Contributed to by David Lubin, Constellation Research and Technology, and Timothy Nixon, Thomson Reuters
(This content was produced by a division of Thomson Reuters outside of Reuters Editorial.)
COP21 will go down in history as a landmark event, the historic conference when leaders of nearly 200 nations agreed to reduce greenhouse gas emissions to curb global warming. Since December 2015, many nations have ratified their commitment to the Paris Accord, while one, the United States, has withdrawn from it. (In fact, the U.S. is now the world’s only nation not to support the accord.)
The Paris Accord was the culminating event that underscored conventional wisdom supporting the importance of environmental sustainability.
Yet for many energy companies, being sustainable is no easy feat. The industry is, by its very nature, extremely carbon intensive. The exploration, drilling, extraction, processing and shipment of fossil-fuel-based products seem to pave the way for greenhouse gas emissions.
Perspective to date
Many large organizations have assessed the future challenges posed by climate change. Yet a majority of these organizations are just beginning to make strategic shifts to a lower-carbon future. Despite this, there are some that see opportunity in this new paradigm.
These are the companies that are starting to diversity and decarbonize their business models. Their plans, many of which started over a decade ago, are producing positive business results and providing a pathway to a profitable low-carbon future that stretches to 2050 and beyond.
France’s Total S.A. (Total) is the fourth largest publicly held oil and gas company in the world and a contributor to GHG emissions. Yet Total, a Top 100 energy leader, is also widely recognized among fossil fuel companies for its vision of a new clean-energy future and its progress in adapting a large, complex business for that future.
Total’s climate-related efforts can be traced back more than a decade, with its initial recognition of the challenges that climate change poses for a major energy company and the need to address them.
In 2006, Total was one of the first major fossil fuel companies to publicly acknowledge the importance of climate change as a global risk. Its initial efforts focused on implementing cost-effective approaches to reduce flaring gas emissions.
By 2008, Total led other major oil companies in systematic reporting of GHG and climate-related performance metrics, including product use, and included initial target setting for improvements in the company’s operational footprint.
In 2009, Total launched EcoSolutions, its low-carbon products and services portfolio. With a series of investments, including SunPower (solar), Saft (battery design), Stem (energy optimization) and BHC Energy (operational energy efficiency), Total committed to shifting its revenue base toward sustainable energy solutions.
In 2014, under the leadership of Patrick Pouyanne, Total’s Chairman and CEO, the company fully articulated its strategy to differentiate itself from other oil companies. Going forward, Total is building its future business on three strategic pillars:
1. Reducing the carbon intensity in its fossil fuel product mix
2. Investing judiciously in carbon capture, utilization and storage technologies
3. Expanding its business base in “renewable,” including production, storage and distribution of clean energy and biofuels
In 2015, Total exited the coal business.
Total’s 2016 reorganization had a strong focus on renewables and low-carbon energy solutions, setting policy support and goals aligned with the Intergovernmental Panel on Climate Change’s (IPCC) 2°C target.
If Total is to realize the full potential of its competitive advantage in the energy sector, it will need to continue to demonstrate viable decarbonization pathways consistent with the 2-degree boundary. This will require continued rapid growth of its EcoSolutions portfolio revenues and leadership among the oil companies as they address the potential challenge of stranded assets, oil reserves that could go unutilized or be “stranded” due to the evolving strategic climate landscape.
Reduced GHG Impacts
Total reduced emissions over the last three years well ahead of IPCC guidance, with an approximate 20 percent aggregate decline (or roughly 130 million tons) in total GHG emissions across all scopes. And while emissions declined, Total’s carbon intensity saw a 9.2 percent average annual rate of decline in GHG / BOE (greenhouse gas emissions/barrel of oil equivalent), between 2013 and 2016, or a cumulative decline of 27.5 percent from the baseline year of 2013. Both aggregate emissions and the GHG intensity of its footprint are falling significantly.
As Total continues to extend its climate impact with more renewable and low-carbon solutions, the increasing value of its transformed green-product portfolio is likely to significantly outpace the potential declining value of its traditional high-carbon products.
View the full GHG Global 250: A New Business Logic for more on Sustainability leadership in the 21st century.