In its study of ESG disclosures released in mid-December, the UK
North Sea Transition Authority finds that reporting
by companies is on a positive
trajectory, with continued
focus on the ‘E’ of ESG.
However, data remain scattered and often difficult
to find across several
reports issued by each company.
North Sea Transition Authority
This inaugural report
sets out the observations
from NSTA analysis and the NSTA’s view of industry progress on ESG disclosure.
The report builds on previous recommendations of the NSTA and its ESG Taskforce, published in March 2021 (“2021 Recommendations”), and further discussed
in the NSTA’s open letter to all licensees
in March 2022. It is our intent to update this report annually.
report is designed to assist industry in navigating the ESG reporting landscape and to highlight the importance of high-quality, focused,
non-financial reports. Cognisant of the broad UK ESG disclosure
regime and the flexibility that is afforded
to companies in their reporting, we recognise the improvements in disclosure that have been made across
the sector. Nevertheless, we continue
to encourage more consistency and
clarity, through meaningful metrics and clear and credible commitments to net zero.
The NSTA will continue
to encourage licensees to report in a manner that
drives trust, and delivers action, authenticity and evidence. This will help safeguard the sector’s social licence to operate,
embedded in the supporting obligation
on governance in the NSTA’s Strategy.
600 global ESG
reporting frameworks, companies are faced with a significant challenge
as to how they harmonise
and clarify what is described by many commentators as
a “confusing muddle” of conflicting frameworks, metrics and guidance.
Overwhelmed with choices, a roadmap
to harmonisation and clarity is needed for the sector: both providers and users
of ESG data face significant challenges with
uniformity and standardisation.
and wider society
cannot be experts in
interpreting potentially hundreds of different definitions of what ESG means. Equally,
companies need to be able to easily identify exactly what is expected
of them to be able to
efficiently allocate resources to the creation of a high-quality
This report sets out the NSTA’s observations on the evolution of ESG reporting in the UK oil and gas
sector and its views on the development of a more standardised approach to ESG
reporting. The NSTA reviewed the public ESG reports of 31 licensees to assess and compare
their ESG disclosure status against
the NSTA’s ESG Taskforce recommendations
and other commonly used ESG frameworks. We did this with
the intent of making it easier for licensees
report, to maintain the sector’s attractiveness
to investors and to help protect its social licence
The NSTA follows a lifecycle approach to net zero regulation and, in its most recent Corporate Plan–2022-2027, set
out priorities for the next five years, including promoting the importance of, and compliance
with, ESG reporting standards.
NSTA remains committed to supporting the sector in its efforts to provide
meaningful ESG disclosure and will continue
to work with a variety of
stakeholders to improve ESG standards. Since 2018, as outlined
in Fig. 1, we have been integrating our
expertise as an authoritative voice on ESG, to reflect the needs
of an investor community and a wider society that are both increasingly focused
on ESG-related matters.
ESG Taskforce was set up in August 2020 to bridge the expectation gap between
disclosers and users of ESG information by delivering recommendations to
enhance and standardise disclosure. During 2021, it issued recommendations
designed to assist in the delivery of manageable, repeatable, and achievable
environmental disclosure metrics, being the ‘E’ of ESG.
relation to the ‘G’ of ESG, we published new NSTA Governance Guidance in
early 2022, outlining when we may review licensee governance arrangements and
the factors that we may consider. The
guidance also sets
expectations for boards in relation to environmental governance and corporate social
The report includes
the following key findings:
Environmental disclosure. Overall, we are encouraged that the majority
of companies continue to make good progress in their disclosures and are on a positive trajectory.
The vast majority included in the NSTA’s analysis
are disclosing in line with most aspects of the 2021 Recommendations.
regulatory disclosure requirements have improved environmental disclosures on climate-related
risks and carbon reduction targets for all companies, but particularly for those licensees with producing assets. Mandated regulatory
compliance with ever more regulations and requirements ensures that many larger
companies must consider their environmental impact. Regimes include Streamline
Energy and Carbon Reporting (“SECR”) and the Task Force on Climate-related Financial Disclosures (“TCFD”) framework, which is reported
against by listed companies on the Main Market, and AIM companies
with more than 500 employees.
2 shows the types of companies that are opting to report against the TCFD
framework. Apart from those required to report
via TCFD, a variety of other frameworks are applied in reports, with
the most frequent alternatives coming from the Global Reporting Initiative
(“GRI”), the Sustainable Accounting Standards Board (“SASB”), the International
Petroleum Industry Environmental
Conservation Association (“IPIECA”), and the UN Sustainable
Development Goals (“UN SDGs”). Materiality assessments are a practical way to understand
stakeholder expectations and to focus
reports on what matters. Further consideration should be given as to how these are presented
to key stakeholders to ensure these remain useful for investors.
In completing our analysis, certain companies have emerged
as “best in class.” These entities
are typically using a standardised and central “ESG Data Centre,”
which pulls all ESG data into one easy-to-find location,
lends itself to common templates
and which the NSTA believes helps to provide additional consistency and clarity.
A common data set, which is focused on material
and relevant information, will provide more balance between
the size of the company
and its ESG disclosure requirements:
there is no need to provide a large report,
if it is not value-adding.
Keep it consistent, relevant and accurate.
By pulling together key disclosures from recognised reporting
standards and frameworks
into an annual data sheet, a wealth of information
can be made easily available. An ESG Data Centre
should provide information on performance
against materiality issues,
using GRI, TCFD, or Carbon Disclosure Project (“CDP”), and a
summary of progress to net zero. It can be included as part of the sustainability or annual report.
