This was a week big oil companies will never forget. For the first time in history, an oil company has been held liable for climate change. Two other oil companies have experienced a shareholder rebellion over their failure to set a strategy for a low-carbon future. Climate activists and disgruntled institutional investors have brought big oil to its knees in a single day. Is this the first step of what’s to come in the renewable energy revolution?
In a few hours, the world’s biggest oil companies had their future outlook completely shaken up. These will have wide implications for the energy industry and other polluting multinationals across the globe. As governments around the world begin to bow to public pressure of reducing carbon emissions, the energy sector is running out of places to hide from accountability as well. Climate activists have long been persistent about the changes the energy sector needed to undertake to limit carbon emissions for the future, now their influence has reached from the streets to the boardroom.
In Europe, a court in The Hague, Netherlands ordered Royal Dutch Shell to slash emissions by 45% by 2030. The court found the oil giant’s sustainability policy insufficiently “concrete” and the company was told. They also noted that Shell had known for a long time about the damage carbon emissions and therefore were violating the right to life and the right to family life by causing a danger to others when alternative measures could be taken. Shell alone was the ninth biggest polluter in the world in 1988-2015, according to the Carbon Majors database. The company was told it had a duty of care and that the level of emissions reductions of Shell and its suppliers and buyers should be brought into line with the Paris Agreement.
In the US, ExonMobil and Chevron both received a major blow. With Exxon Mobil, a tiny hedge fund Engine No. 1 is unseating at least two board members in a bid to force the company’s leadership to reckon with the risk of failing to adjust its business strategy to match global efforts to combat climate change. Eight of Exxon’s nominees were re-elected, along with two of Engine No 1.’s nominees and they could potentially see three of its four nominees joining the Exxon board as the counting is not finished. These results will add pressure to the Exxon CEO Darren Woods, who campaigned against the board challenge and argued the company was already advancing low carbon projects.
Meanwhile at Chevron, shareholders voted in favour of a proposal to cut emissions generated by the use of the company’s products, a move that further underscores the growing investor push at reducing carbon emissions. Shareholders voted 61% in favour of the proposal to cut “Scope 3” emissions, rebuffing the company’s board, which had urged shareholders to reject it. Scope 3 emissions include all indirect emissions that occur in a company’s value chain. While other climate measures such as reporting on the impact its business would have from the net zero 2050 scenario and report on lobbying activities were narrowly defeated, it still represents a paradigm shift in how energy investors view climate change.
All of these moves show that there is more seriousness apparent in the thinking among investors and courts about climate change. This is a stark contrast of the “business as usual” practices that put the Earth in its current climate position. The fight against big oil is an uphill battle due them being politically powerful and the vast amount of money they have through energy reliance. In a matter of a few years, the public opinion has drastically shifted as more extreme weather events have occurred. And with the research pointing to big oil companies contributing to this, the opinions globally on the need for renewable energy have never been higher. Energy companies have stated recent years their efforts towards renewable energy, but these efforts have mostly been dismissed by analysts and the public alike as greenwashing efforts. Those currently in power such as Darren Wood will need to accelerate and actually pivot their stances, or else they will be out of a job.
People around the world pushed long enough against big oil companies and this week, the dominos have begun to tumble. These are the first steps in big changes to how we see the fossil fuel industry. As shareholders continue to turn in favour of the environment and the public and governments continue to put pressure on big oil, companies like Shell, Exxon and Chevron will have to adapt and embrace renewable energy, or go bankrupt. This could be the week that everything changed for big oil, how the industry chooses to respond to this will determine which thrive and which struggle to survive.