The push towards sustainability is visibly gaining traction in Southeast Asia’s energy sector, and it is clear that energy companies must move fast and pivot to harness opportunities both upstream and downstream.
The question now is how? What do they need to start thinking about, and what are the key actions to take to make the shift?
You know it’s all about that base, ‘bout that base
Building a strong base that permeates the whole company is crucial for a successful transformation
The first thing to realise about building a sustainable business successfully is that it cannot be a “bolt-on” solution. This means that simply tagging on solutions like carbon monitoring, ESG tracking or even carbon reduction initiatives on existing business operations will not cut it. Such standalone initiatives, while all in the right direction, are likely to either fizzle out or be seen as a cost centre which the company “just has to do” because the Board or investors demand it.
Pivoting towards sustainability successfully requires adjustments throughout the organisation, from incorporating sustainability into business KPIs to building new capabilities to grow more sustainable revenue streams, to incorporating sustainability awareness and skills in the people they hire.
Building a business on sustainability requires a comprehensive sustainability strategy in relation to both its external and internal footprints.
Energy companies will have to rethink how they can offset the emissions caused by their products. This could be through making investments in carbon capture technologies, or by deviating from the traditional linear economy and moving into a circular economy. For instance, products can be placed in a closed-loop cycle to minimise or even recirculate waste and carbon. Taking this a step further, sustainable energy companies will also have to consider emissions caused by their products as used by end-consumers.
Achieving this circularity might be much easier in Southeast Asia as compared to other regions. This is because the energy giants here – such as Malaysia’s Petronas and Indonesia’s Pertamina – are all government-linked or state-owned enterprises. As public institutions rather than private entities, there will be a greater impetus for them to serve the community and society. Energy companies also need to focus on developing their talent to build better business resilience and upskill the domestic community.
This in turn can spur greater social development, creating more jobs and gainful employment for people. These benefits can extend down the value chain to other companies providing services and raw materials.
Energy companies need to be mindful of their external footprint across environmental and climate change factors such as energy efficiency, GHG emissions, and the use of renewable or alternative fuels. They will also have to account for community and social engagement factors including sourcing and procurement, job creation, local economic development, and more equal access to opportunities.
At the same time, energy companies must make sure their internal operations are aligned with their outward commitment to sustainability.
One way to do this is by rethinking internal operations, such as lowering emissions from operations and adhering to higher environmental and social standards and regulations.
To this end, technology can play a big part. Compared to Europe and North America, a higher share of APAC companies (24 per cent) believes in the power of technology in transforming their sustainable business practices.
In fact, with technology as a key enabler for sustainable operations, companies that accelerate both their digital and sustainability transitions are likely to recover faster and emerge stronger from the COVID-19 crisis, according to recent Accenture research.
As companies are rebuilding and re-platforming to the cloud to modernise their systems and maximise their investments, we are seeing increased interest from energy companies on doing this in a more sustainable manner. This way, technology becomes a social and an environmental enabler, allowing energy businesses to streamline internal operations and reduce their environmental footprint for a more sustainable business and future.
Technology Drives Collaboration Drives Partnerships Drives Progress…
Technology is important and fundamental in this transition – enabling everything from carbon capture to green fuel. The human potential can also be elevated with technology, enabling the workforce and paving the way to a brighter future.
But technology should not be used or developed in silos. The key here is ecosystem partnerships, which can help to accelerate the sustainability agenda. This means collaborating to solve common problems with a social benefit, as well as to being able to compete and deal with the cost pressures of bringing new solutions to the market.
For instance, Petronas’ Cost Reduction Alliance 2.0 (CORAL 2.0) project in 2015 has helped raise Malaysia’s oil and gas industry’s cost competitiveness by creating a common platform for oil and gas players. The aim was to create greater productivity gains from more efficient use of resources across the value chain. This has helped to address the pressures that came from the 2017 oil price downturn in Malaysia, with CORAL 2.0 delivering RM5 billion in savings since 2015.
Energy companies must continue to extend their partnerships and collaborate beyond traditional groups to drive new innovations and developments in energy sustainability.
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Building a purposeful vision and innovative culture
As energy companies reinvent themselves to achieve profitability and relevance through the energy transition, there is no escaping the fact that they need to rethink their future workforce engagement.
These days, even employees demand that companies they work for create meaningful purpose. A good salary and benefits alone are not enough to attract good talent. Our research found that having employees feel that their company and they themselves are working to make a positive difference to the world, together with addressing mental, physical and emotional wellbeing, can realise double digit revenue growth. In another 2018 poll by Dell Technologies, which surveyed over 12,000 Gen Zs across the globe, including some 4,300 individuals from Southeast Asia, 38 per cent said they want to work in socially- and environmentally-responsible organisations. Moving to net-zero carbon to address the existential threat of climate change is, pretty much, as meaningful a purpose as they come, especially for energy companies who are in the best position to make a difference here.
There is a convergence of factors that makes for a recipe for success here – energy companies desperately need to transform themselves to capture new opportunities in the energy transition. To do so, they need new capabilities, which will be primarily driven by transforming their workforce. At the same time, we know that good talent these days demand that companies have a purpose. It does not take much stretch of the imagination to put two and two together – engage employees by empowering them to drive the change towards net-zero carbon!
How to do this? Embedding an innovation-led culture into the DNA of the company is almost a no-brainer these days. Solar project returns too low to meet targeted investment hurdle rate? How about throwing in a battery to provide grid stabilisation as a service? Or marketing hourly Renewable Energy Certificates as a separate revenue stream? The name of the game is building multiple revenue streams from a single asset to improve returns. Luckily renewables lend themselves well to such plays. And an innovative workforce is key to unlocking such value.
Back to the Future
So what does the energy company of the future look like? Oil and gas companies are beginning to look increasingly like utilities companies and utilities companies themselves are changing dramatically. Our final piece in this blog series looks at the various archetypes that energy companies of the future might fall into. Stay tuned!
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