The following are suggestions for what a ‘good’ Data Centre and ESG Datasheet might look like:
Transparent annual set of ESG metrics
with accompanying methodology or independent
Figure 3 shows the percentage of companies reviewed
that are using a Data Centre approach
We have analysed social disclosures by referring to metrics relating to people management,
workforce standards, community relations, and
gender and ethnic
diversity. These metrics are found in recognisable
frameworks, such as the UN SDGs, SASB
framework and GRI.
While there is some way to go in the development of
uniform and standardised social metrics, the majority of companies are
disclosing well. However, reporting of ethnic diversity is lagging,
as can be seen in Fig. 4. It is apparent that diversity
is still viewed primarily through the lens of
In the NSTA’s 2021 Inclusion Report, we committed to engage
operators and tier one contractors to hear some of the best practice examples
of diversity and inclusion from around our sector.
The lessons learned were included in the 2022 Inclusion Report.
across all sectors are being raised with regards to social responsibility. This relates to
internal staff, contractors and employees of suppliers. Strong performance is pivotal to driving
the North Sea Transition Deal, attracting
skills and talent, investment, and maintaining industry’s social licence
As responsible licensees, the sector should continue in its
commitment to create great places to live, work and do business. The NSTA encourages
transparent and tangible steps to minimise negative impacts, such as the cost-of-
living crisis and to maximise positive impacts against the three Ps,
“Profit, People and the Planet.” Data collected and disclosed as part of the ESG process can be leveraged to improve corporate
culture and employee engagement; companies can use the information in their
workforce plans, helping them to attract and retain diverse talent and support diversity, equity and
NSTA Governance Guidance was
published in January 2022, and all
licensees should familiarise themselves with the requirements. The NSTA is
undertaking governance reviews where appropriate. The NSTA Governance Guidance
requires the adoption of a recognised Corporate Governance
Code, such as the UK Code, Wates Principles or the
the analysis of governance disclosure, as shown in Fig. 5, has found that a number of companies do not disclose the
recognised corporate governance code they are following.
The analysis also has identified gaps in the disclosure of whether a regular cycle of external
board evaluation has been undertaken (Fig. 6), which the UK Corporate Governance
regime highlights as important for continuous improvement. The NSTA
encourages all companies to review their disclosure in both these areas.
Some licensees are using auditors or independent consultants to
externally verify ESG Data or sustainability reports. This provides
a more robust set of data, which provides a greater degree of comfort
and credibility for investors, lenders and wider stakeholders. Misinformation and potential
claims of greenwashing can cause significant reputational
damage. Using an external assurance & verification
process could support the reliability of data and enhance its credibility.
In the best reports, demonstrable knowledge, understanding and training across all levels of the company is key, so that all
employees understand the importance of, and reason
for, an ESG report.
Figure 7 shows that a significant proportion of licensees
are now disclosing that they are
aligning ESG performance to remuneration. Senior leadership and the board must have a clear understanding and awareness of ESG requirements facing their companies. An increase
in the use of ESG metrics in board or senior leadership remuneration plans can help
develop strategies and highlight the importance
of ESG reports.
The NSTA believes that clear disclosure of ESG metrics,
external verification, common data tools and templates, accompanied by
appropriate and responsible training and development from board down, will assist the sector’s
continued access to finance, long-term corporate success and social license to operate.
The NSTA’s 2021 ESG recommendations reflected optimal UKCS ESG
disclosure and reporting at that time. A reminder of these recommendations is
in Fig. 9.
The revised 2022 recommendations, shown
in Fig. 8, reflect the pace of change in ESG since March 2021 and capture the key emerging
best practice. We have removed
the tiered approach,
which, at the time, was designed to reflect short-, medium-, and long-term
expectations. All ESG requirements are now deemed equally important.
The recommendations are not intended to create any
new regulatory or additional mandatory burden and are not a substitute for any regulation
or law, nor do they represent advice. However, the NSTA continues to expect voluntary buy-in and, in particular, expects
the UKCS licensees
The recommendations remain designed to assist industry
in developing its ESG reporting
package. They will be kept under regular review and may be amended, as appropriate,
light of further developing best practice
and any change to the NSTA’s powers and responsibilities.
The 2022 recommendations reflect the ESG disclosures that licensees should be making in their reports.
The oil and gas sector has made good progress to improve transparency in ESG disclosure and reporting and must sustain
efforts and improvements going forward. The NSTA, its strategy
and associated guidance
are in place to assist these
efforts amid an ever-evolving landscape and corporate
squeeze with security of supply and net zero challenges.
ESG remains, and will continue
to remain, at the
heart of investment decisions, and access to finance will, in part, depend on
being able to communicate that strong E, S and G practices
embedded at the
heart of an organisation and integral to the
long-term success of the industry’s social licence to operate.
It is the NSTA’s intent to monitor developments in
ESG disclosure practice over the next 12 months. We will be active in our commitment to enhanced
collaboration and engagement with investors and the sector. WO
Where the NSTA makes any assessment
of the ESG disclosure of a Licensee, this is done specifically and exclusively
for the NSTA’s own purposes. This Report, and the NSTA’s observations, is not intended to replace any other ESG disclosure requirements with which each Licensee may have to comply. Third parties should not rely on any statement (or absence of any statement), decision, action or inaction of the NSTA, or rely on
the NSTA in any other way, to satisfy themselves as to adequacy of a Licensee’s ESG disclosure. They will need to carry out their own due diligence on the ESG disclosure of Licensees.
Lead Figure: The study on ESG
disclosures is one of numerous reports put out by the NSTA.