It’s not easy bein’ green, Kermit the Frog lamented more than half a century ago. For the fossil fuel industry in the 2020s, it won’t be easy turnin’ green.

“This is, bar none, the most defining issue that this industry is facing the next couple of decades,” Katherine Blue, KPMG’s U.S. national leader for ESG and climate services, said during a recent webinar. “We’re all very familiar with the discussion around climate risk potentially leading to stranded assets in the energy industry. We know the effects of carbon pricing. We know what that could look like through a portfolio.”

But the oil and gas industry also produces critical products that in some cases can’t be replaced, Blue said. The process of engaging in the energy transition to cleaner fuels involves trade-offs, government policy changes, technological speed, innovation, market pricing and a huge challenge of recruiting a new generation of talent that possesses different skill sets than those of the past.

“It’s really an interesting balance and one that none of us have the right solutions to right now,” she said.

Counting to Net-zero

As difficult as the transformation may be, it might be worth noting that Kermit concludes his song by accepting and embracing his greenness. Could an oil and gas business do the same?

“We have seen the impact of COVID-19 and some initial skepticism as far as to whether COVID-19 would slow down the focus on climate and energy transition,” said Mike Hayes, KPMG International’s global head of climate change and decarbonization, and global head of renewables. “Nothing could have been further from the truth. In fact, we have seen an acceleration of focus from both government and corporates on the question of climate change and energy transition.”

That focus has often manifested in net-zero commitments, or pledges by governments, organizations or companies that their greenhouse gas emissions will be offset by other activities that remove those gases from the atmosphere like planting trees or carbon capture and storage programs.

These pledges typically set a target date. For example, the plan put forth by President Joe Biden during the presidential campaign set a target of a net-zero economy for the U.S. by 2050. Global commitments as of November 2020 covered about 50% of the world’s emissions, the United Nations said, with the percentage likely higher now.

“I think it’s fascinating to watch just the sheer speed of these net-zero commitments that have been made right across the corporate world,” Hayes said. “It’s one thing to make a net-zero commitment. It’s a completely different thing to actually deliver on those. My great fear is that corporates don’t really have the full range of solutions at their fingertips to fully decarbonize and meet their net-zero commitments.”

Can’t Plant Your Way Out of This

Among the risks facing companies is facing accusations of “greenwashing,” or making a net-zero pledge to satisfy investors or the public or government regulators in the short term while pushing real action well into the future. Tree-planting plans have roused suspicions among some environmentalists because the earth lacks sufficient land to plant enough trees to accommodate the net-zero pledges already made. So, if a company has a net-zero plan, it better hold up.

“This issue around verification of data is becoming a part of the energy transition,” Hayes said. “If investors don’t trust the data, what’s the point? I personally believe more standardization around definitions of net-zero will be required because I think that’s a really big problem.”

Developing a detailed roadmap is essential for any entity engaged in the energy transition, Blue said. The plan must include goals, costs, technologies and timing. What is tricky at the moment is trying to gauge the risk of technologies that aren’t yet available and how much capex will be needed to acquire or develop, and incorporate them into operations.

Timing is another aspect that can trip up planners.

“A lot of companies are moving toward 2050, and some of them have 2030-related targets,” she said. “You could be compromising a gain in 2050 by accelerating a particular technology in 2030. So, one of the concerns I think that has been put out there is, you need to be looking at kind of the long train of emissions reductions and not maybe two tranches of emissions reductions.”

And here might be where the petroleum-derived synthetic rubber meets the road (also composed of a fair amount of oil-based substances): how do companies in the fossil fuel industry—routinely blamed for climate change—convince a skeptical if not cynical public and investing community it is serious about its net-zero pledges and making progress to achieve them?

Unsurprisingly, the host of the webinar and one of the Big Four accounting firms worldwide, KPMG, has an answer: hire an accountant.

“The role of the accountant and the auditor is really to prove that the claims that are being made are having the impact and are actually occurring over time,” said Maura Hodge, audit partner and national ESG assurance leader for KPMG in the U.S. “The accountant is really there to assist the business and, in some cases, actually do the calculations to capture what your full greenhouse gas inventory is.”

Measuring that baseline today and then tracking where it is in 2030 or 2050 is becoming more important, Hodge said, because KPMG is already seeing requirements for climate change disclosures in the EU beginning in 2023. She said the U.S. could be heading in that direction, too.

“In having spoken with a number of investors, they recognize the value of assurance over this data because it provides information that you know is high quality and is actually not just a company making a marketing claim or a statement, but that there’s actually something to happen back it up,” Hodge said.

‘Absolutely Crazy’

Hayes, who is heavily engaged in climate change issues and works with the World Economic Forum, and November’s United Nations Climate Change Conference in Glasgow, Scotland, believes oil and gas companies are unfairly treated in the wider government and political discussion. The world needs natural gas for baseload and many other reasons, he said, but misinformation in the public sphere clouds that reality.

“This idea that the future of energy is going to happen without the oil and gas companies is absolutely crazy, if you ask me,” Hayes said. “These are the people who have built and driven the energy industry for the past 150 years. They know how to do this stuff in difficult developing countries because they’ve done this in the oil and gas world.”

What clearly bothers Hayes is the disregard for the people who are part of and depend on the oil and gas industry for their livelihoods by those on the green side of the agenda.

“It’s not that easy to completely pivot a business that has grown up and built on oil and gas and say, ‘we want to become renewable business overnight,” he said. “That is just the wrong way to think about this. This is a people and a cultural issue. We need to understand that if we’re asking people to reinvent themselves, that just doesn’t happen by changing a business plan. Real people are impacted by this and we do need to think through the people issue.”

For Blue, it goes back to the scale of transformation the industry must grapple with, including tough decisions on a net-zero path and climate disclosure-related commitments.

“We feel like a lot of companies aren’t necessarily prepared to have that full discussion and we know the investors are pressing, in particular, not just on a net-zero commitment but on a road map,” she said. “It’s critical for this industry to get it right.”