Bare minimum on energy transition by Exxon, other majors not enough anymore

Jun 09, 2021 News

Oil giants must become vanguards of change – Wood Mac Chief Analyst

Kaieteur News – A few weeks ago, the oil industry witnessed three shocking events. ExxonMobil lost three board seats due to its weak strategy on climate change; shareholders voted for Chevron to significantly reduce its carbon footprint; and Shell lost a court case in the Netherlands that will require it to speed up its emissions reductions.

Wood Mackenzie Chair, Simon Flowers.

In the eyes of Chief Analyst and Chairman of Wood Mackenzie, Simon Flowers, these events clearly demonstrate that investors will no longer accept the bare minimum from the world’s largest oil explorers on climate change.
In his most recent commentary, Flowers said, “These three events will trigger a domino effect through the wider sector with more stakeholder actions through courts and Annual General Meetings. No board, whether Major, National Oil Company or independent, can now afford to dismiss the energy transition. The timeframe for change is accelerating, driven by investor pressures more than fundamentals.”
He added, “…ExxonMobil and Chevron need to pivot from followers into the vanguard of change. The big questions are how far and how fast do they move?”
Flowers noted that European based majors (BP, Shell and Total) are already setting the pace, responding to evolving policy, societal mood and intensifying stakeholder pressure. Flowers noted that each company has outlined clear plans to cut Scope One, Two, and Three emissions and achieve net zero for Scope One and Two by 2050 at the very latest.
In contrast, Flowers said US majors’ present targets are undemanding. He noted in this regard that ExxonMobil aims to cut Scope One and Two emissions (upstream only) by 2025, and Chevron by 2028. “At the very least, we’d expect more aggressive targets for Scope One and Two – the direct and indirect emissions from activities. These need to cover the whole business and not just upstream,” Flowers stated.
What’s more in question, Flowers stated, is whether the US majors embrace Scope Three emissions. Flowers said, Scope Three targets would be a game changer that compromises the strategy both US companies are pursuing. He cautioned nonetheless that such a commitment would not be taken lightly nor quickly.

Sidebar
What are Scope 1, 2 & 3 Emissions?
Greenhouse gas emissions are categorised into three groups or ‘Scopes’ by the most widely-used international accounting tool, the Greenhouse Gas (GHG) Protocol. Scope 1 covers direct emissions from owned or controlled sources. Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company. Scope 3 includes all other indirect emissions that occur in a company’s value chain.
There are a number of benefits associated with measuring Scope 3 emissions. For many companies, the majority of their greenhouse gas (GHG) emissions and cost reduction opportunities lie outside their own operations. By measuring Scope 3 emissions, organisations can:
• Assess where the emission hotspots are in their supply chain;
• Identify resource and energy risks in their supply chain;
• Identify which suppliers are leaders and which are laggards in terms of their sustainability performance;
• Identify energy efficiency and cost reduction opportunities in their supply chain;
• Engage suppliers and assist them to implement sustainability initiatives
• Improve the energy efficiency of their products
• Positively engage with employees to reduce emissions from business travel and employee commuting.
It is important to note, that ExxonMobil has not committed to doing any of the foregoing, which would certainly bring it in line with the Paris Agreement objective to being global temperature down to 1.5 Degrees Celsius.
(Source on Scopes: www.carbontrust.com)

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