ESG and Sustainability in the Energy Sector: A Practical Guide 

Explore ESG and sustainability by industry, with a focus on standards, reporting, current trends, and best practices in the oil & gas, utilities and renewable energy sectors. 

Introduction: Why ESG & Sustainability Differ by Sector 

While ESG and sustainability are often discussed in abstract and generic terms, their practical emphasis varies greatly across industries. In manufacturing the focus is on emissions reduction, supply chain responsibility, and safer, more efficient production processes. The oil and gas sector, by contrast, is under pressure to demonstrate transparency in governance and reporting, while also making credible progress on long-term decarbonization through methane reduction, carbon capture, and investment in alternative energy. 

Retailers face different demands. They must ensure fair labor practices in their supply chains and safeguard consumer data, while also addressing sustainability in highly visible ways such as packaging reduction and waste management. Consumer packaged goods (CPG) companies encounter similar pressures, with added scrutiny over the sourcing of raw materials like palm oil and cocoa, alongside product-level initiatives such as recyclable packaging and reduced water use. 

What emerges from these examples is that ESG and sustainability, though often spoken of in the same breath, mean different things depending on the sector. Each industry faces its own combination of compliance pressures, reputational risks, and opportunities for innovation. 

Nowhere is this more evident than in the energy sectors, which we now take a closer look at. 

ESG and Sustainability in Energy  

ESG (Environmental, Social, and Governance) factors are highly relevant to energy companies because they significantly impact financial performance, investor risk, long-term sustainability, and the evolving energy landscape driven by climate concerns and societal pressure. Energy companies’ operations, particularly those in oil and gas, and electricity generation, have profound environmental consequences such as carbon emissions and resource depletion, while also facing social pressures regarding labor, human rights, and community impacts. Strong ESG practices can mitigate these risks, attract capital from a growing pool of responsible investors, enhance brand reputation, and create new opportunities in the transition to a cleaner energy future. 

What is Financially Material in the Energy Sectors? 

Oil & Gas Sector  

Decarbonization is a central, and indeed increasingly dominant, material factor for the oil and gas industry under the evolving SASB / ISSB framework (particularly via IFRS S2). But while it’s a primary focus, other topics remain important too. 

Standards continue to evolve. Based on the latest ISSB exposure draft (June 2025) to enhance the SASB Standards for priority industries, the ISSB is proposing amendments to the relevant SASB Standards (Oil & Gas Exploration & Production; Midstream; Refining & Marketing; Services) with special emphasis on climate-related content, in support of IFRS S2. 

Greenhouse gas (GHG) emissions remain a key disclosure topic. The exposure draft proposes revisions to metric definitions, e.g. gross Scope 1 emissions, including sub-metrics, such as the percentage covered under emissions-limiting regulations.  

It also sets out more specific requirements for Scope 1 methane emissions, which are particularly critical for upstream oil and gas and narrative disclosures on long and short-term emissions reduction strategies and targets, plus analysis of performance against those targets.  

Despite decarbonization being front and center, other environmental, social and governance topics remain material and are being updated in the exposure draft. These include: 

• Energy management: total energy use, share of renewable energy, energy efficiency practices.  

• Water management: withdrawal, consumption, stress, especially in water‐scarce regions. 

• Labor practices & workforce health & safety: updates on metrics such as workforce composition, safety incidents, training hours. 

• In addition, targeted amendments are planned for other common topics across sectors (e.g. greenhouse gases, water, workforce health/safety) to improve consistency. 

Electricity Utility Sector  

The ISSB is currently conducting a comprehensive review of SASB Standards, including the Electric Utilities & Power Generators industry (which covers electricity generation, transmission & distribution, and related renewables). 

These enhancements are part of the 2024–2026 work plan, and aim to improve the international applicability of disclosure topics and metrics, interoperability with other ESG frameworks (e.g., GRI, TNFD, EFRAG), and alignment with IFRS S1 & S2 for consistency in climate-related disclosures. 

Key environmental disclosure topics under existing SASB Standards include GHG emissions, air quality, water management, coal ash and other waste/residues management. Social topics include energy affordability, especially for regulated utilities, rate-setting, and how costs/prices impact customers; workplace health and safety; end-use efficiency; grid resilience; and nuclear safety. 

