In recent years, the principles of sustainability and ESG (Environmental, Social, Governance) have evolved from an external concern to a fundamental factor in strategy development in the Oil & Gas sector. In an environment marked by growing regulatory pressure, investor demands, and civil society expectations, companies are facing a vital transition: the need to align their activities with sustainability, transparency, and social responsibility criteria. This change is about much more than ethics. It is a strategic need for securing access to financing, insurance, partnerships, and, above all, maintaining the so-called “social license to operate” (SLO). In this context, companies that manage to achieve stability between securing immediate gains and generating lasting value in the future will stand out.

External pressures: regulation, investors, and society

Several factors are accelerating this transformation in the Oil & Gas sector. Firstly, companies are facing climate regulations, including the Paris Agreement targets, carbon pricing mechanisms, and reporting standards such as the CSRD in the European Union and the SEC proposals in the United States. These factors require companies to make practical commitments to reducing emissions and disclosing environmental risks in a structured way.

Institutional investors and financial institutions are increasingly integrating ESG criteria into their risk assessments and financing decisions, placing growing pressure on companies to ensure greater transparency and accountability. A recent example is BP: at its 2025 annual general meeting, approximately 24% of shareholders voted against the reappointment of chairman Helge Lund, signaling dissatisfaction with the company’s reversal of its climate strategy and the lack of consultation with shareholders on that shift¹. Major institutional investors publicly expressed their opposition, highlighting concerns over BP’s governance and long-term sustainability. This event underscores investors’ rising demands for firm climate commitments and corporate governance that reflects environmental and social responsibility.

At the same time, civil society, including environmental NGOs, social movements, and affected communities, is calling for greater accountability. The concept of a “Social License to Operate” (SLO) has gained traction as a new standard of legitimacy, requiring companies to go beyond legal compliance by engaging in active dialogue with impacted communities, maintaining transparency around social and environmental impacts, and adopting exemplary practices in terms of safety, the environment and social responsibility.

Strategies and best practices adopted by companies

Faced with growing pressure from regulators, investors and civil society, the major companies in the Oil & Gas sector have been integrating ESG principles into their strategies, both in response to external demands and to ensure their relevance and competitiveness in the medium and long term. This response has been multifaceted, involving ambitious environmental targets, investments in clean energy, greater transparency, and social initiatives aimed at strengthening public acceptance.

1. Emission reduction targets and reporting

Most leading companies in the sector have already committed to achieving carbon neutrality by 2050, setting intermediate targets for the upcoming decades and strengthening their environmental reporting mechanisms. Equinor, for example, has committed to reducing its operational emissions (Scope 1 and 2) by 50% by 2030² compared to 2015 levels. By the end of 2024, it had already achieved a 34% reduction, despite an increase in production. Similarly, BP has set a target to reduce its operational emissions by 45–50% by 2030³, using 2019 as the baseline. By 2024, the company reported a 38% reduction.

These targets are supported by annual reports aligned with international standards, such as the TCFD, GRI, and SASB, which enhances transparency for both investors and regulators.

2. Energy diversification

Oil companies have been diversifying their portfolios by investing in renewable energy and transition technologies to reduce dependence on fossil fuels. Equinor aims to achieve 10–12 GW⁴ of installed renewable energy capacity by 2030, with a primary focus on offshore wind power. In 2025, Shell, TotalEnergies, and Equinor jointly announced a $714 million investment to expand the Norwegian “Northern Lights”⁵ carbon capture and storage project. The project’s storage capacity is expected to triple to approximately 5 million tons of CO₂ per year by 2028.

These investments reflect the oil industry’s growing commitment to the energy transition, positioning these companies as key players in building a more sustainable and less fossil fuel–dependent energy future.

3. Governance and transparency

ESG integration goes beyond operational practices. Companies have been strengthening their governance structures and accountability mechanisms. Many major oil companies have established sustainability committees on their boards of directors to oversee ESG policies and ensure alignment with overall corporate strategy.

An increasing share of executive variable compensation is now tied to performance on ESG metrics, such as emissions reduction, workplace safety, and organizational diversity, encouraging more substantial commitment and accountability.

Sustainability reporting has become a structured, widespread practice, aligned with internationally recognized frameworks. These reports also include climate risk analyses, based on possible outcomes such as the 2 °C increase envisaged in the Paris Agreement, allowing the potential impact of climate change on companies’ operations, assets, and strategies to be assessed.

