Thursday - May 5, 2022 | News+Articles
What can boards do to end our oil and gas dependency?
The war in Ukraine has cost thousands of lives and created more than four million Ukrainian refugees. Other effects on the world at large are still unspooling, including a huge pending shortage of basic foods (Ukraine is Europe’s breadbasket) and how to get beyond the supply of Russian oil and gas.
Poland and Bulgaria had the Russian gas taps turned off this week because they would not pay in rubles. More European countries might soon be next in line. With global supply chains already severely disrupted by the global pandemic, an energy crisis could soon be upon us. Clearly, we need to end our collective dependency on oil and gas — especially Russian flavoured — so what can board directors do to address this challenge? What are the alternatives? How can we wean ourselves off the black stuff?
To answer these and other related questions, we assembled a stellar cast list of our global Competent Boards Faculty members and alumni last week on a call.
We approached the problems from the perspective of a steward of the future of a company, looking for long-term solutions not just short-term fixes.
What does success really look like? What is the world we want to bring about and how do we transition from where we are to where it should be?
The discussion was broad yet insightful, with many contributions from around the world. Sharing is caring, so here are 20 of their finest insights, examples and takeaways. Since this was under the Chatham House rule, there is no attribution.
1. This all starts and ends with money. Although we want to entice people to do things altruistically, globally that is a challenge. For example, the US government is so divided right now. You have one group that believes in all the green initiatives, and that they will make a much better future. The other side of the country is bought and paid for by the oil and gas industry. And it is a very strong lobby.
2. We need long-term scenario planning to foresee different disruptive scenarios, such as the invasion of Ukraine. People everywhere should be querying leadership on climate strategy, net-zero targets and renewable energy transition plans. Meanwhile, companies should improve their stakeholder engagement so that they truly understand their needs. At a local level, we need partnerships to transform business and value chains
3. So many large enterprises still lack sophistication in their business intelligence, where they can drill down to a reasonable level to understand the energy intensity of specific products or specific regions. An investment in that business intelligence would help them understand those issues and be a little bit more nimble when dramatic shifts take place.
4. It’s going to take a total transformation of fuel production systems, which means we’ve got to encourage those fuel suppliers, whether they be existing companies or new or new startups, to build the refineries that will produce the new fuels, and in an integrated manner with renewable electricity.
5. Besides the focus on switching energy supply, the transition requires a broad approach. Look at the behavioural change you need and then support that. For example, New Zealand lowered the price of public transport. Other countries can look at supporting communities that rely on oil and gas. At the end of the day, we all need to switch and that transition is social as well as practical.
6. To get this energy change to a place where it is committed around the world, it has to be something so radical, and so inexpensive, that it will just overwhelm all the money and the oil and gas industry carpetbaggers. Something like hydrogen, which is the perfect fuel and being tested in trucks in the United States. The change needs to be overwhelming.
7. Companies need to assess, understand and report their carbon emissions, at least scope 1 and 2, plus scope 3 where possible. More importantly, they need to develop transition plans for each part of their operations, then strategically invest in the best opportunities to get to net zero by 2050. We need to pick up the pace and scale up demand-side management and convert to using carbon-free sources.
8. There are things that every company can do today. True, governments are not doing enough, but that needn’t stop companies from taking action. We can reduce our own energy consumption and look for supply-chain partners who are reducing theirs. We can vote with our investment dollars, by disinvesting in Russia and investing in the transition economy. At the same time, we can educate our workforce and consumers.
9. Have companies looked at the social side of different fuels, such as extracting ethanol from grain? Is it more effective or more socially responsible to use that grain for food versus fuel?
10. Board directors can take concrete action. It’s critical that today’s energy and security decisions and actions also take into account future scenarios. Companies can and should invest in the necessary business intelligence to drill down on energy consumption for products and services. This knowledge will equip management and the board to pivot in the future.
11. The investment thesis should be based on energy security and a better energy future. It should be one that is minimal, practical and domestically reliant. As opposed to politicizing it and tying it to sustainability and climate.
12. Part of the problem is the defence industry. They think, “Why do we have to move on when we can make so much money out of this now?”
13. There needs to be strong public-private partnerships, because governments cannot do everything on their own. We have huge organizations that can contribute to these issues as well.
14. Companies must reduce energy consumption. Look at your current footprint as a company, and then increase efficiency of what you have, including lighting, the energy supply for your machinery and so forth. It would also be helpful for companies to really understand where their energy supply originates from. Understand those contracts, taking the ones that are the highest risk and try to beat that risk.
15. We always talk about energy from a sense of fear. But we shouldn’t do that! This is a risk and we got to move with this. We’ve got to ask: how do we want it to be like? What do we want to see? Then start working towards that and encourage behavioural change. Yes, we’re scared of social unrest, but we must start taking people along with us and showing where we want to go and start encouraging that behaviour as opposed to just saying, “Oh, my God, this is gonna be a problem.” Let’s not put money into extra subsidies for petrol prices.
16. Taking a bottom-up approach to strategy in a company is hugely inspiring because it galvanizes the whole organization, no matter what size it is. It engenders loyalty to the company.
17. Most consumers and companies, especially in North America, place far too little emphasis on reducing energy consumption. Instead, they are waiting for technological developments that will allow them to continue to waste more energy. It will take a combination of enlightened government policy regulations and incentives to produce a radical drop in energy demand.
18. We all appreciate technological innovations. We want more. It’s very exciting to hear about them, wherever they may be or whatever form they take. However, we could all make a meaningful contribution to reducing our carbon footprint instantly just by adopting some good practices. Everybody wants to own everything. Look at cars; they make an enormous contribution to our collective carbon footprint. But does everyone really need one?
19. What can the board do? It’s not just having a climate strategy and being committed to net zero by 2050. It’s lobbying governments, right now, to make their voice heard. Collectively, as corporations in every municipality, in every country, in every region. Board members need to ensure that governments are putting policies in place on a country-by-country basis. Step up, and actually be a steward of the future.
20. There is no single neat solution. Boards must pursue all solutions simultaneously. No-one — not individuals, not companies and not other levels of government — should sit on their hands while waiting for national governments to find the courage to adopt the right policies and programs.
It was a great discussion. And there will be more to come. Thanks for listening. Do please message me on LinkedIn if you have any further observations.
Helle Bank Jorgensen is CEO and Founder of Competent Boards. She has a 30-year record of turning ESG risks into innovative and profitable business opportunities. She works with many global Fortune 500 board members and executives, as well as smaller companies and investors. Helle is also the author of the Amazon bestseller, Stewards of The Future: A Guide for Competent Boards. Helle serves at the Nasdaq Center for Board Excellence’s Sustainability & ESG Insights Council; the World Economic Forum (WEF) Expert Network for Corporate Governance, Leadership, and Emerging Multinationals; and His Royal Highness Prince of Wales A4S (Accounting for Sustainability) Global Expert Panel. Connect with her on LinkedIn.