COP26: Changing mindsets and driving collaboration

MATHIAS STECK     Hello and welcome to the 11th Series of the DNV Talks Energy podcast. I’m your host, Mathias Steck. In this series so far we have explored the many different aspects of the energy transition and the extent to which COP26 had an effect in driving major change. In this final episode of the series, we take a look at the factor which progress cannot be made without - mindset change. We’ll examine not just the mindset change required by politicians, large companies and investors but by those whose positive actions and cooperation are vital to achieving net zero, people and communities all over the world. To discuss this, I’m joined by two guests ready to offer their unique perspectives on this urgent challenge: Julie Shuttleworth, CEO of Fortescue Future Industries, a green hydrogen producer based in Australia that was formed in 2018 from a large mining group traditionally relying on fossil fuels, and DNV’s Ditlev Engel, CEO of the Energy Systems business who works with businesses, policymakers and investors all around the world to support the transition to a clean energy future. We hope you enjoy the episode. Julie, I’d like to start with you as DNV’s guest today. We’ll dive a lot deeper into the mindset change that your company, Fortescue Future Industries has undergone but for the benefit of our listeners, could I ask you to start by telling us a bit about yourself, the company and your role there?

JULIE SHUTTLEWORTH     Hi, yes, I’m Julie Shuttleworth. I’m the CEO of Fortescue Future Industries. Fortescue Future Industries is the renewable energy and green hydrogen company of Fortescue Metals Group. Fortescue Metals Group is one of the world’s largest mining companies. We started in 2003 and we produce over 180 million tonnes of iron ore per year. So, we’re a huge carbon emitter. We’re now transitioning, through the establishment of FFI, Fortescue Future Industries, to be a vertically integrated green energy and renewables group. Fortescue Future Industries’ vision is to become the world’s leading renewable energy and green products company. We’ve got two key objectives. We’re aiming to produce over 15 million tonnes per year of green hydrogen by 2030 and we’re supporting the decarbonization of Fortescue by 2030 using green hydrogen, green ammonia and green electricity.

MATHIAS STECK     And could you tell us a bit more about your background and how you came to be now in charge of the transition?

JULIE SHUTTLEWORTH     I started out in the mining industry as a metallurgist, have worked around the world. I started with Fortescue about eight years ago, as general manager of their Cloudbreak mine and then Solomon mine and then became Deputy CEO in 2018. When we really started ramping up the green hydrogen side of the business, starting with an agreement with the CSIRO, which is the Commonwealth Scientific and Industrial Research Organisation here in Australia. My role then transitioned to become CEO of FFI in 2020, when the Board said to me, Julie, we’ve got to be successful, 100% focus on green hydrogen for us to be successful as a company as we transition into the renewable energy future.

MATHIAS STECK     Many thanks, Julie. I’m very keen to revisit some of those areas you raised there in more detail as we go on. But, Ditlev, turning to you now, DNV’s latest projection show that a Paris compliant future is affordable, but only if a change in mindset occurs. What exactly is meant by this?

DITLEV ENGEL     Yes, so, hello, everybody. Every year we produce our Energy Transition Outlook, and we did that in September again this year and, like in previous years, it showed that we are not on the road to Paris, so we are forecasting a 2.3 degree warming going forward. And that is driven, let’s say, by the most likely future that we see, which means that we will see immense change in terms of uptake of renewables, greening, etc. But it simply is not enough and is not fast enough. We have therefore produced our latest report, which is called the Pathway to Net Zero, and that is really to try to describe what it will take if we are going to get to Paris, i.e. 1.5 degree centigrade warming. And that clearly shows the delta between the two, and that means a massive upscale is needed and, let’s say, the mindset of approaching this needs to be very different because we basically have no time. From our point of view, the outlook really demonstrates that we do have the technologies we need in order to get there, but to get them deployed and to get them deployed at the right speed is really where the major challenge is. So, when we talk about the mindset, it is really to say how do we approach the business differently. How are we going to make sure that we scale up everything much, much faster? And how do we do it in a way that we all get everybody on board in order to make a just transition? So, that’s really the mindset that we would like to address and get everybody to understand. We have what we need but we need to do it in a different way in order to make sure we get towards the 1.5 degree centigrade objective.

