The impact of ESG policies on energy companies – legal considerations and compliance

By Blessing Sarfo BOAKYE

In recent years, the global business landscape has witnessed a significant shift towards sustainability, with Environmental, Social, and Governance (ESG) policies emerging as a cornerstone of corporate strategy – policies designed to ensure that companies operate for profit and in a responsible and sustainable manner. This paradigm shift is particularly pronounced in the energy sector, where companies face mounting pressure to reduce their environmental footprint, enhance social equity, and improve governance practices.

The energy industry, historically a major contributor to greenhouse gas emissions, is now at the forefront of efforts to combat climate change. As governments worldwide implement stricter regulations and consumers increasingly demand sustainable practices, energy companies are compelled to adapt their operations to align with these evolving expectations.

This article aims to explore the impact of ESG policies on energy companies, focusing on their legal considerations and compliance challenges. By examining the current regulatory landscape, operational hurdles, and strategic approaches to ESG integration, we will provide insights into how energy companies can navigate these challenges while contributing to a more sustainable future.

ESG in the energy sector

ESG criteria are standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental, Social, and Governance (ESG) policies are multifaceted, encompassing various aspects that energy companies must address:

1. Environmental stewardship – This includes reducing greenhouse gas emissions, managing environmental risks, and promoting sustainable energy sources. Energy companies are investing in renewable energy technologies like solar and wind power and implementing carbon capture and storage (CCS) to minimize their carbon footprint.
2. Social responsibility – This involves ensuring fair labor practices, community engagement, and human rights protection. Energy companies are increasingly focused on creating positive social impacts by supporting local communities and fostering inclusive workplaces.
3. Governance practices – This entails maintaining transparent and ethical decision-making processes, ensuring accountability, and promoting diversity and inclusion within the organization. Strong governance is essential for implementing ESG strategies effectively and maintaining stakeholder trust.

In recent years, ESG has evolved from a voluntary set of principles to a key driver of regulatory policies and corporate strategy. Several global and local influences fuel this shift:

1. Global ESG drivers – One global driver is Climate Change Agreements. International accords like the Paris Agreement have set ambitious targets for carbon emissions reduction, compelling energy companies to transition toward cleaner, renewable energy sources and net-zero carbon commitments.
2. National and regional ESG regulations – Jurisdictions worldwide are introducing ESG-related mandates for energy companies, such as carbon pricing, emission reduction targets, and sustainability disclosure requirements. For example, in Ghana, we have the Ghana Energy Transition and Investment Plan, which was built on Ghana’s Energy Transition Framework. This plan maps out Ghana’s journey to achieve net-zero emissions by 2060. Under this plan, energy companies have also been given a mandate to help the country reach its goal.
3. Investor and stakeholder expectations – Investors increasingly prioritize ESG performance as a key factor in investment decisions. ESG ratings and sustainability indices guide responsible investment, while activist shareholders push for improved corporate governance, transparency, and accountability in energy companies.

Legal considerations

In Ghana, energy companies are gaining momentum in adopting ESG policies. Given the country’s reliance on oil, gas, and emerging renewable energy sources, ESG compliance is critical for balancing environmental protection, social responsibility, and corporate governance.

Some Environmental requirements in Ghana:

1. The Environmental Protection Act 2025 (Act 1124) – It mandates that energy companies obtain Environmental Permits and Environmental Impact Assessment (EIA) certifications before commencing operations. The EIA process evaluates the potential environmental risks of energy projects, including oil and gas exploration, and prescribes mitigation measures to reduce pollution, deforestation, and habitat destruction. This law governs environmental sustainability and mandates energy companies to minimize their ecological impact. Energy companies in Ghana must comply with strict environmental regulations enforced by this Act. Some of these include transitioning from simple cycle power plants to combined cycle plants to reduce greenhouse gas emissions and investing in renewable energy sources such as solar, wind, and hydroelectric power to align with Ghana’s climate goals. Energy companies must comply with laws regulating waste management, including the control of hazardous substances under this Act. Companies are required to manage oil sludge, gas flaring, and other by-products in a manner that minimizes harm to the environment and local communities.
2. Petroleum (Exploration and Production) Act, 2016 (Act 919) – This law regulates petroleum activities in Ghana and is to provide for and ensure safe, secure sustainable and efficient petroleum activities. It requires companies to adopt best practices for environmental sustainability, reduce flaring and emissions, and to prevent oil spills. Non-compliance can result in fines, license revocation, or legal sanctions.

Social impact and community engagement

The social dimension of ESG in Ghana’s energy sector focuses on safeguarding the rights and livelihoods of local communities affected by energy projects. Companies are legally required to promote social inclusivity and corporate social responsibility (CSR). Key legal considerations include:

1. Local content and participation – The Petroleum (Local Content and Local Participation) Regulations, 2013 (L.I. 2204), require energy companies to prioritize local employment, procurement, and capacity building. This regulation aims to enhance the socio-economic benefits of Ghana’s energy resources for Ghanaians.
2. Land acquisition and community rights – Energy companies must adhere to land acquisition laws under the Land Act 2020 (Act 1036) to avoid infringing on the property rights of local communities. Improper compensation, displacement, or lack of consultation can lead to legal disputes, project delays, and reputational damage.
3. Corporate Social Responsibility (CSR) and human rights – Although CSR is not legally mandatory in Ghana, companies are expected to invest in social development initiatives such as education, healthcare, and infrastructure in host communities. Energy companies must also respect human rights, particularly the rights of vulnerable groups, to avoid legal challenges and uphold their social license to operate.

