Impact of ESG in Energy Industry
In the past few weeks, Exxon has added new board members at the request of environmentally focused investors. Royal Dutch Shell is selling some of its oil and gas properties as part of a movement to reduce its exposure to GHG and set up its transition to a low carbon future. Five years ago, these actions would have been unthinkable. Part of my morning routine is to read a couple of energy news websites. On one site today, there are no less than ten articles discussing the impacts of ESG (Environmental, Social and Governance) in the energy industry. Most large publicly traded companies publish annual sustainability reports to show they are socially responsible members of the community. Movements are underway to make ESG reporting a part of SEC filings. Financiers are using ESG metrics as part of their strategy when they invest billions of dollars. Setting aside the discussion of whether this is a good policy, what are the implications of this increased focus? A company’s ESG goals and actions should be transparent.
Looking at the environmental aspects of ESG, companies are making pledges to be carbon neutral or carbon-free in the future. They take actions such as investing in clean energy sources, converting vehicle fleets to EVs, or eliminating GHG emitting equipment. Annual reports are published showing their results to demonstrate accountability. For most companies, the production of these reports is a daunting task and manual process. Typically, someone in the corporate office contacts individuals in field offices for reports on energy consumed/generated, miles driven/flown. Data is reported back via emails or in a spreadsheet. The time spent on producing the annual report can take ten to twelve FTEs up to eight months. This manual effort also creates issues during legal or internal audit reviews as the source documentation may not be readily available. Data management best practices tell us that critical information should be stored in a central repository where appropriate personnel can review and validate it. Since ESG metrics will soon be part of a company’s day-to-day business, what steps can be taken to reduce time and effort spent on completing the required reporting?.
ESG reporting is no different from any other types of regulatory or financial reporting, albeit with using the same data points for a different purpose. If the process is time-intensive and laborious, then look for areas to streamline and automate. As critical as ESG reporting will become over the next few years, companies should be treating this data as they would other sensitive corporate data and manage it with a robust data system. eTRACK+ offered by ANB Systems is a tool well suited to manage ESG data collection and reporting. ANB is also developing a technical reference manual for ESG documentation and computations.
Written by - Michael Stockard
Michael Stockard is an independent consultant at Stockard Energy Advising and is a member of the Advisory Panel at ANB Systems. Michael has over 40 years of experience in the design and implementation of demand-side management programs.