A July 21 analysis by the World Benchmarking Alliance, a group of sustainability-oriented nonprofits and financial institutions, gave Exxon a score of 5.2 out of 100 in how well its corporate strategy is aligned with the Paris Agreement goal to limit warming to 1.5 degrees Celsius above pre-industrial levels (Chevron, its closest peer, scored a 6.4).
In March, CEO Darren Woods dismissed other oil companies’ emissions-reduction commitments as a “beauty competition,” in defending his decision in December 2020 to set goals only to moderately reduce emissions per unit of oil and gas produced, and not to aim for net zero emissions as rivals like BP and Shell have done.
Now, it seems, Woods wants a turn on the runway. The Wall Street Journal reported on Aug. 5 that the company is considering setting a net zero goal for 2050. If it does, that would be a major victory for the climate activist shareholders that shook up the company’s board in May. But the details suggest that Exxon’s commitment would only be skin-deep.
Companies need to focus on their Scope 3 emissions
Corporate emissions are tallied in three categories. Scope 1 covers emissions from the company’s direct operations, like gas burned to run the motor in an oil pump or company car. Scope 2 covers emissions from purchased energy—the electricity in Exxon’s offices, for example. Scope 3 covers emissions that come from a company’s suppliers and from its customers as they make use of the company’s product.
For an oil and gas company, scope 1 and 2 are negligible compared to scope 3: obviously, the vast majority of Exxon’s carbon footprint occurs when its customers burn its products in cars and airplanes and power plants. Exxon has disclosed its scope 1 and 2 emissions for a decade, but only disclosed its scope 3 emissions for the first time in April. And according to the Journal, the new net zero goal will only apply to scopes 1 and 2.
At the moment, Exxon’s main strategy for addressing scope 3 emissions is a new division it set up in February to commercialize carbon capture systems, which would allow major industrial consumers of gas to lower their scope 1 emissions, which, if the gas came from Exxon, are the same as Exxon’s scope 3. Woods has also said that Exxon may eventually sell carbon offset credits it generates through carbon capture activities—essentially running the company’s carbon pollution business in reverse, which could in theory draw down its scope 3 emissions.
Ultimately, the only way for Exxon to eliminate its scope 3 emissions is to stop producing oil and gas. That’s the direction some of its European peers are headed, as they look to become titans of renewable energy. Until Exxon gets on board, it will never be the climate beauty queen.