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Oil Industry Climate Goals: Lots of Talk, Little Action

Oil and gas companies communicate about their ‘ambitious’ climate goals. But they are not taking nearly enough action.

Hannah Schupfer is a postdoctoral researcher at King’s College London, United Kingdom.

Many social movements are blaming fossil fuel companies for their impact on the climate crisis. Governments have also started putting climate goals on the agenda. How do fossil fuel companies respond to this increasing pressure? Are they actually taking meaningful action to stop climate change?

In my PhD studies, I was looking for the answer. With my supervisor, Dr. Birthe Soppe (University of Oslo and University of Innsbruck), I studied five Norwegian oil and gas companies, with a particular emphasis on one of the biggest (we’ll call them ‘OilCompany’ for privacy reasons.) I analyzed more than 250 documents from 2007 – 2021, including OilCompany’s reports and news releases, and documents from environmental organizations and industry associations. I also did 25 interviews with staff from OilCompany, its affiliated start-ups, and industry experts.

Through these documents and interviews, I examined the actions OilCompany has taken on energy production and how they communicated on the issue.

In 2015, external pressure for climate action skyrocketed. OilCompany started setting long-term emissions reduction goals, making small investments in renewable energy, and lowering the emissions from their own operations. They also started using a lot more climate-friendly language (described in detail below). 

But, OilCompany did not do what the world needs most – transition rapidly away from fossil fuel production. Oil and gas companies have the skills and infrastructure required for renewable energy production and distribution. However, even after 2015 oil and gas production still accounted for 96 – 99% of OilCompany’s total sales.

The reason for this? Profit. They can make more selling oil. And OilCompany isn’t alone. This pattern is happening globally.

This article will help climate-concerned investors and policymakers understand:

  1. Why oil companies matter in the fight against climate change.

  2. How corporate communication can exaggerate small actions.

  3. How to achieve greater action and transparency on climate change. 

Why Oil and Gas Companies Matter in the Fight Against Climate Change

Climate change is threatening the planet and requires us to cut greenhouse gas emissions quickly. In 2015, most countries in the world signed the Paris Agreement, agreeing to limit warming to well-below 2 degrees Celsius above pre-industrial levels. We still have a small possibility of achieving that goal, but it will require two things:

  1. Hitting global net zero by 2050 (meaning that any greenhouse gas emissions are balanced by removals.)

  2. Reducing emissions 50% by 2030.

Currently, burning fossil fuels (coal, oil, and gas) creates 75% of all greenhouse gas emissions. To drop emissions by 50% in the next 6 years, people must stop using these fuels quickly. That means oil and gas companies have a critical role to play. They must use their broader energy expertise to transition to renewable energy production, and leave their fossil fuel reserves in the ground.

Growing Pressure in Norway’s Oil and Gas Industry

Norway’s oil and gas industry was the perfect place to explore how companies respond to climate pressure. The oil and gas industry here is well developed, accounting for 12% of the country’s GDP. Norway provides 20-25% of the European Union’s gas.

But companies are facing growing pressure to contribute to climate change solutions. This pressure ramped up in 2015, when Norway signed the Paris Agreement and its Green Party achieved its best ever election results in Norway’s capital city. In 2019, the Norwegian Oil Fund, which is one of the world’s wealthiest and most powerful investment funds, also committed to stop funding fossil fuel exploration and extraction.

I wanted to know how companies were responding to that increased pressure.

Little Short-Term Action on Climate Change

OilCompany has started to expand its activities in renewable energy. The company signed offshore wind projects in various countries, increased collaboration with sustainability entrepreneurs, and set stronger goals for climate impact. The expansion of renewable energy is an industry-wide trend and leading oil companies have joined to set up clean energy projects.

However, OilCompany and other oil and gas firms are adding renewable energy in addition to their existing oil and gas business, rather than as a replacement. To meet the goals of the Paris Agreement, a radical phase-out of fossil fuels is critical. Simply adding ‘more good’ will not reduce the harm. 

How Corporate Communication Can Exaggerate Small Actions

In 2015, OilCompany started communicating a lot more about climate action. I found that OilCompany used four strategies to communicate about climate action without being clear about the (often small) scale of the action. This language became pervasive.

For example, in its public communications about new oil and gas investments (yes, they are still investing in new oil and gas development), such ‘climate-friendly’ language accounted for none of the content in 2014, 13% in 2015, and 67% in 2022.

Investors and policymakers can look for the four strategies below when interpreting oil and gas corporate communications.

(There are better ways to communicate about sustainability action. To learn communications best practices, see NBS’s Sustainability Reporting Playbook.)

Four Strategies that Hide Insufficient Climate Action

4 strategies that hide insufficient climate action

1. Long-term goals without short-term action

OilCompany emphasized ambitious long-term goals, without short-term goals. This isn’t a realistic path for reaching net zero.

For example, OilCompany committed to achieving net zero by 2050, including phasing out oil and gas production. In 2020, they said: “OilCompany today announces its ambition to become a net-zero energy company by 2050. … It sets a clear strategic direction and demonstrates OilCompany’s continued commitment to long-term value creation in support of the Paris Agreement.”

The language is grand, but the details matter. OilCompany’s short-term goals fall far short of what’s needed for Paris Agreement targets. The company’s 2030 emissions goals cover only emissions from their own production, with nothing about Scope 3, including the biggest source of their emissions – customers burning oil and gas.

