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Energy & Utilities Data & Analytics

Four questions to evaluate the effectiveness of your oil and gas ESG initiatives

01/26/2023

by Jay Jayasuriya

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.

3. Do you have the analytics in place to achieve greater ESG insights and make better decisions?

Artificial Intelligence and Machine Learning can give you clearer insights into the current state of your organization, and create a heatmap that prioritizes areas for improvement. Sophisticated analytics tools will enable you to slice and dice data so that you can:

• Visualize risks and opportunities, and create dashboards that highlight top-priority ESG targets.
• Build scenarios and forecasts that enable you to test strategies, objectives, and outcomes.
• Innovate and collaborate to increase impact by adopting new, agile, and iterative ways of leveraging data-driven insights.

An organization-wide commitment to data analytics, digitization, availability, management, and transparency will allow your company to leverage these insights for benchmarking, corporate strategy, investment decisions, and changing consumer behavior research. All of this information works in tandem to reveal a more complete and accurate picture of your performance against key ESG metrics.

4. Are your oil and gas ESG initiatives and data solutions able to unlock long-term value?

Today, more and more investors are focusing on ESG issues. Establishing ESG data analytics capabilities will continue to grow in importance to investors, corporations, government agencies, and firms that are positioning themselves for acquisition.

Recent survey data suggests that:

• 90% of investors attach greater importance to ESG performance since the pandemic
• A growing number of investors are focused on consumer satisfaction when evaluating social risks (35%), as well as D&I issues (32%)
• Corporate decarbonization is a central concern for 86% of investors

Lack of data makes it extremely difficult to assess ESG factors in portfolio decision-making. By having ready access to data and analytics that benchmark their performance in key areas, companies can create value by giving investors the insights they need to make accurate assessments, and to position their companies as a favorable and viable acquisition target.

ESG is not just another passing fad or flashy acronym; these topics will continue to shape public, government, and investor concerns for years to come. In order to broaden their appeal to consumers, investors, government agencies, and other constituencies, O&G companies need to find ways to collect and digitize ESG-related data and use it to provide an accurate view of their current status.

Digitizing ESG data and implementing advanced analytics can help companies create the reporting and documentation that investors need to guide their decision-making process, and that governments need to verify compliance.

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At Sendero, we’re experienced in helping oil and gas companies find new and innovative ways to leverage their data to create measurable, bottom-line benefits. Fill out the form below to find out more about how Sendero can help your company expand its ability to use data to uncover insights into ESG issues and other areas.

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