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Greening companies: what’s at stake?


About this ThinkIn

IN PARTNERSHIP WITH BP

Businesses know they have a role in accelerating the energy transition: most FTSE companies have climate targets, and 197 countries have signed the Paris Agreement. But ultimately to meet the Paris goals the world cannot just rely on green companies alone. Companies – like countries – all have different starting points. Industry, energy and transport produce the single largest share of carbon emissions at 70% of the global total.Their progress in cutting emissions is critically important. So what role can these ‘greening’ companies play in the transition to net zero? How can they be transparent and demonstrate progress? And ultimately how do we ensure that our journey to net zero doesn’t stall?


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The Readout

We convened this ThinkIn on a cool June evening in northern Europe while the Pacific Northwest baked under a heat dome. Temperatures pushed 50 degrees C in British Columbia. Dozens were dying of heat stroke in a meteorological anomaly that – but for climate change – would be expected once in a thousand years.

The climate emergency is upon us. Can big private sector emitters be part of the solution? For those calling themselves greening companies there are obvious answers to the question of what’s at stake. The health of the biosphere is at stake, and so is the type of new energy infrastructure we build in it. 

But the language we use to conduct this debate is itself up for debate. So, what is a greening company?

The proposal

Alan Hayward for BP – which has popularised the term – offered three basic requirements:

  • a commitment to the Paris Agreement and to making its goals a reality;
  • credible plans to reach net zero CO2 emissions by 2050 at the latest; and
  • transparency about those plans.

There’s a “big ask” at the heart of the concept of a greening company. It’s a request for patience – from investors used to consistently high returns from oil and gas companies, because returns on capital as they transition to renewables will be lower than they’re used to; and from society at large because the plan is to fund the transition by continuing to produce fossil fuels.

But there is also a big offer: scale. The “greening” argument holds that only big energy firms making the transition can meet the planet’s energy needs as they do so. Large-scale wind and solar will be integral to humanity’s future, but “pure green plays” alone won’t deliver the power to get us there. 

The critique

Chris Goodall of Carbon Commentary accepted that the legacy energy business has vital experience in project management, capital allocation and risk assessment. But, he said, it’s moving far too slowly. The gradualism inherent in the idea of greening is no match for the urgency of the moment. A 40 per cent cut in total CO2 emissions by 2030 “is simply not fast enough” when continental landmasses are drying out much earlier than expected. Instead of progressive change, the change has to be aggressive, disruptive and unafraid of risk. That might have scared investors as recently as a year ago, but there’s growing evidence that a failure to move fast – and break things if necessary – is what would scare them now.

“Pension funds are beginning to realise the true dimensions of the global warming crisis.”

The alternative

Not all big companies are big emitters. Microsoft has the luxury of a modest carbon footprint considering its revenues. It has pledged to be carbon negative by 2030 including across its entire supply chain, and, by mid-century, “to have taken responsibility for all the carbon we have emitted into the atmosphere since we were incorporated in 1975”. So says Glen Robinson of Microsoft UK, which hopes to keep its promises by

  • requiring more transparency of its suppliers in terms of their emissions;
  • using an internal carbon price to incentivise them to emit less;
  • offsetting what can’t be cut; and
  • investing in carbon capture and other technologies that haven’t been invented yet.

Could / should this approach be adopted by the public sector? It’s a good question and one we’ll seek to answer. But decarbonising supply chains is a second-order challenge for the energy and extractive sectors, which need to decarbonise their own products and operations first. For them, there were the beginnings of a to-do list:

  • Embrace a worldwide carbon price to incentivise carbon-neutral and carbon-negative technologies.
  • Scale up carbon capture technologies to bring the effective price of a tonne of captured CO2 below $100.
  • Branch out into soil science, to realise the full potential of regenerative agriculture by transforming the world’s farmland from a carbon source to a carbon sink.

With your help, we’ll keep adding to this list.

editor and invited experts

Giles Whittell
Sensemaker Editor

Alan Haywood
SVP, ESG Transformation

Chris Goodall
Businessman, author and energy expert

Glen Robinson
National Technology Officer for Microsoft UK