Shownotes: 

I think it is safe to say that 2023 has brought climate consciousness to more people than ever before. Extreme climate events across the world - forest fires, extreme heat, intense droughts, flooding, melting polar ice, changes in the weather pattern, rising air pollution, declining biodiversity have made it difficult for us to ignore climate realities - climate change is for real. And climate anxiety amongst people especially the young is becoming a cause for concern. 

What about some of the biggest contributors to the climate crisis and global warming? Who are they and how concerned are they? According to the IEA ‘The Energy sector is central to efforts to combat climate change. Energy (Fossil fuels – coal, oil and gas – are by far the largest contributor to global climate change) accounts for two-thirds of total greenhouse gas, so it is the central player in efforts to reduce emissions and mitigate climate change.’

But, this sector that made obscene profits this year has not been doing much according to a recent report by the World Benchmarking Alliance. At the launch of the report two weeks back, I was staggered to hear one of the speakers mention that ‘pension funds have not set red lines on fossil fuel funding’. And that £88 billion has been invested in fossil fuel by UK pension funds and banks. It seems very careless, considering we are on the brink - so to speak. 

The WBA Climate and Energy Benchmark in its second iteration assesses and ranks the world’s 100 most influential oil and gas companies including on their low carbon transition and social impact. In a recent conversation with Vicky Sins Climate and Energy Benchmark Lead at the World Benchmarking Alliance (WBA) we spoke about the benchmark, the significance of the insights and its impact on decarbonisation and transition to low carbon economy. Listing below some of the key findings 👇🏾👇🏾👇🏾

👉🏾 0, That’s right ZERO companies have committed to halting the expansion of fossil fuel activities before 2030. With no set date for phasing out fossil fuels most companies don’t have credible transition plans (Am I SHOUTING??)

👉🏾 Most companies have not set targets that cover their scope 1, 2 and 3 emissions meaning that the majority of emissions from this sector are still not covered by reduction targets

👉🏾 Only a minority of the assessed companies are engaged with necessary preconditions for a ‘Just Transition’

👉🏾 Despite soaring profits companies are still not investing in a low carbon transition. Only 25% of companies report the amount of capital expenditure that they have invested in low carbon technologies

👉🏾 To halve the sector’s scope 1 and 2 emissions, companies need to invest $600 billion by 2030 into low-carbon solutions. This is not happening. Just 12 companies’s scope 1 and 2 emissions intensities have decreased in line with their 1.5C pathways. 

👉🏾 Just 35% of companies are committed to social dialogue with workers and affected stakeholders and 46% percent disclose the share of their workforce covered by collective bargaining agreements

👉🏾 Over half of companies assessed still link executive remuneration or incentives to the growth of fossil fuels, and only 18% of assessed companies have scope 3 emission targets.

👉🏾 93% of companies score zero on just transition planning

If you would like to know more, head to the podcast. Link in the comments👇🏾👇🏾

Episode Transcript

Sudha: Hi, Vicky. Good afternoon. Thank you for being a guest on The Elephant in the Room podcast today. 

Vicky: Thank you for having me. It's great to speak to you today. 

Sudha: Okay. let's jump straight to the questions. Give us a quick introduction to the World Benchmarking Alliance and what it does.

Vicky: Yeah. The World Benchmarking Alliance, we're a global NGO and we were really founded by this idea that we needed to create a movement with a lot of different stakeholders like policymakers, civil society organisation, the financial community to really look at what does accountability on companies look like and really accountability in the face of the sustainable development goals.

Vicky: So looking at the heart of what do we need in order to have development done in a sustainable fashion. What is then the role of the private sector and how do we hold them accountable on that role? As you know we had the Paris agreements and the sustainable development goals. They were agreed over eight years ago, and we all realised that business has this significant role to play alongside governments, but really look at the biggest, most influential companies. We have identified 2000 of those and really look at these companies, they employ millions of people's directly throughout their supply chain. And they sometimes hold more influence that is larger than entire countries. So how do we then create this movement to collectively hold these companies to account and reaching these sustainable development goals? 

Sudha: Yeah. That's so interesting. Just the 2000 and how powerful they are. So last week the World Benchmarking Alliance launched the second iteration of the Climate and Energy benchmark.

Sudha: What is the purpose of the benchmark? I missed being there at the event in person, but I was there for the online session. And it was an eyeopening session, let me tell you that. 

