Energy & Natural Resources Report
In conversations with our clients over the past year, we’ve seen a marked shift in what the energy and resource transition means for their businesses. Not so long ago, the energy transition was a set of challenges that could compromise long-term strategic planning. Over the past 12 months, the change-oriented executive teams we work with have moved from just thinking about the challenges to taking action along a path they now see with greater clarity. However, after an optimistic start, many are beginning to hit heavy traffic as they grapple with the increased complexity of delivering on ever greater resource needs with a green footprint.
To quantify what we’re seeing, we surveyed more than 1,000 client executives across the energy and natural resources sector. We wanted a better understanding of their views on the energy and resource transition; new technologies and opportunities; and where they see environmental, social and corporate governance (ESG) challenges in addition to decarbonization. The results confirm many of the trends we see, with more richness.
- Industry is moving more quickly than policy.
- Executives expect their companies to reduce carbon dioxide emissions 28% by 2030.
- On average, they expect the world to reach net zero by 2057.
- Most are more bullish about their own companies’ decarbonization, compared with what they expect from peers and the world at large, which might indicate a greater commitment than the outside world can see.
- Half of oil and gas executives expect their core business to decline in the next 10 years. And 72% of O&G respondents believe they’ll have a new growth business that will complement (62%) or replace (10%) their core by 2030.
- Across sectors, companies now report allocating 23% of their capital to new business ventures, mostly in response to the energy and resource transition, up from 16% when asked in 2020. If this trend continues, it suggests many could reach net zero well ahead of 2050.
- And, they expect it to make a difference: just under half expect their companies to be “materially different” by 2030, up from 36% in 2020.
- Most are still struggling to figure out business models for their new businesses that will deliver adequate returns, attract talent, and strengthen their organizational capabilities.
- Compared with their European counterparts, North American oil and gas respondents are nearly twice as likely to be delaying investment in new business areas due to policy and regulatory uncertainties.
- The data also reveals a growing consensus that, in light of these many challenges, the transition will be disorderly.
In the data that follows, we dive into these topics. The results represent a global view of our clients’ perspectives, with responses from 45 countries across three major regions: the Americas; Asia-Pacific; and Europe, the Middle East, and Africa. At least 10% of the responses come from each of these five sectors: oil and gas, utilities and renewables, mining, agribusiness, and chemicals. This data also covers a range of perspectives within companies. Just over half of responses came from vice presidents or higher, including C-level executives and board members, with the rest from individual contributors and frontline management. From these responses, we see excitement and ambition across the board, with individuals having greater faith in their firms’ abilities and plans than the market at large.
However, the data underlines that there’s still a tremendous amount of ground left to cover. And as executive teams ramp up to deliver even more output, some are finding it challenging to square the traditional demands of their business—delivering products safely, securely, reliably, and affordably—with new demands to operate more sustainably and with a smaller carbon and ecological footprint. For example, within the utilities sector, greater competition has squeezed returns from renewables, and the importance of grid reliability has become clearer with intermittency issues in Texas and Europe. Consumers around the world are feeling the pain of high energy costs. As companies try to succeed in new markets, they’re facing new challenges such as finding the right talent and navigating the policy regimes.
Our survey provides keen insight into what’s on the minds of energy and resource executives as they navigate difficult and disrupted paths through the energy and resource transition. Their views show evidence of positive trajectories for investment, technology, and new business growth, but also highlight the need for more attention on how to deliver, as well as the sometimes-fragile link between policy and providers.