"2023 Oil and Gas Benchmark, Insights Report", 26 June 2023

Summary

The World Benchmarking Alliance Climate and Energy Benchmark measures and ranks the world’s 100 most influential oil & gas companies on their alignment to a low-carbon world. The 2023 benchmark is the second iteration since the benchmark was launched in 2021. The assessment combines the ACT (Assessing low Carbon Transition) Oil & Gas methodology and the WBA social and just transition indicators. This approach provides a holistic assessment of companies’ efforts to achieve a low-carbon transition that is just and equitable.

Key finding 1: With no set date to phase out fossil fuels, companies fail to make credible transition plans

None of the benchmarked companies have committed to halt expansion and stop exploration for new reserves. In 2022 alone, the emissions resulting from the combustion of oil and gas extracted by these companies constituted roughly 13 gigatonnes of CO2, nearly equivalent to one-third of the total energy-related CO2 emissions worldwide during the year. Companies are still pursuing a ‘take what you can, while you can’ approach, now further justified by global events. Record profits made by the big oil companies in 2022 have, in the case of some companies, resulted in the relaxation of transition plans. One of the biggest high-profile examples is BP, which scaled back its plans to reduce its oil and gas production by 2030.

Key finding 2: Despite soaring profits, companies are still not investing in a low-carbon transition

Oil and gas companies are still not meeting the sectoral-level expectation that at least 77% of a company's total investments should be dedicated to low-carbon technologies. The 2023 benchmark shows that the average share of companies’ low-carbon CapEx and R&D has increased since the 2021 assessment. However, only 25% of the assessed companies report their low-carbon capital expenditure (CapEx) share, 9% of companies report low-carbon research and development (R&D) share and 16% report their revenue share from low-carbon technologies. Neste, Naturgy and Engie lead with respective investments of 88%, 59% and 51% in low-carbon CapEx in proportion to their overall CapEx. Only Neste invests a high enough share of its overall CapEx in low-carbon activities, such as advanced biofuels, to meet sectoral level expectations. Further, Naturgy, Eni and CPC lead in the shares of overall R&D dedicated to low-carbon technologies, with investments of 100%, 70% and 68% respectively. Only Naturgy discloses a low-carbon R&D share that is aligned with the sectoral-level expectation. Neste, Engie and SK Innovation lead in revenue share in low-carbon technologies with 38%, 13% and 7% respectively. Nevertheless, the assessed companies have not improved on their revenue share from low-carbon technologies.

Key finding 3: Companies are not addressing their direct operational emissions, even when financially feasible decarbonisation solutions are readily available

Only 12 companies' scope 1 and 2 emissions intensity has decreased in line with their 1.5°C pathways in the past few years. Of these 12, seven are headquartered in the USA, four in Europe and one in Japan. Six companies are upstream players and represent 50% of all the upstream-only companies assessed. All companies are publicly listed apart from Equinor, which is majority state-owned. Furthermore, all of these companies have reduced their methane and flaring emissions. They have achieved this through means such as continuous methane monitoring, aerial mapping, leak detection and repair, replacing and retrofitting of equipment and increasing gas capture. Regardless, while these companies show good performance in reducing their operational emissions, none of them show a sufficient reduction in scope 1, 2 and 3 emissions intensity to align with their 1.5°C pathways.

Key finding 4: It's time companies come to the table with workers and affected stakeholders to plan for a just transition together

Companies in the oil and gas sector have strong connections with workers and unions when compared to other sectors in WBA’s Climate and Energy Benchmark. Among the benchmarked companies, 35% have public commitments to engage in social dialogue and 46% disclose the share of their workforce covered by collective bargaining agreements; both these metrics have improved since the 2021 assessment. Furthermore, two companies, Eni and Ecopetrol, describe how they support collective bargaining and freedom of association among their suppliers, up from no companies reporting this in 2021. With improved performance in these indicators, oil and gas companies seem to be strengthening their connection with workers and unions. Now, as 93% of the companies are not taking action and score zero on just transition planning, it is time for the companies to use these connections to workers and unions to plan for a just transition together.

Key finding 5: Companies need to build on current progress and continue to strengthen their human rights due diligence

While a majority (56%) of oil and gas companies are committed to respecting human rights, companies also need to translate these commitments into real actions that manage human rights risks. To do this, companies should carry out human rights due diligence, to not only address human rights abuses that are uncovered, but to work proactively to reduce human rights risks. The first step of due diligence is to identify human rights risks that may be prevalent, both in own operations as well as in the supply chain. The share of companies that work to identify risks in their own operations has increased from 23% in 2021 to 25% in this assessment, and those working to identify risks among their suppliers has increased from 14% in 2021 to 19%. However, oil and gas companies do not show improvement in relation to the later stages of due diligence, with only 12% of the companies demonstrating a complete and effective human rights due diligence procedure in this assessment.

What has driven changes to scores?

Overall, there have been no significant changes to module scores...since the 2021 assessment, companies have improved both their oversight of climate change issues and scenario analysis. However, those with oversight still lack the necessary expertise in the low-carbon transition, and the climate scenario analysis completed by companies fails to adequately consider financial impacts. Companies with the greatest reduction in performance score have all notably decreased in their material investment and sold product performance scores, meaning the companies’ emissions intensities are even less aligned with their 1.5°C pathway than in the previous assessment. The remaining modules have seen little to no change.

Looking forward

Looking forward, 80% of the companies receive a negative trend score and are not expected to improve in future assessments. Since the 2021 assessment, four companies have seen an improvement in their trend, moving from a negative to a positive or equal rating. However, seven companies have seen a worsening trend - with both Ampol and BP dropping from a positive to a negative trend score between 2021 and 2023. Despite small improvements in scores, it is clear that the oil and gas industry is still required to make rapid shifts. It must employ stronger leadership, more investment and greater transparency to scale the vast ambition and performance gap that exists in the sector."