MATHIAS STECK     Talking about the positive mindset, Ditlev, the general public also needs to get on board, and this may involve spending their own money as well. How can they be motivated?

DITLEV ENGEL     Well, first and foremost, we need to look at what is the total amount of money that we spend in the world on energy, and basically today we spend about 3.5% of global GDP on energy, seen from a society point of view. Now, on the energy transition that we forecast at DNV, we think this will fall down to 1.5/1.6% of global GDP, and the reason for that is that technology will keep on giving us so much more, constantly going forward. We keep getting more for every dollar or euro that we invest, and that is important to be mindful of. So, it is affordable, and we also see that even when we talk about the pathway to net zero where we need to be even faster, we will spend less, just above 2% of global GDP by doing that. So, we can afford to do so, seen from let’s say, governments and the total world economic point of view. Now, how does that translate into the cost of the single consumer? Well, we have to be mindful of that we need to scale up a lot of things and we need to think differently of how we pay for things. Because we also need to pay for things that we need to scale down, and that is the role that governments have to put in place and think differently about the cost and the investment. So, we need to do a lot of investments upfront that we will benefit from later on as we will see that we get more out of each dollar that we invest now. Now, for the individual consumer that is, of course, something where governments needs to find the right balance in this transition, so they make it just. And, again, this means that we need to measure things in a different way instead of like we always talk, for instance, about the cost per kilowatt hour. We need to understand that if we invest now, it will become much cheaper in the future. And that is how we have to think about it. We have seen that, for instance, when we invest into the scaling of wind. In the beginning we paid a lot to pay for, for instance, offshore wind but as we invest into that, we have seen over the last 20 years that the cost has come down significantly and now today there are no need for governments to support this financially. So, we have to understand that we need to invest upfront. We will then get the benefits later on. And let me then just add as well that the cost of climate change is very, very high. So, the consumer will pay a significant amount, and so will societies, if we do not get this addressed. So, therefore, we have to remember that the cost of climate change is a very, very high cost that needs to be factored in as well. I think it’s very exciting what’s happening with Fortescue Future Industries. One of my takeaways, and we will talk about a little later, from COP26, is that the future is very much about scaling, it’s very much about speed, and it’s very much about system thinking. And when I listen to the plans that you have at Fortescue Future Industries, it sounds that scaling, speed and systems is exactly what is being addressed here. From our experience at DNV, we see that many corporations are working very hard to change the mindset and the culture. So, I would be very curious to know from you, how does that actually happen at Fortescue?

JULIE SHUTTLEWORTH     The Board of Fortescue’s been mulling over green hydrogen for nearly a decade and when our Chairman, Dr Andrew Forrest, was doing his PhD in marine ecology, he really realized the oceans were warming and the planet was warming and he could see the impacts on not just marine life but humans and the planet. And that really drove him and our Board to really get focussing on this really quickly and that resulted in Fortescue Future Industries being created in 2020, resulted in us going around the world visiting 47 countries on the very first trip in the middle of a global pandemic to secure renewable energy resources, to look at the technology, the manufacturing and to really drive this agenda for renewables. Green hydrogen is a practical implementable solution that decarbonizes hard-to-abate sectors, such as heavy haulage, shipping, rail, aviation  and heavy industry. We use over 750 million litres of diesel per year. The planet’s cooking. It’s a critical point in time and we need to take action, so we’re leading by example. We’re putting projects in place that decarbonizes our operations by 2030 and we’re also looking at a global portfolio of projects around the world to make green hydrogen and green ammonia to help decarbonize the whole planet. Scale is key to drive cost down. We need hundreds of gigawatts of renewable energy to feed into green hydrogen projects. Technology and innovation is absolutely key and also manufacturing of the key components that go into these green hydrogen economies. So, we’re focussing on all of that in FFI to make sure we get a good kickstart with this. The other important thing is to really get green hydrogen projects started quickly. We’ve got to get the flywheel turning. That means we do the first project, we learn, make improvements, apply them to the next project and we just get lots of learnings early on and get those projects moving.

