From climate change and carbon emissions, to diversity and inclusion, to compliance and green initiatives, to transitioning to renewables, the Oil & Gas industry is facing a growing set of expectations when it comes to Environmental, Social, and Governance (ESG) issues. The need to focus on these areas goes beyond simply being a good corporate citizen. A growing number of investors and analysts are beginning to factor oil and gas ESG initiatives into their decisions and recommendations, including the types of valuations they make for M&A activity.
How can you demonstrate your performance and improvement in these areas? The first step is to identify the data points that are needed, and then digitize them so that they can be monitored, recorded, and evaluated. While some companies may attempt to do this on their own, a growing number are turning to third-party consultants to help them develop the necessary processes and IT capabilities.
Is your organization prepared to provide accurate and meaningful ESG data if needed? We’ve prepared four questions to help you assess your current status — and how you might better position your firm in the coming years.
1. Has your organization made ESG data a priority?
Currently, 50% of companies believe they perform effectively against environmental metrics, 39% believe their company performs well for governance, and 37% for social issues. Do you have the data on-hand to prove how your organization is measuring up?
A commitment to prioritizing ESG data will unlock your organization’s ability to digitize, analyze, and act upon the information related to the areas that are being most closely scrutinized by investors, governments, the media, and the public at large, including:
- Environmental matters such as energy consumption, carbon emissions, water consumption, waste management, and transitioning to renewables.
- Social concerns such as health and safety issues, diversity and inclusion initiatives, human rights, labor rights, privacy, and data security.
- Governance issues including regulatory compliance, accountability, oversight, ethical conduct, and executive remuneration.
2. Do you have the IT foundation needed to fully leverage your ESG data?
Prioritizing ESG data is one thing. But getting the optimum benefit requires more than simply gathering existing data, spreadsheets, and stakeholder input. Building a solid foundation requires the digitization of data. An organization’s capabilities in this area can be viewed in three phases:
- Operational. Strong governance is needed to elevate the control environment for ESG data to the level of financial data. Processes, controls, metrics, reporting, transparency policies, and benchmarks are put into place, and roles and responsibilities are assigned.
- Advanced. This involves having standard ESG reporting tools in place, along with analytics dashboards, access to third-party data, and an investment in niche solutions that help achieve organizational goals.
- Leadership. At this level, your organization is using data for ESG forecasting, and the leadership team is incorporating data-driven ESG insights into their decision-making process. Your organization is beginning to build an ecosystem of new technologies, business models, and partnerships to maintain a clear view of your company’s performance.
According to technology executives, the two biggest challenges are 1) knowing how and where to source ESG related data and 2) ensuring the data they do source is trustworthy and auditable. As governmental and regulatory bodies push for more transparency in ESG performance, the need for reliable, digitized data becomes more important.