Embracing the opportunity of ESG to deliver a sustainable future


In recent years, alongside profitability, investors and stakeholders have become increasingly focused on a company’s “Environmental, Social and Governance” (ESG) performance, placing significant importance on these non-financial disclosures. It is now seen as a differentiator in the market to secure business and attract investors, regardless of the company’s size or transition ambitions.  

For a sector with a heritage in oil and gas, the value add of metrics like atmospheric emissions, health and safety, and prioritizing local procurement is welcomed. The traditional oil and gas sector, transitioning to support low-carbon opportunities, is very well-placed to maximize the focus on ESG. This is a huge opportunity to showcase our climate and social leadership. 

The sector is a rich and interconnected value chain, often influenced by a range of factors, Fig. 1. When it comes to ESG performance and stakeholder expectations, this is no different. To embrace the focus on ESG, companies need to consider the expectations of them as individual firms, within a value-chain, and more widely as a sector depending on stakeholders. 



Fig. 1. The upstream oil and gas sector is a rich, interconnected value chain, often influenced, enhanced and drive by a range of factors. Image: OEUK, photo by Timothy Newman, Unsplash.

Companies on the UKCS are global leaders in driving the energy transition and accounting for climate change risks and opportunities, having developed Vision2035 in 2019, Emission Reduction Targets in 2020, and signing the North Sea Transition Deal in 2021. The UK has shown a commendable focus on accelerating green opportunities and scaling up UK content that supports people and communities. These commitments serve as the backbone of UK policy, outlining measures to facilitate the transition to a sustainable future whilst delivering economic growth.  

It is clear that private finance will play a pivotal role in scaling these low-carbon opportunities and driving the large-scale investment needed. However, interaction between the public and private sector is crucial for underwriting the success needed to achieve net-zero. Strong ESG performance is fundamental for both attracting the private finance needed, retaining social license to operate that unlocks public finance, and meeting the current and future workforce’s expectations. The UK has emerged as a leader in this evolving landscape, with the government’s net-zero review and greening finance framework setting crucial milestones to unlock a sustainable future, placing energy security and affordability at the heart of its policies. 

However, to fully unlock the economic opportunities that strong ESG performance can deliver, we must ensure that we avoid segregating what is a good and bad ESG performer, based on sector heritage. No sector can be wholly good or wholly bad when it comes to ESG, nor should it be a static assessment.  

Increasing mandatory reporting requirements. As financial and non-financial disclosures become increasingly intertwined with market expectations, clarity on how this will be articulated to the market through reporting requirements and to wider stakeholders is key. Oil and gas companies risk facing increased scrutiny, if they get this wrong and do not illustrate a joined-up strategy across their whole business—avoiding ESG becoming a tick-box exercise. Compliance and ambition are fundamental to attract capital and retain social license to operate in the current market, with a number of financial products being introduced to the market that, without considering ESG, would be cut-off. 

To aid giving a true and fair representation to the market, a number of mandatory and voluntary reporting requirements are beginning to be placed on companies. The need to measure and compare ESG performance of different companies to inform stakeholders decisions has shaped national and international policy.  

This includes the EU taxonomy and underlying reporting requirements agreed in 2022 and the development of the sustainability standards board under the international financial reporting standards board. Similarly, we’ve also seen the introduction of initiatives like the Task Force on Climate-related Financial Disclosures (TCFD) be adopted by the UK Government and mandated compliance for the biggest companies in the UK.    

These policy frameworks aim to enhance and drive forward sustainable practices, opening an exciting opportunity for oil and gas companies to showcase the strong progress made by the industry on its ESG initiatives credentials. Embracing the new ESG requirements presents an opportunity for these companies to demonstrate transparency and progress in decarbonization efforts, including emissions reduction. 

Failure to act on these requirements could make it more challenging for oil and gas companies to raise finance at affordable rates, compared to other industries. To navigate these new expectations successfully, the oil and gas industry must embrace appropriate ESG criteria and work towards achieving industry-wide decarbonization goals. 

The steps being taken to mandate climate disclosures and introduce global ESG standards is welcome. It does this by offering companies a framework for reporting environmental information with the same rigour as financial information. In turn, this helps businesses to provide investors with key environmental information via mainstream corporate reports, enhancing the efficient allocation of capital. 

Fit for purpose integration of ESG in credit rating providers assessments will be key. Appropriate, unbiased, and consistent integration of ESG assessments in credit and other rating agencies will be key to give certainty to the market and ensure fair allocation of capital. The priority of a credit rating or non-financial rating must retain a clear true north—to manage financial risk. OEUK welcomed the recent consultation on rating agency requirements as a key step to providing robustness in the market.  

Under current expectations, oil and gas companies can be unduly, and unjustly, penalized, based solely on their industry affiliation. However, if rating companies could recognize and reward the sector’s progress in ESG initiatives, it would help break the stigma associated with oil and gas and foster a more inclusive and constructive approach towards sustainability. 

This, coupled with the development, and implementation, of clear and standardized reporting requirements is essential to providing companies with well-defined guidelines and frameworks for reporting on ESG factors. Scaling this across the whole economy and international reporting requirements will be critical to enabling better comparability and consistency across the industry, helping investors and stakeholders make informed investment decisions whilst simultaneously driving transparency.



Fig 2. Embedding an ESG strategy within a company’s operations requires a series of deliberate steps. Image: OEUK.

Embedding ESG in operations. Oil and gas was the first sector in the UK to commit to net-zero, which is amplified through the huge number of OEUK members with public transition plans and illustrating progress through annual sustainability reports., Fig. 2. This is not unique to operators, and we see this across our whole membership from SMEs to Supply Chain to non-operative companies.  

Looking ahead – delivering net-zero. At OEUK, we believe that to continue to accelerate net zero opportunities at pace, we need to be ESG leaders. To be successful here, we need fit-for-purpose policy and voluntary reporting frameworks that maximise giving confidence to the market and stakeholders without a sectorial bias. ESG reporting that supports investment into all energy sources and products needed to deliver the energy transition will be fundamental.  

About the Authors

David Whitehouse

Offshore Energies UK

David Whitehouse is chief executive at Offshore Energies UK (OEUK). As an established industry leader with 30 years of experience, he has been a longstanding champion of OEUK, the leading trade association for the UK’s integrating offshore energies industry. Its membership includes over 400 organizations with an interest in offshore oil, gas, carbon capture and storage, hydrogen and wind. Working together with its members, OEUK is a driving force supporting the UK in ensuring security of energy supply while helping to meet its net zero ambitions. It works on behalf of the sector and its members to inform understanding with facts, evidence and data, engage on a range of key issues and support the broader value of this industry in a changing energy landscape. Mr. Whitehouse is respected across the sector for his strategic and hands-on leadership in the North Sea and around the world, including the U.S., Netherlands and Philippines. His passion for energy, engineering and innovation is built on a PhD in theoretical chemistry from Cambridge University and a first-class degree in chemistry from Manchester University. He is currently studying at the University of Aberdeen for a Masters in renewable engineering, an area of key growth and interest for OEUK and its members.


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