business climate change corporate responsibility

Forcing change among the oil majors

“Energy is reinventing itself,” says the PR blurb, and “Total is becoming TotalEnergies“. Yes, that’s the French oil giant Total rebranding itself last week as “a broad energy company committed to producing and providing energies that are ever more affordable, reliable and clean.”

Fossil fuels remain part of that portfolio and they’re not pretending otherwise, so it’s not necessarily the greenwash some are going to accuse it of. It’s an acknowledgement that after the age of fossil fuels, we’re now in a more plural energy system. The name acknowledges that diversity, with a logo that hints at transformation.

What it reminded me of is BP’s restyling from British Petroleum to ‘Beyond Petroleum’ in the early 2000s. That was roundly scorned by the green movement at the time, and there clearly was an attempt to reset the public’s view of the company after some bad press. Nevertheless, in many ways it was ahead of its time. Under the leadership of Lord John Browne, BP had invested significantly in renewable energy and had pulled out of the tar sands. The plan was to expand renewable energy and improve efficiency so that the company’s emissions would level off even as it grew. While that would be inadequate today, it was then rather bold, and 20 years on there are oil majors nowhere near that kind of commitment.

It didn’t last of course. When BP ran into trouble after the Deepwater Horizon incident, it needed tens of billions to cover the liabilities. The new leadership sold off a host of ‘non core’ assets, including its pioneering solar power and biofuel projects, and consolidated around the more immediate profits of oil. The shareholders breathed a sigh of relief. Lord Browne could see further than they could, and neither the new CEO nor the shareholders were quite convinced about the energy transition.

That’s where this year’s changes in the oil companies are different. This time the shareholders are on board, and in many cases they are driving the change. Alliances of investors such as Follow This have forced significant changes at Chevron, Shell, BP and Exxon in the last couple of weeks.

Exxon is perhaps the most striking. An activist investor firm called Engine No 1 has deliberately targeted them with a strategic campaign called Re-Energizing Exxon. They argue that Exxon “has failed to evolve with the industry’s transition”, and if they won’t change themselves, they’ll force the change through shareholder action. This they did, putting forward four new board members at the recent AGM and getting three of them elected.

These are not climate activists. They are capitalists and they’re very clear about their motivations: “The energy industry and the world are changing. To protect and enhance value for shareholders, we believe ExxonMobil must change as well.”

This is a sign of how far things have come. It looked like BP was taking a risky gamble in jumping early into the energy transition. Now shareholders see an almost opposite risk: that of being left behind by the energy transition. Exxon is now being rebuked for not doing enough.

For some, this will vindicate the role of shareholder activism over divestment, which prefers to pull money out of destructive industries. I’ve always seen them as complementary, one pushing and one pulling, and this year their combined efforts have delivered serious change in the oil industry.

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