Does climate change exist and should we worry about it? The question that crossed the minds of many executives at ExxonMobil. From 1998 to 2008, the company’s scientists were convinced that climate change did not have negative consequences on society. During that time, there were two opposing school of thoughts on the reliability of scientific data that suggested climate change was negatively impacting the world.
But why would climate change matter to ExxonMobil? Because ExxonMobil has built an extremely profitable company from extracting and refining crude oil.
Now fast forward to 2016, ExxonMobil’s CEO has publicly admitted to the negative effects of climate change .
Video: Rex Tillerson admits Global Warming is real
But again, why should ExxonMobil care about the impact of climate change? To answer this question, we must further investigate the current business model of ExxonMobil.
ExxonMobil has three main business units: Upstream (extraction of oil or natural gas from the ground), Downstream, (refining of crude oil to gasoline or other byproducts) and Chemicals (refining of oil into other chemical byproducts, such as plastics and glue). All three industries are big contributors to greenhouse gases: the oil and natural gas industry emits 225 million metric tons CO2 equivalent, the refining industry emits 182 million metric tons CO2 equivalent, and the chemical industry emits 180 million metric tons CO2 equivalent.
ExxonMobil as a corporation has been responsible for 4.7% to 5.3% of humanity’s industrial greenhouse gas emissions since 1882. Considering the new greenhouse regulations, such as the Environmental Protection Agency (EPA) new standards, that are aiming to reduce global greenhouse gas emissions, ExxonMobil must re-examine its current operating model and consider removing the company’s dependency on crude oil. Moreover, as an employee of an ExxonMobil Chemicals plant, I learned about the multiple fines that were imposed on the company for exceeding its daily allowable emission of greenhouse gases. To try to prevent the fines, management was constantly considering new ways to reduce the amount of emissions. The company built new units that recovered gases that would historically be emitted into the atmosphere. Since these new units do not improve throughput or machine utilization, the cost is completely associated with continued operations and will decrease the company’s margins. Also, with the continued increase of regulations, similar expenditures are expected to be implemented throughout every division of the corporation.
Acknowledging the need to move in a new direction, the company has taken the following steps:
- Selling Assets: The company’s new strategy is to sell certain assets, such as refineries. Within the last few years, the company sold the Torrance, CA and the Chalmette, LA refinery. As an employee, it was communicated to the employees that all manufacturing plants, such as refineries and chemical plants, are up for sale, especially in states with very stringent emission regulations, such as California.
- Investing in New Technologies: ExxonMobil has recently made large investments into a Fuel Cell company that focuses on using carbon capture and sequestration (CSS) to remove carbon dioxide from streams in natural gas and power plants. The company also made large investments into producing liquid transportation fuels from algae.
Working in the Research and Engineering division of the company, I learned about the large investments that the company made to improve operations and to find ways to reduce the emissions of greenhouse gases. The company has made tremendous strides to change the direction of the company, but why not completely change the business?
Challenges of Changing the Business
- Increasing Energy Demand: The world’s energy consumption is predicted to continuously increase, and it will be difficult for renewables to meet all of the world’s energy demand.
- Reliance on Fossil Fuels: Currently, Fossil Fuels supply 88% of the global energy demand, so the transition from fossil fuels to renewables will require large investments in the current energy grid and world infrastructure.
Chart 2: Energy Demand by Country  Chart 3: Energy Sources for the World 
So, what should the company do? The answer lies on the balance sheet. ExxonMobil has $3.705 Billion of cash, so ExxonMobil should acquire a renewable energy company or build an in-house renewable energy division. Diversifying into renewable technology not only allows ExxonMobil to reduce greenhouse emission, but it also makes financial sense to invest into renewable technology. By 2020, some experts predict solar will be the cheapest electricity on the planet and will become a competitive alternative to fossil fuels. Additionally, with the additions of stringent industry regulations for the oil industry and tax incentives for renewable energy, the margins in the renewable energy industry will continue to increase while the margins for the oil industry will continue to decrease.
Word Count: 799
 Greenpeace Org, “Infographic: Exxon’s Long History of Climate Change Denial,” Greenpeace Organization, http://www.greenpeace.org/usa/global-warming/exxon-and-the-oil-industry-knew-about-climate-change/infographic-exxons-long-history-of-climate-change-denial/, accessed November 2016.
 SEC, “ExxonMobil Corp: Consolidated Statement of Income – USD ($) in Millions,” U.S. Securities and Exchange Commission, https://www.sec.gov/cgi-bin/viewer?action=view&cik=34088&accession_number=0000034088-16-000065&xbrl_type=v#, access November 2016.
 Sofia Plagakis, “Oil and Gas Production a Major Source of Greenhouse Gas Emissions, EPA Data Reveals,” Center for Effective Government, February 12, 2013, http://www.foreffectivegov.org/oil-and-gas-production-major-source-of-greenhouse-gas-emissions-epa-data-reveals, accessed November 2016.
 Douglas Starr, “Just 90 companies are to blame for most climate change, this ‘carbon accountant’ says,” Science, August 25, 2016, http://www.sciencemag.org/news/2016/08/just-90-companies-are-blame-most-climate-change-carbon-accountant-says, accessed November 2016.
 Enesta Jones, “EPA Releases First-Ever Standards to Cut Methane Emissions from the Oil and Gas Sector,” US Environmental Protection Agency, May 12, 2016, https://www.epa.gov/newsreleases/epa-releases-first-ever-standards-cut-methane-emissions-oil-and-gas-sector, accessed November 2016.
 Maria Gallucci, “Exxon Mobil Corp. (XOM) Backing Fuel Cell Technology to Clean Up Carbon Emissions In Power Plants,” International Business Times, May 5, 2016, http://www.ibtimes.com/exxon-mobil-corp-xom-backing-fuel-cell-technology-clean-carbon-emissions-power-plants-2364598, accessed November 2016.
 Jad Mouawad, “Exxon to Invest Millions to Make Fuel From Algae,” The New York Times, July 13, 2009, http://www.nytimes.com/2009/07/14/business/energy-environment/14fuel.html, accessed November 2016.
 Rebecca Henderson, Sophus Reinert, Polina Dekhtyar, Amram Migdal, “Climate Change in 2016: Implications for Business,” Harvard Business School, October 14, 2016.
 EIA, “What is U.S. electricity generation by energy source?” U.S. Energy Information Administration, April 1, 2016, https://www.eia.gov/tools/faqs/faq.cfm?id=427&t=3, accessed November 2016.
 SEC, “ExxonMobil Corp: Consolidated Balance Sheet – USD ($) in Millions,” U.S. Securities and Exchange Commission, https://www.sec.gov/cgi-bin/viewer?action=view&cik=34088&accession_number=0000034088-16-000065&xbrl_type=v#, access November 2016.
 Ken Mataya, “Rex Tillerson admits Global Warming is real,” Youtube, July 22, 2016, https://www.youtube.com/watch?v=TkuyY2FFR7c, accessed November 2016.