ESG pillars are central to Galp's transformation

Changes in the energy sector demand attention focused on the three pillars of sustainability – environment, social and governance – and force us to rethink the impact of all our decisions on investments and strategic choices

Listening – to society and the market – is the key verb in energy transition and in adapting to a new reality. Galp, on its path to decarbonisation, which involves a 360º transformation in the business, needs to pay attention to the three pillars that sustain and determine a company´s success. According to Lee Hodder, director of Strategy & Sustainability at Galp, working on the ESG pillars (Environment, Social and Governance) is fundamental in any organisation that wants to be successful in the future. As far as this company director is concerned, “these three pillars are key when thinking about how the energy system is going to change in the coming decades, the changes our portfolio is going to undergo, our environmental performance, and how our environmental decisions are going to contribute to a Net Zero world”.

In a conversation with Energiser, while participating at ESG Week 2022 on the panel “Path to net zero: Accelerating Investments to achieve the Future”, Lee Hodder argues that one of the common mistakes made by companies is to focus solely on the environmental component, a more current issue due to climate change, while neglecting the social component and corporate governance. At Galp, he explains, “we are scrutinising the three pillars, with a particularly solid focus on social issues”.

“We need to pay attention to what people say, much more so than the industry has done in the past”

When transformation represents such a big change in the portfolio as that underway at the Portuguese energy company, employees are an essential part of the process, and mustn´t be regarded as accessories. “We have to ensure that people are as prepared to handle our future portfolio as they are now, so we need to figure out how to give them the right opportunities and ensure that they are part of this transition”, he stresses. Furthermore, this change gives Galp the opportunity to create a new relationship with its clients. “Society's expectations are changing very rapidly and as such we have to pay attention to what people are saying, much more than the industry has done in the past”, he reinforces.

With respect to governance, the work involving transformation also needs to begin within organisations. “We need to be far more aware of what our governance is, and ensure that all our decision makers are fully conscious of how they can affect our business decisions”, argues Lee Hodder. Basically, the person in charge of strategy in the area of sustainability believes that we need to ensure that the organisation's governance system is permanently focused on the three pillars of sustainability. “It's all about being more aware of the potential impact of our decisions, and dealing with all our investments with our eyes wide open”. 

Transformation in a changing world

The already difficult task of managing an ambitious transformation process in a relatively short period of time becomes even more challenging when completely unexpected destabilising factors arise. The war in Ukraine has resulted in enormous turmoil in the energy markets, with a direct impact on prices of raw materials and, consequently, on the end user's pocket.  

In the short term, explains Lee Hodder, Galp's concern is to seek ways of giving customers more economical options. In the long term, we need to rethink investments “resulting from the additional income we have in fossil fuels due to the short-term impacts arising from the war, thereby ensuring we emerge from this situation stronger”. The Galp strategist explains that the current situation is forcing the energy company to analyse what investments can be made in low carb areas, to think outside the box in investments linked to the hydrogen value chain, in new forms of involvement in solar energy, and sparking discussions on how quickly the transformation is occurring due to the war.

Nevertheless, the Galp official believes that Portugal could play a major role in the changes arising from this conflict, insofar as the country's geostrategic position guarantees potential good connections to North Africa, which it can take advantage of through its “excellent deep-water ports such as Sines and Matosinhos, thereby opening up the possibility of Europe being supplied by other parts of the world”. The renewable resources of the Iberian Peninsula also represent a sea of opportunities for the country. When it comes to sun and wind, we have “some of the best resources in the world”. However, he points out, “the main challenge is related to the infrastructures that allow resources in Portugal to have better access to Europe”.