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Tackling greenwashing in the energy industry

Posted by | Rauf Mammadov

Energy companies have created a myriad of ecolabels for their products to demonstrate their commitment to climate change goals. But how authentic are these labels and what does increased scrutiny mean for them?

The global push for clean energy has put the energy majors between a rock and a hard place. On the one hand these majors must meet self- or government-imposed climate change goals, and on the other, they are responsible for delivering best financial results to satisfy their stakeholders. Not an easy task. What makes the situation even more complicated is the absence of universal standards. Most of the energy majors operate globally, navigating diverse regions and contending with varying standards.

Several of the majors have found unique solutions to overcome these challenges, announcing carbon-neutral products which are approved by third party certifications.  Although the labels on these products claim carbon neutrality, a closer look reveals that their content is no different from regular products. The problem is that in many cases the claimed carbon-neutrality is achieved through carbon offset mechanisms. This means that these companies have certified their products as carbon-neutral by acquiring an amount of CO2 equivalent to the CO2 emissions associated with the lifecycle of those products.

This may come to an end soon as governments are beginning to standardize the calculation methodology for cradle-to-grave lifecycle emissions. In May, the American Petroleum Institute issued its first technical report on the methodology for calculating lubricant emissions, while both the UK and the EU are also applying additional scrutiny.

Standardization may prevent companies from imposing their own carbon neutrality standards, but they are generally being welcomed by the industry as they set a common baseline, and help to optimize production costs. These standards can also serve as a protective shield for companies against allegations of greenwashing.

The increasing standardization and scrutiny imposed by governments signal a pivotal moment for energy companies amidst the global push for clean energy. As they navigate the balance between climate goals and financial obligations, the drive towards universal standards is gaining momentum, potentially curbing greenwashing and providing a welcome defense for companies committed to genuine environmental responsibility.

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