How can oil and gas companies improve their reputations, deal with stakeholder perceptions and demands, achieve greater socioeconomic impact, and meet compliance requirements?
From a scientific perspective, the oil, gas, and chemicals (OGC) sector is preeminently qualified to lead the global transition to a decarbonized world. However, when it comes to trust, a recent global survey puts the energy industry at the bottom of the pack. This lack of trust stems from negative headlines (oil spills, fracking, plastic pollution), a sense of industry corruption, and inequitable distribution of reward for extraction. Companies that do not rebuild, renew, and leverage trust, particularly as it relates to the energy transition and sustainability, risk a higher cost of capital and asset erosion as financial institutions increasingly incorporate climate risk into their credit calculations and apply environmental, social, and governance (ESG) screens.
Trust underpins the progress necessary to address climate change and the business-model transformation required for oil and gas companies to survive and prosper in the coming years. Oil and gas leaders must understand that trust is tangible and is built from the inside out of an organization. They must make conscious, daily choices toward greater transparency and invest in relationships that generate mutual value. And they must understand the different expectations that oil and gas stakeholder groups have of the company, whether they are investors, employees, customers, or nongovernmental organizations and activist groups. What climate commitments will the company need to meet in order to engender the trust of each group?
Overcoming the trust deficit for oil and gas companies will not be easy, but there are steps they can take to establish and leverage trust in transitioning to a sustainable future. These include:
The road to decarbonization is not going to be easy and will require significant trade-offs and difficult decisions. It is of critical strategic and financial performance and should be at the top of the board and executive agenda for any company that is serious about surviving the transition. For companies that are nimble and thoughtful, decarbonization is going to enable a new phase of growth and value creation. For those that delay, the risks are mounting and their survival is not guaranteed.
When it comes to climate change and sustainability, oil and gas companies, positioned as they are at the beginning of the energy value chain, have a huge opportunity to lead the conversation. They can contribute information based on what they do best: geology and molecular chemistry. They can speak realistically about how long developments in the energy transition will take and how much they will cost. Finally, they can be forthright about their own historical and ongoing contributions to climate change and the challenges faced. In doing so, they can create compelling narratives that demonstrate a deep understanding of stakeholders’ desires and forego the urge to simply “spin a story” that casts them in a more positive light.