Leaders are tackling the carbon challenge head-on in several ways. The first is through ESG target-setting. Nearly all (96 percent) of the leaders we surveyed have set ambitious ESG targets. The same percentage of leaders is committed to reporting frequently on their emission-reduction progress. In contrast, 56 percent of laggards have set targets. Only 47 percent regularly publicize their results.
The second way leaders address the Carbon issue is by elevating the importance of their low-carbon solutions. They expect their low-carbon business segments to experience margin growth of at least 20 percent. They also expect low-carbon businesses to contribute handsomely to their revenue growth by 2030. For them, hydrogen and renewable power hold the most potential.
Finally, leaders take decisive and practical near-term actions by, for example, investing in energy management solutions, focusing on achieving significant process efficiencies, and deploying better carbon-detection and management technologies.
Leaders in Carbon go beyond reacting to external ESG pressures and are proactively creating new sources of growth outside traditional oil and gas.
Reinvention leaders believe their Carbon-related actions will deliver significant results.
Of leaders expect their Carbon initiatives to boost their ESG performance by at least 20% (vs. 15% of laggards).
Of leaders expect their Carbon initiatives to reduce their emissions by at least 20% (vs. 2% of laggards).
Follow the leaders. But not always.
Our research confirms that Leaders are using Carbon to create a sustainable competitive advantage. But there is more they can do. For example, in terms of ESG management, leaders gave less priority to promoting circularity, which we believe will be a key driver to reduce the carbon footprint. They also placed less focus on identifying and strengthening low-carbon hydrocarbon assets in their portfolios, which is surprising given their inclination to address all aspects of decarbonization.
Think (and act) like a leader
Move fast. Don’t wait until it’s too late to make your move in Carbon. As carbon management is quickly becoming table stakes, oil and gas companies need to establish their emissions performance metrics and develop a proactive plan, roadmap and incentives to enable the outcomes they seek.
Act as though carbon already has a price. Make informed capital allocation decisions by incorporating the projected cost of carbon into field development planning and valuations.
Go low. Low-carbon businesses present the biggest opportunities for growth. Identify where you will have the chance to make the biggest impact and take action to build differentiated capabilities.
Extend your partnerships. Collaborate beyond your traditional peer and partner groups to drive new innovations and convergence beyond industry borders.