Climate change is a complex issue, driven by the way we live, eat, and consume. Our every action leaves an environmental footprint on our planet, and as such, the responsibility to reduce it is shared between individuals and the private industrial corporations that provide goods and services.
Within the European Union, one of the largest quantities of greenhouse gasses (GHG) comes from the energy production and supply sector, which is essential to sustaining our lifestyles. As part of global efforts to mitigate climate damage, this sector has come under scrutiny by climate experts and regulatory bodies, which have recommended steps to reduce its impact on climate change.
Suppose you follow global business news or social media pages. In that case, you might have come across announcements by global energy giants where they pledge to reduce oil extraction, shift towards “lower carbon energy” sources, and invest in “carbon offsets” to cancel their overall carbon impacts effectively.
Recent developments, however, show that many of the promised innovative initiatives have been scrapped, and pledges have been quietly backtracked, often out of the press spotlight. While external factors can influence a business’s success, these examples remind us of a concept that has gained more attention in recent years: greenwashing.
In this issue of our newsletter, we explore what greenwashing is and how the fossil fuel industry might be misleading us into believing they are committed to a sustainable future.
Where Does Greenwashing Come From? Will it Be Punishable by Law?
The term greenwashing was first coined by American ecologist Jay Westerveld in 1986. While staying in a hotel, Westerveld noticed the hotel’s “Save the towel” policy, which encouraged guests to reuse towels in their rooms to save water. In his essay, he argued that this policy was more about saving money on cleaning costs rather than saving the planet, but still would be regarded as a move to have a positive social impact. Thus, the concept of greenwashing was born.
Greenwashing refers to the practice of making something appear more environmentally friendly or less harmful to the environment than it really is. This can apply to various contexts but is most commonly associated with private companies inflating the environmental benefits of their products or services. Companies often do this to better appeal to consumers, particularly younger generations, who are increasingly concerned about the climate impact of their purchases.
To prevent companies from misleading consumers, the EU adopted the Green Claims Directive in 2023 as part of the broader European Green Deal protocol to advance climate action in the EU. This directive ensures that environmental claims made by companies are scrutinized by regulators. Offenders face fines for misleading customers through deceptive advertisements.
Given this context, let’s explore how the energy industry is engaging in greenwashing.
What Does Greenwashing Look Like in the Energy Sector?
As the climate crisis looms closer, researchers have called for significant reductions in fossil fuel investments and extraction. In response, numerous energy giants have pledged to change their strategies and align with these demands. However, it is often the case that they mislead consumers or simply backtrack on their promises.
Here are three ways in which fossil fuel and energy giants demonstrate their commitment to a cleaner future, yet act differently.
Many energy giants have announced ambitious net-zero targets, presenting them as significant steps towards sustainability. However, these pledges often fall short upon closer inspection.
For example, the Saudi-owned Aramco energy company announced its goal to become net-zero by 2050, focusing on reducing Scope 1 and 2 emissions- those generated by the company’s direct operations and energy consumption. However, this claim becomes less impressive when you realize that this only accounts for 10% of Aramco’s total emissions, creating a misleading impression of the company’s effort to attain environmental goals. The pledge loses further credibility as the firm plans to expand its natural gas production and maintain steady oil production rates.
Similarly, Dutch fossil fuel giant Shell revised its 2021 sustainability strategy, lowering its 2030 carbon reduction target and completely scrapping its 2050 targets. The company also dropped its pledge to reduce oil production rates, arguing that the “target of a reduction in oil production (has been) met”. However, they did not mention that this reduction was achieved through the sale of an oilfield to ConocoPhillips, another hydrocarbon company, rather than an actual decrease in extraction. Meanwhile, Shell continues to expand its gas business, whose sales are expected to increase.
The English oil and gas company British Petroleum, better known as BP, followed a similar path. Last year, BP revised its 2030 GHG emissions reduction target, lowering it from 40% (one of the highest in the industry) to the original 25% set in 2020. This occurred while the company reported record profits and significantly increased shareholder payouts.
