Growing Expectations: The Rising Tide of Sustainability Reporting Initiatives and Their Challenges for the Oil and Gas Industry
Authors: Lindsey Carolina Ortega , Janus Bertrand , Murphy Helen 
Published: June 2014

As public interest in environmental and social issues has grown over the past 20 years, an increasing number of companies have responded by publishing sustainability reports. These reports document company performance on health, safety, environmental, social and governance factors, typically on an annual basis. This trend has been accompanied by a growth in voluntary frameworks, which aim to increase the usefulness of sustainability reports by making them comparable. More recently an increasing number of policy makers, governments and stock exchanges have been embedding sustainability reporting into policy and regulation through mandatory initiatives, with no less than 134 individual policies identified across 45 countries and regions in 2013.1

A significant number of oil and gas companies have been producing sustainability reports for many years, with the number continuing to increase each year. The 2013 KPMG Survey of Corporate Responsibility Reporting found that 72% of oil and gas companies report today, compared to 59 % in 2008.2 For oil and gas companies, sustainability reporting provides a platform for describing how strategic issues—such as climate change and energy—are being addressed through long-term plans and current initiatives. The benefits provided can include those relating to financial risk and opportunity to performance along environmental, social and corporate governance (ESG) dimensions, establishing the license to operate, providing a differentiator from competitors and fostering investor confidence together with trust and employee loyalty.3 Furthermore for some national oil companies, reporting can provide a robust way to demonstrate to the local population that they are effectively managing the country’s oil and gas resources.4

Despite the continued spread of voluntary sustainability reporting since the 1990s, and indeed the more recent growth of mandatory reporting initiatives by governments and stock exchanges, additional reporting initiatives continue to emerge.5 This is because the content of many reports continues to be questioned and financial institutions state that they are not finding the information they need. One observation is that existing reports lack focus; companies are currently trying to satisfy the needs of too many stakeholders in one document; that includes employees, local communities, analysts and socially responsible investors.6 This has resulted in the continued development of reporting frameworks by different organisations with little or no coordination between them.7 Consequently companies across all sectors are increasingly being asked to provide additional information to their annual sustainability reports (or the same information presented in different ways) by growing numbers of external organisations, such as rating agencies and non-governmental organisations (NGOs). Furthermore, many of these voluntary reporting schemes require increasing levels of complex information year on year without clear explanations of why a reasonable investor or analyst would need such information. There is also a gap in the evidence that demonstrates the link between reporting extensive volumes of information on top of what is already provided in traditional sustainability reports and good performance or even performance improvements.8