{"id":11035,"date":"2016-11-04T05:22:03","date_gmt":"2016-11-04T09:22:03","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/hess-corporation-can-oil-companies-be-part-of-the-solutionor-at-least-less-of-the-problem\/"},"modified":"2016-11-04T05:22:03","modified_gmt":"2016-11-04T09:22:03","slug":"hess-corporation-can-oil-companies-be-part-of-the-solutionor-at-least-less-of-the-problem","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/hess-corporation-can-oil-companies-be-part-of-the-solutionor-at-least-less-of-the-problem\/","title":{"rendered":"Hess Corporation: Can Oil Companies Be Part of the Solution\u2026Or At Least Less of the Problem?"},"content":{"rendered":"

Climate change is such a massive and intractable threat that it will have unforeseen consequences on organizations seemingly far removed from its direct effects. Conversely, there are organizations with business models so fundamentally at odds with any ideal response that we tend to overlook the potentially valuable ways they can still contribute. The Hess Corporation is such a company.<\/p>\n

I\u2019ll set aside the industry\u2019s elephant in the room\u2014the future of oil & gas in a world with a changing climate and its operational impact\u2014 instead focusing on approaches that an independent U.S. oil & gas company can<\/em> take without flouting its core business or fiduciary duty to shareholders. I\u2019ll address the industry context and what Hess is doing today before assessing some response areas where the company could be supportive and possibly even proactive. While these prescriptions may seem frustratingly limited in scope, it\u2019s valuable to acknowledge oil companies\u2019 strategic restraints and still pinpoint feasible initiatives that they can publicly support. To combat climate change, the more buy-in the better\u2014wherever we can cultivate it.<\/p>\n

Hess Today \u2013 Industry Comparison <\/strong><\/p>\n

Hess\u2019 climate change response is shaped by its obligations to investors as well as the industry\u2019s overwhelmingly conservative standards on this issue\u2014 particularly in the context of a low oil price environment where performance has lagged and shareholder pressure has intensified.<\/p>\n

\"screen-shot-2016-11-04-at-4-59-34-am\"<\/a><\/p>\n

Hess has demonstrated success in reducing operations emissions, curbing equity GHG by 5 million tons between 2008 and 2015 (1). They\u2019ve also taken steps to reduce methane emissions and contribute to prevailing research on the topic (2). Hess acknowledges the very real threat that climate change poses in its financial reports and public messaging (3). For context, these limited actions place Hess in good standing with regard to peers: for example, despite nearly three times the market cap, Phillips66 has no stated climate change policy and only includes climate change in its annual report to warn investors that global response <\/em>could threaten Phillips66\u2019s business (4) (5) (6).<\/p>\n

Hess Tomorrow \u2013 Areas of Common Ground?<\/strong><\/p>\n

Against this backdrop, where could<\/em> Hess be more progressive? Below, I list approaches within the four main mitigation strategy types, as outlined in McKinsey\u2019s Abatement Report (7).<\/p>\n

\"four-abatement-types-copy\"<\/a><\/p>\n

Shifting to low-carbon energy supply<\/p>\n

Hess can tout the importance of minimizing coal\u2019s role in the global energy mix and shifting away from coal-fired power plants. Some oil & gas companies are becoming increasingly outspoken against coal, publicly lobbying to shift capacity over to cleaner natural gas (8). If Hess could champion reductions in coal use without lobbying on behalf of natural gas, that would perfectly align with climate change response best practices.<\/p>\n

\"coal-v-nat-gas-share\"<\/a><\/p>\n

In addition, while adaptation is not as cost-effective as mitigation, it can still play a role: Hess can push for equipping fossil fuel plants with carbon capture and storage.<\/p>\n

Energy Efficiency<\/p>\n

Hess could readily support initiatives such as improving insulation in buildings, or a transition to LED lightbulbs that can provide a 50% increase in energy efficiency (7). Hess could support the need for more fuel-efficient vehicles\u2014CEO John Hess appears to be sympathetic, saying at a conference back in 2009 that \u201cWe need to have the courage to demand 50 miles per gallon fuel economy as the national standard for all vehicles” (9). The company is famous for its annual Hess Toy Truck; the company could drive significant public awareness if, for the first time ever, it merely added a second vehicle– perhaps some sort of hybrid, or a light rail train that symbolized a push to lower traffic congestion in major urban areas.<\/p>\n