DITLEV ENGEL     So, it was a mindset change, let’s say starting with the Board and then it has cascaded into the organization.

JULIE SHUTTLEWORTH     It sure was. Our founder and chairman, Dr Andrew Forrest, with the Board, cascaded that down into leadership and the organization has picked that up and run with it with huge vigour and passion and that’s the culture of our company, never ever give up attitude, being greatest and determined, setting stretch targets and getting some quick action. Ditlev, in terms of DNV and your climate objectives, what’s the most challenging thing you’ve got in your company right now?

DITLEV ENGEL     For us the greatest challenge is really to make sure we deploy our strategy. We have a strategy of how to tackle global transformations. I’m working in the energy space, so obviously for us the biggest challenge will be how to help our customers decarbonize faster, and that is what we are focusing on. Obviously, across DNV we have similar challenges on the decarbonization but also others. But I would say rounding all 12,000 people in DNV around our new strategy to tackle global transformation and specifically for us and the energy system is how to really get all of our clients to decarbonize faster is really what we spend all our time at. And then I would say we are fortunate also to make sure that we need to bring a lot of new colleagues on board. So, we are really focusing on how to make our strategy very well anchored, both to our current colleagues but hopefully also future colleagues that will join us in accelerating a transition.

MATHIAS STECK     So, building off what we just heard, mindset change is definitely at the centre of this transition but also you mentioned quite a lot of investments required and also there must be a change in the experience of your workforce. So, Julie, what about the time needed to build that capital and the experience that an organization needs to fully decarbonize?

JULIE SHUTTLEWORTH     This is a really important aspect to cover off. People and skills is really critical. Culture of a company, where everyone’s passionate about the cause. You’ve got to obviously have funding to be able to do this and having Fortescue Metals Group as our mother company provides a good foundation for us to have some funds for these early projects, particularly the early R&D and technology work that needs to be done. I’m going to give an example here of our green fleet team. We’ve already got hydrogen working in a huge haul truck, ammonia operating in a train and we’re converting a ship to run on ammonia. All this is really important to get technology demonstrated and then get it in the field operating so that you can learn and make improvements and decarbonize the operation. We also traveled around the world in the last 15 months. Our team’s traveled to over 60 countries, meeting with prime ministers and presidents, various ministers, securing renewable energy resources, acquiring technology, looking at manufacturing facilities, and all this really plays a big part into making sure the overall plan for the green hydrogen business is going to work.

MATHIAS STECK     Ditlev, thinking about organizations such as Fortescue that have diversified into clean solutions, is the onus now on all companies to think the same way?

DITLEV ENGEL     I think we will see now, in the coming years, first and foremost, a lot of different pressures building up on the carbon footprint of any organization, both when it comes from the investor’s point of view but also from the regulator’s point of view that want to know how much each organization or each company is emitting in its operations. So, I think there will be a very different focus across industries on exactly how to deal and work with the carbon footprint of any organization. At the same time, we’re also seeing now that this is, of course, also a huge challenge but also a huge opportunity and, as was just mentioned by Julie, it’s a completely new approach by, let’s say, a company like Fortescue coming into the industry with a new mindset of how they want to change their approach. And we are seeing this now, that the way that many companies are engaging in this going forward is quite different from what was done in the past. So, I think that’s very encouraging because the role of business is absolutely critical, in order to accelerate the transition and, therefore, when we talk about speed, when we talk about scale, the fact that companies and large companies are embracing this, are engaging in a new way that we just heard, is exactly what we need to see. We have seen it, for instance, in the automotive industry where there has been huge changes over the last number of years of how to decarbonize and really move into fully electrical vehicles in order to decarbonize the transport sector, just as one example. And that is, again, I think what we need to see happening, how each industry can say, what can we do going forward? And there, obviously, we have the hard-to-abate sector, like mining, where it is very important to say, we cannot do it just with renewables, we have to do something else and therefore moving into hydrogen, for instance, is the way forward. And I think that’s very exciting because technology is really the thing that is going to help us succeed on this challenge, and it’s technologies that we can deploy very, very fast.

