Dear Colleague,

What a year it has been, with Covid continuing, supply chains disrupted, the shocking invasion of Ukraine, and the return of inflation levels not seen in 40 years. Throughout, we’ve had the continued honor and pleasure to work with you, our clients across the energy and natural resources (ENR) sectors, on your most important issues. We believe these are the world’s most important issues, and we’re grateful for the opportunity.

This is our second annual report on the energy and resource transition, and our chance to share with you what we’re seeing and learning in our work and research. As we highlighted last year, we see three themes framing our work with you.

• Innovation. Harnessing transformative technologies and practices will help companies continue to thrive while preserving the planet for future generations.
• Impact. Working with customers and other stakeholders has never been more important to ensure that companies maintain the social license to operate complex businesses in our communities and fragile environments.
• Economics. Funding these transitions demands new levels of investor management and regulatory engagement. Companies will need to create extraordinary economic value to draw the capital and access the resources necessary to tackle these challenges.

This year’s report includes new proprietary data and analysis from several Bain research initiatives, to better understand the depth of our collective ambition, the progress we’re making, and the challenges we still face. The findings make us cautiously optimistic. ENR companies are investing as much in innovation and impact, combined, as they are in economics—a good sign that executives are investing in the future. Fewer than 15% of capital investment decisions are characterized as made solely on an economic basis. The large profits that some energy companies earned during the first months of 2022 are likely to sharpen focus on capital decisions, as executives work to get the balance right between funding the current business, investing in the future, and rewarding shareholders.

The report has three sections:

• Data-based insights. Our surveys of more than 1,000 executives, a new database tracking the investment decisions of the top 125 ENR companies (covering more than $6 trillion in market capitalization), and more than 30 hours of interviews with investment professionals give us a full-spectrum view of the energy and natural resources sector’s intent, actions, and reactions.
• Meaningful trends. We take a closer look at three critical areas where developments are reshaping the way ENR companies approach their business: talent management, engaging with stakeholders, and circularity.
• Essential capabilities. We report on the evolving nature of five critical capabilities essential to navigating the transitions underway. These include flexible and more nimble strategies, an openness to M&A and partnerships, and new perspectives on operations, inflationary pricing, and sustainability.

Based on our work with clients and observations of the dramatic progress made by the readers of this report over the past year, we’re sanguine about the outlook for the value to be created and the contributions to be made in the ENR space in the coming decades. It will surely continue to be a challenging ride, but we look forward to continuing to work with you and continuing the discussion.