ESG Focus – How businesses can create an energy transition strategy
With energy supply and sustainability leading the agenda at the last International Energy Week and continuing to be key in 2023, businesses look at reducing emissions and guaranteeing energy security.
The energy market has experienced immense volatility in recent months. European gas prices peaked at over €300 per megawatt hour in 2022, up from €50 in August 2021 (data on European gas prices sourced from European Gas Hub). Despite this, we saw a continued rise in demand for gas and global carbon emissions reached an estimated 40.6 billion tonnes (2022 Global Carbon Emissions sourced from NOAA Research News).
Promisingly, there was a shift towards renewables. Research from Bip found that the total investment by the Oil & Gas sector in renewables rose to $17 billion in 2022, almost 6 times the rate of 2019. Representing a 5.2% investment of capital expenditure compared to 2019’s 0.7% (figures on capital expenditure by the oil & gas sector sourced from internal Bip data).
With energy supply and sustainability leading the agenda at International Energy Week 2023 at the beginning of March and continuing to be key in 2023, Carlo Capé, Co-Founder and CEO of Bip and BIP UK, has outlined three key focal points for businesses aiming to reduce emissions and guarantee energy security.
1. Base your targets on data
It has been a consistent pitfall of climate change policy that businesses’ energy related pledges and targets do not reflect the reality of their energy usage. Ambitious goals can often be made without a strong foundational understanding of an organisation’s current emissions and the drastic change needed to meet such targets, or even net-zero.
For an effective solution, businesses must collect and analyse data properly to understand how they use energy and its corresponding emissions, and these findings must be visible and understood at a board level. Only once data is foundational for your business’ energy transition plans targets and metrics can be reliably made. These targets form the basis of the roadmap for improving emissions. Without these metrics, a business is flying blind and risks falling behind on the basic requirements on climate reporting.
2. Fail to plan and you plan to fail
Having a reliable framework in place for a business’ energy transition which can be followed internally, and reflects the goals of the wider world, will be crucial for its success. These are often complex and many businesses may need support to ensure plans are achievable in both the short-term and long-term.
The end goal, whether it’s reducing a business’ emissions or its exposure to energy insecurity, will be rooted in data and backed with clear evidence for gauging success. From kick-off, your transformation team should know exactly what success looks like and will be prepared to alter legacy processes which conflict with the end goal. Critical decisions should be well-defined, with each team member empowered to make the necessary calls.
3. Embed a company-wide commitment to ensure success
While a dedicated transition department, or external support, which is responsible for a company meeting its sustainability goals is important, strategies must be embedded within the entire company for it to work. Recommendations on the reporting and measurement of emissions, the collection of data or corresponding roadmaps, for example, are nullified if policies cannot be applied across an entire organisation.
Changes of this scale begin at the board level, but their success is guaranteed with company-wide application. A coordinated approach which is layered to the very foundations of the organisation will mean your desired energy policy is factored into every decision-making process.
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