Doubt your effort in the industry and worry that driving greater sustainability is an insurmountable challenge, listen to Jason Olbekson.
As Salesforce’s Oil & Gas Industry Consulting Director, Jason sees firsthand how companies respond to demands to reduce greenhouse gas emissions. Instead of feeling threatened by the necessary changes, he sees many of these companies striving for a far-reaching transformation.
“If you look at the increasing pressure on carbon emissions, it’s driving oil and gas companies to reconsider their energy portfolios,” Jason said during a recent Salesforce webinar, “The future of Canada’s industrial sector is zero net.” “You’re not just worried about your ESG or your carbon footprint. It’s also the product they sell. They are switching to more environmentally friendly technologies. They continue to develop their business models.”
These optimistic signs couldn’t have come at a better time. If the world is to navigate a safe and successful energy transition, the role of traditional energy companies, with all their experience, resources and skills, will be crucial.
As pointed out by Georges Smine, vice president of sustainability solutions at Salesforce, there is a surge of ESG and sustainability requirements pushing net zero to the fore. This includes ever-evolving industry regulations and increasing pressure from shareholders who want more transparency and carbon accounting in ESG reporting.
As a result, Georges added
CFOs also pay more attention to sustainability as they see a link between higher ESG ratings and better financial performance. This, in turn, leads to the third pressure area: the consumers. With more choice than ever, Georges noted that consumers are actively looking for companies that produce goods based on an eco-friendly manufacturing approach.
Putting all of these factors collected, it’s no wonder sustainability is becoming a top business priority for the industry. Business leaders, too, recognize the magnitude of the task ahead.
“To limit global warming, we need to halve emissions by 2030, and that’s more than 100 gigatonnes of CO2 or equivalent,” Georges said.
However, the true goal should be net zero, which means completely negating the number of greenhouse gases produced by human activities, including what goes into manufacturing and oil and gas companies.
Without reporting on its progress towards net zero, Georges said the heavy industry faces growing challenges raising capital, retaining customers, protecting its brand reputation and wearing down already overworked sustainability teams.
How industry experiences can be transferred to net zero initiatives
On the plus side, Jason noted several similarities between traditional oil and gas plants and some newer renewable or alternative fuels. This contains:
- The need for experience in managing complex projects
- Asset management and maintenance are mission-critical.
- A comparable trading model and deal structure (i.e. long-term oil purchase agreements and renewable power purchase agreements)
- A vast ecosystem of stakeholders, landowners and administrative agencies.
This could mean that the transition to green manufacturing may not be as seamless as some initially thought.
In any case, the industrial area is hardly stopping. According to Scott Mattoon, industry consultant and director of the production at Salesforce, the initial impetus to meet regulatory requirements quickly gives way to satisfying consumer demand.
For example, he said there is now more demand for electric vehicles under development than internal combustion engine vehicles
“I think we want to avoid some kind of prescriptive one-size-fits-all approach,” he added. “The transition rate is important but will vary greatly by industry. An oil exploration company will look very different than a food packaging company in terms of its energy profile and ability to substitute energy sources.”
Where the past offers a clue to a more sustainable future
Doing what is right for the planet might also seem less daunting if you take a quick look at history.
Jason spoke about how the British Navy was the original catalyst for the transition from coal to petrochemical fuel that created our modern industrial complex. There are also influential organizations that are promoting green manufacturing today.
“If you look at a company like Amazon saying, ‘Hey, we could convert all the vehicles in our fleet to hydrogen,’ I think that’s going to be a game changer,” he said.
By reaching net zero, the industrial sector also has opportunities for innovation from a customer experience perspective. Think about what materializes at most gas stations today: most of us stand next to a pump, impatient for the tank to fill up so we can get on with our day. Compare that to coffeehouse brands installing charging stations for EV drivers, or oil companies introducing a coffeehouse-like experience for the same type of customer, Jason said.
Retraining, upskilling and development of a greener industrial workforce
The road to net zero is also paved with an unprecedented opportunity for oil and gas and manufacturing companies to rethink how they build their teams. The pandemic has caused many companies to lose already skilled workers, a problem Jason says could worsen if employers don’t take steps to prepare their workforce for a more sustainable future.
He said this should translate into the codification of institutional knowledge and the automation of work processes like carbon accounting. In addition, “digital natives” who do not want to get bogged down with manual processes had to be empowered.
Scott agreed, predicting that top talent will have high expectations.
“Industrial workers will look for a company that has modern technology so they can work wherever they are and whenever they need to, even if it’s just on a mobile device,” he said. “They’re going to want to be able to access the right information at the right time to make decisions without having to go to middle and upper management levels.”
We cannot afford to ignore the difficulties or minimize the effort that Net Zero requires. However, Scott said many companies in the industrial sector are approaching sustainability with the right mindset.
“The smart manufacturers we’re hearing from recognizing that this is an opportunity to go beyond collaborating with the supply chain on emissions targets, and they’re improving the effectiveness of their global supply chain,” he said. Ultimately, it’s an opportunity for them to deliver quickly and improve their company’s image as a leader in their industry.”