Fires across the West Coast of the United States, as well as in the Amazon. Hurricanes in the Atlantic. Flooding in the Sudan. These are just some of the events in 2020 that underscored the need for all of us to adopt a sustainability mindset. Even businesses. Especially businesses.
Such disasters, however, can feel too amorphous to tackle. And because they’re not directly related to the business—or at least not impacting the next quarter’s results—some leaders are delaying the urgent actions that are needed. But their shareholders aren’t accepting excuses. They know the situation is dire and are more rigorously examining companies’ business plans to make sure sustainability is on the agenda for 2021. Their scrutiny is warranted. Our analyses show we are on course to overshoot our carbon budget—the cumulative amount of CO2 emissions permitted to keep global average temperature increases less than 2°C (3.6˚F)—by as much as 200 percent by 2050.
The good news is that most business leaders are stepping up. A recent Accenture study found 59 percent of CEOs say they are deploying low-carbon and renewable energy across their operations today. And 44 percent see a net-zero, carbon-neutral future for their company. Of those committed to climate action, two-thirds view technologies like cloud as critical enablers for accelerating change and making their commitments a reality.
Flipping the sustainability switch in energy
The oil and gas sector contributes 80 percent to global emissions. For that reason alone, it is understandable that people are asking oil and gas leaders, “what’s your plan for meeting your emissions targets?” We believe that plan should comprise three key steps:
- Act today. Whatever your business model is now, clean the core. That means minimizing emissions and maximizing efficiencies in current operations. Next, focus on transitioning existing sources of energy to cleaner alternatives. Finally, look toward adopting and scaling frontier energy sources, processes and technologies. Keep in mind, you can’t just cherry pick here. Success requires all three sets of actions to be activated.
- Work with your ecosystem partners. Up to 25 percent of potential emissions reductions achievable through 2050 are dependent on collaboration between energy suppliers and their customers. Four sectors—power, transportation, heavy industry and buildings—will drive most of the projected rise in emissions. These are the industries that oil and gas companies must influence. That means more than investing in clean energy pilot projects. It means innovating and collaborating with them at scale to make the transition to a low- or no-emission future a reality.
- Over the medium term, energy companies will have to clearly determine which one of three archetypal roles they will play. The “Oil and Gas Specialist” sustains and grows value primarily through cost competitiveness in the core oil and gas value chain, with a strong focus on ESG. The “Energy Major” builds or adds clean energy businesses to its existing oil and gas assets over time and derives value from cross-value chain margin excellence across molecules, electrons and/or solutions. The “Low-Carbon Solutions Leader” will exit its role in oil and gas and refocus on leading in one or more clean areas of the energy system. Companies in other sectors will, similarly, have to rethink their operating models for a more sustainable future.
Throughout this three-step journey, energy companies should highlight their efforts—not just in ads touting their adoption of new energy sources or new business models—but also by publicizing the ways they are improving sustainability within their own business operations.
Seeing the future of energy through the clouds
The oil and gas sector is not alone in preparing for a different, low-carbon future. We are seeing leaders from companies across industries starting to rethink their organization’s business models and making changes that will have a big impact on their business performance. For many, the change begins with cloud.
Adopting cloud as a means to digitize core business processes is also a particularly effective “green” solution. That’s because it can help minimize the need for physical equipment and energy-intensive data centers, while leveraging more energy-efficient computing power. These benefits translate into a significant reduction in carbon emissions. According to our research, migration to the public cloud can facilitate a 5.9 percent decrease in total IT emissions. That comes to nearly 60 million tons of CO2 globally per year, which is the equivalent of taking 22 million cars off the road.
Lowering direct energy demand is just one measure of cloud’s impact on emissions. Another advantage of cloud is its ability to unlock the power of analytics and facilitate other sustainability efforts at scale. Consider how it could help energy companies maximize efficiencies in their current operations or clean their core. Given we need to save over 40 billion tons of CO2 emissions to achieve our climate targets, it’s nice to know that solutions like cloud can be a value multiplier, with numerous beneficial effects.
In our work, we’ve seen up to 40 percent total cost of IT ownership savings from public cloud, driven by greater workload flexibility, better server utilization rates and a more energy-efficient infrastructure. The cost-savings story of cloud resonates with business leader, investors and consumers. It also helps drive buy-in (and potentially frees funding) for enterprise-wide sustainability initiatives. The level of sustainability and financial benefits of cloud migration is dependent on three things: the cloud provider selected, the organization’s ambition for cloud optimization, and its appetite for cloud-enabled sustainability innovations.
The fires, hurricanes and floods of 2020 should serve as a warning—and a catalyst for change. Other disasters will undoubtedly come. For oil and gas companies, they may not take the form of a sudden storm or wildfire. Shareholder dissatisfaction, eroding consumer trust, or an inability to take optimal advantage of emerging technologies and energy sources can all have devastating consequences. In contrast to natural disasters, however, these challenges can be anticipated and tackled. Cloud sets the stage for the actions that are needed now.
Disclaimer: The views and opinions expressed in this document are meant to stimulate thought and discussion. As each business has unique requirements and objectives, these ideas should not be viewed as professional advice with respect to the business.