4. Social impact and local acceptance

To strengthen their social license to operate, many companies are investing in initiatives that directly benefit local communities, particularly in developing regions. During COP29 in November 2024, Shell, BP, Equinor, and TotalEnergies announced a joint $500 million fund aimed at providing electricity and clean cooking solutions to communities in Sub-Saharan Africa and Southeast Asia⁶. These investments not only support the UN’s Sustainable Development Goals (namely SDG 7: clean and affordable energy, but also aim to foster broader public acceptance of future energy projects.

Challenges and risks in ESG implementation in the Oil & Gas sector

Despite the progress made, integrating ESG criteria across the Oil & Gas sector still faces significant barriers. These challenges range from strategic dilemmas to operational and technological constraints, internal resistance, and reputational risks. The transition toward more sustainable business models demands deep, often disruptive change, requiring companies to navigate regulatory uncertainty, geopolitical tensions, and constant pressure to deliver financial results.

1. Conflict between profit and sustainability

One of the sector’s core dilemmas is striking a balance between the need for short-term profitability and the long-term investments required for sustainable transformation. Volatility in oil and gas prices, coupled with shifts in global political dynamics, can have a direct impact on corporate strategies. In 2024, rising energy prices and the temporary U.S. withdrawal from the Paris Agreement led several oil companies to revise their plans. BP, for instance, cut $5 billion from its energy transition investments and announced an increase in annual oil and gas investments to $10 billion, targeting a daily production of 2.5 million barrels by 2030⁷. These decisions illustrate a structural tension within the sector: prioritizing short-term returns may delay sustainable investments, potentially undermining long-term competitiveness.

2. Regulatory complexity and greenwashing risk

The proliferation of reporting standards and frameworks—such as CSRD, ESRS, SEC, TCFD, GRI, and others—has created compliance challenges, particularly due to the lack of global harmonization. Global companies operate in multiple jurisdictions, which means managing different legal requirements and metrics. This complexity increases the risk of errors, omissions, or unclear communication, which can be perceived as greenwashing.

Public and institutional scrutiny over the credibility of environmental claims is becoming increasingly stringent, and any perception of bad faith can severely damage a company’s reputation and brand value.

A Greenpeace study revealed that in 2022, only a very small fraction of the energy sold by some major oil companies came from renewable sources, while the vast majority of investments remained focused on fossil fuels. The report also highlighted significant transparency gaps, with climate commitments often considered vague or unverifiable.

This highlights the sector’s high reputational risk and fuels skepticism among investors and the public regarding plans that are inconsistent or poorly substantiated.

The absence of a unified global standard for measuring ESG performance makes it difficult to objectively assess impacts and leaves room for distortions. In particular, Scope 3 emissions (related to the use of products by customers) continue to generate controversy. Many companies avoid setting absolute targets in this area. This diversity of methodological approaches compromises comparability between companies and raises doubts about the reliability of the indicators used.

3. Internal barriers and cultural resistance

Adopting ESG practices requires profound organizational transformation—change that is not always embraced internally. Resistance to change, a lack of specialized sustainability skills, and misalignment across management levels often hinder the effective implementation of new strategies. Integrating ESG into decision-making processes—from strategic planning to daily operations—demands upskilling, a mindset shift, and, in many cases, a redefinition of corporate priorities.

In 2024, ExxonMobil took legal action to challenge a shareholder proposal calling for strengthened carbon emissions reduction targets, submitted by two investors. Even after the proposal was voluntarily withdrawn, the company continued with the lawsuit, citing a need to clarify the legal boundaries of shareholder influence in such resolutions⁸. The case drew significant attention and reflects a shifting landscape where fiduciary and strategic responsibilities are being reinterpreted in light of climate challenges. It also signals potential future tensions between investors and companies that remain less committed to the energy transition.

4. Technological dependence and operational risks

Many of the solutions proposed for the energy transition—such as green hydrogen, carbon capture and storage (CCS), or the electrification of offshore operations—are still under development or face technical and economic constraints. Relying on emerging technologies exposes companies to viability risks, implementation delays, and high investment costs. Additionally, integrating these technologies into existing systems introduces operational risks that must be carefully managed.

5. Uneven transition

The energy transition is unfolding against a backdrop of profound inequality, both in terms of public policy and access to resources and infrastructure. While some countries are implementing strong public policies to accelerate decarbonization, others remain heavily dependent on fossil fuels, both economically and energetically. Global Oil & Gas companies operate across both types of environments, requiring a flexible approach tailored to varying levels of ESG maturity and ambition. This asymmetry presents a risk of strategic fragmentation and increased exposure to political and social instability.

