Business Advisory Services

The current energy crisis has proven that oil and gas can’t easily or quickly be replaced by wind and solar. A phase-out of fossil fuels, over the next 30 years will likely be composed of a diverse energy mix that includes oil and gas but also hydrogen, renewables, hydro and nuclear power.

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Environmental and social activists are putting increasing pressure on the industry, questioning its “social license” to operate. This is largely based on the pollution and climate change damage they believe the industry is responsible for. As a result, companies are feeling intense pressure to respond in terms of capital allocation decisions and strategy out of fear of damage to both their corporate reputation and bottom lines.

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Hope for the best, prepare for the worst.

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It’s impossible to predict the future. Who could have imagined the COVID 19 pandemic that’s upended the world and the global economy for two years? Or the military invasion of Ukraine by the Russian government that what will likely be a profound political and economic global fallout. Much of what may happen is out of the control of industry. However, the following are some steps you may want to consider taking so that your organization will be as well positioned and prepared as possible regardless of what occurs in 2022.

• Have an ESG (environmental, social and governance) plan in place to proactively address activist investor and stakeholder concerns.

• Tackle the issues head-on rather than waiting to respond under pressure.

• Review your organizations’ crisis playbook. Does it include all potential scenarios, and is it kept relevant?

• Review your organization’s commodity risk management philosophy.

• Prepare for how short and long-term changes in the pricing environment could impact customer and shareholder sentiment, and also government involvement.

• Understand how proposed legislation and government actions could impact your company.

• Determine if your organization has the flexibility to shift gears quickly to take advantage of opportunities as political agendas change.

• Focus on relationship building: Continue or increase efforts to build relationships with all relevant stakeholders, including consumer groups, governments, regulators, and society at large. In the same way, consider industry and cross-industry cooperation efforts to proactively shape reasonable regulation with governments.

• Get your supply chains in order: Review your current setup and determine how you can reduce disruption and improve resilience. For example, are your operations flexible and resilient enough to adapt and adjust in real-time to changes in trade flows, new regulations, continued COVID-19 disruption, climate change, trade tensions and other geopolitical movements?

• Is your technology current so you can reduce operating costs, provide visibility, and seamlessly diversify the way customer needs are met?

• Review your organization’s risks mitigation and defense protection: The Social, Economic, Environmental and Technology risk is perhaps the most underestimated above-ground risk in the industrial sectors. It cuts across political and geographical boundaries, and any company, regardless of size, is a potential target. No matter your location or where you operate, you are equally vulnerable to a risk or security breach.

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The world is in a state of continuous change and will not be going back to what was, industry will have to embrace and operate in a state of dynamic change to survive and grow.  There will be continuous regulatory changes for Decarbonization, ESG compliance and other geo political demands by governments or activist and consumer groups, and incremental tweaks to resources, purchasing, reporting and technology may not do the trick.

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The speed and intensity of diversification will be impacted by short-term supply and price issues and geopolitical events, but the future direction is clear. Industry l need to change, and you should be taking steps now to prepare for the inevitable.