Oil and gas companies that think ESG has gone down the priority list in the last couple of years should think again. It hasn’t and it isn’t going to go away. Stakeholders need to hear your ESG story. But how they expect you to tell it has changed.
Until very recently, companies could couch their ESG narrative in terms of goals and commitments and provide examples that demonstrated their steps toward delivering on these.
However, ESG communications has moved on since then. Today’s stakeholders expect a new style of communication that requires evidence of ESG actions and proof of their impact, or ‘improve it and prove it’ communications.
In recent times, the war in Ukraine and rampaging oil prices deflected the global focus towards energy security as some of the industry’s bigger players chased record profits and investors found their love for fossil fuels once more.
But this year, with oil prices stuck in the ‘meh’ zone of high $70s/low $80s per barrel, investors are swinging the spotlight back to the environment.
Campaigners are turning up the heat once again. In Norway recently, a court ruled in favour of climate activists in a case about emissions from North Sea oil and gas fields and attention is now turning to the UK. At Shell, a group of 27 investors representing 5% of shares has filed a resolution urging the company set tighter climate targets.
You need to ensure your ESG story meets today’s communication expectations. But who should you be talking to? And how?
Industry forecasts show demand for fossil fuels isn’t going to disappear anytime soon. However, how the industry goes about its business and its relationships with society at large are changing.
For exploration and production (E&P) companies that have made their money from maximising the extraction of fossil fuels, repositioning to incorporate a commitment to environmental, social and governance initiatives (ESG) can be challenging.
As one exploration company CEO put it: “Investors are only prepared to back companies…who can say they are doing something on the environmental front.”
Governments around the world have expressed commitments to emissions reductions and sustainability goals. But as an oil and gas company, proving you take your ESG responsibilities seriously can be tough – particularly when some sections of society see you as the problem, not part of the solution.
Against a lack of trust from the outside world on the one hand, and the need to attract investment on the other, effectively sharing your ESG credentials requires commitment, consideration, clarity and communication.
Everyone’s busy proving their ESG credentials right now so it’s important to show you’re serious and committed while avoiding greenwashing. An ESG page hidden away on your website isn’t enough. If your approach to repositioning is half-hearted it’ll reflect through your communication channels and could harm your brand rather than helping it.
Create a detailed ESG strategy that mirrors the importance you place on this aspect of your business. Don’t dash off a plan filled with vague aspirations and unachievable targets and expect it to fly. Today’s stakeholders can see right through non-specific proclamations and ill-defined strategies and will hold you to account.
Nowadays, you need to prove what you’ve done, show what you’re doing and define exactly what it is you’re going to do. Tangible proof points can convince people that one: you’re serious about ESG and two: because you’re serious about ESG you’re worth their investment.
What you say and how you say it are critical to how favourably your actions and ambitions will be received by your stakeholders. First, you need to understand the specific vocabulary, and we’ve developed a sustainability glossary to help you.
You’ll be accountable for how you communicate your ESG goals, and your claims may well be scrutinised, so authenticity must be at the core of your internal and external communications.
Communicating intent ahead of action can still be a powerful first step if you can avoid the greenwashing pitfalls and deliver credible clarity. But it is just a first step. Today’s expectations of ‘improve it and prove’ communications demand a quick transition to this evidence-based stage. Burying your head in the sand over how to talk about ESG isn’t an option. Say nothing, and the world assumes you’re doing nothing.
Sign up today for notifications of future posts in our ESG Insights series.