The world’s most prestigious management consultancy McKinsey & Company is using its role as an important adviser to the COP28 climate talks to promote their interests on its large clients in the oil and gas industry and thwarting efforts to stop the use of fossils fuels that cause global warming, as per various reports and leaks.
In secret the American-based company has offered future energy scenarios to participants of the summit which are in contradiction to the climate targets it publically supports An AFP investigation has revealed.
A “energy transition narrative” drafted by the firm and then obtained by AFP does not reduce oil consumption 50% by the year 2050 as well as calling for trillions of new investment in oil and gas each year from now until 2050.
McKinsey is a firm whose biggest clients include American ExxonMobil as well as Saudi Arabia’s state-owned Aramco -is one of the consultants offering free guidance on behalf of those in the United Arab Emirates as it hosts the crucial negotiations that begin on November 30.
The talks are supervised by Sultan Al Jaber, head of the Emirati state-owned oil company ADNOC.
With experts predicting that 2023 is likely to be the hottest year ever recorded as well as greenhouse gases set to record numbers, McKinsey is “vocally and brazenly calling for lower levels of ambition on oil phase-out at the highest levels within the COP28 presidency,” According to a source present in the room for private conversations with the summit’s organizers.
McKinsey has responded by stating the fact that “sustainability is a mission-critical priority” and it’s dedicated to helping clients cut carbon emissions.
“We are proud to be supporting COP28 by providing strategic insight and analysis, and sectoral and technical expertise,” it said to AFP.
“Written by oil industry for the oil industry’
A number of McKinsey’s competitors that operate in Dubai have been working to find real solutions to climate change, according to three sources who took part in high-level preparation meetings and who requested not to be identified as the discussions were private.
“But it was very clear from an early stage that McKinsey had a conflict of interest,” according to an insider who was a participant of COP28 presidency discussions.
“They would give advice at the highest levels that was not in the best interest of the COP president as the leader of a multilateral climate agreement, but in the best interest of the COP president as the CEO of one of the region’s biggest oil and gas companies.”
Confidential documents reviewed by AFP confirm this.
It is said that the McKinsey report on the energy situation for COP28’s presidency “reads as if it was written by the oil industry for the oil industry” according to Kingsmill Bond an expert equity expert who examined the report.
“This is clearly not a credible pathway to net zero,” Bond is an associate principal of the Rocky Mountain Institute think tank said to AFP.
A COP28 spokesperson confirmed to AFP it was “McKinsey supports COP28 through providing insights and analysis on a pro bono basis.” However, to say that the firm’s analysis was not compatible with the global climate goals “is just incorrect”, said the spokesman.
At odds with net zero
It is structured like the law firm it is, McKinsey employs some 35,000 employees across the globe, including 700 senior semi-autonomous partners which last year’s revenue was reported as $15 billion.
In 2015, the Paris Agreement calls on nations to limit warmings to 1.5 degrees Celsius and the UN’s scientific advisory body for science has declared that the world’s economy should be carbon-neutral by 2050 if it wants to keep it within that range.
However, analysts believe the route McKinsey suggested to Jaber in the COP talks could allow fossil fuel companies to continue pumping way too much gas and oil to reach “net zero”.
“On average, 40-50 MMb/d (millions of barrels per day) of oil is still expected to be utilized in 2050,” in comparison to around 100 MMb/d in the present according to McKinsey’s report.
It’s twice as much as what is allowed under the International Energy Agency (IEA) net zero roadmap, according to Jim Williams of the University of San Francisco and one of the top models for the decarbonisation trajectory.
The IEA recommends that CO2-removal techniques grow by 100,000 percent by 2050 in order to stay in the direction of the goal of a net zero-carbon worldan enthralling challenge that has no assurance of achievement.
However, the McKinsey scenario is likely to require at least double that amount, experts have said.
“It must involve either far more massive levels of negative emissions technologies” which pull CO2 from the air, “or an even faster phase out of coal and gas” as stated by the former BP geoscientist Mike Coffin, head of Carbon Tracker’s Oil, Gas and Mining team at Carbon Tracker.
