Deloitte Study: Navigating the Energy Transition from Disruption to Growth

NEW YORK, May 27, 2020 /PRNewswire/ --

Key takeaways:

• Despite current economic challenges, energy and industrial leaders are expected to remain committed to their long-term plans to reduce fossil fuel reliance.
• Eighty-nine percent of executives surveyed across energy and industrial sectors reported already having or developing a strategy to reduce reliance on fossil fuels. 
• While a temporary pause in spending on some priorities and technologies is expected, as companies await a recovery, they are unlikely to be canceled completely.
• Momentum for action on decarbonization, reinforced by growing consumer and stakeholder pressures, will likely not be compromised by present circumstances.

Why this matters
In the wake of the COVID-19 pandemic, oil price collapse, and increasingly challenged economy, many have questioned if the pace of the global energy transition has been disrupted and whether energy and industrial companies will remain committed to their decarbonization goals. Deloitte's "Navigating the energy transition from disruption to growth," report examines progress to date in the energy transition, the decisions management teams in the energy and industrial sectors are facing, and how the current economic environment could affect the transition's future trajectory. As part of this study, Deloitte surveyed 600 C-suite executives and other senior corporate leaders globally for their perspectives around low-carbon trends and strategies.

Energy transition remains a priority for energy and industrials
Despite the current economic challenges, the survey study findings suggest that energy and industrial leaders are expected to remain committed to an energy transition that they believe can help reduce costs, increase customer loyalty and make their companies more competitive.

• Eighty-nine percent of surveyed executives (92% oil and gas, 92% power and utilities, 87% chemical, 87% industrials) reported their companies either already had a plan or were developing a strategy to reduce reliance on fossil fuels. 
• Across sectors surveyed, some of the top drivers of decarbonization included customer focus and digital technologies supporting energy efficiency (i.e., cost savings) and decarbonization.
• More than 50% of the executives reported that meeting decarbonization reduction targets are tied to board and/or executive compensation.
• Seventy-one percent of CEOs surveyed across industries said that the key benefit achieved from their plans for a lower-carbon future was to improve the environment.
• While environmental benefits will likely be deemphasized as companies regain their footing through the economic crisis, reducing costs and maintaining a competitive position are expected to remain important even in the downturn.

Decarbonization a strategic imperative for oil and gas
The energy transition is having a mixed impact on the oil and gas sector, as decarbonization is expected to slow long-term oil demand growth. Most company leaders in this sector however appear to recognize this reality and are rethinking where and how they do business in a decarbonizing world. Many are making the energy transition a strategic priority, as evidenced from the survey results detailing the scale of plans and commitments in place.

• Sixty-eight percent of surveyed CEOs indicated that the key component of their decarbonization strategy was a focus on low-carbon fuels, including natural gas.
• Oil and gas executives cited consumer support and regulatory mandates including policy incentives, as the top drivers for the energy transition.
• Almost half (49%) of oil and gas company respondents said they plan to switch to cleaner fuels or renewables in their facilities and field operations.
• Further down the value chain, 57% of chemical executives reported that their company has invested in renewables to reduce emissions and waste.
• More than half (56%) of oil and gas respondents indicated that plan metrics to reduce reliance on fossil fuels were tied to executive compensation.
• When asked if a low-carbon future would have a positive, neutral, or negative impact on the future of their organization, over 60% surveyed said it would have a positive impact.

Key quotes
"This year has turned out to be a decisive one for the energy transition. While 2020 brought tremendous headwinds for companies on multiple fronts, leaders across the energy and industrial sectors haven't lost sight of the climate crisis. Decarbonization priorities have become deeply embedded into business strategies and created a momentum for action that will not easily be compromised by present circumstances."

-  Stanley Porter, vice chairman, Deloitte LLP and U.S. energy, resources and industrials leader 

"The COVID-19 crisis has highlighted many of the attributes that could accelerate the energy transition as companies re-evaluate supply chains, collaborate within and across sectors and pioneer capex-light scalable solutions with digital technologies and analytics at the core. The coming months will likely show how enduring these innovations may prove."

-  Kate Hardin, executive director for the Deloitte Research Center for Energy & Industrials

Technologies play key role in business climate goals
Survey respondents overwhelmingly cited technology as a key enabler of progress in the energy transition. While a near-term pause in spending on new technologies is expected, they are unlikely to be canceled completely as these investments help increase operational efficiency, reduce carbon emissions, and benefit companies in the long run.

• Digital technologies that improve energy efficiency were ranked as the top priority for oil and gas (59%); and industrial products and construction (53%) executives surveyed.
• Carbon-capture-utilization-and-storage (CCUS) and other carbon-reducing technologies were identified as a key component to emission reduction by oil and gas (54%); and chemicals and specialty materials (54%) surveyed leaders.
• Nearly 70% of executives who reported that they have a sustainability strategy in place, cited digital technologies supporting sustainability and energy efficiency as the key driver.
• Top accelerators to achieving decarbonization goals among oil and gas surveyed executives included partnerships; mergers and acquisitions; and organic investments.

For more information on Deloitte's perspective on the Future of Energy, please click here. Connect with us on Twitter at @Deloitte4Energy or on LinkedIn at Stanley Porter or Kate Hardin.

About Deloitte
Deloitte provides industry-leading audit, consulting, tax and advisory services to many of the world's most admired brands, including nearly 90% of the Fortune 500® and more than 7,000 private companies. Our people work across the industry sectors that drive and shape today's marketplace — delivering measurable and lasting results that help reinforce public trust in our capital markets, inspire clients to see challenges as opportunities to transform and thrive, and help lead the way toward a stronger economy and a healthy society. Deloitte is proud to be part of the largest global professional services network serving our clients in the markets that are most important to them. Now celebrating 175 years of service, our network of member firms spans more than 150 countries and territories. Learn how Deloitte's more than 312,000 people worldwide make an impact that matters at www.deloitte.com.

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