Vicky: That's good to hear. And hopefully others have the opportunity to listen back to it. But indeed this was the second iteration of the oil and gas industry benchmark launch. We look at what are the traditional high emitting sectors and how are they transitioning to a low carbon economy, and how do they do that in a just, and equitable way? 

The reason why we look at the oil and gas sector is, as you probably know, and maybe for the listeners as well, is the energy sector is responsible for three quarters of our global greenhouse gas emissions. And of course, the use of fossil fuels is an important one as the main contributor to that. So we all recognise there is this need for this major shift away from fossil fuels. And we looked then at who are then the biggest players in this supply chain?

Vicky: And how are they really looking into contributing to the goals of the Paris Agreement, which we said we want to limit global warming to one and a half degree scenario in order to have still a liveable planet for the next generations to come. So that's the reason why we look at the oil and gas sector specifically, and we look at a hundred companies within the oil and gas industry and what it is that they do or don't do in order to meet those goals.

Sudha: Yeah, it's so interesting isn't it that the oil and gas industry is responsible for three-four of the emissions but how they have managed to get people to focus on other areas rather than on their own is very, very interesting. So how do you assess the company's Vicky in this benchmark and what is the key focus of the assessment?

Vicky: So as I mentioned, we look at 100 companies from different shareholder structures. So we also say influential companies does not automatically mean that these are the largest listed companies. Of course, they are also included. But for the oil and gas sector, the national oil companies also are a very important player in this industry.

Vicky: So we look at different type of companies alongside the full value chain. From upstream to downstream to midstream to full integrated companies. And the real focus lies on how credible are the plans that these companies are presenting, because the last time we assessed this sample was 2021. We then look at collecting data and information. We do this in partnership with CDP, who a lot of these companies report to. So we are able to reuse the information. Then we use a methodology called ACT, assessing low carbon transition, really looking into, okay, has the company set the targets? Are these targets then aligned with the one and a half degree pathway that the IEA the International Energy Agency has presented for this sector, then identify and how are they then contributing to reaching their own targets.

Vicky: So for example, we look at - are these companies making the right investments? What type of horizon do they have for the targets? Is it only a short term horizon? Or do we see that a lot of these companies set targets to 2050, which we encourage. But then also this needs to translate them back into, what does that mean in terms of the short term, in the medium term. And how are they then aligning this really to these net zero pledges that they've made, because it is really important that they are transparent around how they are going and intending to get there. Because to my earlier points about accountability, that can only happen if companies are transparent in what they are actually doing to achieve that.

Sudha: So true, because there are lots of things that lots of people are going and saying at big conferences and big forums. But what is the road to those? And what is the authenticity of those claims or the statements that they're making? 

Vicky: Yeah, exactly. And for a lot of these leaders, it's still along way to go at 2050. It's an easy commitment to make if you're might not be here, right? So, but if you have to actually contribute to that in the next five years, that goes on you. So we also look at where is then this decision making embedded in an organisation? At what level is it really felt and understood that, this transition is an integral part of their business model going forward.

Sudha: Yeah. have they really resourced for it and prepared financially for it? Considering that there are no set dates to phase out fossil fuels, how are companies preparing for the transition? I mean, this is the elephant in the room, I would say. 

Vicky: Exactly. And that's, of course, also part of the reason why you're doing the podcasts. Right, is really looking to addressing that big item is it's been very clear that Antonio Gutierrez also said, right, the only credible future for this sector is that there is a phase out date for fossil fuels because the problem is not only the managing of the emission of the fossil fuels.

Vicky: The problem is the fossil fuels itself, right? And that is something that really needs to be understood. And then often, of course, we get this feedback like, but yeah, but we're still so dependent and access to energy is an important one. And that in itself makes the argument why these companies need to start planning for the transition. Because of the fact that we, everyone needs to understand that there is no long term future for fossil fuels going forward if we want to keep this temperature goal in sight.

Vicky: So where we do see that companies compared to 2021, there has been an increase in companies that have set targets. So at least we see that companies have started to maybe be a bit more public disclosing about the commitments that they want to make. But without this fossil fuel date insight and the end date insight, it means that there is a lot of incremental change to their business, model is like, how do I more efficiently use the resources available whilst actually the only way is that it's transitioning out.

Vicky: Of this business model and into another business model, being lot of focus on investing in renewables and technologies to get there. And these targets that these companies have set, like I said, it's like, it's an interesting evolution that more companies have set the targets, but most do not include scope three in their target setting.

