The social aspect of ESG within the energy and natural resources industry

02 November 2023

The ESG lens is firmly focused on the energy and natural resources industry, and we have increasingly witnessed how ESG principles are driving the business agenda within the sector. But of the three defined pillars of ESG, the social aspect of ESG can be the most difficult and nuanced to balance with the other two pillars of ESG.

Our ESG specialists highlight key considerations for business leaders in energy and natural resources.

Defining the social aspect of ESG

The social aspect of ESG is broad ranging, covering everything to do with people within your business and externally, including your supply chain. This can include:

  • diversity and inclusion;
  • retention; 
  • training and employee development;
  • health and safety;
  • workplace conditions and equal pay; and
  • community engagement. 

What standards are out there?

We are seeing emerging regulations impacting the energy and natural resources industry - IFRS S1 and S2 standards, which were released by the IFRS earlier this year. We don’t yet know how the UK will adopt these IFRS standards, but the government is aiming to make an endorsement decision by July 2024. We are seeing these IFRS standards adopted by other countries, such as Australia, as well as alignment to European standards (CSRD and ESRS). Within IFRS, the Sustainable Accounting Standards Board (SASB) standard taxonomy has been created to help determine what is material for each industry.

It’s not enough for businesses just to wait for and adhere to these standards. There is a big ethical and reputational risk of not doing what’s right on a social level for your internal and external stakeholders, and this includes your supply chain.

Key areas to address

  • Your supply chain
  • Diversity and inclusion
  • Retention
  • Safety & workplace conditions
  • Community engagement

Your supply chain

For energy and natural resources businesses, understanding your supply chain is key to getting the social element of ESG right. From a business continuity point of view, it is important to fully understand all the connected parties within your supply chain and their individual policies. Key areas to consider are:

  • health and safety;
  • adherence to labour laws such as modern slavery and child labour; and
  • UN sustainable development goals, a common area of reporting within this sector, which covers diversity and inclusion, gender equality, and working conditions.

There is an opportunity for businesses in the sector to engage with their supply chain and commit to making positive changes that will be mutually beneficial.

Sheena McGuinness, RSM UK’s head of renewables and cleantech, comments:

‘Supply chains are particularly important to decarbonisation because they generate around 60% of all carbon emissions. Tax leaders are key to understanding the inputs making up the supply chain and then formulating the plan for a sustainable supply chain.’

Diversity and inclusion

The IEA’s Energy and gender report describes the energy sector as male dominated with women representing only 16% of the workforce, wages for female employees 20% lower than male employees, and under 14% of women in senior roles. In 2022, 78% of the sector's jobs were held by white employees.

To meet diversity and inclusion goals, companies should have inclusive policies and practices that prevent discrimination and promote diversity at all levels of the organisation. 

Sheena McGuinness comments: ‘Having a diverse workforce can quite literally pay dividends. McKinsey found in a study that ethnically diverse workforces are more financially successful and companies with a gender diverse executive team were 25% more likely to have above-average profitability.’


According to ONS data, employment in the mining, energy and water supply industry has declined by 15% from April 2021 to April 2023, which indicates that retention is a challenge for the sector.

Getting your people strategy right can really help with recruitment and retention of your key staff.

Rich Hall, head of sustainability in our ESG practice comments: ‘Employees or potential employees are far more attuned to ESG than they ever were. Increasingly, employees are looking to work for a business with values and a purpose more aligned to their own. So, clearly articulating your ESG culture can be a real differentiator for your business.’

Safety & workplace conditions

With inherent dangers facing exploration and engineering workers in the sector, there has been a strong focus on health and safety. The Health and Safety Executive report improvements have been made in reducing the number of injuries but the sector has one of the highest rates of occupational ill health, due to fatigue and stress

David Hough, partner in our energy team comments: ‘Our mining clients place a significant focus on workplace safety with significant capital expenditure budgeted each year to reduce the risk of injury. Many businesses treat reducing such injuries as a KPI which is reported to investors on at least an annual basis.’

Community engagement

This refers to how a company engages with and contributes to the social and economic development of the communities where it operates or has an impact. For example, supporting local businesses and communities and creating positive social value.

Sheena McGuinness comments: ‘Community engagement and the wider social aspects within ESG are becoming more front and centre in the evaluation and perception of companies by investors and the wider public. We have seen lobbying of the UK government to amend the Companies Act to place all stakeholders on a par with shareholders. This has helped to bring social considerations to the fore and removed the option for companies to pursue profits at the expense of workers, communities and nature.’

David Hough comments: ‘Community engagement in areas of mining activity is critical in obtaining a ‘social license’ from local groups to allow mine development in the area. Typical activities include development of local infrastructure and training and employment initiatives.’

Difficulty of evaluating 

The social aspect of ESG can be more difficult to measure but key principles include transparency of reporting and the authenticity of your business values. For example, it is important to hold yourself to account in terms of your targets, where you do fall short.

Graham Ricketts, RSM UK’s co-head of mining and metals comments: ‘Setting and measuring progress towards ESG targets using reported KPIs is important in allowing investors to understand and compare companies. However, in the absence of formal guidelines, KPI reporting may be vulnerable to inconsistency and even manipulation to tell the story a company wants to tell rather than the actual story.’

Paul Watts, RSM UK’s co-head of energy comments: ‘For our UK head quartered clients, we are seeing our clients typically applying UK corporate guidelines where guidelines don’t exist in locations where they operate. But it is complex to juggle UK standards with requirements such as local permits and licences.’

For energy and natural resource organisations, the external lens of ESG has been critically focussed upon either carbon emissions, human rights or indeed both.  Whilst it is unlikely that any such focus will lessen anytime soon (though geographic locations can have a significant influence over this) in reality, we are witnessing a broader approach to viewing their responsibilities on ESG.  It is not that carbon emissions or human rights are any less important - rather by taking a wider stance as to ESG in areas, such as diversity and inclusion and wider social impacts within communities, energy and natural resource organisations may be better placed to mitigate such risks and to drive resilience.  As we can see in this article, legislation is heading inexorably to greater transparency over an organisation’s full suite of ESG activities and isn’t solely focussed on their own operations.  Supply chain activity will be ever more important across a widening number of topics and metrics.

How RSM can help

To discuss ESG issues for your business in more detail, please contact our specialists Rich Hall or Kathy Hobbs.

This article was authored in collaboration between our ESG consulting team and our sector experts: Paul Watts, Sheena McGuinness, Grant Morrison, Graham Ricketts and David Hough.


Rich Hall
Partner, Head of Sustainability
Rich Hall
Partner, Head of Sustainability