In today's rapidly changing world, the pursuit of sustainability has become a critical goal for businesses across industries. Embracing sustainable practices not only benefits the environment but also enhances a company's reputation, reduces costs, and drives long-term success.
For energy companies built on hydrocarbons, there is no single template or formula for becoming a more sustainable, less carbon-intensive business. Some are evolving their product portfolio or exploring new business models like electric vehicle charging or carbon trading. Others are pursuing ambitious targets for reducing emissions and their overall carbon footprint. Some are initiating a series of more subtle, strategic investments and operational shifts. And some, of course, are moving more aggressively than others.
Yet a common thread connects many of these energy companies’ priorities, and that’s a drive to maximize the productivity and efficiency of existing operations. Rather than de-emphasizing their hydrocarbon operations, which likely will continue to play a critical role in the global energy mix for decades to come, many companies have realized, as Jayakrishnan Ramaswamy, Director, Business Process and Systems at Crescent Petroleum, put it in Forbes, that “sustainability begins with operational excellence.”
Broadly speaking, operational excellence refers to the continuous improvement of processes and systems within an organization to enhance efficiencies, reduce costs, and deliver superior products or services. It involves streamlining operations, eliminating inefficiency, and fostering a culture of continuous improvement. By focusing on operational excellence, companies can create a solid foundation for sustainable practices.
Achieving operational excellence doesn’t just put an energy company in a stronger position to meet its sustainability goals or requirements and perhaps even take a leadership role in carbon reduction. It also enables a company to capture new value across its operations, in part by driving out unnecessary costs and inefficiencies.
Artificial Intelligence
As artificial intelligence and machine-learning capabilities advance and mature, the opportunities for energy companies to incorporate AI- and ML-driven automation into their operations to capture new value will increase, from the field all the way down to the end user.
As asset-dependent as the energy industry is, companies that digitally connect and network their assets gain the ability to apply ML and AI tools to gather insight along every step of an energy molecule’s journey, identifying ways to make specific processes more efficient and certain facilities lower-emitting. That extends to the energy workforce as well, where new generative-AI capabilities are emerging to help companies manage their people more efficiently.
Today, ML and AI also are being used to strengthen predictive maintenance, and to execute certain processes and tasks automatically. More energy companies are turning to robotic process automation (RPA), for example, to automate planning and scheduling.
With the ability to rapidly analyze and collect data across an energy molecule’s entire journey, layering this automation with huge amounts of other relevant data from disparate sources, companies can identify specific areas of their operations where efficiencies can be achieved. And in the not-too-distant future, it may be not just feasible but practical for energy companies to rely on “lights-out” operations, where key assets run on an almost entirely automated basis, with little human involvement.
Digital Platform
For hydrocarbon-focused companies seeking to thrive in the energy transition, having a fully integrated digital infrastructure that enables information and insight to flow seamlessly, in real time, across the organization, is one major key to operational excellence. As Crescent Petroleum found when it got rid of siloed systems and integrated its operations under a single digital system, the insights yielded by operational data translated into better decision-making about how and where to deploy resources to reduce facility emissions. This in turn revealed pathways for more cost- and resource-efficient ways to extract, refine, and deliver products to market.
Relying less on custom, code-intensive applications, and turning more to ready-to-integrate, off-the-shelf solutions available in the cloud for non-differentiating business processes (such as task management, workforce management, and documentation), can help companies capture new efficiencies while cutting IT costs. Some of the biggest names in the energy business, including BP, Chevron, and Shell, are already moving in that direction, having taken steps to eliminate custom code and reduce costs through standardizing operations.
Sustainability-Related Networks and Metrics
Many energy companies are building digitally connected supplier networks, then applying AI and ML tools to analyze huge amounts of data from inside and outside their businesses. This enables them to be more responsive and agile in their supply chain decisions, better manage risk, and identify the most sustainable pathways for getting products to market.
Hydrocarbons aren’t likely to soon lose their relevance in the energy mix. DNV, an independent assurance and risk management firm, recently predicted in its Energy Transition Outlook 2023, that 48 percent of the global energy mix will remain driven by fossil fuels by 2050. Still, achieving operational excellence will mean prioritizing sustainability performance alongside financial performance across the business. Incorporating environmental, social, and governance (ESG) metrics into corporate performance assessments ensures a joint focus on achieving sustainability while maximizing profits. For example, SAP offers a precision-tooled approach to sustainability by enabling transactional carbon accounting through its green ledger.
Sustainability begins with operational excellence. By optimizing processes, reducing waste, embracing innovative technologies, fostering collaboration, engaging employees, and measuring progress, companies can pave the way for a greener and more sustainable future.
Brent Potts is responsible for global marketing for the oil, gas, and energy industry at SAP.