ESG Strategy Series #6

It is now well established and widely reported that Environment, Social and Governance (ESG) strategies, metrics and performance are essential for oil and gas companies looking to operate and develop responsibly in a rapidly changing world with a heightened focus on oil and gas transition.

A clear message coming from the oil and gas sector, which aligns with societal expectations, is that if ESG is to be undertaken it must demonstrate meaningful change and go beyond messaging and public relations. In turn, this provides opportunity develop and grow through stakeholder and community acceptance and ongoing access to capital.

UK North Sea new entrant and independent oil and gas operators are realising benefits and value from developing ESG programs. ESG is not exclusively for the majors. Large-cap, mid-cap and smaller companies can all increase their access to capital, enhance stakeholder relationships and meet regulatory requirements through ESG performance.

A successful ESG approach for oil and gas operators addresses the following:

1. Determine what ESG topics are of material importance and develop a bespoke ESG strategy to address these. Addressing the expectations and challenges of investors, shareholders and the wider stakeholder community is central to building a strategy
2. Demystifying what ESG practically means to individual operator companies is essential to ensuring that commitments and associated ESG metrics have value and are resilient to stakeholder scrutiny and challenge.
3. A top down approach to ESG with the development of a strategy owned by the Board of Directors demonstrates a commitment to ESG at the leadership level has been seen as a differentiator within the oil and gas industry.
4. Ensuring that the ESG strategy is resilient and adaptable to change, addressing current and future challenges that the sector will face. Recent developments such as the UK Oil and Gas Authority Maximising Economic Recovery Strategy, which represents the beginning of a shift in net zero and wider industry sustainability targets and commitments are becoming enshrined in legislation.

The oil and gas sector has a long history of adaptation and commitment to societal expectations and challenges. Step changes in safety and environmental performance, community engagement and impact reduction as well as operational transparancey have been implemented over recent years.

ESG represents the latest challenge for the industry and in many ways can be considered one of the most diverse and wide ranging yet. When developed and applied correctly with leadership and commitment, ESG provides an oil and gas operator of any size and focus with the ability to demonstrate true sustainability and ongoing relevance as part of the energy transition.

Our full ESG Strategy Series :