Alongside the SASB Standards updates, the ISSB will issue consequential amendments to the industry-based guidance that supports IFRS S2 Climate-Related Disclosures. The comment period for these amendments is due to end on November 30, 2025. 

Earlier in 2025, the ISSB released a separate exposure draft entitled “Amendments to Greenhouse Gas Emissions Disclosures,” focused on clarifying certain requirements in IFRS S2 for all sectors. These proposed amendments address issues such as: 

• Relief for Scope 3 Category 15 emission disclosures relating to derivatives and certain financial activities. 

• Flexibility in using industry-classification systems other than GICS where required. 

• Clarification on using a jurisdiction’s required emissions measurement method (even if not the GHG Protocol). 

• Option to use jurisdiction-mandated Global Warming Potential (GWP) values instead of the latest IPCC values. 

Renewable Energy Sector 

For renewables and alternative energy project developers, some topics overlap (GHG, air & emissions, water) but there are also specific ones about materials sourcing (for solar, wind), lifecycle and decommissioning, supply chain, biodiversity, etc. The existing SASB standard was published way back in 2017. However, there are several ongoing updates and developments in the pipeline that will affect the renewables (and broader electricity/utilities) sector. These include, at the time of writing, targeted amendments across 41 SASB Standards to align topics like Energy Management, GHG emissions, and water management. Wider research projects with relevance to renewables includes research on Biodiversity, Ecosystems and Ecosystem Services (BEES) which may become a future standard or strong guidance for all industries, including renewable energy (where land use, habitat, etc., are material).  

Standards and Regional Variations 

ISSB/SASB alignment provides a baseline set of industry-specific disclosures that companies can map into different regulatory frameworks across regions. For energy companies (oil & gas, electricity, renewables), these are the main frameworks by region: 

European Union 

CSRD / ESRS (Corporate Sustainability Reporting Directive / European Sustainability Reporting Standards) are mandatory from 2024/25 onwards. Energy sector firms face detailed climate (E1), pollution (E2), water (E3), biodiversity (E4), and resource use (E5) disclosure requirements. There is a heavy focus on double materiality (meaning both financial and environmental/social impacts). 

CSRD is the strictest ESG framework globally, directly regulating large energy producers, utilities, and oil & gas companies. 

The Carbon Border Adjustment Mechanism (CBAM) is an EU policy that puts a price on the carbon emissions embedded in imported carbon-intensive goods. It entered into force on 17 May 2023. Energy companies are impacted by CBAM, specifically through the impact on imported electricity, where CBAM places a carbon price on electricity imported from non-EU countries that do not have comparable carbon pricing. This aims to prevent carbon leakage and market distortion by ensuring imported, fossil-fuel-generated electricity faces the same carbon costs as domestically produced electricity, making it less competitive than EU-generated electricity with a similar carbon footprint. 

United States 

The main federal regulation of relevance in the United States is the Securities and Exchange Commission’s Climate Disclosure Rule. The SEC adopted the Climate Rule in March 2024, mandating disclosures of climate-related risks, governance, strategy, and GHG emissions (including Scope 1 and 2, and conditional Scope 3 disclosures). However, it was immediately challenged in court by states, trade groups, and other stakeholders. The SEC issued a stay on the rule on April 4, 2024, to ensure regulatory certainty while the litigation proceeds. 

If it comes into force it will require disclosure of Scope 1 & 2 GHG emissions, climate risks, governance, and transition planning, with Scope 3 optional or conditional (for larger organizations if material. Energy companies (especially oil & gas, power utilities) will be most directly affected. 

On a state level California SB 253 & SB 261 covers companies doing business in California with revenues in excess of $1 billion. SB 253 requires full Scope 1, 2, and 3 GHG disclosure. SB 261 requires reporting on climate-related financial risks. 

United Kingdom 

The UK Companies Act and Financial Conduct Authority rules (aligned with TCFD and moving toward ISSB/IFRS S2) require UK-listed and large private companies to disclose climate governance, strategy, risk management, and metrics/targets. 

Transition plan disclosures are encouraged via the UK Transition Plan Taskforce (TPT) framework which aims to (important for utilities and renewables). 

The UK will roll out its own version of CBAM in 2027. It is similar to the EU regulation, though it covers a slightly different set of product categories.  

Asia/Pacific 

In Asia Pacific there are several different regulatory initiatives. Highlights include: 

Japan: Climate disclosures are required under the Financial Services Agency (FSA), aligned with TCFD and moving toward ISSB. 

