Internal vs external challenges in climate action

𝗕𝗮𝗰𝗸 𝘁𝗼 𝗣𝗲𝘁𝗿𝗼𝗹𝗲𝘂𝗺? 𝗥𝗲𝗳𝗹𝗲𝗰𝘁𝗶𝗼𝗻𝘀 𝗼𝗻 𝗕𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗠𝗼𝗱𝗲𝗹𝘀 𝗮𝗻𝗱 𝘁𝗵𝗲 𝗘𝘃𝗼𝗹𝘃𝗶𝗻𝗴 𝗥𝗼𝗹𝗲 𝗼𝗳 𝗜𝗻𝗰𝘂𝗺𝗯𝗲𝗻𝘁𝘀 𝗶𝗻 𝘁𝗵𝗲 𝗘𝗻𝗲𝗿𝗴𝘆 𝗧𝗿𝗮𝗻𝘀𝗶𝘁𝗶𝗼𝗻 Back in 2022, I wrote my first published paper exploring how incumbent oil and gas companies could carve out a role in the hydrogen economy. This article was shaped by my own experience. Having started my career in oil and gas, it was clear — even then — that the biggest challenge for incumbents wasn’t deploying technology (if there’s one thing O&G does well, it’s building big things). 𝗧𝗵𝗲 𝗿𝗲𝗮𝗹 𝗰𝗵𝗮𝗹𝗹𝗲𝗻𝗴𝗲, 𝘁𝗵𝗲𝗻 𝗮𝗻𝗱 𝗻𝗼𝘄, 𝗶𝘀 𝘄𝗵𝗲𝘁𝗵𝗲𝗿 𝘁𝗵𝗲𝘆 𝗰𝗮𝗻 𝗱𝗲𝘃𝗲𝗹𝗼𝗽 𝗻𝗲𝘄 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗺𝗼𝗱𝗲𝗹𝘀 that reflect the very different economics and customer dynamics of low emissions markets, rather than trying to make them fit within existing portfolios. This week, BP’s strategic reset brought many of these themes back into focus, as the company announced a renewed emphasis on oil and gas alongside a slowdown in renewables investment, including pausing some of Australia’s largest hydrogen projects. There are, of course, many external pressures influencing decisions like this; changing geopolitical dynamics, energy security priorities, policy uncertainty, and unanticipated competition from agile, pure-play renewable developers with very different risk appetites. What struck me back in 2022 — and what I still see playing out today — is how much these 𝗲𝘅𝘁𝗲𝗿𝗻𝗮𝗹 𝗽𝗿𝗲𝘀𝘀𝘂𝗿𝗲𝘀 𝗲𝘅𝗽𝗼𝘀𝗲 𝘁𝗵𝗲 𝗶𝗻𝘁𝗲𝗿𝗻𝗮𝗹 𝗰𝗵𝗮𝗹𝗹𝗲𝗻𝗴𝗲𝘀 incumbents face when applying traditional oil and gas business models to new energy markets. The performance metrics, risk appetite, capital allocation processes, and internal culture optimised for hydrocarbon value chains rarely translate to the decentralised, customer-driven, collaborative ecosystems emerging around hydrogen, renewables, and industrial decarbonisation. This isn’t about any single company - it’s a structural challenge for the whole O&G sector as it looks ahead to relevance in a net-zero future. If the sector wants to play a long-term role in low-carbon markets, 𝘁𝗵𝗲 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗺𝗼𝗱𝗲𝗹 𝗰𝗵𝗮𝗹𝗹𝗲𝗻𝗴𝗲 𝗰𝗮𝗻’𝘁 𝗯𝗲 𝘁𝗿𝗲𝗮𝘁𝗲𝗱 𝗮𝘀 𝗮𝗻 𝗮𝗳𝘁𝗲𝗿𝘁𝗵𝗼𝘂𝗴𝗵𝘁. Developing fit-for-purpose investment frameworks, establishing clear separation between core and emerging businesses, and embedding business model innovation as an ongoing capability will be essential. Balancing short-term shareholder expectations with long-term relevance is difficult — but without tackling these internal constraints, it will become increasingly difficult to participate in markets where traditional business models simply don’t fit. If you’re interested, you can read my original 2022 article here (https://lnkd.in/gZWZDe3t) — or feel free to reach out if you’d like to discuss this further.

