- New standards and requirements have helped drive consistency and transparency of ESG disclosures
- Executive pay being linked to key ESG metrics such as emissions cuts
- Licensees urged to provide more information about their supply chain engagements
Top-quality environmental, social and governance (ESG) disclosure is crucial to attracting further investment into the UK’s oil and gas industry, a report from the North Sea Transition Authority (NSTA) says.
Many of the 29 licensees analysed by the NSTA are following good practice across key areas of ESG reporting and are on the right track, though there is still plenty of room for improvement.
More than half of the companies now link executive’s variable pay with key ESG performance indicators, such as emissions reduction. This is an effective tool for hitting targets and should be adopted even more widely.
The majority (62%) are publishing ESG data in easy to find, central locations on their websites. The use of “data centres”, one of the key recommendations in the NSTA’s inaugural ESG Disclosure Report, promotes consistency and makes it easier to compare companies’ performance.
New regulatory standards issued by the International Sustainability Standards Board and requirements under the Corporate Sustainability Reporting Directive are also helping to drive up the consistency and transparency of licensees’ ESG reports.
The NSTA remains focused on helping industry by setting up a dedicated taskforce, hosting roundtables with key stakeholders and highlighting the importance of robust and consistent ESG disclosure – all actions which have contributed to the impressive progress seen across industry.
The new ESG Disclosure Report contains a series of recommendations to ensure progress continues, including fostering closer links between ESG teams and management and providing greater transparency on energy transition investments.
ESG experts generally agree that environmental considerations form the bedrock of the sector’s ESG reporting, with climate-change disclosure the biggest factor in determining whether a company is an industry leader or lagging behind.
While a number of companies are identifying climate-related risks, some still do not use internationally recognised frameworks – for example, those provided by the Task Force on Climate-related Financial Disclosures and Carbon Disclosure Project – to guide their work and ensure they are sharing enough of the right information.
On social matters, licensees performed well on human-resources-related areas, such as diversity and inclusion, health and safety and training. Operators submit data about their supply chain engagements, including payment terms and local content, to the NSTA confidentially, but they would enhance the quality of their ESG disclosure if they put this information in the public domain proactively.
Disclosure was strong across well-established, governance-related themes, such as business ethics and risk management, though payments to governments and political donations could be more transparent.
Joanne Edgeler, Head of Licensee Governance and ESG, said: “ESG reporting is no longer a ‘nice to have’ extra, it is crucial to attracting and maintaining investment. The principle of ‘No ESG disclosure, no access to finance’ is truer now than ever before. Industry is getting there but there is room for improvement and the NSTA will continue to work with licensees to build on this.”
Notes to editors:
Read the report here.
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