MATHIAS STECK     Staying with you, Ditlev, for this next question, we are talking today, following COP26, which was seen as a major opportunity for international collaboration over climate change. Where does the fundamental shift in mindset have to start? With political action and commitment, certainly, but how can the necessary pressure be sustained to change the way of thinking?

DITLEV ENGEL     I think first and foremost, we need to recognize that people can see that there are opportunities ahead and also that there is job creation ahead by moving into this agenda. I think that’s very, very important, that people can see this as an opportunity as well. And when we talk about what happened at COP26 this time, I would say I have never seen, being in previous COPs, so many business activities around, let’s say, the purpose of the meeting obviously being political but there were so many companies there telling and showing how they could contribute to this and this is, I think, what is very important to drive this forward on a positive momentum. At the same time, we obviously also saw that what was submitted to the UN was not sufficient, so everybody has been requested that would give us a world of 2.4 degrees centigrade, which is actually very much in line with what DNV is forecasting, that everybody has been asked to go back and look at what do they need to do on each country level in order to get there. And I think here, again, the partnership between private and public is absolutely essential, so the plans of the government is going to mirror that, the build-up that is going to happen. We have seen now, for instance, with the new government coming into Germany, that it has been accelerated, when they’re going to phase out coal, which obviously means moving that eight-year forward is a very big step in order to accelerate the transition. And this is just one of the examples that each country has to consider. Okay, we had a plan, it was not enough, we have to do even more. And the more that we see firm commitment from governments and also it will make it easier for business to know how to plan and act and I think this is very important. So, the signals and the very firm signals that governments are sending will make it much easier for business to react to this and then also create the opportunities. So, that is really what we need to see and, as I said, one of my main takeaways was that it is about scaling, it is about speed and it is about systems. And I think this is also what businesses took away and also what government needs to focus on and, hopefully, by doing this together, because we need each other in order to make this happen in a very close cooperation.

MATHIAS STECK     So, you mentioned firm commitment from governments. We heard about the importance of political leadership. Based on this, I’d like to put this next question to both of you. What role do you think COP26 played in focussing minds, whether politically, economically or from a large business standpoint on the climate change challenge? Let’s start with Julie and then turn to Ditlev.

JULIE SHUTTLEWORTH     COP26 was amazing. There was tens of thousands of people there, such a buzz there, talking to so many businesses, governments. You could really see a focus coming together to decarbonize the planet, to make some strong commitments. What I really was impressed with was the amount of businesses, the amount of innovation and technology, people making commitments and leading by example. What we do need is business to lead by example, to show that it can be done, and that’s exactly what Fortescue Future Industries was aiming to do, show by putting hydrogen in a truck or putting ammonia in a train, ammonia in a ship, that these are practical, implementable solutions that we’re trialling now to decarbonize our heavy industry by 2030.

MATHIAS STECK     Thank you, Julie. Ditlev, what was your take on this?