\"hess-toy-truck-2016\"<\/a><\/p>\n

Behavioral change<\/p>\n

Hess is already implementing many behavioral changes company-wide\u2014efforts like improvements in efficiency and sustainability as well as recycling (1).<\/p>\n

\u00a0<\/strong><\/p>\n

Terrestrial carbon<\/p>\n

Because forests and soils serve as natural sinks for carbon (10), fighting deforestation, supporting reforestation, and sequestering more carbon in soils through changes in agricultural practices are all imperative endeavors that Hess can endorse. Implementation, however, is more difficult given that 90% of the unlockable gains reside in developing countries (7).<\/p>\n

In fact, optimal climate change response in general places an outsized burden on developing countries that need dirty, affordable energy the most; Hess could support some kind of charitable initiative that ensures energy remains affordable and accessible in developing nations.<\/p>\n

* **<\/p>\n

Oil companies will never be at the bleeding edge of effective climate change response; but by acknowledging the limitations of their contributions\u00a0by virtue of their industry, we can think more deeply about creative ways to encourage their involvement in valuable solutions.<\/p>\n

(787 words)<\/p>\n

 <\/p>\n

 <\/p>\n

(1) Hess Corporation 2015 Corporate Sustainability Report, http:\/\/www.hess.com\/docs\/default-source\/sustainability\/hess-2015-csr.pdf?sfvrsn=2<\/a><\/p>\n

(2)\u00a0Hess Corporation Website, Methane Emissions Discussion http:\/\/www.hess.com\/sustainability\/climate-change-energy\/improving-our-understanding-of-methane-emissions<\/a>, accessed November 2016<\/p>\n

(3) Hess Corporation 2015 Annual Report, http:\/\/phx.corporate-ir.net\/External.File?item=UGFyZW50SUQ9NjE0NTM1fENoaWxkSUQ9MzI4NzUyfFR5cGU9MQ==&t=1<\/a><\/p>\n

(4) Phillips66 Website, http:\/\/www.phillips66.com\/EN\/Pages\/index.aspx, accessed November 2016<\/p>\n

(5) Phillips66 2015 Annual Report,\u00a0http:\/\/s1.q4cdn.com\/175206842\/files\/doc_financials\/annual\/2015\/P66_Annual_Report_2016.pdf<\/p>\n

(6) Ceres.org 2016 assessment of Phillips66, https:\/\/www.ceres.org\/investor-network\/resolutions\/phillips-66-ghg-reduction-goals-2016<\/a>, accessed November 2016<\/p>\n

(7) ‘Pathways to a Low-Carbon Economy,’ McKinsey & Co. Report, 2009;\u00a0http:\/\/www.mckinsey.com\/~\/media\/mckinsey\/dotcom\/client_service\/sustainability\/cost%20curve%20pdfs\/pathways_lowcarbon_economy_version2.ashx<\/a><\/p>\n

(8) Wall Street Journal, Sarah Kent & Inti Landauro, \u201cOil Industry Takes Aim at Coal, Pushes Gas Ahead of Climate-Change Talks,\u201d June 2, 2015, http:\/\/www.wsj.com\/articles\/oil-industry-takes-aim-at-coal-pushes-gas-ahead-of-climate-change-talks-1433258932<\/a><\/p>\n

(9) Reuters Market News, \u201cU.S. needs gas tax, 50 mpg standard -Hess CEO,\u201d Oct 20, 2009, http:\/\/www.reuters.com\/article\/hess-gasolinetax-idUSLK53144420091020<\/a><\/p>\n

(10) “Forests and Climate Change,” Food and Agriculture Organization of the United Nations,\u00a0http:\/\/www.fao.org\/forestry\/climatechange\/53459\/en\/, accessed November 2016<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

It is valuable to acknowledge oil companies\u2019 opposition to many climate change initiatives, yet still pinpoint areas of common ground where they can offer assistance. 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