Singapore: SGX (Singapore Exchange) mandates climate disclosures for listed issuers in high-impact sectors (including energy). 

China is piloting sustainability disclosure aligned with ISSB; energy and heavy industry likely first in scope. 

 Australia: Draft legislation (2025) mandates climate disclosures consistent with ISSB S2, phased in from 2026, targeting major emitters such as oil & gas and power. 

What Does This Mean for Procurement, Supply Management and Reporting? 

While CFOs and sustainability officers are typically responsible for disclosure, procurement, sourcing and supply chain professionals are on the front line of compliance and reputation management in the energy sector. By embedding disclosure-aligned data collection, decarbonization criteria, human rights diligence, and digital transparency into sourcing strategies, they shield the organization from regulatory risk and protect its social license to operate. Here are a few things that they should be doing: 

Get Supplier Data Disclosure-Ready 

Procurement leaders should map the supply base against ESG disclosure topics (GHG, water, biodiversity, labor rights, community relations). They should request emissions data (Scope 1 & 2, plus supplier Scope 3) from contractors and suppliers, especially those providing drilling services, engineering-procurement-construction (EPC) firms, equipment manufacturers, or renewable component suppliers. The best approach is to align data collection templates with SASB/IFRS S2 metrics so disclosures can be rolled up seamlessly into corporate reporting. 

Align Procurement KPIs with Disclosure Frameworks 

Procurement leaders should link procurement scorecards to SASB/ISSB material topics and report on these KPIs in parallel with CSRD, SEC, or ISSB filings. 

• GHG intensity of procured goods, 

• Percentage of suppliers reporting Scope 1 & 2, 

• Percentage of contracts with ESG clauses, 

• Safety incident rates in the supply chain. 

Prioritize Decarbonization in Sourcing 

This is the biggest and hottest ESG topic in the energy sector. Organizations should include carbon intensity and energy mix in sourcing criteria for fuels, power, and raw materials. 

• For oil & gas: favor suppliers with methane-reduction initiatives, low-carbon operations, and transparent targets. 

• For power generation: favor lower-carbon fuels (e.g., gas over coal, biomass with sustainable certification, green hydrogen) and negotiate long-term contracts for renewable energy inputs. Select turbines, boilers, CCS (carbon capture & storage), and efficiency upgrades with the lowest lifecycle emissions. 

• For transmission & distribution: procure smart grid tech, advanced metering, and storage solutions that enable renewable integration and reduce system losses. 

• For renewables: assess embedded carbon in materials (steel, cement, rare earths for wind/solar), and track recyclability. 

• In general: negotiate contracts that include emissions-reduction commitments and data-sharing clauses. 

Embed Water and Biodiversity Safeguards 

• For oil & gas: ensure water-management contractors meet regional stress-based standards; monitor effluent and reinjection practices. 

• For utilities and renewables: scrutinize land-use and habitat impacts (solar farms, hydro, wind turbines) to minimize reputational risk. 

• Adopt supplier biodiversity questionnaires (aligned to TNFD or ISSB biodiversity research projects) in procurement processes. 

Strengthen Human Rights & Community Due Diligence 

• Review supplier operations in sensitive geographies (indigenous land, conflict zones, high-risk labor markets). 

• Enforce compliance with ILO standards and local labor laws. 

• Mandate third-party audits or EcoVadis-style ratings for high-risk suppliers. 

• Build grievance mechanisms into contracts, ensuring suppliers respond to community concerns before they escalate. 

Integrate Cybersecurity and Resilience into Supplier Vetting 

• With grids, pipelines, and offshore platforms vulnerable to cyber and physical threats, procurement should screen IT/OT suppliers for cybersecurity certifications (ISO 27001, NERC CIP). 

• Require business continuity and emergency management plans from logistics and field-service providers. 

Technology and Data Enablers for the Energy Sector 

ESG and sustainability are top of the agenda in the energy sector, with the focus on decarbonization. This will prove challenging for procurement and supply chain leaders. The following technological developments will help them rise to the challenge: 

Carbon & ESG Data Management 

Enterprise carbon accounting platforms need to be in place to automate Scope 1–3 emissions data capture and reporting across corporate operations and suppliers. Life cycle assessment (LCA) tools will enable you to quantify product and project footprints (e.g. turbines, pipelines, solar panels) using standardized methodologies. 

