How can oil companies best respond to global competition and climate change? Keep up with competition by adapting your climate change strategy.
Don’t be blinded by your current state.
Local pressures shape corporate climate strategies. For example, European companies express more interest in image because Europeans show stronger public environmental concern than Americans. Yet, companies are also subject to international pressures due to the global nature of the oil industry.
Research by David Levy and Ans Kolk on multinational corporations finds tension between global integration and local influences. Their study, Strategic Responses to Global Climate Change, looks at how oil companies respond to global competition and climate change.
Convergence of Strategy with Local & Global Factors of Influence
Local factors and context influence initial actions, but climate change have started converging. Oil companies participate in a global industry with access to similar technology and markets. Companies are becoming more aware of competitor responses, international regulation, and climate science.
How Companies are Repositioning Themselves
The major oil companies (BP, Shell, and Exxon) acknowledge climate change as a threat and are adapting. Shell and BP have repositioned themselves as “energy companies” and are investing in renewables to improve their image and product acceptance. Exxon, known for opposing emissions regulation, has invested in fuel cells and recapturing carbon. Exxon has admitted climate risk is “widely recognized” and that doing nothing is “neither prudent nor responsible.” The company is also investing in energy efficiency and carbon capture for storage. Investing in alternative technologies and emissions reduction can help companies keep up in a changing global market.
Oil Companies Investing in Renewables
BP expects renewables to account for five percent of revenue by 2020, and 50 percent by 2060. Shell believes renewables will account for 30-40 percent of global energy by 2060 and has committed to invest $500 million mainly in solar and wind over five years.
Implications for Managers
Don’t by blinded by your existing – and locally influenced – threats and opportunities. Your country’s institutional frames may not help determine future market conditions.
Keep up with competition by adapting your climate change strategy:
Invest in renewables and technologies like solar, wind, fuel cells, photovoltaics, carbon sequestration and advanced batteries.
Set targets to reduce your company’s emissions.
Consider your role in the emerging emissions market.
Be attentive to changes in the global pressures from competitor actions, regulation, media and NGOs.
Implications for Researchers
Future research could examine whether similar pressures drive the climate change strategies of other business sectors. We also suggest research can follow how the oil sector continues to change in the medium to long term in response to climate change.
The paper by Levy and Kolk analyzes the strategies of four major oil companies in Europe (Shell, BP) and the U.S (Exxon, Texaco) in response to climate change and what pressures have the most influence. Data are taken from interviews with 16 senior managers responsible for strategy, public affairs and environmental concerns, as well as industry staff, government agencies and NGOs. Data are also taken from secondary sources.
Levy, David, & Kolk, Ans.(2002). Strategic Responses to Global Climate Change: Conflicting Pressures on Multinationals in the Oil Industry. Business and Politics, 4(3): 275-300.