Oil & Gas: It's Time for Social Conscience

Oil & Gas: It's Time For Social Conscience

When discussing ESG in oil and gas, the focus traditionally is on the ‘E’ in ESG (especially Health, Safety and Environment). This is rightly critical amidst this rapidly shifting societal and political landscape. However, in the eyes of third-party rating agencies, it’s not just a climate story, it’s a whole story, with all three pillars of ESG equally weighted.

A low score in one aspect of ESG could result in a missed opportunity to secure capital from potential investors. While the governance and environmental aspects of ESG now, to some degree, take care of themselves due to standardised metrics and frameworks; social disclosure continues to be a laggard, yet it remains a financial imperative.

The oil and gas sector has the potential to be an exemplar of good social practice. Its global supply chain, which heightens exposure to potentially poor working conditions and human rights challenges, has seen many in oil and gas demonstrating strong corporate social responsibility such as supporting opposition to modern slavery, responsible sourcing of human capital and investing in local communities.

Furthermore, recent OGA/industry workshops on the ‘S’ of ESG have highlighted that many in the sector are doing great work on diversity and inclusion, and this needs to be made more apparent to investors.

Despite this, internal OGA analysis has shown that disclosure of social metrics pertinent to the investor community is varied. In order to meet an increasing demand for transparency of social targets many businesses struggle to showcase all the social good they do. Companies need to understand that there is a changing investor landscape amid radical shifts in societal attitudes and keep pace. This is evidenced by global fund manager Blackrock’s new 2021 proxy voting guidance which requires businesses to be clear and consistent in reporting their handling of human capital management.

There are many frameworks, and sector reports available to the oil and gas sector, but these can be confusing, and may add to the alphabet soup of ESG standards. The OGA is committed to assisting the sector in improving and demonstrating its social disclosure, and the revised OGA strategy highlights the importance of good ESG policies and practice.

In addition, the North Sea Transition Deal includes guidance on how businesses should approach critical social challenges including equality of opportunity, workforce upskilling, and utilisation of local content. The OGA recognises the challenges associated with the disclosure of social issues and has reconvened its ESG taskforce which has agreed to review social disclosure to better help businesses meet the demands of investors.

Our sector cannot afford simply to take a wait and see approach, we must adapt quickly to improve our social performance and report clearly on those areas in which we already do brilliant work. Failure to do so will see our social licence to operate further decline.