Message from
the CEO

Public corporations have an affinity for grand mission statements, elegant wording, and grand virtue-signaling. Yet they struggle to act in impactful and consistent ways. This creates a credibility gap that can quickly turn political, with society defining and taking up sides: ESG virtue signalers, woke capitalism critics, stakeholder capitalism theorists, and so on. Sadly, public companies have largely failed to lead on this topic, which is central to their missions.

At CNX, we aim to lead. A prominent CEO of a well-known investment firm wrote that stakeholder capitalism shouldn’t be political. Instead, it should be about establishing mutually beneficial relationships between a company and its employees, customers, and communities.

We wholeheartedly agree with such an assessment. But there is a wide gulf between the packaged messaging being promoted across the corporate community and the actions and results on the ground. Many in the environmental NGO community have appropriated the core concepts of stakeholder capitalism, leveraging ESG as a Trojan horse to pursue wider societal outcomes based on ideological beliefs. In turn, many easily intimidated corporate leaders seek to appease such groups in a futile effort to be spared their public ire at best, and at worst, to be canceled altogether. Such tactics—employed by those who would misuse the concepts of ESG—have triggered an epidemic of false choices and an outbreak of companies over-promising and under-delivering on ESG performance.

Much good can come from ESG principles, if applied correctly, for both company and stakeholders. CNX is determined to be the exemplar for such success.

As outlined in this report, we offer a unique value proposition across key, clearly defined stakeholder groups. We have been busy building a Sustainable Business Model (SBM) and brand that is authentic, rooted in our Appalachia First strategic vision, and that sets the pace for tangible ESG performance. This report details our ambitions for our SBM and ESG efforts. But more importantly, it emphasizes our actions over our words. For us, tangible results achieved through meaningful action are much more important than impressive but hollow presentations.

Our SBM hinges on competitive moats of stacked shale pay horizons, integrated upstream and midstream assets, and innovative new technologies. These three non-replicable advantages allow us to be low-cost, low-capital intensity, and operationally flexible to generate regular and substantial free cash flow (FCF). We then prioritize injecting that FCF back into our business through investments in human capital, optimization of our asset base, investments in our region, strengthening our balance sheet by paying down debt, and returning capital to our shareholders. We view success through the lens of generating, and growing, FCF per share to create an attractive long-term investment opportunity for our shareholders.

Late in 2022, we launched “Appalachia First,” our strategic vision for the future of the company, industry, and region we call home. Appalachia First envisions a socio-economic transformation built upon the foundation of lower carbon intensive natural gas and derivative products. We are proud that this vision, and our SBM, are the antithesis of the herd mentality—it’s what we call a Tangible, Impactful, Local strategy for the company, industry, region, and ultimately, the world. We seek results, not platitudes and empty concepts lacking measurable return on investment.

Our approach forms a virtuous circle, as our business helps sustain the Appalachian region and, in turn, the region continues to sustain CNX for the future generations.

False choices brought on by the abuse of ESG tenants have real consequences. In 2022, tech stocks fell more than 30% while the energy sector gained almost 60%. But because of climate pledges and other ESG criteria applied by fund managers, many investors were overweight in tech compared to energy.

Corporate ESG reports are often check-the-box exercises— published to appease the crowd and satisfy arbitrary, inconsistent scoring systems that lack a consistency that harken to proposed climate rules from the SEC. Our view of this document—as a labor of love in which our entire team is closely engaged—is a very different one. While we strive for perfection each day, we know it’s not attainable—but the act of striving for perfection makes all the difference. This exemplifies our entire approach to ESG performance.

We understand that in our quest for perfection we will, at times, fall short. But even in the act of falling short of lofty goals, we will have made Tangible, Impactful, and Local improvements across a wide range of metrics and stakeholders.

The unique CNX brand and approach was on full display on a cold evening in late 2022. While dignitaries from the corporate and political community were celebrating the holiday season at a historic, venerable social club in downtown Pittsburgh, the CNX team was literally across the street from the elite enclave with a local organization called Outreached Arms. Outreached Arms doesn’t attract the big dollars from the wealthy foundations. It quietly does its work partnering with the First Presbyterian Church of Pittsburgh to serve meals to Pittsburgh’s homeless and working poor. There was no fanfare, no check presentation or photo op; just CNX employees and CNX Foundation Mentorship Academy high school students lending a helping hand (and outreached arms) to those across our region in need.

There are two paths as a company in today’s ESG environment: you can virtue-signal, talk, and strive to simply avoid criticism or you can roll up your sleeves and engage in the difficult issues that move the needle in local communities. Despite success being far from certain (and a certain level of failure almost assured), we will always choose the latter, playing the long game and doing what is right, not expedient, for our stakeholders.

My personal hope is that this report serves not as a static, check-the-box compliance document, but as an invitation to an open dialogue with our partners, shareholders, employees, and the communities about what effective ESG performance should be. If we are successful in establishing and maintaining this exchange of ideas and search for truly impactful ESG, we all will benefit.

Between the unique CNX approach and the popular but hollow approach, we believe the choice is clear. Yes, you can have it all when it comes to ESG performance—CNX Resources Corporation.

Nick Deiuliis
President and Chief Executive Officer