Planning for tomorrow's energy transitions today
Companies in the energy, utilities and resources sectors have the potential to play a huge role in the development of a circular economy. Many of the technological developments that could accelerate circularity are within their sphere of operations. These include innovations in materials composition and efficiency, electrification, hydrogen production, biochemistry and synthetic chemistry, and carbon capture and use.
“Circularity goes to the heart of many of the challenges brought on by the global pandemic—the needs to rationalise operations, to construct more localised supply chains and to build resilience. Addressing them with circularity as a guiding principle yields the benefit of new business models that can add value and provide a competitive advantage.”
Jeroen van Hoof - Global Leader, Energy, Utilities and Resources, PwC Netherlands
Five urgent global issues are fundamentally changing the way millions of people live and work: asymmetry, disruption, age, polarisation and trust (our ADAPT framework). The global pandemic has now accelerated the need for change, and circularity offers a way of pressing the reset button to address many of the challenges.
Climate concerns have already been placing pressure on traditional ‘take, make, dispose’ economic and business models. In contrast to these linear approaches, circularity decouples economic activity from the consumption of materials and energy by creating closed-loop cycles in which waste is minimised or even eliminated, and in which resources, including carbon, are reused. Even companies with business models that are inherently linear, such as oil and gas or mining, can introduce elements of circularity into their operations. And so, we look at what circularity can offer to companies across the energy, utilities and resources sectors.
Circularity can be centred on three overarching principles (prioritise renewable inputs, maximise product use, recover by-products and waste), which define ten corresponding strategies. The diagram illustrates the continual flow of resources in both the production/distribution phase and the consumption phase.
Across the board, companies in the energy, utilities and resources sectors are examining their use of resources with a fresh eye and striving to derisk business models. Circularity provides a useful lens to consider strategic options, ensuring that resources are used with more care and, wherever possible, treated as assets that have cradle-to-cradle value.
Examine where your current operational footprint and direction are taking you. Assess your opportunities to deliver circularity, looking deep inside your operations and outside to the surrounding community of suppliers, customers and stakeholders.
Set out your circularity ambition and give it the necessary strategic underpinning, ensuring that it is widely communicated and understood by those who have to deliver it.
For some companies, it may be small steps. For others, it will require the transformation of their whole business model. Either way, identify the company-specific capabilities that will enable your circular transition.
Forge the relationships and alliances that you will need to develop an effective circular ecosystem. Circular ecosystems need to be part of a supportive framework within well-functioning markets and have clear rules, a dedicated infrastructure and a logistical network.
Monitor your circularity steps with adequate management and reporting processes, and use those processes to further refine your circular strategy.
It’s better to facilitate your own circular transformation, rather than let others overtake you and find yourself playing catch-up.
Global Leader, Oil and Gas, Partner, PwC United States
Dr. Nils Naujok
Global Leader, Chemicals, Partner, Strategy& Germany
Global Energy, Utilities & Resources Advisory Leader, PwC United Kingdom
Tel: +44 7740 157147