The Energy Transition Needs Business to Value Purpose Alongside Profit
There is no mistaking the importance of addressing the way we all live and work — and the impact we are having on our planet. With a rise in social activism driving the response from governments and industry alike, the case for why we need to change has certainly gathered pace. But there has been less discussion about how we change.
This is the fifth piece in an occasional series about the state of business around the SDGs, in the lead up to the COP26 Conference in November. Here is the previous article in the series.
The Tensions of Transition
Change will require new kinds of businesses and a new social contract between business and society that will be about thinking beyond profit and toward purpose; continuously refreshing our licence to operate and engage communities and society more broadly.
The transition tension that companies and investors are facing are numerous, including:
- Understanding the need to optimize an existing asset base that could possibly maintain supply for another 20 to 30 years with a societal demand to achieve the transition in less than 10 years.
- Ensuring a planned exit and managed decline that delivers sustainable energy supply, along with sustainable earnings for the future of businesses that can create the next level of answers.
- How we transition a highly skilled energy workforce into new energy solutions and technologies.
- Ultimately, how we invest in our collective future with purpose, how we create a model of capitalism that benefits all stakeholders.
The Value of the SDGs
Decarbonization, a rapid shift toward renewables, and smarter use of energy will all be important drivers, but in many parts of the world, we also need to improve access to secure and affordable energy to support socioeconomic development. We need to consider a just skills transition for one of the world’s largest workforces, and we need to keep the lights on in the interim.
This is where the Sustainable Development Goals can offer us the framework to bridge the gap between global thematic issues such as water, energy, climate, oceans, urbanization, science and technology, and digitization, and how we currently design, build, create, power and maintain the infrastructure that supports our lives today.
They offer a framework to examine each area in detail and to look at what we are doing today that needs to stop, what we can transition, and where we need to design new solutions for the future. At Wood, we are putting the Sustainable Development Goals at the heart of our strategy to develop and grow our business, and we are proud to be the Business Avenger for SDG #7 Affordable and Clean Energy.
Technical Solutions for an Energy Transition
In reality, there won’t be a single pathway to achieving an energy transition, but rather multiple, connected pathways.
Firstly, it means transitioning the conventional energy industry, including repurposing upstream assets for carbon capture and storage or downstream assets into biofuel refining plants. If we can deliver hydrocarbon-based supply with a net zero impact, this will remain important for some years to come.
What does this look like in practice?
In the upstream oil and gas sector, the parameters around exploration and production activity have clearly changed. There’s now an expectation that these products need to be produced with a minimal or zero-carbon footprint.
This means that operators of offshore assets will need to explore and invest in options to electrify their platforms, either through power-to-shore solutions, or by connecting to offshore wind farms like Equinor is currently doing with two of its assets in the Norwegian North Sea.
The drive toward net-zero is also putting a sharper focus on eradicating the practice of flaring and on minimizing fugitive emissions. All of this is technically feasible, and with a carbon tax likely to be introduced over the coming years, it’s an area where smart policy can start to bring together environmental goals and commercial drivers to deliver lasting change.
Building a healthier, cleaner planet underpinned by low-carbon energy systems will require a new way of thinking on how we build and maintain the built environment and our use and access to natural resources.
The Role of Hydrocarbons
To maintain energy security, which still underpins our quality of life, we need to accept and shape a role for hydrocarbons that is still compatible with our net-zero ambitions. This is a pragmatic and important compromise, not a cop-out. We need to be mindful of the need for energy equality in those parts of the world where energy is needed most.
Secondly, a successful energy transition undoubtedly means building momentum in renewable energy such as solar, onshore and offshore wind, or other low-carbon solutions including blue, green and bio-hydrogen. As well as in creating new solutions such as those required in electric vehicle charging and infrastructure.
The transport sector is another area where we are already seeing new technical solutions help to shape a path toward a net-zero future. Whether it’s the steady momentum building in electric vehicles, hydrogen-powered buses and lorries, or new environmental policy around shipping, we’re seeing a sector that’s reinventing itself in a way that’s good for business and the environment.
At Wood, we’re partnering with companies like UOP Honeywell to create solutions to help decarbonize air travel. With electric or hydrogen-powered flights still a long way from reality, the only short-term solution lies in the development of sustainable aviation fuels. By combining our hydrogen technology with UOPs eco-fining solutions, we are able to create a green product to power flights that ensure air travel has a minimal impact on the environment.
Engineering Solutions for the Built Environment
Building a healthier, cleaner planet underpinned by low-carbon energy systems demands a new approach from the energy industry and for those of us working in the sector. It requires a new way of thinking on how we build and maintain the built environment and our use and access to natural resources.
A primary challenge in engineering solutions for a net zero future lies in ensuring that investment levels are appropriate to meet demand.
And crucially, it’s not just about spending money, but about ensuring it’s channeled toward the right blend of opportunities and that the right market conditions are in place to enable any investment to deliver on the strategic intent.
This considered, purposeful investment is not simply about meeting the ESG criteria of certain investors. It has, at its foundation, the ability to meet the broad and diverse needs of society as a whole and derive profit from doing good.
A Less-Polarized Debate
As scientists and engineers, we encourage a less-polarized debate and focus on the technical solutions, appreciating the need to quickly transition an industry, jobs and communities to a different future.
Collaboration, compromise and investing with greater purpose will determine whether we succeed and how quickly we do so.
The choices we make today, if they are the right ones — can have a profound impact on the world we hand over to future generations.