Governance and transparency regulations

Good corporate governance is essential for ESG compliance in Ghana. Governance-related legal requirements include transparency, accountability, and ethical business practices:

1. Companies Act, 2019 (Act 992) – Energy companies must establish robust corporate governance structures per this Act and Bank of Ghana directives. They must also implement mechanisms for stakeholder engagement to address concerns and build trust. Weak governance can lead to corruption risks and diminished investor confidence.
2. Disclosure and reporting requirements – Energy companies listed on the Ghana Stock Exchange (GSE) are subject to the GSE Listing Rules, which require sustainability disclosures. Companies are encouraged to report on their ESG performance, including environmental impacts, social investments, and governance practices, to enhance transparency and attract ESG-conscious investors.
3. Anti-corruption laws – Compliance with Ghana’s anti-corruption laws, such as the Public Procurement Act, 2003 (Act 663) and the Anti-Money Laundering Act, 2020 (Act 1044), is critical. Energy companies must implement strong internal controls to prevent bribery, fraud, and corruption, which can undermine ESG goals and result in severe legal penalties.

Navigating ESG compliance challenges in Ghana

Despite these legal frameworks, energy companies in Ghana face several ESG-related compliance challenges, including:

1. Regulatory complexity – Overlapping mandates between the Environmental Protection Authority (EPA), the Ministry of Energy, and the Ghana National Petroleum Corporation (GNPC) can create regulatory uncertainty.
2. Resource gaps – Limited capacity in regulatory enforcement may lead to inconsistencies in compliance monitoring and enforcement. Regulatory bodies often lack adequate resources, technical expertise, or enforcement mechanisms to conduct regular audits, enforce penalties, or monitor ESG compliance effectively. This may result in non-compliance going undetected or unpunished.
3. Balancing profitability and ESG commitments – Companies may struggle to align ESG compliance with financial performance, particularly in capital-intensive projects like oil and gas exploration.
4. Financial constraints – Compliance with ESG standards, such as upgrading technology to reduce emissions or undertaking extensive community development projects, can be capital-intensive, which poses challenges for smaller or mid-sized energy firms.
5. Technological limitations – Advanced systems are needed to monitor and report ESG metrics effectively. Many energy companies lack robust systems for collecting, managing, and disclosing ESG-related data, making it difficult to meet international reporting standards or attract ESG-focused investors.

Strategies for addressing ESG challenges in Ghana’s energy sector

To navigate these challenges and strengthen ESG compliance, energy companies in Ghana can adopt the following strategies:

1. Establishing a centralized ESG governance framework – This can be done by creating an internal ESG committee or task force that includes legal, environmental, and community relations experts to oversee policy development, implementation, and compliance monitoring. The company can designate ESG officers or sustainability managers to coordinate company-wide initiatives and liaise with regulators.
2. Strengthening ESG data collection and reporting systems – This can be done by developing or investing in digital platforms to track and report ESG metrics (e.g., emissions levels, waste output, community investments) in real-time and by aligning sustainability reporting with global frameworks such as the GRI (Global Reporting Initiative), SASB (Sustainability Accounting Standards Board), or TCFD (Task Force on Climate-related Financial Disclosures).
3. Enhancing regulatory engagement and legal compliance capacity – Conduct regular legal audits to assess compliance with ESG-related laws and address regulatory gaps. The company will also benefit from building strong relationships with key regulatory agencies and participating in policy dialogues to stay informed about emerging ESG requirements.
4. Building internal ESG awareness and capacity – Regular training sessions for staff at all levels to promote ESG literacy, legal obligations, and ethical conduct can help create awareness. Also, by recognizing and rewarding employee initiatives that align with ESG goals, such as energy-saving ideas or community volunteerism, employees become more aware and interested in ESG.
5. Seeking strategic partnerships and ESG financing opportunities – Collaborating with development finance institutions (DFIs), NGOs, and international organizations to access funding, technical assistance, and ESG expertise can help with financial constraints. Companies can also explore green bonds, carbon credits, and sustainability-linked loans to finance ESG-driven projects.

Conclusion

ESG compliance is no longer optional for energy companies in Ghana, it is a legal and strategic imperative. As environmental regulations tighten and stakeholder expectations grow, companies must address challenges like regulatory complexity and social impact through proactive, integrated ESG strategies. By aligning operations with ESG principles, energy firms can reduce legal risks, attract investment, and contribute to Ghana’s sustainable development goals. Those that embed ESG into their core practices will ensure compliance and secure long-term resilience and competitive advantage in a rapidly evolving energy landscape.

>>>the writer is an Associate at Sustineri Attorneys PRUC (www.sustineriattorneys.com). Blessing specializes in Corporate and Commercial Practice, Energy Law, Environment, Social and Governance (ESG) and Dispute Resolution. She welcomes views on this article via [email protected]

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