TCFD (Task Force on Climate-related Financial Disclosure)
In June 2017, the TCFD (Task Force on Climate-related Financial Disclosures) of the G20’s Financial Stability Board published its final recommendations on information pertaining to climate to be released by companies. These recommendations include additional details for certain sectors, such as energy.
After analyzing the final report, Total publicly announced its support for the TCFD and its recommendations during the summer of 2017, while noting that it is up to companies to define the information about climate-related risks and opportunities that is material, which should, consequently, be disclosed in financial fillings, and the additional information that they choose to report on a voluntary basis. Total also believes that the quantification of impacts of different scenarios may not be relevant to investors as assumptions made by different companies may strongly diverge. The Group considers that companies have a major role to play in shaping how these issues evolve and that the modalities of the application of scenarios and the use of metrics should be further studied.
Total is continuing to dialogue as part of the Oil & Gas Preparer Forum set up by the TCFD in the autumn of 2017 with a view to publishing best applicable practices, in particular for the oil and gas sector. Total also joined the initiative launched by the WBCSD in December 2017 by signing the “CEO Guide to Climate-related Financial Disclosures”.
Below, Total gives details of how the Group implements the TCFD’s recommendations, according to the four pillars, and how it intends to launch an initiative for continual improvement in this field.
Total’s strategic approach takes full account of climate-related issues, which are also taken into consideration in the changes brought to the organization of the Group. The Group’s ambition to become the leader in responsible energy is reflected by the implementation of the One Total project, which gave rise to a new organization that came into full effect on January 1, 2017, and includes in particular:
- a new Gas, Renewables & Power business segment, whose President is a member of the Executive Committee, which spearheads the Group’s ambitions in low-carbon and energy efficiency businesses; and
- a Strategy-Innovation corporate division, which includes a Strategy & Climate division tasked with incorporating climate issues into the Group’s strategy.
Oversight by the Board of Directors
Total’s Board of Directors ensures that climate-related issues are incorporated into the Group’s strategy. Since 2008, these major issues for the Group have no longer been treated as one component of environmental risks, but rather on an independant basis. Every year, the Board of Directors reviews the main issues related to climate change in the strategic outlook review of the Group’s business segments, which are presented by the respective general management structures.
Also, the Audit Committee does more specific work on the climatic and environmental reporting processes in the review of the performance indicators published by Total in its annual reports and audited by an independent third-party organization. In 2016, the Compensation Committee also decided to introduce changes to the variable compensation of the Chairman and Chief Executive Officer to take better account of the achievement of Corporate Societal Responsibility (CSR) and HSE targets.
Finally, in September 2017, the Board of Directors decided to change the regulations of the Strategic Committee in order to broaden its missions in the realm of CSR and in questions relating to the inclusion of climate-related issues in the Group’s strategy. This committee is now called the Strategic & CSR Committee.
The Board of Directors is fully mobilized by this issue in order to support the development of Total, and it approved the publication of the first Climate Report in March 2016. This report is updated every year.
Role of management
Total’s Chairman and Chief Executive Officer deploys the Group’s climate strategy in keeping with the long-term strategic guidelines defined by the Board of Directors.
General Management calls on the Senior Vice President Strategy & Climate, who is the highest-ranking person in the organization with a day-to-day responsibility for issues related to climate change. In particular, this includes the development of the climate road map for the Group, its implementation and the definition of targets to reduce the carbon footprint. He reports directly to the Senior Vice President Strategy & Innovation, who sits on Total’s Executive Committee: see the Group's organization chart.
The Executive Committee relies on the work done by the Group Risk Management Committee to have a map of the climate-related risks to which the Group is exposed, and to make sure that the risk management measures in place are efficient.
Moreover, the Risk Committee (CORISK) assesses investment projects, the risks and the corresponding climate-related issues (flaring, greenhouse gas emissions, sensitivity to CO2 prices) before they are presented to the Executive Committee.
Finally, the Senior Vice President Climate chairs the Climate-Energy steering committee, which includes transverse Holding functions and representatives of Strategy and HSE management from the various business segments. The mission of this committee consists of structuring the Group’s approach to the climate, and in particular of:
- developing and periodically adjusting the Group’s climate-energy roadmap;
- proposing the targets that the Group sets itself (in terms of energy efficiency, GHG emission reductions, etc.);
- keeping a watch of the existing or emerging CO2 markets; and
- initiating or driving the technological roadmaps corresponding to these subjects (energy efficiency, capture and storage of CO2, for example).
Identification of climate-related risks and opportunities
The risks and opportunities related to climate change are analyzed according to different timescales: short term (until 2020), medium term (until 2030) and long term (beyond 2030).
As indicated in the Governance Chapter above, the risks related to climate change are identified in the analysis of investment projects and their impact is also examined for the entire Group portfolio. These risks are presented in detail in point 3.1.2 of Chapter 3 of the Registration Document 2017.
Climate change also provides Total with opportunities:
- in the coming decades, demand for electricity will grow faster than the global demand for energy, and the contribution of renewables and gas to the production of electricity is essential to the success of the 2°C scenario. This represents an opportunity for Total. Access to energy and decentralized production are part of this opportunity;
- but electricity alone will not be sufficient to meet all the needs, and in particular those of transport: gas and biofuels are amongst the solutions that the Group intends to develop;
- speeding up the development of CO2 capture, utilization and storage technologies (CCUS) is a source of opportunities to meet the needs of various industries (electricity generation, but also cement works, steel works, waste treatment, etc.); and
- helping customers to reduce their energy costs and environmental impact also offers opportunities, as part of a trend that will be accelerated by digital technology. Total intends to innovate in order to provide them with new product and service offers that will support their energy options and their usages. The promotion of hybrid solutions combining hydrocarbons and renewables is part of this approach. Similarly, services can be offered to optimize energy for industrial sites. The Group aims to develop this approach for industrial and mobility applications.
