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ONGC's 'Adequate' ESG Rating Raises Governance and Penalty Concerns
The latest ESG assessment for Oil and Natural Gas Corporation (ONGC) from ESGRisk.ai has landed the company an overall score of 49, placing it in the 'Adequate' category. This unsolicited rating, based on publicly available data, reveals a mixed picture: while ONGC shows strengths in social aspects such as human rights and community engagement, the report flags significant weaknesses in its governance and environmental management practices.
The report covered environmental, social, and governance aspects. ONGC's strengths were noted in areas including human rights, employment quality, biodiversity impact, community engagement, and customer engagement. However, the assessment also highlighted weaknesses in occupational health & safety, water pollution, waste management, and disclosures on related party transactions (RPTs). The company's governance score was specifically noted as 36.02.
An 'Adequate' ESG rating suggests ONGC is managing its sustainability risks and performance at a baseline level, with considerable room for improvement. For investors, low scores in governance and environmental factors, especially when coupled with past penalties, can signal potential operational disruptions, increased regulatory scrutiny, and reputational damage. Such ratings, even if unsolicited, offer an independent perspective on a company's long-term sustainability and its ability to adapt to evolving environmental and social expectations, potentially impacting investor confidence and access to capital.
ONGC, India's largest oil and gas exploration and production company, has a complex history involving regulatory and governance issues. In recent years, it has faced ongoing fines from stock exchanges for failing to meet listing norm requirements concerning board composition, particularly a lack of independent and women directors. The company attributes these appointment challenges to government control.
The company has also been involved in multiple Goods and Services Tax (GST) disputes. These include a ₹22 crore demand order issued in March 2025 concerning alleged non-payment of GST on royalties for joint venture partners, a ₹60 lakh penalty for excise duty discrepancies in October 2025, and a ₹6.72 crore IGST demand related to 2017 liabilities.
Furthermore, a Central Bureau of Investigation (CBI) case booked a chief engineer for alleged disproportionate assets totaling ₹1.11 crore between 2014 and 2020, pointing to governance vulnerabilities.
Following this ESG report, investors are likely to intensify scrutiny on ONGC's governance and environmental practices. Management may also increase its focus on enhancing occupational health & safety and waste management. Greater pressure is expected to address related party transaction disclosure concerns and strengthen board independence. The unsolicited nature of this report might prompt ONGC to engage more actively with ESG rating agencies or improve its public disclosures.
Key risks to monitor include governance lapses, such as the ₹1.11 crore bribery and corruption case against a chief engineer and his wife, ongoing issues with board director appointments leading to exchange fines, and concerns over RPT disclosures. Significant regulatory penalties and tax demands, including the ₹22 crore GST demand and a ₹60 lakh excise duty penalty, highlight persistent compliance challenges. Past incidents like gas leaks and fires underscore potential risks in occupational health & safety and environmental management, areas identified as weak in the ESG report. Persistent governance and compliance issues can erode stakeholder trust and affect the company's social license to operate.
ONGC's 'Adequate' ESG rating places it in a varied position among peers. Coal India Limited, another energy sector firm, received a 'Moderate' ESG rating of 58 from NSE Sustainability for FY2025. Oil India Limited, a direct competitor, holds a CRISIL ESG score of 52, also categorized as 'Adequate'. Reliance Industries Limited, while a diversified company, faces complex ESG perceptions; risk-focused agencies often assign it lower scores due to environmental and governance concerns, yet its substantial investments in renewables and digital infrastructure are viewed positively for long-term value creation.
Investors will be monitoring ONGC's official response to the ESGRisk.ai report and any planned actions to address identified weaknesses. Tracking future ESG ratings from other agencies and ONGC's own sustainability reporting for improvements in governance and environmental metrics will be crucial. The resolution of ongoing GST disputes and any further regulatory actions, along with updates on board appointments and compliance with listing norms, are also important observations. Management's commitment and execution in improving occupational health, safety, and waste management practices will be evaluated.