ESG Total Cost of Ownership: A Case Study in the Oil and Gas Industry

Abstract The Oil and Gas (O&G) industry is facing unparalleled challenges in aligning with sustainable practices against the backdrop of increasing global concerns about climate change and social responsibility. This paper introduces the concept of ESG Total Cost of Ownership (ESG TCO) as a transformative framework, facilitating the understanding of Environmental, Social, and Governance (ESG) factors in supplier selection processes within global value chains, ultimately enhancing operational sustainability and ensuring business continuity. Through a case study developed in an O&G company in the global subsea industry, this paper extracts insights from empirical studies and data analysis. The study's scope interrogates the inadequacies of traditional Total Cost of Ownership (TCO) models to fully account for the broader spectrum of costs incurred by O&G operations. Leveraging a comprehensive literature review, this research explores the integration of ESG indicators into the TCO model, highlighting the challenges and opportunities within complex and interconnected supply chains. It proposes a nuanced methodology for integrating sustainability into cost analysis, addressing the unique obstacles and advantages presented by the sector. The narrative commences with an examination of the environmental legacy and evolving societal expectations confronting the O&G industry, particularly within the global subsea sector. It assesses the ESG TCO framework's efficacy in offering a holistic evaluation of costs and sustainability building blocks encompassing human Rights, safety and carbon intensity factors. The analysis presents strategic recommendations for companies seeking to enhance their sustainability profiles and navigate the transition towards more sustainable operations. By situating ESG TCO as an essential methodology for industry players, this research contributes valuable perspectives to the academic literature on responsible business conduct within the energy sector, particularly those engaged in the global subsea industry. Also, from practical lenses it underscores the strategic relevance of adopting ESG TCO in fostering sustainability, highlighting its role in guiding companies through the complexities of modern supply chains, regulatory environments, and customer requirements. Based on the imperative of pursuing financial gains and embracing sustainability in worldwide industries, the adoption of the ESG TCO framework offers a strategic pathway. It advances sustainability within global supply chains, positioning it as a cornerstone for selecting isonomically suppliers based on their sustainable performance, considering future client requirements towards the value chain and fostering resilient business models amidst the dual challenges of adhering to environmental responsibilities and navigating societal pressure.