Skip to content
Home » Economic Social and Corporate Governance

Economic Social and Corporate Governance

  • by


The environmental, social and governance issue have a great impact on the level of investment in any region in the world. These issues affect firms directly and therefore it is always important for firms to address them early enough so that they can identify the risks and how to mitigate them. The Australian Industries have not been spared in the ESG issues. The gas and oil industry in Australia have been facing several ESG challenges in the assessment of sustainability and the ethical practices thereof. The managers and owners recognize ESG considerations are vital to the firms since they offer guidelines through which the firms can invest in both short and long term. The ESG is an important factor since it determines the sustainability of the firms. The investors on the other hand strive to find ways in which the sustainability of the firms can be achieved so that they can invest there. They therefore require shared comprehension how to analyze and scrutinize the ESG factors and their financial materiality.

ESG covers more than the environmental performance and goes in depth to cover the governmental and social factors. Investors need to be conversant with ESG since responsible investments do not function exclusively. ESG is used by firm in the creation of a pool of stocks to choose for both short- and long-term goals. The ESG is used in the establishment of the framework that is used for assessing the effect of sustainability and the ethical practices that a firm has on its financial operations. Woodside has been one of the most notable firms that has been applying the ESG framework in their activities in order to improve their performance and attract more investors. The firm has also been using this framework so that it could educate the investors to make better investment decisions. The ESG was initially used only by the impact investors but nowadays it is used by all sorts of investors due to the increased governmental interest to create public awareness concerning the ESG for the firms influence. The ESG factors can generally have much impact on the firm’s financial performance.

The Environmental, Social and Governmental Considerations in The Investment Strategies (ESG)

Environmental Factor

This is basically concerned with the influence of the firm on the environment and the capability that the firm has in mitigating given risks that could probably harm the environment. Firms are assessed by their utilization of energy, generation of waste, the level of pollution that they do and the usage of resources in the production of goods and services. The world requires more energy which would be delivered in cleaner manner (Ann, 2019). Woodside has been in the first line in adhering to the climate change policies that they have put in place. The firm has four pillars that are used to manage the greenhouse gas emissions. Woodside is committed to lowering the carbon-world and playing an important role in the transformation of energy by limiting their own emission. The firm keeps supplying a cleaner energy to the world because the world needs that (Ann, 2019).

Social Factor

This is used in the investigation of the firm’s affiliation with the other firms and the entire communities. These factors are used in the consideration of the attitudes towards the human rights, diversity and protecting consumers from exploitation (Corporate Finance Institute, 2020). Investors have been engaging firms in their portfolio to improve their knowledge on how these firms manage their ESG issues and hence the investors have been able to safeguard their capital. There are also a number of key engagement themes that the investors have been looking at in Woodside including the supply chain management, human rights and climate change among others (Corporate Finance Institute, 2020).


This factor is concerned with the internal affairs of the firm and its affiliations with the stakeholders counting the employees and shareholders. A governance that shows transparency would be vital since it can assist in avoiding conflict of interest amid the firm and reduce the expenses. The long-term positive performance is affiliated to the corporate governance because there are proper policies that can be used in retention of the talented workers (Corporate Finance Institute, 2020).

The Key Benefits of ESG

Provides better informed investments

There has been evolution in responsible investment over time. There are various models of investment depending on the aspect in which people are describing investment. The latter include ethical investment and socially responsible investment.  Also termed as the ESG integration. The primary merits of ESG can be analyzed in two points (Mans, 2019). Firstly, it can be used in detecting major investment risks before they blow up. The integration of ESG analysis is important since it can make the investors make informed decisions before doing any investment.

Provides a clearer way for analyzing a firms CO2 footprint

ESG ha for a long time, been associated with the greenhouse gas emission as indicated by “E” .in some instances, the environmental performance of some firms is basic and investors in this mater have been heavily engaged in climate change over time (Mans, 2019). The way the firm deals with EAG can tell the investors a lot about the firm concerning the quality of management and the level of governance. A well-integrated ESG is important since it helps in answering questions like the amount of earnings and also questions related to the share price impacts.

The ESG Reporting Guide for the Australian Companies

The ESG for Australian investors is an important guide since it has a comparable information that is sued in the identification and management exposure to ESG investment risks. The guide also helps the investors to decide on the selection and holding of stocks in the portfolios (Louise & Sally, 2015). The ESG guideline is also vital since it prompts investment managers to engage with firms on these issues. The ESG guide is primarily meant to compliment the reporting requirements and any recommendations thereof.

Factor: Environmental Factor

The social factor

The social factor is concerned with how the Woodside firm relates with the neighboring communities and other looks into the way in which the firm acts towards embracing diversity, observation of human rights and the protection of consumers. The social factor is a vital one since it can have a great impact on the operational success of a firm through attracting the potential investors and new customers and also in the retention of the loyal customers. Social factor is also vital in the maintenance of relationship with the other business partners and also the communities that are impacted upon by the operations of woodside (Galbreath, 2018). To the investors, human capital is an important factor in the execution, expansion and business continuity. The human capital management is vital since it is used on controlling practices that contribute to employee productivity and loyalty. Poor HCM is dangerous since it can cause;

  • Failure to meet goals
  • It is a major contributor to business interruption
  • Gives workers poor morale.

