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Has Exxon Mobil turned over a new, green leaf?

News that Exxon Mobil will spend $3bn in the next five years on a new low-carbon business unit came after a flurry of announcements signalling that America’s biggest fossil fuel producer has finally accepted that it may need to change course in the face of climate change.

Has Exxon Mobil turned over a new, green leaf?

It remains to be seen whether it will be enough to silence Exxon’s legion of critics, including the Attorney General of Connecticut, who in September filed the latest of a wave of lawsuits from US states and cities accusing Exxon Mobil of “an ongoing, systematic campaign of lies and deception” to discredit the scientific consensus about human-induced climate change, despite knowing since the 1970s that fossil fuel production caused global warming.

As late as October, Exxon Mobil’s CEO Darren Woods dismissed the suggestion that climate change concerns posed long-term risk to his industry, reassuring staff that there would be “an ongoing need for the products we produced.”

On the face of it heightened investor pressure from activist investor Engine No 1, backed by heavyweight institutions like the Church Commissioners for England and US hedge fund DE Shaw, have forced Exxon to move into line with US number 2 producer Chevron, with which it is rumoured to be in merger talks.

Before Christmas the Irving, Texas oil major announced a five year programme committing to cut the intensity of CO2 emissions from its upstream production by 15-20% by 2025, and decrease the intensity of methane, a far more potent greenhouse gas, by 40-50% – though this is far lower than the 65% cut in methane emissions by 2025 being proposed by the Clean Air Task Force and under consideration by the Biden administration.

Like Chevron, Exxon’s new targets apply only to Exxon’s scope 1 and 2 emissions, from its own operations, as set out in the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard. But given that its products fuel the world economy, scopes 1 and 2 account for less than 20% of an oil company’s total emissions.

Scope 3, or the impact of its products in use, accounts for the rest. While Exxon recently announced it would begin reporting on its Scope 3 emissions this year, US producers lag far behind European energy majors Royal Dutch Shell, BP, and Total, which last year signed up to in committing to net-zero emissions by 2050 across all three scopes.

Royal Dutch Shell coloured in its net-zero plans for investors in February, announcing that it was cutting back oil production by 1-2% a year and speeding up its timeline to reduce the net carbon intensity of each unit of energy it produces. By 2035 this will be 45% less than 2016, compared to 30% previously, and 100% by mid-century, from 65%.

The oil major will increase investment in renewables, including biofuels and hydrogen, build out its EV charging services network, and boost carbon capture and storage to store an additional 25m tonnes a year by 2035. More controversially, it is also planning a major investment in offsetting, with a target to offset 120m tonnes of its customers emissions by 2030.

Shell’s green energy renewable energy targets aren’t as ambitious as those of BP and Total, which earlier in February announced plans to rebrand itself as TotalEnergies as it transforms into a broad energy company over the next decade.

BP, meanwhile, plans to grow its renewable output 20-fold, while slashing oil output by 40% by 2030, a far more decisive shift than Shell’s 1-2% per year.

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Still, in an industry first, shareholders will have an advisory vote on Shell’s transition plan at this year’s general meeting, while the pay of more than 16,500 staff, not just top executives, will be linked to targets to reduce the carbon intensity of its energy products.

It is not just the European energy majors that are far ahead. The Science-based Targets initiative, a partnership between CDP, the United Nations Global Compact, World Resources Institute, and the World Wide Fund for Nature (WWF), reported in January that 34% of all European companies with the greatest climate impact have committed to, or set, targets in line with science to cut CO2 emissions, in contrast to just 16% in North America and 12% in Asia.

But are even European companies doing enough to bend the curve on dangerous climate change?

As we reported in the December issue of The Ethical Corporation, until later this year, when the SBTi will publish a new global standard, there has been no standardised mechanism for third-party monitoring and verification, or for companies to report transparently on how they are actually performing against their targets. And even the SBTi does not yet provide rules on reducing scope 3 emissions.

Meanwhile, there has been a proliferation of many more companies setting net-zero targets with no grounding in science, with a major chasm opening between net-zero ambition and concrete action.

According to research by Signal Climate Analytics, about one-third of human-caused greenhouse gas emissions can be tied to the direct and indirect business activities of just 250 companies, which include the world’s biggest oil and gas companies, along with companies in the energy-intensive transport, mining, metals, and manufacturing and consumer goods sectors.

That number excludes privately held and state-owned companies, for which it is much more difficult to obtain high quality, verifiable data. But the direct and indirect emissions of the G250 and their value chains are huge, and they wield enormous power over sector peers, regulatory frameworks and even consumer attitudes about climate change.

In short, where these businesses are going with their treatment of our planet, we are all going.

Over the course of 2021 Reuters and Signal will be delving into the extent to which those 250 companies are taking action to bring their operations in line with 1.5C pathway, focusing on 25 companies per month.

Given the incompleteness of the data, we will list them in their sectors alphabetically, making it easier to draw comparisons between companies within sectors on their climate risk performance, and to answer two key questions: how transparent are they about their total GHG emissions and related environmental impacts, and are they decarbonising fast enough to avoid the worst consequences of an over-heated planet?

The story told by the related chart, looking at the first 25 companies, is not encouraging, given that they alone account for approximately 10% of annual human-caused emissions.

The energy sector dominates, accounting for 17 of the 25, but only three, Royal Dutch Shell, BP and Total, having set a Science Based Target to reduce their emissions. Another nine are doing the bare minimum by admitting that climate change is an important risk, or by disclosing only emission from their own operations.

In other sectors, Thyssenkrupp, Vale, and VW are disclosing plans, although not always including all scopes, to adopt 1.5C aligned science-based targets, showing they are on a path to systematically transform their core products, processes ‒ and in some cases business models ‒ with solutions that reduce or eliminate harmful environmental or climate change impacts.

Among them is U.S.-based diesel-engine manufacturer Cummins, a signatory to the SBTi’s Business Ambition for 1.5C coalition, which has investing meaningfully in a new power segment, combining the company’s electrified powertrains, fuel cells and hydrogen production technology. Over the last three reporting years, GHG emissions across all scopes fell 7% while revenue increased, decoupled from emissions, by 15%. The company also reported record profitability in 2019.

This will be a pivotal year on the climate scene, as big carbon is pushed harder than ever to become better for our global economy and planet. The new Biden administration will bring the United States back to the regulatory discussion, and market signals are likely to continue to increase both the transition opportunity for innovators, and the risk for laggards.

Given this push, many expect the gulf between European companies and in the US on climate risk to narrow, with many more Americans firms among those setting zero-carbon targets in the run-up to the critical COP26 climate conference in Glasgow in November.

As the year progresses, Reuters and Signal Climate Analytics will be updating both the transparency and performance data on our G250 list. Given the urgency of action between now and 2030, we hope to help make a meaningful contribution to revealing where firms are actually turning over a new green leaf, and how the underlying business of carbon intensive industry is transforming.”

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Reuters Professional is owned by Thomson Reuters. Tim Nixon and David Lubin, of Signal Climate Analytics, contributed to this article.

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