Big Oil and Big Changes

The past weeks have been incredibly important for the oil and energy industry globally. With ExxonMobil’s board changing drastically on the 26th of May and Shell being ordered to cut emissions significantly on the same day, one must take a step back to comprehend what this means for the industry and for the environment.

Fight against climate change

Oil and Energy Industry: ExxonMobile and Shell

Background

ExxonMobil is one of the largest oil and gas companies in the world, as well as a very prominent company in history, as it descended from Standard Oil founded by John D. Rockefeller. Its revenue is amid the biggest in the world for the oil industry and it is by far the largest culprit of greenhouse-gas emissions amongst other oil giants. Despite being the biggest in the game, the company has been criticised for its lack of appreciation for environmental aims, not to mention its controversial ex-CEO, Lee Raymond, who does not believe in global warming and regularly spoke out against efforts to combat it. The company has had its fair share of environmental controversies in the past, such as the 1989 oil spill in Alaska, which is believed to be one of the biggest in the world, as well as leading climate change denial research.

Shell, on the other hand, is a noteworthy multinational in Europe. The Anglo-Dutch company has been hugely successful and is the biggest company by revenue that is based in Europe. Just like any large oil company, Shell has also had a few faux-pas in its environmental record but is generally rated far more highly in that regard in comparison to ExxonMobil. Extreme issues with its pipelines in Niger Delta, however, have caused its emissions to be called into question in the Netherlands. Protests by the likes of Amnesty International and Friends of the Earth have led to the results below. Shell had agreed to cut its emissions by 20% by 2030 and reduce them to net-zero by 2050. This, however, was not convincing enough for the Dutch court.

What actually happened?

This week, ExxonMobil faced an unprecedented change to its board, as two of the candidates elected, Kaisa Hietala and Gregory Goff, come from a hedge-fund focused on carbon-reduction, Engine No.1. ExxonMobil had previously started investing into sustainability projects which, it is theorised, was due to the impending threat of its board changing. As stated above, the company has traditionally had a very dismissive and antagonistic approach to climate affairs, so these efforts were considered very unexpected. A few aspects of this change to Exxon’s board stand out as quite remarkable. Firstly, Engine No.1 is a hedge-fund which was founded in December 2020 and has managed to get 2 (and a possible 3rd) members on the board of one of the biggest companies in the world. This is thanks to some very powerful and wealthy allies (large pension funds, such as CalPRS and CalSTRS) backing Engine No.1’s campaign, as well as its focus on a carbon-reducing strategy. Additionally, the fact that Exxon’s board changed practically against its will is another exceptional development. It is an indicator to similar companies that their boards can change against their will.

In Shell’s case, the Dutch court decided that it needs to cut its emissions by 2030 by 45% rather than 20%, something which Shell is expected to launch an appeal against.  The ongoing court case brought by Friends of the Earth was launched in 2019 over an oil spill affecting Nigerian farmers. This is a major move from the Dutch court which is enhanced by the recent decision of the Australian court, where a minister was held to have a duty of care to protect young people against climate-related harm. Similarly, the Dutch court found that Shell’s current policy was not adequate for the standard of care set by Dutch law. It seems like the focus on affordable and clean energy (UN Sustainable Development Goal 7) and climate action (Goal 13), are in the forefront of some very powerful bodies’ approaches.

These developments indicate one thing above all else: a focus on carbon reduction and climate change is inevitable and indispensable for any company in the oil and energy industry in the 21st century.

By Alexandra Bjornstad