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ESG in Energy & Natural Resources

ESG programs for energy and natural resources (E&NR)

In today’s world, environmental, social, and governance (ESG) is a core pillar of value creation for businesses. Due to an evolving set of expectations from stakeholders, changes in current environmental regulation, and the pending implementation of integrated audit standards (financial and non-financial information) for publicly-traded companies, a holistic approach to ESG is no longer a discussion for E&NR entities—it’s a necessity.

The environment and community engagement have long been table stakes for E&NR entities. A robust ESG initiative, however, will go further to encompass other ESG programs including greenhouse gas (GHG) emissions measurement and reduction strategies under the environmental (E), and equity, inclusion, and diversity imperatives under the social (S).

If energy and natural resources companies want to maintain access to capital markets and be positioned for long-term success, investing in an ESG program is essential.

ESG issues specific to E&NR

Every industry has different driving forces behind the development of ESG Programs. The following issues are material to the E&NR sector:

Scrutiny from the public over greenhouse gas emissions makes it harder to obtain capital for E&NR firms. Capital is being allocated towards insurgent competitors in the sector and taking market share.

Weather events and wildfires are occurring more often, and with greater intensity, making climate change appear more imminent to people. As a result, E&NR firms are experiencing pressure to innovate their business model and reduce their environmental impact.

Pressure is increasing on companies to revaluate their role in local and global communities. For E&NR companies, most of the scrutiny focuses on environmental issues (i.e., water use, waste, air pollution, transparency, etc.). To successfully navigate this transition, it is vital to have a robust ESG program with enhanced community engagement to maintain the social license required to operate.

Upcoming ESG regulation will make it mandatory for E&NR companies to implement a sustainability strategy and report on progress through formal ESG-integrated reporting (as outlined above). While ESG reporting is currently voluntary, this will become a requirement by stock exchanges in the near future.

Benefits of investing in ESG programs for energy and natural resource companies:

Early integration of an ESG program strategically positions your organization for long-term success
Access to capital
Safe and sustainable operations
Brand reputation
Talent attraction and retention
Operational efficiency and innovation
Partnership opportunities and community impact

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