Energy leaders must finally come to the transition table

The Situation: The firms absent at the energy transition’s top table in 2022 says so much about the global sustainability context. You can find some real optimism and action in the examples below. But there remains a lack of leadership from the biggest global energy firms.

The biggest international energy firms must massively increase their level of collaboration with their entire ecosystems. We need them to loudly disclose transition plans that combined with alignment throughout their ecosystems, could have the power to reshape the systems that are still so far from being good enough.

We are concerned we will lose the right to transition—because we’ll have lost trust.

– CEO of an Australian mining giant

Most every C-level conversation now involves sustainability and the energy transition—in all industries. That is true. But despite that, none of the global oil majors have publicly disclosed transition plans that align with the global sustainability context (see our detailed outline here) of decarbonizing and addressing all environmental, social, and governance (ESG) factors that underpin the UN Goals. Exxon, Chevron, Shell, BP, and TotalEnergies (the latter three Europeans being more progressive on sustainability than the first two US firms as a rule) are yet to align and realize the opportunity in front of them. Saudi Aramco, with a market cap 10 times that of Exxon, the next largest, is in the same boat, along with too many others to list. Major regional firms from around the world have aligned, across the energy, utilities, and resources industries, and there’s great stuff happening. But they do not have the scale and influence to reshape the global energy system the way the biggest firms could.

There’s a glaring energy transition opportunity

Oil, gas, energy, utilities, and resources firms cannot continue to think sustainability’s commercial opportunities don’t apply to them… as well as the responsibility they need to realize.

NextEra is a North American energy firm that recently disclosed a clear transition plan covering its internal, client-related, and ecosystem sustainability. A separate energy firm from Europe has made massive strides on renewable energy, collaborating in global multisector coalitions. However, when its CEO spoke recently, they still didn’t push a message of aligned roadmapping. They did, however, comment:

When you look at [energy and utilities firms] mission statements, they’re all the same. Thank goodness. It at least means we all understand.

– A major European energy CEO

Clearly, “understanding” isn’t enough. Someone needs to grab the energy transition bar and move it forward. But neither NextEra nor the European energy firm above is big enough to trigger the system-level change we need.

The energy and utilities industries have a massive role beyond managing their internal sustainability. Providing energy and utilities in any form is integral for clients and whole ecosystems—especially as electrification and the broader decarbonization of energy plays out. Like financial services (FS) firms’ role in allocating and managing finance and helping clients transition (see our separate take), energy and utilities firms can influence the broader ecosystem well beyond their company walls.

At COP26, the UN summit in 2021, it was notable that every industry was finally present at the table after years of oil absenteeism. That doesn’t mean that their plans align either through the industry or to the global climate change context they’ve been primarily responsible for creating and must be involved in solving. Most progressive people and orgnizations want to work with them. The biggest energy majors must see that by working with their whole ecosystem—and being the firm to set the standard their peers have no choice but to follow—is the only viable moral and commercial option. See our presentation to COP26 that touches on collaboration in ecosystems and energy. We’ll shortly be outlining the broader commercials of sustainability.

Even in the most written-off industries, despite all the work that still needs to be done, there are signs of optimism

In Australia, that recently elected a more climate-conscious government (although most comment they’re still not planning on going far and fast enough), the CEO of a leading mining firm recently outlined the firm’s collaboration model between competitors and its ecosystem:

We’re putting decarbonization ahead of profit in our model. Yes, we’re accountable to shareholders. But we need the right to exist. Cooperation is critical to demonstrate commitment and building trust. Otherwise, we’ll lose the license to operate. Talent, stakeholders, and the long-term will take that license away. Business performance will only be more and more linked to sustainability.

– CEO of an Australian mining giant

I’m optimistic that many energy, utilities, and resources CEOs are openly talking about collaboration and honesty. But I’m more worried that these CEOs don’t include the biggest global players often, loudly, or transparently enough. Although many European energy firms are undoubtedly more progressive than the global competition and it’s more believable that they are trying to change the system, they cannot for a second argue their efforts are enough. That view draws on, in part, private conversations with people engaging at the highest levels in these energy firms, and I trust them to be doing the right thing.

Now is a good time to refer to “We are concerned we will lose the right to transition—because we’ll have lost trust” which needs no further commentary.

The Bottom Line: Anyone with a leadership position across the sustainability effort must come together so that major energy firms cannot define the coming decades due to their absence.

The glaring opportunity in the energy transition and the entire global sustainability context is for firms with enough power to prove that changing their business to change the system works. If these firms won’t do what we need, their partners should be lining up to create new business models and push the disclosure of transition plans to put a meaningful stake in the ground.