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Oil and Gas Companies Lag Far Behind Other Firms on Emissions Cuts

Eight of the 11 domestic energy companies on the Fortune 100 haven't set greenhouse gas reduction or renewable energy goals, a report finds.

Jan 3, 2013
Valero is one of the U.S. oil companies that hasn't set internal greenhouse gas

Recognizing the impact of global warming—or perhaps just looking for a little positive press—large corporations are adopting internal greenhouse gas reduction and renewable energy goals.

Noticeably underrepresented? Oil and gas companies.

A report released last month by the World Wildlife Fund (WWF) showed that 58 of the country's Fortune 100 companies set goals in 2012 to either use more renewable energy for their operations or reduce their greenhouse gas emissions. Globally, the number of participating companies was even higher—68 of the world's 100 largest companies have set some sort of greenhouse or renewable energy goal.

But energy companies lagged behind on both lists. Eight of the 11 domestic energy companies on the Fortune 100 haven't set internal energy goals. The exceptions are Hess and Chevron, which both set renewable energy and greenhouse gas targets, and ExxonMobil, which set a greenhouse gas target. (Hess was accidentally omitted from the report, according to a WWF spokesman.)

Eleven of the 20 energy companies on the global list hadn't set targets, the lowest participation rate of any industry.

The report was produced by WWF, Ceres and Calvert Investing, and is the first in a series of reports that will look at sustainability in business. Ceres is a coalition of large investors and environmental groups that promotes sustainability in the business community. Calvert Investments is a Maryland-based mutual fund company that invests in socially and environmentally responsible companies.

"The industry is quite technologically advanced, but it just hasn't prioritized that innovation in a way that's commensurate to approaching the challenge of climate change," said Andrew Logan, director of the oil and gas program for Ceres. "Not only is this possible, it's necessary. If the world is going to address climate change, the oil industry is going to have to come along, either willingly or kicking and screaming."

The world's largest companies have begun setting environmental goals for a variety of reasons—policy pressures, public relations or simply an acknowledgment that renewables might someday be cheaper than, or at least competitive with, oil and gas.

Three quarters of the nation's industrial companies now have some sort of environmental target, led by Caterpillar's goal of using 20 percent renewably energy in its operations by 2020 and reducing 25 percent of its emissions in that time. Sixty percent of the "consumer staples" businesses, including Procter & Gamble, have renewable energy or emissions goals.

The challenge for companies that produce fossil fuels, of course, is that the very products they're selling contribute to climate change, so moving towards renewables would seem to be a foolish business move.

"Admitting that there's a climate problem is like admitting that your product has a problem," said Marty Spitzer, the World Wildlife Fund's director of U.S. climate policy. "Maybe there's an irrational fear that setting goals for their internal operations somehow undermines their business model."

But Spitzer said energy companies can reduce greenhouse gas emissions without killing their own business, by cutting emissions associated with their internal operations and the electricity they purchase.

Emissions are generally separated into three categories or "scopes." Scope 1 emissions are direct emissions, resulting from internal operations, which for oil and gas companies can include extraction and refining. Scope 2 emissions are associated with the electricity a company buys.

Reducing these types of emissions can be easier than trying to reduce Scope 3 emissions, which are associated with the use of the industry's final products, Spitzer said.

"I think there's a really good case for companies setting goals for Scope 1 and Scope 2, because it's just about efficiency," he said.

The oil and gas sector is directly responsible for 6 percent of global carbon dioxide emissions, according to a 2010 report by McKinsey & Company. A new campaign by climate advocates says fossil fuel companies must keep 80 percent of their carbon reserves in the ground to prevent uncontrollable climate change.

Spitzer said that even a modest 5 percent reduction—below the goal many other companies have set—could have a major impact on the world's emissions.

Chevron, ExxonMobil and Hess have made a stab at it.

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