Getting On Board to Decarbonize, Transform Energy

From Commitment to Action

Shell has set a target to become a net-zero emissions energy business by 2050. The company has described in its Energy Transition Strategy for investors and other stakeholders how it plans to achieve this, with milestones, for example, at 2023 and 2030, says Maurer. The company is transforming its business and finding new opportunities in selling more low-carbon products such as biofuels, solar- and wind-generated electricity, hydrogen, and electric vehicle charging.

“It is absolutely clear that the energy sector’s transition toward lower carbon is accelerating,” says Maurer. “Society is demanding it, and many governments are setting clear targets with solid plans to achieve them. This level of commitment is causing many to realize that to achieve ambitious targets, action is urgently needed.”

Shell and other organizations are collaborating with customers, businesses, and governments to address the energy transition and emission reductions sector by sector, especially in those that are harder to decarbonize, such as aviation, shipping, commercial road freight, power, and heating. Many of these organizations also support government policies to reduce carbon emissions in the economy by sector.

According to a Shell report on shipping decarbonization, shipping is an example of a capital-intensive industry with large, long-lived assets, thin margins, and a high dependence on energy-dense fuels. These characteristics combine to make decarbonization complex and expensive, says Helmi.

Many of the challenges to decarbonize are specific to sectors, so it’s important to foster collaboration across key ecosystem players within a sector, says Helmi. Across several sectors, technology already exists at adequate scale to facilitate energy transition in some regions of the world. “Electric and hydrogen fuels are available today to transform modes of transportation that consumers in some areas can use and see in their everyday lives,” says Helmi. “This accessibility is becoming an incentive that is drawing more interest and inspiring more action.”

Organizations can leverage positive sentiments around the potential for lower carbon solutions to help bring about change, notes Maurer. With a growing number of governments and organizations engaged based on increasing demands and societal pressures, the conditions are ripe for organizations to collaborate within sectors and develop actionable plans to drive change.

“The complexity of the challenge is such that no single organization can do this alone,” says Maurer. “Collaboration is critical across the complete ecosystem for each sector, across markets, and across jurisdictions to align all of the various players with respect to commitments and actions.”

As collaboration leads to action, success may become more achievable, which will inspire more organizations to get involved, observes Maurer. “Through this kind of collaboration, organizations can identify challenges that represent opportunities, which enable them to capitalize on change to achieve commercial success,” he says.

As an example, some organizations have moved portions of their commercial vehicle fleet to electric powertrains and are building significant on-site power generation capacity to charge these trucks. Such organizations have positioned themselves to meet more ambitious targets as they unfold, such as a decision in the United Kingdom to accelerate to 2030 a ban on new petrol and diesel passenger car and van sales originally scheduled for 2040.

Making the capital commitment for suppliers in current market conditions can be challenging, especially when, for example, loans are often based on residual values that are difficult to estimate because such vehicles have not been on the market long enough to produce historic data. “Certain decisions among organizations are interdependent,” says Helmi. “Often one stakeholder needs for another to make a decision before it can move forward. This is why parallel progress across the supply and demand sides of any market in this space is so critical.”

Certain decisions among organizations are interdependent … This is why parallel progress across the supply and demand sides of any market in this space is so critical.

— Tarek Helmi, Partner, Deloitte Netherlands

Digital, Regulatory Enablers

Digital technologies can become a significant enabler of decarbonization given rapid advances in technology and increased uptake during the pandemic, says Helmi. “While technology can assist with the design of alternative energy solutions, it can also improve utilization of existing assets,” he says. More proactive logistics planning with technology, for example, can reduce fuel consumption, which reduces emissions.

Shell uses digital technology in this way to improve efficiency in shipping, road, and rail transport, says Maurer. “Digital technology can play a fundamental role in not only improving efficiencies to reduce emission but also improving ROI, and the tools are readily available now,” he says.

Regulation is another enabling factor in decarbonization. “For the energy transition to really accelerate, it must be based on business and profit models that are effective, and that requires the adoption of common regulatory policy frameworks,” says Maurer. Developing such frameworks requires collaboration among regulators—and the potential for collaboration is promising in many jurisdictions, he says.

Well-developed regulatory frameworks could act as a catalyst for action, says Helmi, but they ideally should be coordinated across jurisdictions to drive decisions across stakeholder groups. To the extent local governments adopt multiple different requirements, that adds operational complexity that makes it more difficult for organizations to confidently act.

As an example, some major cities in Europe are developing different low-emission zones for heavy-duty trucks, but the impact of these initiatives could be greater if they were more widely and consistently applied. This could help create a level playing field for companies operating across particular regions, strengthening incentives to invest in more emission-efficient trucks.

“We see indicators that regulators are working toward becoming more collaborative in developing appropriate frameworks, so we are hopeful that will promote further agility in decision-making and action,” adds Helmi. The 26th United Nations Climate Change Conference of the Parties, also known as COP26, scheduled for November, is expected to provide a forum for continued collaboration.

For organizations that are still weighing their response to calls for change, Maurer recommends encouraging action. “People can spend a lot of time studying, assessing, and planning for decarbonization, but we are past that point,” he says. “It is time for action, and many organizations are taking it. For those that aren’t sure where or how to get involved, it might be helpful to begin networking with organizations in the same sector that are engaged in these efforts and identify how to get involved.”

Helmi proposes a three-part examination. “Look ahead, look inside, and look around,” he says. “Organizations that look at their circumstances from these three perspectives may find that change is inevitable and they have an opportunity to consider their role. They can help drive innovation, reconstruct relationships with customers, and develop a plan for a positive ROI to position themselves for success through the transition.”

—by Tammy Whitehouse, senior writer, Deloitte Insights in the Wall Street Journal

Disclaimer and Copyright

This article is part of an ongoing series of interviews with C-suite leaders and other executives. Mr. Maurer’s participation in this article is solely for educational purposes based on his knowledge of the subject, and the views expressed by him are solely his own. This article should not be deemed or construed to be for the purpose of soliciting business for Shell, nor does Deloitte advocate or endorse the services or products provided by Shell.This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms or their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in this communication, and none of DTTL, its member firms, related entities, personnel or agents shall be liable or responsible for any loss or damage whatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and their related entities, are legally separate and independent entities.

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