The Correlation of Sustainability in the Oil and Energy Industries

In the 2020s, the necessity for sustainability is at its peak as the global population continues to rise. With it comes an increased demand for energy. Most of the world’s power comes from burning fossil fuels, but the tide is quickly turning — more countries are implementing renewable energy methods to be more environmentally friendly.

Moving toward renewable energy can help save the planet from the dire effects of climate change, but the transition won’t happen overnight. The world needs the oil and energy industries to cooperate. How are these sectors moving toward sustainability? What’s pushing these industries to find greener practices?

1. How Have the Oil and Energy Industries Affected the Planet?
2. Does Greenwashing Occur in the Energy Industry?
3. Who Is Pushing for Sustainability in the Energy Sector?
4. What Are ESG Scores?
5. How Can The Energy Sectors Move Toward Sustainability?
6. Moving to Sustainability With Accountability

How Have the Oil and Energy Industries Affected the Planet?

In the last century, fossil fuels have been critical for human life and advancing technology. Burning fossil fuels produces energy for homes and powers automobile engines. Many countries have pushed for renewable energy, but fossil fuels still account for over 80% of energy consumption worldwide, whether from oil, coal or gas.

Fossil fuels have become embedded in human life, but that means their impact on the environment is sizable. Fossil fuels specifically are detrimental to the environment, especially with pollution. Burning this energy source often leads to polluted air. For example, many cities have to deal with nitrogen oxides released into the atmosphere, creating smog and acid rain. Some cities with highly polluted air include Los Angeles, Phoenix and San Jose.

Since energy generation requires fossil fuels and oil companies need electricity to power their operations, the sectors must work together to become sustainable. Without doing so, one risks unbalancing the other.

Does Greenwashing Occur in the Energy Industry?

Sustainability has been a significant focus across many industries, but how seriously do they take their policies? Some organizations tout green policies in their advertisements, press releases and other public forums. However, their actions and yearly reports don’t add up. This problem leads to labels of greenwashing that sometimes happen to corporations in the energy industry.

For example, a 2022 study examined reports from some of the leaders in oil and energy, like Chevron, ExxonMobil, Shell and British Petroleum (BP). Between 2009 and 2020, BP's inclusion of the phrase climate change increased by over 300 in its yearly reports. BP promised investors and customers it would reduce its projects that extract fossil fuel. However, researchers found that wasn’t the case — the study concluded BP and Shell increased their fossil fuel enterprises.

Who Is Pushing for Sustainability in the Energy Sector?

Governmental bodies worldwide have passed legislation or agreed to treaties to increase their renewable energy consumption and reduce their environmental impact. In 2015, nearly 200 nations signed the Paris Agreement to combat climate change. This treaty has changed how many countries view energy and approach regulations to lower greenhouse gas (GHG) emissions.

The Paris Climate Accords aim to cap global warming. In the last 140 years, Earth’s surface temperature has increased by about 0.14° Fahrenheit (0.08° Celsius) annually. In response to the treaty, many governing bodies have implemented regulations to curb GHG emissions. For example, the European Union will ban the sale of internal combustion engine vehicles starting in 2035.

Another motivating force for the oil and gas industry comes from the business sector. Investors from Main Street to Wall Street want to see more sustainability in their investments. So, to maintain long-term profitability, investors are instead using their money with businesses prioritizing green policies. One way to monitor and hold organizations accountable is to focus on environmental, social and governance (ESG) scores.

What Are ESG Scores?

ESG scores are one of the best modern tools for examining a company’s efforts to become more sustainable. Some organizations may only use sustainability for marketing purposes or to increase profits in the short term, but ESG scores provide a comprehensive report for investors to see what they are doing.

These reports are essential for the oil and energy industries as they attempt to shed their old habits and move toward sustainability. In ESG reports, there will be a score from 0 to 100 based on factors like:

Environmental:

The first factor in an ESG score is the environment. This section examines how much energy a business consumes, its carbon emissions and waste production.

Social:

The next factor concerns how a corporation manages priorities like diversity. How diverse are their management teams? How satisfied are their employees and how many of them are staying?

Governance:

The governance element focuses on the highest levels of each company. It reviews how diverse organizations make their boards, how much they pay board members and what methods they take in holding each other accountable.

You can find ESG ratings from entities like Bloomberg. The New York-based business reviews over 14,000 companies in over 100 countries worldwide. Some of the top organizations in their ratings include Alphabet, Microsoft and Bank of America. One organization on the list from the energy sector is the Exelon Corporation — the business produces zero-carbon electricity and aims to cut its GHG emissions in half by 2030.

How Can The Energy Sectors Move Toward Sustainability?

The oil and energy industries negatively impact the environment, but hope remains. Many countries still rely on fossil fuels to power homes, cars and businesses. So, finding ways to clean up their processes would make the industry more sustainable as the world transitions to renewables. Some of these strategies may include:

Lowering emissions:

The first step in sustainability efforts should be to reduce emissions. Energy companies can achieve this by mapping their energy flow and finding areas to reduce GHG emissions. New technology and streamlined processes can make businesses much more efficient with time and energy consumption.

Reducing leaks:

One of the worst adverse effects oil and energy organizations can have is a spill, leak or other accidents. These events cost the corporation time and money and devastate the surrounding environment. One example is methane leaks — thousands of tons of methane can leak into the air annually. The sector can reduce methane leaks by using artificial intelligence to improve leak monitoring.

Decreasing water usage:

An overlooked part of the oil and gas industry is its water usage. Many businesses require high amounts of water to extract fuel from the ground. Water is especially crucial in practices like fracking. In this process, organizations inject water mixed with chemicals and sand to crack the surface and extract oil. California allocated nearly 1.5 billion gallons of fresh water for oil extraction in three years. More sustainable practices include recycling water and reducing the use of freshwater.

Moving to Sustainability With Accountability

Across industries, numerous companies are moving toward sustainability by implementing greener policies. One sector attempting to turn green is the oil and energy industries.

Many pledge to become more sustainable, but some fall under accusations of greenwashing. One way to improve accountability is by using ESG scores. This metric lets investors and consumers see a comprehensive picture of what organizations are doing to improve the planet’s health.

How can 12:eleven help with ESG?

About 12:eleven

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