Vicky: And for the ones that don't know, but burning fossil fuels is the highest emission source, right? So as long as that's not captured in those targets, then there is also no credibility to neither the target, nor the transition, and the acknowledgement of these companies that they need to tackle that part of the transition as well.

Sudha: Vicky, I speak a lot about the Global South because of, again, dependency and also not having a voice generally in the climate conversations as much as they should have. And we have China and India and the Global South who are really dependent on fossil fuels. US, is a big party, but we are talking about Global South.

Sudha: And is there enough investment, sufficient investment, and are there enough viable innovations that can support mass movement to low carbon solutions? Because at the end of the day, when you talk about people moving away or looking for solutions, there has to be some accelerant, something that will get people to adopt. There has to be some incentive and of course there has to be the existing technology. 

Vicky: Yeah, no, and I think everything that we set and analysed is science based, right? It is not something that we come up with. And within the IEA, it has been very well investigated that all the technology that you need in order to achieve the 2030 targets, that technology is there.

Vicky: They need significant investments from these companies to back them up and to deploy them in a high rate fashion to support this. And then of course, we look at the 2030 to 2050 targets that needs a lot of R&D and it leads a lot of development. In principle, the development has already started, and we know that with the right amount of financial investment that that technology can mature in order to support that longer term objective.

Vicky: Of course, there's two sides to this, and especially also what you say in terms of developing countries. I think A, we look at the companies themselves. This sector has made a record profit last year, right? Four trillion US dollars in profit, that alone should tell these companies is like, the thing you need to do with that profit is significantly invest into these deployments of these technology. For your own operation, but also to help others to accelerate on reaching these goals. And we say that based upon the IEA paper and their scenarios, 77% of a company's total investments should be in low carbon technologies and then spread across the different timeframes. And the sector is far, far off of doing that, right? 

Vicky: And the transparency on what it is that they're contributing to the low carbon technology is very low. So the call to action that we say is A) there needs to be more transparency in these companies and B) there are good examples of companies that are aligning their full investments to the low carbon scenario that is needed. And we also want them to highlight this leadership more so that we also see it is possible to do this, but it's to be the strategic conviction that they do and then the point around the developing countries, the finance has a massive role to play in that. Because they also need to unlock finance, equip development banks in different regions, because we've not talked about the just transition elements in this, but a lot of these countries are very dependent from a social perspective as well of this industry.

Vicky: If we foresee that there's going to be a demand side reduction in the future, we have the obligation to plan for not only the workers and communities, but for these whole countries that they are equipped and financially equipped to move to a new economy going forward. 

Sudha: This is very interesting. I think one of the examples that we can look at actually, it's not even an adjacent industry. It's the pandemic and look at how people have collaborated because they believe that lives were going to be lost. The lives that are being lost because of climate change and climate extreme events, we don't look at it in totality. We are not looking at it as something that is so imminent that is impacting our day to day lives.

Sudha: And I think that is the urgency that is probably required. And collaboration and not hiding something, share it and let it grow and let it make positive change. 

Vicky, moving on to the next question, what is the preparedness of the oil and gas industry towards taking positive action for climate change and is it possible for the industry to create a roadmap, you were talking about just transition for a just transition because it is traditionally an exploitative industry. 

Vicky: I think these are two questions that have two different answers almost, because it's like, what is the preparedness of the oil and gas industry for positive action? We've seen some glimmers of hope in some countries, but it's very scattered around different topics. Some are doing well on investments, some are taking steps to include scope 3, but overall, we would say that this sector is not prepared to take a sufficient action to provide a positive contribution.

Vicky: Hence our focus as well and probably we will get towards the end as well as like what's next, but very much to accelerate accountability to this sector. And it has come to the point where of course, there's always been a discussion that this sector needs to be part of the solution because of their importance in the industry.

Vicky: But what if they're not prepared, what is then needed in order to create a solution, because going forward and continuing the way we do is not an option. And I think that should be clear. I do think that it is still possible for the industry to create a roadmap for a just transition because of the fact that they have been able to build this infrastructure, they're big infrastructure companies. They're big companies that have highly trained talents, right? They have been able to build communities. They have been able to build, bring industries to different countries. So if they will use that, to have a vision about what is the future workforce that this industry is in need of?

Vicky:...