Strategic opportunities linked to the ESG agenda

While the challenges are significant, the ESG agenda offers a growing range of opportunities for Oil & Gas companies that can anticipate trends, align their business models with emerging expectations, and position themselves as active players in the energy transition. Far from being just a compliance obligation, sustainability is becoming a true competitive differentiator, with direct impacts on access to financing, technological innovation, operational efficiency, and social legitimacy.

1. Preferential access to capital and sustainable financing

The rise of sustainable finance is opening new pathways for the sector. Institutional investors, ESG-focused funds, and multilateral banks are increasingly willing to support companies with firm environmental and social commitments. Instruments such as green bonds, sustainability-linked loans, and other ESG-oriented financial products enable companies to secure capital on more favorable terms and strengthen relationships with financial stakeholders. Furthermore, strong ESG performance helps reduce the cost of capital by mitigating reputational, legal, and operational risks.

2. Market differentiation and enhanced reputation

In an environment where social legitimacy is becoming a prerequisite to operate, investing in ESG practices can provide a clear competitive edge. Companies that lead in transparency, safety, social impact, and environmental responsibility are more likely to gain support from local communities, regulators, and business partners. A strong reputation also eases market entry, license negotiations, and the development of strategic partnerships. Additionally, it enhances employer branding, which is crucial for attracting and retaining top talent.

3. Innovation and portfolio diversification

The energy transition is accelerating technological innovation and driving diversification of business models. By investing in renewable energy, energy efficiency solutions, green hydrogen, biofuels, or carbon capture and storage technologies, Oil & Gas companies can create new revenue streams and reduce their reliance on fossil fuels. This repositioning enables them to stay ahead of long-term declines in oil demand and capitalize on emerging markets, including electric mobility, energy storage, and industrial decarbonization.

4. Operational efficiency and cost reduction

Many ESG initiatives directly contribute to improved operational efficiency. Reducing fugitive emissions, minimizing energy consumption, managing waste more effectively, and digitizing processes are examples of measures that enhance environmental performance while lowering operating costs. In this context, continuous improvement methodologies already widely used in the industry—such as Lean and Kaizen—are especially valuable for identifying inefficiencies, eliminating waste, and ensuring more sustainable and streamlined processes.

5. Regulatory foresight and risk mitigation

Companies that proactively align their practices with evolving regulatory standards and international frameworks significantly reduce their exposure to sanctions, legal disputes, and the high costs of abrupt compliance. By strategically integrating ESG, organizations can build regulatory resilience and adapt their operating models to future requirements, from non-financial reporting obligations to carbon pricing mechanisms. This adaptability provides a decisive advantage in a rapidly shifting regulatory landscape.

Conclusion and future outlook

The integration of ESG principles in the Oil & Gas sector has become essential for both survival and sustainable growth. Companies leading this transformation will not only be better equipped to meet regulatory, societal, and financial demands, but also to anticipate and address emerging challenges. Still, they will also unlock new sources of value—from sustainable financing to business model innovation.

Shortly, the sector will face increasing pressure to accelerate decarbonization, deepen transparency commitments, and demonstrate positive impacts on the communities in which it operates. Organizations that combine long-term vision with disciplined, adaptable execution will be better positioned to navigate complexity and lead with resilience.

Ultimately, success will depend on the ability to turn intention into action, reporting into measurable outcomes, and commitments into an embedded organizational culture. In a global landscape defined by uncertainty and transition, it will be those companies that pair environmental and social responsibility with operational excellence that will set the new benchmarks for the industry.

References

1. The Guardian. BP braces for investor rebellion at first AGM since climate strategy U‑turn. The Guardian, 17 April 2025. ↩︎
2. Equinor ASA. Energy Transition Plan. Equinor, 2025. ↩︎
3. BP. Getting to Net Zero. BP, 2025 ↩︎
4. Equinor ASA. Energy Transition Plan. Equinor, 2025. ↩︎
5. Reuters. Shell, Equinor, TotalEnergies to invest $714 million in carbon storage expansion. Reuters, 27 March 2025. ↩︎
6. TotalEnergies. COP29: TotalEnergies, bp, Equinor and Shell join forces to help increase access to energy. TotalEnergies, 15 November 2024.  ↩︎
7. Reuters. BP ramps up oil and gas spending to $10 billion as CEO rebuilds confidence. Reuters, 26 February 2025. ↩︎
8. TIME. Exxon’s Climate Fight With Investors Won’t Be the Last. TIME, 28 May 2024. ↩︎