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From E&P to ESG – how to reposition an oil and gas company
Last year, a poll of 1,000 American adults found 60% believed oil and gas companies were mostly or completely responsible for climate change.
In the UK, an international operator recently donated $1 million to a children’s charity to support work in Ukraine. The charity rejected the donation. They’d agreed to stop taking donations from companies ‘whose core business is in fossil fuels’.
You need to take a position. But what? And how?
For exploration and production (E&P) companies that have made their money from maximizing the extraction of fossil fuels, repositioning to incorporate a commitment to environmental, social and governance initiatives (ESG) can be challenging.
Rising oil and gas prices in recent months add weight to industry forecasts that demand for fossil fuels isn’t going to disappear anytime soon. However, the industry goes about its business and its relationships with society at large are changing.
The highly volatile and cyclical nature of the oil and gas industry means we have a tendency ride out trends until we can get back to doing things the way we’ve always done them. But ESG isn’t a trend. You can’t ignore it and it’s not going to go away.
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.”
This warning made in 2020 in a letter to investors by Larry Fink, the highly influential CEO of BlackRock, the world’s largest investment manager indicates the importance of ESG.
“We will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them.”
Similarly, 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 society at large sees the industry as part of the problem, not the solution.
Against such 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. 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 actually 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. When an internationally respected organisation like the BBC posts advice to readers about how to spot business greenwashing you know non-specific proclamations and ill-defined strategies won’t cut it with your stakeholders.
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 target audiences. You’ll be accountable for how you communicate your ESG goals and your claims may well be scrutinised, so authenticity has to be at the core of your communications.
Communicating intent ahead of action can be a powerful first step, if you can avoid the greenwashing pitfalls, and deliver credible clarity. Say nothing, and the world assumes you do nothing.
Let’s begin your ESG repositioning today. Contact us here.