ESG, Sustainability and Decarbonization: An Analysis of Strategies and Solutions for the Energy Industry

Abstract

Various studies have shown that fossil fuels are the main driver for climate change and mitigating CO₂ emissions has been a major issue for the oil and gas industry. Directly and indirectly, the industry accounts for 42 percent of global emissions and it is now being referred to as ground zero for climate change. Pressure continues to mount from both the investor community and various governments who are demanding climate action and are proposing new requirements for businesses to publish specific details of how they will adapt and achieve net-zero by 2050. Leaders across the energy industry are now addressing these issues by incorporating ESG into their business. ESG issues cut across industries and lines of service, and these issues are ever evolving. Each industry has vastly different sources of emissions, therefore their means of decarbonization differ greatly. Understanding the emissions associated with oil and gas operations is crucial to evaluating and tracking the sustainability factors impacting the industry. This paper takes a deep dive into what sustainability and ESG looks like in oil and gas operations and addresses the key drivers of ESG in the oil industry. It details the ESG issues that are material to all sectors of the industry and provides valuable insights on how organizations can embed sustainable business practices into engineering design and business operations. It also addresses the specific challenges ESG poses to the industry, suggests a multi-pronged approach to tackle decarbonization, and looks at various opportunities that the wave of ESG activities present for the industry. Succeeding in business is no longer just about profitability, but about how companies perform on a variety of ESG-related issues. It is now a business imperative to undergo a sustainability transformation, and oil industry operations should be designed with sustainability in mind. Sustainability and ESG should be part of the industry’s DNA and should be integrated in all its activities. ESG issues represent the language of the future and addressing it will become as significant for the oil industry as digital transformation; not only because of its broad geographical footprint, but also its operations and assets, many of which are GHG emitters. ESG is not just a compliance exercise, it's a strategic decision. To meet the goals of the Paris Agreement, the oil industry should strive to become a net-zero GHG emitter. Without a net-zero story, it may realize that there might not be much interest in hearing the rest of its story. The net-zero equation is not yet solved, but it can be, with bold action and smart innovation. No other industry is better positioned to solve this than the oil and gas industry.