(Part-1)
ONGC Videsh Ltd (OVL), the wholly-owned overseas arm of the state-run Oil & Natural Gas Corporation (ONGC) is faced with serious concerns over its decades of ESG (Environment, Social, and Governance) nonchalance reflecting in its shabby sustainability reports those may derail its future growth plans.
The international ESG rating agency, Sustainalytics, a division of Morningstar, has put OVL under severe risk category with ESG risk rating of 49.3. Any company, which falls under 40+ category, faces extreme resistance and hardest riders besides higher interest rates from the global banking community. Sustainalytics, in its latest report, has put OVL at 188th position among 297 companies (where 1st is equal to lowest risk) based on the ESG parameters.
OVL has recently raised $500 million in foreign currency from a consortium of banks that comprised DBS, Bank of Baroda and the State Bank of India. Although it is not immediately known what are the riders, attached to this debt, according to DBS Bank “our commitments to a more sustainable future are wide ranging. They encompass the way we do business, sustainable practices in our role in the communities we are part of.”
ESG has blown up to a massive proportion in the last two decades eversince the climate activists blew the horns across the world, mostly against fossil fuel companies allegedly responsible for climate change. The Covid-19 pandemic fueled the campaign to gain further momentum with even Indian Asset Management companies launching a litany of ESG funds to assure investors of their genuine endeavors to fund only the ESG compliant companies.
“Everything has changed after the colossal damage cast by the Covid-19 except for few companies like OVL which are complacent with their statusquo-ist approach,” said a senior official who prefers anonymity.
The ESG risk rating, done by the sustainalytics, can be overlooked. But if one looks at the sustainability reports of this self-vaunted Indian Multinational, one will be shocked. The reports, those feature in its most vintage looking website, provide shocking testimony to the fact that how OVL Management remained blissfully ignorant about the company’s ESG transformation needs.
The research into the issue has found that the management has knowingly or unknowingly allowed its sustainability group to do only cut-paste jobs while flaunting sustainability projects like CDM (Carbon Development Mechanism.
CDM, taken up by the then ONGC Chairman Subir Raha in 2006, registered 15 projects by the end of 2007-2008. Surprisingly, the same list appears in the sustainability reports year after year till the last integrated annual report of ONGC-OVL.
The CDM allows emission-reduction projects in developing countries to earn certified emission reduction (CER) credits, each equivalent to one tonne of CO2. These CERs can be traded and sold, and used by industrialized countries to a meet a part of their emission reduction targets under the Kyoto Protocol.
“ A Great beginning was made 17 years ago, which could have earned a great reputation for the company by now. But the ‘High-fliers’ of OVL chose to ignore this extremely important survival tool,” another senior ONGC official deplores.
For the research, a number of officials in ONGC, OVL were spoken to by this news portal and everyone was unanimous on one thing that the sustainability group is looked down upon as the second class citizens in the company.
The vertical comes under the Directors Exploration who have been used to always tomtom about many questionable discoveries, particularly in the last one decade and a half. Had they been little concerned, how the same data could be published-again just copy paste-year after year.
It is not known how many swamp deers could survive after the high-decibel relocation from Kaziranga in 2011, but their story survives even today in the sustainability report. Same old ringle bamboo plantation in Uttarakhand or mangrove plantation in Ankleshwar, gets repeated every time, quite unabashedly, in the so called Sustainability report of ONGC and OVL.
The same projects in the renewable energy sector, which were taken up way back in 2007, are being showcased year after year putting the company at a ‘severe’ risk in front of the banking community.
Even the photograph that features on the sustainability page of ONGC is as old as of 2014 in which, except for Prime Minister, everybody has been changed from their then portfolios, quipped a senior official.
Sources said the current Chairman, Mr. Arun Singh has expressed his deepest concerns time and again about the sheer negligence leading to the challenges confronting OVL, which has earned a rare distinction of reporting drastic production decline last few years. But, asked an officer, is it the job of a Chairman alone to micro-manage everything. Even after he has raised the sustainability issue in several internal discussions, why there is no palpable change, asked another officer.
While the nation is looking at the OVL for energy security, the company management, which has learnt to make grand presentations triggering false hopes, is busy on finding excuses.
“Well,” said an officer, “ Geopolitical situation will either persist or will improve in the near future. But ESG ground is getting harder and harder with climate change as well as human rights issue. The questions are whether OVL will continue to find excuses and ruin the great Indian dream for self reliance on energy.
Whether OVL will continue to always piggyback on the parent company ONGC for its quest for international oil or it will create real value on its own. Whether it will continue to remain as a springboard for a few previledged ONGC officers or it will bring real energy security in India.
The questions remain…..