DITLEV ENGEL     Well, I have to say that due to the fact that the cost has come down so significantly on renewables over the last 20 years, we now have very cost-competitive options at the table. We are also in a world that is electrifying and at unprecedented speed. Everything is really being electrified, if you think about it. And that electrification of the world obviously needs to be green and it needs to be fast. And I think this message is something that people really understood, also because the trust in the technologies are really there. And, obviously, for instance, when we talk about hydrogen, this is, of course, also a very big technical challenge that needs to be overcome, also from safety perspectives and others. But the fact that people are now ready to embrace it, means that just as was mentioned, that we are now going to work on it, and I think that one of the very important issues here now is action. We need to take action and we need to try and we need to make it happen. And, again, just to say, for instance, if you go 20 years back and look at offshore wind at the time, it was not cost competitive but it got started and people started to learn and innovation doesn’t just come from going from A to Z in one shot. You need to go through A, B, C, D and E and learn as you go. So, I fully agree, it is really about getting started, getting it deployed and we are seeing a number of examples of this, for instance, in Northern Europe. That is now going to be built out of massive energy islands, which is going to be a massive undertaking and, for instance, as was mentioned now, building up of global green hydrogen. All these things just need to happen. So, the real takeaway, and I think this is where businesses really can contribute, is to take action and make it happen and then the governments need to create the right framework in order to do so, and that balance is something that we need to strike. So, I think it was really a very business focussed COP26 and was also one that I think people can really see the opportunities. It’s taken us a while to get there but we also have to remember we have to get so many things done in such a short time. So, we need also, therefore, really to focus on the people and the competence of the people to lift this challenge because we will require a lot of different competencies in order to make it happen.

MATHIAS STECK     Thank you, Ditlev. And, really, we have just heard from Ditlev how important it is to drive action, push it forward, and you have given us some great examples of initiatives from Fortescue. But how important is it for a company like Fortescue that there are other like-minded organizations committed to climate impact reduction to collaborate and to do business with?

JULIE SHUTTLEWORTH     It’s critically important. The planet’s cooking. It’s on a trajectory to get hotter and hotter, so all businesses, governments, communities need to come together to take action to stop that. It’s about getting that flywheel turning, getting these first projects going, learning from each other, applying it to the next projects so that we can be successful together. Overall, this is not about competition with other companies, this is about working together to actually help save the planet. Government support’s key. Development of technologies is key. Then there’s projects going very fast is key. And how governments can help with that is we need clear and efficient approvals pathways for these green hydrogen projects and renewable projects so that we can get these green hydrogen projects going fast. And the legislation and clear pathways aren’t there in all countries, in all regions just yet, so that’s very important so we can get these projects going quickly.

MATHIAS STECK     So, it’s an immense effort and could you give an advice to other companies who want to embark on a similar journey as Fortescue?

JULIE SHUTTLEWORTH     This is a new space. Decarbonizing heavy industry using renewable electricity, green hydrogen, green ammonia. So, it’s going to be sometimes uncomfortable, sometimes going to be uncertain, and that’s absolutely okay. There’s going to be some risks we take, some investments we make, some technology we develop that isn’t actually going to be the end one, but we have to get started to get the results that the world needs. So, it’s about never giving up, having the right culture, getting that track record in place and collaborating with other companies, governments, communities to get going.

MATHIAS STECK     And would you maybe even have an example of a success story, how that worked, collaborating with others?

JULIE SHUTTLEWORTH     In March this year our Chairman, Dr Andrew Forrest, gave us a challenge to have a huge haul truck running on hydrogen by 30th June. We had three and a half months to do that. Our team got activated, passionately driving with a culture, the never ever give up attitude and culture that we’ve got here. They ran around the world to get all the parts, they called in engineers, scientists, other companies to help and within just over 100 days had a huge haul truck running on hydrogen. That wasn’t just our small team at FFI. That pulled in people from all around the world, companies from around the world to help us achieve that, which was absolutely incredible. So, that technology demonstrator got going from all that collaboration and now we’re actually putting a hydrogen truck into operation as the next phase of our technology development.

MATHIAS STECK     We have discussed the concept of mindset change in relation to policymakers, investors and large business but, of course, real change can only happen with the cooperation of entire populations. I want to finish with a final question for both of you today. What role do people and communities need to play in driving change and is it a top-down or bottom-up process? Ditlev, can I put that question to you first and then Julie?

