INDUSTRY: Energy and Utilities

Greenhouse gas (GHG) emissions

Extracting and producing fossil fuels creates significant GHGs, both through combustion and venting, flaring and fugitive methane. As climate change regulations tighten, oil and gas companies face mounting compliance costs and risks. For electric utility companies in the sector, stricter emissions regulations can raise compliance costs, particularly in deregulated markets. Those lagging behind in terms of embracing clean technologies and optimising GHG reduction strategies risk asset write-downs, expensive carbon credits, and spiralling costs. For waste management companies, regulatory pressure to limit GHG footprints associated with landfills is increasing. Overall, GHG regulations pose both risks and opportunities for the waste management industry, impacting costs, investments, and even permits. The ability to capture and utilise landfill gas can generate revenue and operational efficiencies, while poor performance can hinder permit acquisitions and renewals, ultimately affecting revenue streams.

Business resilience and ethics

Fossil fuel companies face a double threat from tightening greenhouse gas (GHG) emission regulations and increasingly competitive alternative energy technologies. These factors could restrict demand growth and depress prices for fossil fuels, potentially leaving a significant portion of reserves unextracted. Coal companies face additional challenges from air quality regulations impacting coal-fired power plants. Beyond environmental concerns, ethical business practices and transparency in payments to governments and individuals are crucial considerations for the energy and utilities sector. Bribery and corruption, unfortunately, remain prevalent in some regions. However, the proliferation of anti-corruption, anti-bribery, and payments-transparency laws and initiatives worldwide create an increasingly robust regulatory environment aimed at mitigating these risks. Violations of these laws can result in significant financial consequences for companies in the sector, including substantial one-time costs or heightened ongoing compliance burdens.

Water management

For energy and utilities companies, effective water and wastewater management is a critical business imperative. Leaky infrastructure, inefficient treatment processes, and water-intensive electricity generation pose significant financial, regulatory, and reputational risks. Companies must optimise distribution networks to minimise non-revenue water losses, invest in innovative treatment technologies to ensure safe and compliant effluent, and prioritise water-efficient power plants to navigate tightening supplies and stricter regulations. By proactively addressing these challenges, energy and utilities companies can not only protect the environment and public health, but also secure their long-term financial viability and social licence to operate.

Sustainable materials

For renewable energy providers, reliance on a handful of critical materials, often concentrated in politically unstable regions or with limited substitutes, makes supply chains vulnerable to disruptions and price volatility. This dependence on scarce resources can also stifle innovation, drive up costs, and expose companies to environmental and social concerns. By actively promoting transparency in their supply chains, prioritising responsible sourcing and supporting research for alternative materials, solar and wind energy companies can not only secure their own access to critical resources but also contribute to a more sustainable future for the entire industry. Find out more about our supply chain audit tool, FutureConnect.

Human rights risks

For energy and utility companies, human rights risks threaten social licence to operate, incur financial penalties, and tarnish reputations. Vulnerable communities impacted by resource extraction, hazardous working conditions, and compromised water access can lead to project delays, lawsuits, and public backlash. Embracing a proactive approach to human rights, through due diligence and responsible sourcing, builds trust, creates a fairer value chain, and ultimately strengthens a company’s long-term social and financial sustainability.

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