Regulatory reporting modules can be deployed to map data to frameworks such as CSRD/ESRS, IFRS S2, SEC (if revived), CBAM, UK TPT. 

Supplier self-service portals, such as are provided in JAGGAER One, allow suppliers to input verified emissions and ESG data directly into the system. 

Supplier Intelligence & Risk Monitoring 

Supplier intelligence in JAGGAER One is enriched with third-party ESG ratings and due diligence services, which provide up-to-date scores on suppliers’ environmental, social, and governance performance. These feeds include adverse media and litigation tracking, with scans for controversies, human rights violations, or environmental breaches in your extended supply base. 

Geospatial and satellite monitoring help to identify biodiversity impacts, land use change, and emissions hotspots linked to supplier facilities while ethical sourcing databases support compliance with EU Battery Regulation, US Dodd-Frank, and equivalent rules. Findings and alerts can also be incorporated into supplier intelligence. 

Supply Chain Mapping & Traceability 

Multi-tier supplier mapping platforms will expose dependencies beyond Tier 1 to capture hidden risks (e.g. rare earths in wind turbines, contractors in pipeline projects). 

A project by JAGGAER and EY has developed a blockchain solution that is used selectively for high-risk supply chains to create immutable records of provenance, certifying where and how a product was made. This can enable secure chain-of-custody for fuels, hydrogen, bioenergy, or renewable components, with auditability for regulators. 

IoT-enabled logistics tracking enables the monitoring of transport emissions, spills, or hazardous material movements in real time. 

Analytics, Forecasting & Scenario Modelling 

Analytics software in JAGGAER enables organizations to model carbon pricing, transition risk, or physical climate impacts (storms, floods, droughts) on supplier costs and performance. With predictive analytics, they can flag suppliers likely to default on ESG commitments or fail to meet compliance thresholds. 

Integrated dashboards that combine financial, operational, and ESG KPIs allow procurement to demonstrate the impact on both compliance and value. 

Collaboration & Supplier Enablement 

Digital collaboration portals enable co-innovation between buyers and suppliers on decarbonization projects, joint target setting, and progress monitoring. In addition, knowledge-sharing platforms support supplier training on ESG reporting, ISO standards, and compliance best practices. 

Business Resilience Systems 

Finally, business continuity and incident management systems are especially important in the energy sector and one aspect of this is ensuring contractors and logistics partners meet resilience standards. High-profile disruptions (the July 2024 power outage in Spain that affected millions of households, and the Heathrow Airport power cut in February 2025) are precisely the sort of events that expose the need for better incident management and continuity planning in the energy sector. In addition, companies should put in place supplier cybersecurity assessment platforms to evaluate IT/OT vendors against frameworks like NIST, ISO 27001, NERC CIP (critical for grid operators). 

Conclusion: Sector Expertise Is Essential 

For the energy sector, ESG priorities are now fundamental. Decarbonization remains the most urgent, with oil and gas operators under pressure to cut Scope 1 emissions — especially methane — while utilities and power generators must accelerate the shift in fuel mix and improve grid efficiency. Renewables face their own scrutiny, from the embedded carbon in materials to end-of-life recycling and biodiversity impacts. Across all subsectors, transparent, auditable disclosure aligned with SASB/IFRS and regional rules such as CSRD in Europe or California’s SB 253 is now a baseline expectation for investors, regulators, and customers alike. 

Beyond emissions, resilience and responsible practices are also critical. Water use, workforce safety, and respect for human rights in supply chains remain material factors that procurement and sourcing leaders must integrate into day-to-day decisions. With recent power outages and geopolitical volatility underscoring the risks, incident readiness and supply chain transparency are also ESG imperatives. Energy companies that embed these priorities into procurement and operations will not only stay ahead of compliance but also protect reputation, strengthen stakeholder trust, and unlock new avenues for sustainable growth. 

For procurement and supply chain leaders, the call to action is equally clear: embed ESG at the core of supplier relationships, sourcing decisions, and reporting practices to secure resilience, investor confidence, and long-term advantage. The JAGGAER One source-to-pay platform, with end-to-end supplier intelligence supplemented by third-party data feeds from ESG and sustainability specialists such as EcoVadis, is your best bet for achieving these goals. As well as meeting the needs of procurement, supplier intelligence data from JAGGAER can be easily integrated into high-level executive dashboards.