Our key takeaway: We are in what is known as the ‘decisive decade’ when it comes to reducing our greenhouse gas emissions. Yet, the World Benchmarking Alliance (WBA) finds that “There has been little advance – and alarmingly even some decline – in oil and gas companies’ progress on limiting global warming to 1.5 degrees.” We know that around 80% of the sector’s emissions come from the use of oil and gas products. And we know that the sector’s only route to transition is phasing out fossil fuels (no new oil and gas expansion should occur beyond projects approved in 2021 and production must rapidly decline by the end of this decade - according to the IEA). And yet, the WBA finds that there is no sign that companies are slowing down extraction. To the contrary, the 81 oil and gas companies with extraction activities reviewed will increase total oil production by 9% from 2021, peaking in 2028. Over half of companies reviewed still link executive remuneration or incentives to the growth of fossil fuels. We know from the IEA what companies need to do to reduce their operational emissions (i.e.: tackling methane emissions, eliminating non-emergency flaring, electrifying upstream facilities with low-emissions electricity, equipping oil and gas processes with carbon capture utilisation and storage (CCUS), and expanding the use of green hydrogen in refineries.) And yet, the WBA finds that companies are not decarbonising fast enough within their direct operational emissions. Scope 3 emissions are not faring any better. The silver lining is that companies are taking social dialogue with workers and affected stakeholders more seriously than before. The WBA ends with a call to action: “World Benchmarking Alliance calls for rapid action from the oil and gas sector to ensure a just transition to a zero carbon future, with the need to see accelerated pressure from investors, policymakers and the public critical to hold the sector accountable.”
The World Benchmarking Alliance (WBA) has published its second Climate and Energy Benchmark. This benchmark measures and ranks the world’s 100 most influential oil and gas companies on their alignment to a low-carbon world. You can find the insights report here, the company rankings here, and the data set here:
- Lack of credible transition plans: WBA underscores that the “phase out of fossil fuels is urgently needed to limit increase in global temperatures to 1.5˚C. The IEA’s Net Zero Emissions (NZE) by 2050 Scenario has given a firm directive that no new oil and gas expansion should occur beyond projects approved in 2021 and production must rapidly decline by the end of this decade.” However, companies are not fixing a set date to phase out fossil fuels - rather they have “persisted in their expansion efforts.” In addition, oil and gas companies are not investing sufficiently in new low-carbon solutions and research and development. WBA reminds us that the IEA’s NZE Scenario by 2030 is that every 1 USD spent by companies on fossil fuels should be outmatched by 5 USD spent on clean energy supply and another 4 USD on efficiency and end users. Only one company – Neste – is currently investing enough to align with a credible transition plan.
- Direct operational emissions, and scope 3: The WBA finds that “[c]ompanies are not addressing their direct operational emissions, even when financially feasible decarbonisation solutions are readily available.” Most companies “are not reducing their operational emissions fast enough to limit global warming to 1.5°.” The WBA reiterates that five key levers listed by the IEA to achieve reduction in direct operational emissions: “tackling methane emissions, eliminating non-emergency flaring, electrifying upstream facilities with low-emissions electricity, equipping oil and gas processes with carbon capture utilisation and storage (CCUS), and expanding the use of green hydrogen in refineries.” When it comes to scope 3, the WBA finds that “most of the companies have not set targets that cover their scope 1, 2 and 3 emissions, meaning that the majority of emissions from this sector are still not covered by reduction targets.”
- Just transition ahead: The WBA finds that metrics related to social dialogue with workers and affected stakeholders have increased since the last benchmark in 2021, and “oil and gas companies seem to be strengthening their connection with workers and unions.” 35% of the companies reviewed “have public commitments to engage in social dialogue and 46% disclose the share of their workforce covered by collective bargaining agreements.” At the same time, 93% of the companies score zero on just transition planning. The WBA therefore calls on companies to “use these connections to workers and unions to plan for a just transition together.” All of this while continuing to conduct human rights due diligence.