It has been suggested that these companies may have abandoned their climate targets to counter potential security risks stemming from the Ukrainian conflict, with Russia punishing its allies through energy supply cuts. However, a professor of Environmental Studies and Sociology at Brown University (US) argues that “climate pledges became popular while fossil fuels were becoming less profitable years ago, but since the Russian invasion of Ukraine, gas prices have risen”, prompting a change of mind due to increased profit opportunities. If this is the case, these companies should be held accountable under greenwashing regulations.
Energy companies often tout their commitment to reducing global impacts by investing in alternative energy sources with lower environmental impact.
However, these investments represent only a tiny fraction of what is spent on continuing fossil fuel extraction. It has been reported that fossil fuel giants account for only 1% of global investments in renewable energy. More tellingly, green investments by oil and gas giants made up just 2.5% of their total capital spending in 2022.
Instead, attention is often directed toward Carbon Capture and Storage (CCS) technologies, where carbon dioxide (CO2) is caught right at the source of emission and permanently trapped in safe locations. US-based Exxon Mobil and Southern Company have recently announced their commitment to investing in this technology.
Chevron has been very vocal about its use of CCS technology to prevent emissions from its operations. With over 25 million tonnes of captured CO2, these efforts will yield real benefits for our planet. However, what is not often shown is that this amount is significantly overshadowed by the company's total global emissions, which were estimated to exceed 670 million tonnes in 2021 alone.
While the use of CCS presents real opportunities for the future, projections reveal that this technology will only cover a small fraction of our yearly carbon budget. Still, this doesn’t stop energy giants from using them in their climate pledges and avoiding diverting funds into real alternatives.
Energy giants have also invested in projects that, while they present opportunities for positive climate impact, often serve as distractions from their continued focus on fossil fuel extraction.
One such example is the development of biofuels from algae. Algae are a suitable source of biofuels given their adaptability and low nutrient need, and the resulting fuel creates lower CO2 outflows than fossil fuels. Many energy giants started their own algae biofuel divisions, touting the wonders of this technology. But fast forward to this day, and all major fossil firms have dropped the project, with Exxon Mobil being the latest to exit the algae race. While researchers recognize the initiative’s significant potential for the future and acknowledge that progress is being made in the right direction, the decision to quietly backtrack from this commitment seems convenient, especially given the vast advertisement spending made in recent years.
Shell is also guilty of a similar tactic. The firm invested in a process known as pyrolysis, which turns hard-to-recycle plastic waste into a liquid feedstock known as pyrolysis oil, to produce new plastic products. However, the promise made in 2019 to turn 1 million tons of plastic into this pyrolysis oil has recently been dropped by the Dutch energy giant, as it found the objective “unfeasible”, once again conveniently avoiding the spotlight.
What Will Be Done in the Future?
It is important not to exclusively blame energy companies for the effect of their product on climate change, given that they provide an essential commodity that has had positive impacts on our economies and development. The point of this article is not to shame private entities for failing to meet ambitious voluntary carbon reduction targets or for their failures in research and development towards cleaner energy sources. However, it becomes a different topic when these fossil fuel giants exploit the public’s desire for change and paint a golden aura related to sustainability to appear more environmentally conscious than they are - all the more when they are cashing in record profits and slowing down climate regulations.
But the landscape may be changing, as we see efforts to fight back against these practices. Earlier this year, Exxon’s Canadian subsidiary Imperial Oil deleted a video of its Chief Executive Officer claiming that CCS technology is critical in enabling the firm’s net-zero emissions, given Canada’s anti-greenwashing regulations. Saudi Aramco pulled a similar move by removing its advertisement claiming that oil powered a “more sustainable future”.
Moreover, legal actions have been taken against Exxon Mobil and Dutch airline KLM for alleged greenwashing claims made in their advertisements.
As the world grapples with the escalating climate crisis, it is imperative that we are capable of spotting greenwashing, and we hope that this article will make you more attentive in this matter. It is, however, also crucial that we take active steps to combat it. Regulatory bodies must enforce stricter penalties for misleading environmental claims, ensuring that the transition to a sustainable future is both authentic and effective.
References
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