there have been 12 workplace deaths at Suncor sites, which Elliott said is more than all of the company's closest peers combined. (Canadian Natural Resources Ltd., for example, has had four workplace deaths in that period while Cenovus Energy Inc. has had one.)

Highlighting Suncor's challenges with workplace safety is a good way for Elliott to gain traction with the public and the press as it makes the case for a management change at the company, said Josh Young, chief investment officer and founder of Houston-based, oil and gas-focused Bison Investments.

But there's more to it than just PR, Young said. While ultimately what investors care about is "money in their pockets," an unusually poor safety track record can be a warning sign that there are other things going on at a company that could impact the value of an investment.

"From an investor perspective, it's just indicative of poor management," Young said. "Well-run companies have good safety track records, and poorly-run companies have bad ones."

Suncor's recent tarnished safety record includes the death of a contractor in a truck crash at the company's Base Mine site in Fort McMurray in January, as well as an incident in 2021 involving a bulldozer colliding with a pickup truck at the Fort Hills oilsand mine. That incident resulted in the deaths of two contract workers.

Another worker died in 2021 when the bulldozer he was driving fell through the ice of a tailings pond at Suncor's Base Mine.

The company also had a fire at a refinery in March that resulted in an injury.

Rob Stewart, a Calgary-based workplace safety expert, said Elliott's highlighting of Suncor's safety issues might be "a little bit unfair," as the sheer size of the company means it is more likely to have incidents than other, smaller industry players.

"I can tell you that Suncor probably spends more (on safety programs), and really does care more than some others," he said.

But Stewart said that doesn't take away from the underlying issues that Elliott has raised, which he said are "systemic" throughout the entire oilsands industry and the result of a clash between the desire to improve safety performance and the need to maximize profit.

"Companies are saying, 'we value safety,' but then they're also saying, 'hey, we have to have this level of production, we have to have shareholder value'," Stewart said, adding that accidents happen when companies try to save money by skimping on equipment, staffing levels or other resources.

"It becomes about cost and schedule, and that translates into what actually happens on the ground."

Stewart said he expects to see more investor activism related to workplace health and safety in the years to come, especially with the rise to prominence of ESG (environmental, social and governance) factors in investment decision-making.

He pointed out that south of the border, e-commerce giant Amazon is also facing shareholder pressure related to worker safety at its warehouses, among other issues.

"It's not just Elliot doing this," Stewart said. "We're going to see more and more of this type of thing as investors start understanding that safety is really an insight into the quality of a company's management."

Earlier this year, Suncor chief executive Mark Little acknowledged that the company must do more to improve workplace safety. He said the company has a plan to address the problem, which includes rolling out collision and fatigue management technology across all its mobile mine equipment within the next 18 to 24 months.

Suncor also recently completed an independent review of safety at its oilsands mines, including a focus on the safety of contract workers.