Demand for oil to reach its peak –
McKinsey’s plan for COP28 declares that $2.7 trillion annually in investment growth will need to be put into gas and oil up to midcentury, a position that is at odds to the IEA net-zero plan.
“Even with the current situation and no additional climate policies, we expect that global oil demand will peak in this decade,” said IEA Executive Director Fatih Birol.
A number of major oil and gas companies — buoyed by the high profits and prices in the aftermath of the conflict within Ukraine and the war in Ukraine pulled back from commitments to switch to renewables sources of energy or, in certain cases, stepped up their primary business.
“We will stay anchored in what we know we’re good at,” ExxonMobil CEO Darren Woods told McKinsey in an interview posted on the company’s website in September. He explained why ExxonMobil has stayed clear of solar and wind energy.
By 2021, the McKinsey’s efforts for fossil fuel customers sparked an internal revolt within its group of employees.
More than 1,100 employees of the firm have signed an internal memo seen by AFP informing them of “there is significant risk to McKinsey and our values from pursuing the current course.”
“Our inaction on (or perhaps assistance with) client emissions poses serious risk to our reputation” and “our client relationships”, they wrote.
“We have been telling the world to be bold and align to a 1.5C emissions pathway; it is long overdue that we take our own advice.”
McKinsey said to AFP that the firm is made it a point to assist clients in reaching the goal of net zero in 2050 which means involving “high-emitting sectors”.
“Walking away from these sectors would do nothing to solve the climate challenge,” it said.
– ‘We need consultancies’ –
As global warming continues to accelerate the pace of change, companies are hiring consultants to plan for the potential climate-related hazards and opportunities.
“We do need the consultancies to help because we’ve got to get going and move very quickly,” said Bob Ward of the Grantham Research Institute on Climates Changes and the Environments at the London School of Economics.
“But it’s essential that they actively work for the transition rather than trying to slow it down because of the vested interests of incumbents, such as the fossil fuel industry.”
The major players include McKinsey, Boston Consulting Group and Bain are hiring the best graduates with six-figure salaries to design strategies for their clients.
The 2022 McKinsey document on carbon markets for private use, as seen by AFP identified a number of its key customers, such as oil giants Chevron and BP as well as power company Drax along with mining firm Rio Tinto.
The largesst oil firm in the world, Aramco, declined to respond to questions from AFP about its relationship with the company.
McKinsey states that it has helped clients in the healthcare industry build solar capacity, help wind energy companies to increase their competitiveness, and at a minimum, a developing country to obtain more renewable energy for electricity however, it does not mention the customers.
“If we want to ensure a managed decline of fossil fuel production, we can’t do so if those helping (companies) make money from fossil fuel production continue to have a seat around the table,” Pascoe Sabido who is a researcher with Corporate Europe Observatory, a think tank. Corporate Europe Observatory think tank told AFP.
He also said there was a “blind spot” over consultancies their involvement in the handling of this climate change crisis.
“The lobbying and the fixing that happens under the radar… is much more dangerous because there’s much less accountability.”
‘Gas and Oil Consulting” –
McKinsey has seen tough news in recent years.
It was ordered to pay hundreds of millions of dollars over the last 2 years in settlements with lawsuits following being accused of causing an opioid overdose epidemic through providing advice to drug companies. McKinsey has denied any violations.
Numerous investigations have proven that the oil as well as gas companies were conscious the possible trajectory and consequences of global warming from the 1970s, based on studies by their own scientists yet creating doubts about the climate science, which reached that same conclusion.
McKinsey can be “capable of doing good work helping clients navigate the energy transition, but that work pales in comparison to what it is doing for oil and gas,” said one former McKinsey consultant who asked not to be identified because of a confidentiality agreement.
“They serve the world’s largest polluters,” the expert said. “The firm is best understood as possibly the most powerful oil and gas consulting firm on the planet posturing as a sustainability firm, advising polluting clients on any opportunity to preserve the status quo.”