Climate & Energy Industry: Beyond the Blind Spots – a Conversation with Ambre Eyoum
Ambre Eyoum, a Multilateral and Corporate Affairs manager at Total and a Global Governance Futures 2030 fellow, explores the ways oil and gas industry can adjust to face some of the most pressing global challenges, such as climate change.
1.You work in the energy sector, more specifically in the oil and gas industry. Recently, the Intergovernmental Panel on Climate Change (IPCC) rang the alarm bell on climate change action. Is the industry taking this reality into account?
Climate change is one of the most pressing global challenges and it is now a top-agenda issue for many actors since the Paris Agreement in 2015. Following the IPCC’s successive alarming reports, the oil and gas industry has also become more aware and concerned by its carbon footprint. Energy consumption – which is highly correlated to mobility – accounts for nearly 70% of global greenhouse gas emissions: needless to say, if this industry is part of the problem, it is also part of the solution. However this sector is often stigmatized as climate-skeptic, and there is a growing blind spot when it comes to acknowledging the new orientation and the efforts it is taking to tackle climate change.
Over the last five years, most European energy companies (such as Total, Shell, Equinor, and Eni) have incorporated the International Energy Agency’s Sustainable Development scenario and low-carbon energy transition targets to their corporate strategy. By 2030, low emission energy such as natural gas or renewables will represent a growing share of the companies’ energy mix. This shift has significantly widened industry leaders’ positioning from oil and gas to energy more generally. Corporate branding strategies have been adjusted and climate-related narrative has become a key dimension of leadership communication and competition between the leaders of this industry. For example, in May 2018, the Norwegian company Statoil was renamed Equinor to reflect its low-carbon orientation.
The International Energy Agency’s World Energy Outlook forecasts a growing demand for energy, driven by China and India. In its scenario, hydrocarbons will still represent more than 50% of the global energy demand by 2035. However, at the industry level, there is already a shift from “oil and gas” to “oil to gas” with an increasing share of natural gas production, which is the lowest emitting fossil fuel. Some companies have made it a pivotal asset in their low-carbon transition. Such is the case with Total, which has taken a sharp turn towards natural gas, which is expected to reach 60% of the company’s energy mix by 2035. It is important to mention that a switch from coal to natural gas in power generation could reduce global carbon emissions by 10%. Energy efficiency and a steady decline of clean energy technology prices will also give a strong impetus towards the low-carbon energy transition.
2.How do you think the oil and gas industry can adjust its business model in order to meet this challenge?
The most significant example of how this industry is collectively addressing climate change is the inception in 2014 of the Oil and Gas Climate Initiative (OGCI). This CEO-led initiative reached 13 members in 2018, representing 25% of the global oil and gas production. In 2017, OGCI members dedicated 6.3 billion dollars to low-carbon technologies and research & development. In addition, the OGCI Climate Investments fund, worth one billion dollars, aims at testing and deploying low-carbon solutions. This organization is playing an active role to develop carbon capture, utilization and storage (CCUS) which is seen as a key technology to achieve decarbonization. Other actions are targeting gas flaring and methane emissions reduction. The industry has also been advocating for carbon pricing as an economic tool to better offset its carbon footprint.
The fight against climate change requires an important level of cooperation both between public-private actors and within the industry. To put it briefly, energy suppliers are facing a trilemma: how to deliver affordable energy access when more than one billion people still don’t have access to electricity; while meeting a growing worldwide energy demand related to economic and demographic growth (with a population reaching up to nine billion by 2040); and reducing its carbon footprint, all at the same time. Leveraging the industry’s financial and technological capacities can be an effective means to reach carbon neutrality and to make far-reaching climate commitments.
3. Corporate social responsibility (CSR) has recently become a buzzword and companies face more and more pressure from civil society and investors. How do you think this concept can be more efficient?
Corporate social responsibility has followed a professionalization path to go beyond philanthropy and to be more and more embedded in corporate strategy. However, the oil and gas industry suffers from a severe image deficit when it comes to CSR. There are many preconceived ideas and biases about “greenwashing,” even if this sector is under permanent scrutiny from investors (who are more and more demanding on CSR criteria), non-governmental organizations, regulators, and civil society. This pressure is an important drive to take corporate social responsibility seriously, but it is not the only one. In this sector and more specifically in Upstream (the exploration and production segment of the industry), acceptability to external stakeholders (host countries, civil society, local communities, etc.) determines companies’ licenses to operate. From this perspective, government affairs, CSR programs and businesses are intrinsically related.
Recently, concrete measures include linking top management’s wages or bonuses to CSR performances and climate indicators. This kind of incentive is an efficient tool to embed CSR in corporate vision and performance.
4. You are a French Young Professional Representative in the World Petroleum Council, and you recently attended the One Young World Summit in The Hague. Should the younger generation’s empowerment go beyond just the business-as-usual approach?
In the coming years, I expect to see the CSR approach firmly rooted in the mindset of the younger generation, which is more concerned with sustainability. In this industry there is a significant young professional community willing to leverage their technical expertise so as to make a positive impact. They are aware that they are involved in an industry that is facing a tipping point. My immersion in the World Petroleum Council Young Professionals community has been an eye-opener and a source of optimism. As for One Young World, this platform is conveying the idea that positive change can and should come from the private sector. I strongly believe that there is no monopoly on positive change. Advocating for open-mindedness to go beyond a Manichean vision of public and private actors, as well as public and private interests, is essential. Multi-stakeholder cooperation will be more and more needed in order to meet global challenges. To do so, multilateral platforms gathering together public, private, non-profit, and international organizations, as well as civil society representatives – from different regions and generations – are key. Focusing on CSR does not prevent us from being results-driven.
5. How can oil and gas companies contribute to a more equitable and efficient use of revenues redistribution to the local economies?
In-country value creation is an important aspect of oil and gas project development, particularly in Upstream. Over the last years, a significant effort has been made to better distribute economic contributions over project life cycles. Industrial projects generate sizeable direct and indirect business opportunities to the local economies of the producing countries. In addition, the “local content” regulation of some countries such as Nigeria or Kazakhstan is stringent, including for instance target rates of local employment and minimum local shareholder participation, as well as other measures. As the International Petroleum Industry Environmental Conservation Association (IPIECA) local content strategy puts it, “these requirements aim to create jobs, promote enterprise development and accelerate the transfer of skills and technologies. Local content has therefore become a strategic issue for the oil and gas industry – presenting both challenges and opportunities.”
Contributing to a shared development also meets the companies’ interest in the long-run. At the global level, companies partly share international organizations’ sustainable development agendas when it comes to education-related issues or universal access to energy. For the latter, Sustainable energy for All (SEforALL), a global initiative launched by the United Nations in 2011, is a very good example.
Regarding the question of revenue and transparency, the Extractive Industries Transparency Initiative was created in 2002 to address the good governance issue by disclosing information about oil-related revenues and their allocation to socio-economic spending. These are a few examples of tangible commitments to sustainable development.
Ambre Eyoum is a Multilateral & Corporate affairs manager at Total and a French representative of the Young Professionals Committee of the World Petroleum Council. She is a Global Governance Futures 2030 Fellow. The views expressed here are her own.
Photo by Zbynek Burival on Unsplash