Pros and Cons of ESG Programs in the Oil and Gas Industry

Pros and Cons of ESG Programs in the Oil and Gas Industry
Maintaining strong partnerships with the supply chain and local communities is key.

With the energy transition underway, many companies are moving toward greener operations. In the oil and gas industry, environmental, social and corporate governance (ESG) programs are especially complex; but, maintaining strong partnerships with the supply chain and local communities is key.

“Today, the companies that really engage with their local communities can deliver a win-win outcome that supports their ESG goals and delivers long-term value creation, which is of real value to their investors,” said Andrea Di Lillo, global business development director for OPEX Oil and Gas with Bureau Veritas.


Andrew Poreda, ESG research analyst at Sage Advisory Services, said the ESG movement might help shape the way many oil and gas companies look in the future.

A strong competitive advantage for these companies moving forward is “demonstrating the ability to run operations responsibly in the most carbon-efficient fashion,” said Uday Turaga, CEO of ADI Analytics, a boutique consulting firm specializing in oil and gas, energy, chemicals and industrials.

Other benefits include:

  • Better positioning companies to proactively manage risks;
  • Building trust with stakeholders and shareholders, providing increased visibility into planning, identification, and management of operational risks;
  • Helping oil and gas companies make better informed business decisions;
  • Attracting talent;
  • Stimulating innovation;
  • Long-term value creation; and
  • Mitigating risk of litigations.

“ESG investing will likely encourage many of these companies to spend more money in research and development to help explore the potential of other technology (like green hydrogen, advanced nuclear, or renewable energy projects), which will allow these companies to survive when the transition away from fossil fuels is complete (whenever that may be),” Poreda said.


Rapid scaling of clean energy is one challenge of the “green transition,” Dianne Saxe, president of Toronto, Canada-based Saxe Facts, said she sees, but the oil and gas industry has the skills, knowledge and experience to make it happen.

“They’ve got the trained people, expertise in energy markets and managing giant projects, and groups of oil worker are asking for jobs in the green transition,” Saxe said. “There’s an awful lot of room for oil and gas companies, but that room doesn’t include continuing doing what you’ve been doing.”

Other challenges of an ESG program include:

  • Readiness of companies to integrate it into operations;
  • Identifying the right standards and metrics for consistent measurement;
  • Aligning ESG with other company priorities;
  • Cultural business norms in host countries;
  • Upfront costs; and
  • Resource cycles.

“Messages that best resonate focus on numbers and critical statistics that highlight how ESG can help to bolster the bottom line,” said Rebecca Greenan, senior vice president of finance and operations CruxOCM. “For example, ‘As a result of the X contract, emissions were cut by X amount.’”

Monique Jozwiakowski is president and CEO of Houston-based MOJOZ Consulting, LLC. Read more about what makes ESG programs successful in How to Tell a Real Oil and Gas ESG Program from a FakeAdditional information is available in McKinsey Quarterly's Five ways that ESG creates value and the International Energy Agency's Net Zero by 2050—A Roadmap for the Global Energy Sector.


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