Key Risks in Gas and Oil Industry

Woodside plays a major role in making contributions to the welfare of the society and making sure that every norm adopted is adhered to by the firm. The firm completed a suite of social impacts and opportunities in 2019 and there were several risks that came up within Woodside company. Some of the risks include;

There is an increased level of community consultation and stakeholder and this was dangerous to the firm

There is also a notable failure to manage all social impacts and the firm’s stakeholders could also not realize the chances available for the firm’s activities (Murphy & McGrath, 2018).

The firm also risked not achieving the outcomes expected from the social contributions

There is also a risk on the effects of cultural heritage and traditions of the indigenous communities.

Analysis of E, S, G failure

There is a new linkage that explains the affiliation amid the social impact and the investment performance. The sustainability reported and the reporting guidelines including the global reporting initiative are more concerned and the involved firms are tightly held responsible for any social impacts (Lokuwaduge & Heenetigala, 2017). Firms however, are judged on their overall performance rather than according to the most salient issues in the particular firm.

ESG factors are also not always material for performance in any given firm and they also do not highlight the fields where the particular firm has a greater impact in the society.

The growing commonness of the sustainability movement has led to many investors to consider the ESG rankings, motivates partially by the amount of investable assets pledged by the asset owners and other agencies (Lokuwaduge & Heenetigala, 2017). However, research shows that some firms today score far much commendably in the environmental and social dimensions of their transactions at a premium which is almost relative to that of their peers. However, without investing the association amid social impact and profitability, there exists minor economic explanation for this charge (Louise & Sally, 2015).

Woodside recently achieved a strong social factor when it improved its safety performance for the workers. The achievement was way below the target. They firm had also decreased on the potential to identify the hazards and hence the incidents increased by 170% (Murphy & McGrath, 2018). The firm employed the corporate governance to ensure that the contractors develop solution that would improve the human safety performance and ensure that there are work programs that are affiliated to the growth projects.

ESG Reporting in Woodside

Woodside led the advancement of the liquefied natural gas industry in Australia. The firm has been in the first lane to solving related problems so that they can make a tomorrow out of the challenges faced today. The firm is much more focused on its capabilities as an integrated upstream. The firm is devoted to giving most Australians energy through their existing assets (Lokuwaduge & Heenetigala, 2017). The firm also performs internationally since they reported that they have a field development in Singapore. Woodside shows strong social factors by ensuring that they have a string environmental performance and strong safety of the people bin their operations. The firm is committed to upholding its values towards human rights, diversity and working sustainability among other values. The firm endures meaningful affiliation with the nearby communities through maintaining the license to operate. The firm reports on ESG because it tackles issues related to it (Corporate Finance Institute, 2020). It is concerned with the environment, its socially responsible and adheres to the corporate governance. The risk rating for woodside as of now stands at 6.00 (Murphy & McGrath, 2018). The firm has been adhering to the ESG standards according to the guidelines set and this has been effective to them and has made them record outstanding performance (Ann, 2019).

Evaluation of the Environmental Factor

The operational activities that can affect the environment within a firm’s supply chain, on the primary operations and on the products can cause adverse effects on the shareholders including;

Challenges in the production because there have been new safeguards put in place

There is capital cost that is associated with remediation

There is compensation cost

Impacts on the firm’s regulatory license to operate

The investors in this matter want to know several issues concerning the firm including;

The number and level of impact of the breaches of the environmental license

Provisions of the environment according to the balance sheet

Hygiene and water management (Corporate Finance Institute, 2020)

The environmental data

And Climate change among others.

Some of the policies that have already been implemented include;

Comparison of the Woodside management with the ESG

Generally, the ESG framework is utilized in assessing the effect of sustainability and ethical practices practiced by firms on its financial operations. The ESG has been a vital factor for Woodside company (Lokuwaduge & Heenetigala, 2017). The principles of corporate governance have been widely used in the firm for guidance. The environmental factors have been applied to explain factors including;

Environmental management and climate while the social factors address; human capital management and the stakeholder management (Louise & Sally, 2015). On the other hand, the corporate governance is used to issues related to corporate governance. However, ESG factors are also not always material for performance in any given firm and they also do not highlight the fields where the particular firm has a greater impact in the society (Mans, 2019).


As discussed above, ESG brings in mind issues like climate change and resources to mind. The ESG has three primary factors including the Environmental factor, Social factor and the corporate governance factor. The issues dealing with ESG are dealt with by the shareholders and are used as an item for future progression. The woodside company has been trying to up their game on the ESG with an aim of improving their is therefore important for any firm to understand the guidelines and some considerations for the members of a firm to fully participate in improving the performance of firms.


Ann, P. (2019). Sustainable Development Report 2019. London Benchmarking Group: Woodside Petroleum Ltd.

Corporate Finance Institute. (2020, December 1st). Environmental, Social and Corporate Governance. Retrieved from Corporate Finance Institute:

Galbreath, J. (2018). ESG in focus: The Australian evidence. Journal of business ethics, 118(3), 529-541.

Lokuwaduge, C., & Heenetigala, K. (2017). Integrating environmental, social and governance (ESG) disclosure for a sustainable development: An Australian study. Business Strategy and the Environment, 26(4), 438-450.

Louise, D., & Sally, L. (2015). ESG REPORTING GUIDE FOR FOR AUSTRALIAN COMPANIES. Financial Service Council, 1(1), 3-21.

Mans, C. (2019). ESG – busting the myths. Trends & special topics, 1(1), 1-4.

Murphy, D., & McGrath, D. (2018). ESG reporting–class actions, deterrence, and avoidance. Sustainability Accounting, Management and Policy Journal, 15(5), 132-154.

error: Content is protected !!