ESG

Do you remember ExxonMobil?

History is the endless repetition of the wrong way of doing things.

Do You Remember Kodak?

They owned the photography market for a century.

They’re a shadow of their former self.

They refused to embrace digital.

They were left behind.

Do You Remember Blockbuster?

They were an entertainment institution.

They’ve all but gone now.

Like the frog in the pot, they ignored the fact the water (internet streaming services) was getting hotter (taking over).

They were left behind.

Will ExxonMobil join them?

A titan of the oil industry dating back 140 years, with 24% market share of the oil and gas integrated operations industry, they are a giant in the manufacture of fossil fuels.

However, the energy market is undergoing disruption.

Digital disrupted Kodak’s business.
The internet disrupted Blockbuster’s business.
Renewables are disrupting ExxonMobil’s business.

Will ExxonMobil follow the market or the path trodden by Kodak and Blockbuster into folklore?

ExxonMobil sues its activist investor

Investors are demanding a greener future, and the world is turning towards renewable energy.

ExxonMobil, however, is doubling down on what they know.

ExxonMobil is suing activist investors who want the company to increase its focus on climate change

It’s like clinging to a horse-drawn carriage in the age of the car.

The future is speeding by, and ExxonMobil risks getting left behind.

Is ExxonMobil committing self-sabotage?

At the same time that ExxonMobil is taking this action to stop activist shareholders from submitting climate-focused Environmental, Social, and Governance (ESG) proposals, Deloitte has released an article that found stronger ESG action leads to greater valuation.

There is increased confidence among M&A leaders to evaluate a target’s ESG profile, suggesting that a weak profile could negatively impact a deal’s value. It also highlights the growing importance of ESG for M&A strategies, implying that companies might be less willing to pay a premium for a target with weak ESG performance.

ExxonMobil is pushing back on a key aspect of ESG – the very thing the market is paying a premium on.

...but what about ExxonMobil's commitment to net zero?

To ExxonMobil’s credit, they are expressing a commitment to net zero by 2050. This is only for scope 1 and 2 emissions – the direct and indirect emissions in manufacturing their products. However, scope 3 emissions represent the bulk of all emissions – especially the USE of their products downstream in their supply chain.

What now? Four actions for Four players

The cautionary tales of Kodak and Blockbuster serve as stark reminders of the danger of clinging to outdated models in the face of disruption. ExxonMobil, despite its commitment to net zero by 2050 (for some emissions), appears to be following a similar path. Their lawsuit against their activist investors raises serious questions about their reaction to the energy market disruption.

1) Investors: Continue to demand transparency and concrete action plans from ExxonMobil on how they will achieve net zero emissions across their entire value chain (Scopes 1, 2, and 3).

2) Consumers: Educate yourselves about the environmental impact of the products you use and choose companies that prioritise sustainability. Support businesses that are actively transitioning to renewable energy sources.

3) Government: Regulate and incentivise the transition to a clean energy economy. Hold companies accountable for their environmental impact.

4) ExxonMobil: Face the current energy market disruption head-on by applying your enormous resourcefulness to transition into new forms of energy and another century of success.

By working together, all four can prevent ExxonMobil from becoming another cautionary tale and ensure a more sustainable future for generations to come.