Environmental, social, and governance (ESG) practices went from idealistic goals to a top priority for major companies across industries. In fact, global ESG assets are anticipated to exceed $53 trillion by 2025.
Prioritized by investors and younger generations of workers, ESG has become a flag of corporate social responsibility carried by both public and private business owners.
For the oil and gas, energy and utilities sectors, addressing the ‘E’ in ESG has become vital to achieving sustainability, compliance and earning customer and vendor trust. And yet tackling the ‘E’ is no small feat. While larger U.S.-based companies like Exxon, who have teams dedicated to ESG are reducing greenhouse gas emission pledges, smaller companies across the board are struggling to find the resources to meet the basic ESG reporting and disclosure demands from the government and general public.
An energy company’s environmental impact includes its:
- carbon footprint
- air pollution
- resource consumption and management
- material disposal
- potentially natural habitat destruction
Why the ‘E’ matters
Customers, investors, and the workforce now have heightened awareness of sustainability and the issues plaguing our planet. Companies that are seen as wasteful or show disregard to their environment risk losing business, financial support, and public backing.
As seen through events like 2022’s oil spill off Peru’s coastline, irreversible damage is caused to both the environment and a company’s brand reputation when major environmental disasters take place.
On the other hand, organizations that implement strong ESG practices garner more investor interest and customer loyalty, attracting and motivating quality employees through a sense of purpose.
3 best practices for putting the “E” in ESG
Knowing how to start measuring and improving your company’s environmental impact can be a challenge. What should you do first?
Even if your organization has the resources to track its own carbon footprint and resource management, how do you track the impact of your supply and value chain partners? Here are three best practices to help you begin or ensure that your existing sustainability plan holds up to investor and customer expectations.
1. Understand your current environmental impact. In an ideal world, you already have access to metrics that illustrate your company’s current impact on its environment and community. For many businesses, especially smaller ones, this is not reality. Instead, look at your operations and evaluate which processes have the most significant environmental impact. Is it carbon emissions during production, or maybe material waste? Determining your baseline is critical to moving past it.
2. Determine your company’s goals. Most smaller businesses are at an early stage in their transition to more environmentally conscious operations. The goal here is not to go from your current state to net zero in one year. Think more practically and set more achievable goals such as reducing material waste by x%, or incrementally cutting back on carbon emissions.
Based on what you identified as areas of improvement, what is a realistic goal for the next five years, understanding that your organization might take on additional costs during the implementation of these changes? You may even realize cost savings as you find areas of improvement through technology or the removal of unsustainable practices from your operations.
3. Set up a measurement system. Investors are looking for metrics that demonstrate your company is working toward and reaching its ESG goals. Organizations often already have most of the information they need to understand and improve their environmental impact. They just need to repackage it to fit their ESG goals and reporting.
Technology is your friend when it comes to tracking. Investing in software designed specifically for resource, supply and value chain tracking is beneficial well beyond determining your initial benchmark report. Your business will need a way to collect, track, store and comply with ESG requirements today and tomorrow.