2. Measurements that can’t be compared

OilCompany also blurred the small scale of their climate action by using metrics without an appropriate comparable. Understanding the scale of new action requires comparing it with existing actions or other benchmarks. For example, in the excerpt below, OilCompany describes its investment in renewable energy, but doesn’t acknowledge that renewables will still account for only a small amount of its total energy sales:

“To develop OilCompany as a broad energy company, renewables will be a significant growth area. OilCompany…expects a production capacity of 4-6 Gigawatts (GW) by 2026 and 12-16 GW by 2035.”

The company hopes to nearly triple its renewable energy production in 10 years. At this rate, renewables will still account for less than 15% of total sales if no new oil and gas resources are added. This is misaligned with Paris Agreement goals.

Companies should say how much of their total production will move to renewable, rather than to how many Gigawatts of energy capacity it will add. Similarly, it’s more informative to know what percent of total emissions a company will cut, than to know how many tonnes of carbon dioxide emissions it will save.

3. Describing fossil fuels as ‘low carbon’

OilCompany uses the term ‘low-carbon’ to describe some of its fossil fuel use, like natural gas production or efficiency improvements in fossil fuel technology. Natural gas is definitely less polluting than coal and oil. But fossil fuel production is still misaligned with the goals of the Paris Agreement.

Consider this excerpt from a 2021 OilCompany press release: “Oil will remain an important part of the energy mix for the long term. We will, however, minimize our impact on the climate through our strategy of exploring high-value, low-carbon resources.

The term ‘low-carbon’ is only meaningful if the actual impact on carbon emissions is described. For example, OilCompany could say: “These low-carbon resources have led to a X% reduction in our total carbon emissions.” The actual emissions reductions by OilCompany in this example are likely small.

4. Saying fossil fuels are necessary for thriving 

I found that OilCompany used society’s rising energy demand to justify the continuation of fossil fuels. This is a misleading claim, and it’s problematic because oil companies have an influential voice. This message can confuse consumers, investors, and policymakers, fueling broader inaction.

It’s true that we cannot phase out fossil fuels from one day to the next. Fossil fuels supply about 80% of the world’s energy. But renewable energy is now reliable and affordable, and we could transition to renewables much more quickly than we are. Oil companies can use the time we have to address climate change more responsibly. They can set stronger, industry-wide emission reduction goals, and set the ground for fossil fuel phaseout.

Achieving Greater Action and Transparency on Climate Change

My research shows there’s one main reason oil companies don’t drop oil production and shift to renewables: Profit.

While renewable energy is profitable, it’s not as profitable as oil and gas. Interviewees talked openly about needing to make profits, and not being able to do something just because it is sustainable.

Companies face pressure from governments, consumers, and investors to take action on climate change. Yet, they also face pressure to generate large shareholder returns. As a result, they continue to maximize profits by selling oil and gas, while adding small amounts of renewable energy and lots of green communication to satisfy sustainability pressures.

But investors and policymakers can lead companies in a more sustainable direction.

Investors can demand fossil fuel divestment and transparent carbon reporting using a recognized standard. For example, in 2019, a Norwegian wealth fund divested from companies exclusively dedicated to fossil fuel extraction, which motivated OilCompany to restructure and grow its investment in wind power generation. Similarly, Barclays recently required its energy clients to have clear decarbonisation targets and strategies.

Good policy can also accelerate corporate action and transparency. Government policy can financially support the scale of renewable energy technology, or mandate the phase out of fossil fuels. Regulations can also mandate corporate sustainability reporting, using internationally recognized standards for more transparency and comparability.

Human Desire and the Climate Crisis

During my PhD, I saw big interest in sustainability. I saw practitioners, researchers, and students who put their hearts into having a positive impact. I saw people working in the energy industry to drive renewable energy. I saw workers who refuse to join an oil and gas business.

There is a strong human desire to tackle the climate crisis. We just need to move from long-term goals to short-term actions, and work together to create industry-wide change.

Ivey/ARCS PhD Sustainability Academy

Hannah’s research won a best paper award at the 2023 PhD Sustainability Academy, co-hosted by the Ivey Business School and Alliance for Research on Corporate Sustainability (ARCS), and directed by Dr. Oana Branzei. The event convenes 15 promising PhD students, mentored by senior researchers in sustainability. Participants come from multiple disciplines and use diverse approaches

About the Author

Hannah Schupfer is a postdoctoral researcher at King’s College London, United Kingdom. She is currently doing research on sustainability and corporate purpose. Hannah won the 2023 Ivey-ARCS PhD Academy Best Paper Award for her research on the response of oil and gas companies to rising sustainability pressures. She conducted her PhD at the INTRANSIT research centre, University of Oslo, Norway.

She also has a master’s degree in Organization Studies from the University of Innsbruck, Austria, and a bachelor’s degree in International Business Administration from the University of Vienna. Prior to arriving at the University of Oslo, Hannah worked in the public sect

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  • Hannah Schupfer

    Hannah Schupfer is a postdoctoral researcher at King’s College London, United Kingdom. She is currently doing research on sustainability and corporate purpose. Hannah won the 2023 Ivey-ARCS PhD Academy Best Paper Award for her research on the response of oil and gas companies to rising sustainability pressures. She conducted her PhD at the INTRANSIT research centre, University of Oslo, Norway. She also has a master's degree in Organization Studies from the University of Innsbruck, Austria, and a bachelor's degree in International Business Administration from the University of Vienna. Prior to arriving at the University of Oslo, Hannah worked in the public sector.

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