Guest blog: 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
is 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 need 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 the 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, take 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. Please message me on LinkedIn if you have any
further observations.
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