The energy sector continues to face tremendous change. Regardless of whether your company is a long-standing incumbent or an alternative fuels start-up, innovation, value creation strategy, and social impact are all areas companies will need to consider during the energy transition we are facing today.
According to a new report from Bain and Company, “Industries in the energy and natural resources sector oil—and gas, utilities, chemicals, mining, and agriculture—face a unique and intense period of change as they navigate through the energy and resource transition. None of the old imperatives have gone away: these companies still need to produce and deliver energy, materials, food, and services, efficiently, to their demanding customers. But that’s only table stakes now. Climate change, shifting consumer preferences, demands for greater accountability, and unprecedented levels of business competition will all require new ways of working, technological breakthroughs, and leadership that can rapidly scale their deployment.”
From today through 2026, industries that supply energy and natural resources will face a critical crossroads. They must keep their business going while also reinventing themselves to become more sustainable and reduce their carbon footprint.
Some investors doubt these companies can thread this particular needle and are shifting their money to newer start-up companies that don’t carry the same baggage. While disruption is sure to happen, it is likely too early to count these companies out just yet. There are trillions of dollars available, making the transition compelling to new and old companies.
This isn’t to say that existing Energy and Natural Resources (ENR) companies aren’t facing challenges. The greenhouse gasses and carbon emissions damages are making it more difficult for them to access capital and newer, greener competitors are being funded heavily. The impact of global warming is happening faster than many expected and is driving the public outcry for cleaner energy sources.
Companies are making specific changes to reduce their greenhouse gas emissions, but reducing carbon emissions requires a coordinated effort from everyone (companies and countries) as they are not traceable to a single source. There are three areas that Bain sees from companies successfully making the transition:
ENR companies are accustomed to innovating. Now they are focusing their innovation inwards on their operations and supply chain as they look to become more sustainable and lower-carbon in the future. In some cases, they are copying what new upstart companies are doing, and in other cases, they are developing their own innovative ideas.
Existing ENR companies are being forced to reevaluate their position in their communities. They have to put their money where their mouth is as it relates to becoming better corporate citizens. The scrutiny that has long been there has reached a tipping point. Beyond carbon and greenhouse gas emissions, water use, waste, recycling are other areas where improvement is expected. These changes will likely require retraining and or reskilling their workforce to adapt to a more automated future.
For ENR firms, economics goes beyond making a quarterly number. To continue to attract investment, the ability to demonstrate how you plan to get to zero-carbon or reduce emissions by a certain percentage by a specific date is going to be just as important to investors. Firms are already putting strict guidelines in place to access their capital.
To read more about what trends Bain is seeing today and the tools and capabilities you can use to navigate the energy transition, we recommend you read the full report here.
While the impact of doing nothing is dire and the challenges that lie ahead are complex, there is no reason to think we won’t address and overcome them. If you have questions about the energy sector or need an executive recruiter who understands the industry, send us a note, and one of our retained search consultants will be in touch shortly after that.