Learn about the key drivers of sustainable manufacturing in the energy, oil, and gas sectors, including government regulations, digitalization, and changing expectations of employees, customers, and investors.
The compatibility of the oil and gas industry with a sustainable future is a cause for growing concerns. As a result, many organizations claim to address sustainability by engaging in several initiatives often related to their respective supply chain operations, including sustainable manufacturing.
Technology and climate change are also impacting nearly every industry on a global scale, the oil and gas sector inclusive. This is why the call for sustainability has reached a high crescendo, driving the oil and gas industry towards massive transformations.
As a result of these developments, many conventional oil and gas companies are evolving and referring to themselves as energy organizations, retail companies, mobility enterprises, etc., as they strive to diversify and even expand to new areas with highly advanced business models.
Many utility and energy companies have made digitalization and sustainability their primary focus. As a result, there is no doubt that this particular industry is leading the pack – and other sectors – regarding adopting sustainable practices.
SAP and Oxford Economics conducted a survey a few years ago and discovered that utilities and energy executives had made several sustainability-related changes, even more so than many other industries.
Over 79 percent (¾) or three-quarters declare sustainability issues as top-of-mind 0r major concerns at every stage of the manufacturing process. Nearly half – up to 47 percent – have even committed to a net zero carbon objective.
What are the Drivers of Sustainable Manufacturing in the Energy, Oil, and Gas Sectors?
Several factors influence all energy, oil, and gas sustainability efforts. As a result, many organizations are adopting numerous approaches to address these growing issues permanently affecting the industry.
Here are some of the most significant drivers of sustainable change:
Government Regulations, Subsidies, Incentives
Government interventions are pushing oil, gas, and energy firms to look for and consider more sustainable and circular solutions for meeting every aggressive carbon-neutral target. These agreements, in addition to various subsidies, incentives, and carbon taxes that different levels of government offer globally.
More than a few alternative or renewable energy initiatives have several government incentives, such as electric cars, tax credits for using solar panels, and other renewable energy options.
It remains to be seen if the demand for these alternatives will be high for the long haul when incentives or subsidies are minimized, exposing the true cost of renewable energy sources.
More alternative energy options will be developed and mass-produced, bringing down renewable energy costs. But no one knows if it will be enough to offset government subsidies.
The costs of renewable energy have to go down far enough that people will choose them of their own volition regardless of incentives or subsidies.
Digitalization makes diversification possible, and thanks to cutting-edge technology, companies are changing how they work. This creates more opportunities for partners to collaborate and open new doors to newer options for progressive business models.
Digitalization is presently allowing the oil, gas, and energy industry to redefine boundaries, thanks to the pandemic for accelerating that mandate. More business processes and systems are moving to the cloud, making it easier to streamline and integrate operations across entire establishments and even beyond.
This opens the door for product and service innovation as well as diversification.
Changing Expectations of the Employee, Customer, and Investor
People now have shifting expectations that have a massive impact on the oil, gas, and energy sector, especially if viewed from several angles. Eco-conscious consumers relentlessly put lots of pressure on organizations to focus more on adopting or integrating sustainable practices in their day-to-day operations and utilize alternative energy sources.
Many organizations are facing growing pressure from their own workforce. Retiring employees go away with their intellectual property and traditional methods. Instead, they are effectively replaced with an eco-conscious and tech-savvy generation of employees who question every traditional operating method.
These employees always enter heavy-emission industries and organizations with one goal: to promote sustainability within the organization and industry.
Investors are also mounting pressure on organizations to focus on sustainability. For instance, when Harvard University ends all investments in fossil fuels and no longer funds activities driving global warming, investors will take note because they will be positively influenced.
Changing Cost Structures and Diversification
More than a few oil, gas and energy organizations no longer focus on traditional revenue streams. They focus more on customer needs and diversify in order to include newer revenue streams such as:
- Electric charging stations
- Renewable energy
- Advanced chemicals
- Autonomous transport-on-demand initiatives
They are even focusing on expanding their retail outlets, proving that barrels of oil is no longer the central focus. In addition, the industry’s ‘power-as-a-service’ business model is also geared to get a brand-new cost structure. This reflects the ever-growing trend of use- or subscription-based business models that many organizations adopt globally.
Steps for More Sustainable Manufacturing in the Future
Here are some of the recommended steps decision-makers should take toward a more sustainable future:
- Obtain materials in an ethical manner and according to sustainable approaches
- Operate equipment and assets in an energy-efficient way that is safe for the workforce and the environment
- Utilize delivery and transport methods that reduce mileage and optimize emissions, loads, and carbon footprint.
- Map out long-term strategies for foundational transformation that takes sustainability into consideration in each process
- Use data to sufficiently influence decisions on implementable sustainable practices at the design, engineering, and manufacturing stages to track, measure, and efficiently minimize emissions at each stage.
Oil and gas companies continue to diversify, which creates a lot more complexity than when they were only focused on the barrel. This complexity, which is an obstacle to meeting their sustainable goals, also creates more challenges to every sustainable effort they have set in play.
Nevertheless, nearly half of these companies remain committed to accomplishing a net zero carbon objective, which is the most of any industry according to the survey of about 1,000 executives across industries worldwide.
So, can sustainable manufacturing exist in the natural gas industry? Yes, it can exist, but only if the drivers of sustainable transformation don’t relent. Soon enough, if the other sectors or industries pitch in, industries will develop, enhance, and implement many more sustainable practices.