Internal and external drivers of sustainability ROI 🌎 Sustainability is increasingly recognized as a strategic priority, with clear business drivers influencing internal operations and external market positioning. The ROI of sustainability can be assessed through seven key drivers that connect operational excellence with market expectations, highlighting its role as a value-creation mechanism. Internally, sustainability supports operational efficiencies and innovation. Streamlining resource use not only reduces costs but also reinforces responsible practices. Purpose-led workplaces improve retention and engagement, contributing to productivity and team cohesion. Ambitious sustainability objectives drive innovation, enabling the development of new products, services, and business models aligned with emerging demands. Externally, market dynamics and compliance pressures shape sustainability's relevance. Meeting evolving regulatory standards avoids penalties and unlocks incentives. Investors increasingly prioritize ESG metrics, influencing access to capital and valuation potential. Demand for responsible products and services continues to grow, driven by shifts in consumer and client preferences. Resilience and accountability emerge as critical enablers of sustainability integration. Governance structures that emphasize transparency and data-driven decisions reduce risk exposure and enhance stakeholder trust. Collaboration across value chains ensures stable operations while supporting ethical and sustainable practices. These elements strengthen competitive positioning and safeguard long-term business viability. Sustainability is no longer a compliance exercise but a strategic framework for navigating complexity and unlocking value. By addressing internal and external drivers holistically, organizations can position themselves to lead in an increasingly interconnected and sustainability-driven global economy. #sustainability #sustainable #business #esg #climatechange #ROI

Businesses once seemed keen to tout their ESG credentials, but many no longer view sustainability as a priority. What’s gone wrong – and how can it be fixed asks Amy Nguyen in Raconteur | B Corp™. María Mendiluce is CEO of the We Mean Business Coalition (WMBC). She believes “governments should work more closely with leading businesses to remove the barriers to the energy transition and the regeneration of nature.”   Impact of external factors  In some instances, trade policy has contributed to the sustainability slowdown. Frederic Hans senior policy adviser at the NewClimate Institute think-tank, points to the electric vehicles (EV) industry, for example. Moreover, regulations in ESG reporting may not be having the desired effect in the near term. Rick Benfield says regulations such as the EU’s Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive have led to increased number-counting to meet reporting requirements but have failed to motivate broader stakeholder engagement. Internal pressures, particularly to deliver financial performance, are also impeding the focus on sustainability. How to renew the focus on sustainability So how can firms get back on course and elevate sustainability on the list of priorities? They must first recognise the magnitude of the task at hand. “As we shift from higher-level pledges to real-world implementation, following through on net-zero commitments with the right strategies and planning can be difficult,” Hans says.  Organisations must first fully integrate sustainability into their business and set clear KPIs. Similarly, Benfield recommends giving equal weight to climate and social-related targets, as much as financial ones. It is important, however, that leaders are comfortable with a degree of uncertainty and failure. Mendiluce says: Managing board expectations on realistic timelines to achieve sustainability targets is also important, as is communicating how climate risk can threaten current and future productivity, revenue and innovation. Hans points to the opportunities peer learning can present, especially on measuring and reducing scope three emissions along the value chain. “Working with others gives these companies a chance to influence and steer actions, especially in developing solutions for scope three,” he says. Last is lobbying and advocating for broader market regulation that can help to drive the energy transition. Mendiluce argues that “true leaders are able to navigate short-term pressures, overcome market barriers and hold course on their strong long-term vision.” read more below: Raconteur | B Corp™ #leadership #futureleadership #responsiblebusiness #sustainability #newleadership #systemschange #regenerativebusiness #ESGs #measurement #chiefsustainabilityofficer #peerlearning https://lnkd.in/enrAdb4D

Surprisingly, C-suite executives and managers across regions and sectors all believe their company makes more progress in advancing social issues than on climate and nature goals. They also widely see the lack of financial incentives as a big brake on their companies’ sustainability progress. Although the 1475 C-suite members and managers ERM recently surveyed saw the lack of financial incentives tied to sustainability performance as the biggest single barrier to their companies’ progress, the other top hurdles were primarily external, such as unavailable or too expensive technology and insufficient forceful regulations. At the same time, executives and managers look at internal solutions to accelerate sustainability progress, with the introduction of better staff training and widespread sustainability-tied financial incentives being tipped as actions with the highest potential. Counterintuitively, these are also solutions that companies are relatively slow to implement. Read our survey report for detailed data, insights, and recommendations: https://lnkd.in/dJDEySJ5 #ESG #sustainbility #transformation