Impact of climate-related risks and opportunities
Climate-related issues are at the heart of the strategic vision implemented by the company, on the basis of the International Energy Agency’s Sustainable Development Scenario (2°C). Beyond the reorganization of the Group, the impact of the risks and opportunities related to climate change is reflected in Total's climate strategy by the following paths of action:
1. Improving the carbon intensity of the hydrocarbon production mix with at least 60% of gas in 20 years:
- developing an offensive strategy for gas, while limiting methane emissions. In 2017, Total has announced the acquisition of the LNG assets portfolio of Engie,
- selecting and developing hydrocarbons projects that are amongst the most competitive in terms of meeting the highest safety and environmental standards (reduction of exposure in oil shale in Canada; no oil exploration activities in oil fields under sea ice in the Arctic),
- progressing in CO2 capture, utilization and storage technologies: up to 10% of R&D investments dedicated to CCUS and the work done by the OGCI (marketability issues, capture technologies and worldwide storage capacities),
- supporting the introduction of carbon pricing mechanisms: since 2008, Total has incorporated a long-term CO2 price of $30 to 40/t in the economic assessment of its investments, according to the crude oil scenario, or the applicable price, if higher in a given country,
- halt of coal activities since 2016.
2. Developing low-carbon activities to supply electricity. Total intends that the low-carbon activities that contribute in particular to the production of electricity, will account for almost 20% of its portfolio in 20 years. This includes the downstream gas-electricity chain, renewables and energy storage. Total also promotes the use of biofuels. The objectives are:
- to continue developing renewable energies. Total has developped solar energy since 2011, through SunPower. Since 2016 the acquisition of Lampiris supports the strategy to develop gas and electricity marketing activities. In 2017, the entering into of an agreement with EREN Renewable Energy continues this approach,
- developing energy storage activities: the acquisition of Saft Groupe in 2016 shall enable the integration of activities related to electricity storage solutions, which are essential to the development of renewables,
- developing bioenergies: Total has been producing bioenergy for more than 20 years. With the start-up of La Mède, the Group will have a world-scale biorefinery (500,000 t/year). Total has also set up a JV with Corbion Plastics (100% biodegradable polymers from renewable sources),
- favoring access to energy: TOTAL has deployed an affordable solar lamps offer since 2011. The aim of the Group is to provide access to electricity to 25 million people in Africa by 2020.
3. Improving energy efficiency:
- continuing the drive to cut greenhouse gas emissions from the Group’s facilities,
- providing responsible energy usage solutions for customers (acquisition of GreenFlex in 2017).
In parallel to these three paths of action, Total is actively committed to these issues in international organizations and initiatives, and in particular the OGCI, which has an ambitious working program for the years to come. OGCI Climate Investments is a one-billion-dollar fund set up by the members of the OGCI, who wanted to make a concrete commitment to the climate together. They represent 20% of worldwide production of oil and gas and 10% of worldwide energy production. This fund was set up to support projects and technologies that can significantly cut emissions. Priority will go to the capture, utilization and storage of CO2, the reduction of methane emissions and energy efficiency.
Resilience of the organization’s strategy
The Group’s strategy incorporates the challenges of climate change, using as a point of reference the 2°C Sustainable Development scenario of the IEA and its impact on energy markets.
The Group ensures sustainability of its rojects and long-term strategy relative to climate change issues by the incorporation into financial evaluations of its investments submitted to the Executive Committee a long-term CO2 price of $30 to $40 per ton (depending on the crude price), or the current CO2 price if this is higher in a given country.
Regulations designed to gradually limit fossil fuel use may, depending on the GHG emission limits and time horizons set, negatively and significantly affect the development of projects, as well as the economic value of certain of the Group’s assets. Internal studies conducted by Total have shown that a long-term CO2 price of $40/t1 applied worldwide would have a negative impact of around 5% on the discounted present value of the Group’s assets (upstream and downstream)2. In addition, the average reserve life of the Group’s proved and probable reserves is approximately 20 years and the discounted value of proved and probable reserves with a reserve life of more than 20 years is less than 10% of the discounted value of the Group’s upstream assets.
Processes to identify and assess risks related to climate change
As described in the Governance Chapter above, the risks related to climate issues belong to the major risks identified and analyzed by the Group Risk Management Committee, which assists the Executive Committee.
The Risk Committee (CORISK) also checks the analysis of the various risks incurred by investment projects before they are submitted to the Executive Committee, and climate-related risks in particular.
Processes to manage risks related to climate change
Total's risks management procedures are described in point 3.4 of Chapter 3 of Total's Registration Document 2017.
Integration of climate-related risks into global risk management
The risks related to climate issues are part of the major risks identified and analyzed by the Group Risk Management Committee, and they are fully integrated in Total’s global risk management processes.
Metrics and targets
Metrics to measure climate-related risks and opportunities
Total uses the indicators described in detail on the Sustainable Performance's website Climate page to measure its performance in terms of climate change.
GHG emissions and related risks
Scope 1 and 2 GHG emissions, and the most significant items in Scope 3 of Total’s GHG emissions are addressed in detail on the Sustainable Performance's website Climate page.
All this data and the related risks are also reported to the CDP once a year, and Total’s response to the CDP questionnaire is posted on the Group’s website (total.com).
Targets used to manage climate-related risks and opportunities
The objectives defined and the indicators used by Total to measure its performance in terms of climate change are described in detail on the Sustainable Performance's website Climate page.
1 As from 2021 or the current price in a given country.
2 Sensitivity calculated for a crude oil price of $60/80/b compared to a reference scenario that takes into account a CO2 price in the regions already covered by a carbon pricing system.