DITLEV ENGEL     Yes, I think, Mathias, it’s both. We see that more and more, that the impact and the role of climate is having on elections, for instance. It is really picking up in many countries across the world and it’s becoming very important. But it’s, of course, also important then to say to everyone that when you vote for that, you also vote for change. And we also know that it can be very controversial to put up a solar plant or a wind plant or put new grid into the ground or whatever it might be. We all need to be mindful of that this is what it needs. Change is needed and we therefore need to give away so this can happen, and this is a very important debate in many countries. And what we have seen there is that the better that you are as an organization to engage local communities in the transition, the more likely you are to get success, that you need to respect the way that you do the change in cooperation with people. So, I think that interaction, again, is between not just, let’s say, the central government but also municipalities and others on how they work together. At least I can say and share a small story, that it seems to be that, for instance, in Denmark, where I live, we have a lot of onshore wind and when there are local communities co-invested into the project, they seem to be much more happy with them and they don’t seem to be so noisy or other things, if there is a local also economic interest. So, I think that in order to make sure that you really make it fast, that you both have to set out the big plans from governments on sort of a top approach, but you also have then to anchor it with both industries and local communities and agree on how we are going to do this as best possible because we have to solve this challenge. And that cooperation is, of course, sometimes creating frictions but that is the difficult things that you need to do. But we always know that making big infrastructural changes is something that can be very controversial. So, I think we all have to accept that if we want to make this happen, then we also need to accept that. I can only say that if, for instance, you draw a parallel to what we are experiencing living with COVID-19 these days, how fast all of us could change our behaviours because we understood we really have to. And I think this is the same kind of messages that we all have to give way and make sure that this can happen which, again, also means that engaging relevant lobby organizations and others and get their commitment to the support so that we can make sure that we can make this transition. And, finally, I will also have to say that the better that we can demonstrate that it will also create jobs in local communities, obviously the more support we will get. So, I think a very important role for governments is to tell people if we’re going to scale down these industries, we’ve got to create new industries that are going to create these jobs and we have seen, for instance, from the international energy organizations and others how many millions of jobs can be created. So, we also have to remember that it is a transition that should involve local communities, job creation but governments have set out the overall frame and then connect the dots, so people can really see the way forward. Because if you can see that, you will also support it. If you can’t see it, you won’t support it. I think this is very, very critical for the success, also knowing that we have no time. So, we have to get communication right and we have to do it in a very, let’s say, cooperative manner going forward.

MATHIAS STECK     Thank you very much, Ditlev. And, Julie, what are your thoughts on this?

JULIE SHUTTLEWORTH     Green hydrogen provides an amazing opportunity for communities to benefit from the green hydrogen projects across the world, especially developing countries, not just where there’s oil, gas or minerals under the soil. And engaging with communities early is absolutely critical. I’ve just traveled around the world, 20 countries in two months. I visited communities in the DRC, Papua New Guinea, Argentina, just to name a few of the countries. We had such positive engagement with the communities. Our team had been on the ground, obviously, before I arrived, been doing a lot of work with them, talking about education, training, jobs, opportunities for local businesses, making sure communities thrive from our activities. Where the meetings were the best was where the government officials and the business officials and the community came together to discuss the projects and the potential opportunities. And so, bringing government, community and the business together is absolutely key to be successful. Absolutely no doubt, communities is absolutely critical for these projects and our view is if the communities don’t support the project, if they don’t support us being there, then we won’t be able to be do the projects there.

MATHIAS STECK     Julie and Ditlev, many thanks for your time and for sharing your fascinating insights with us today.

JULIE SHUTTLEWORTH     Thanks, it was great to be here to talk about action for climate change.

DITLEV ENGEL     Thank you very much, Mathias, and thank you, Julie.

MATHIAS STECK     Thanks to all our listeners for joining us today and throughout the series. The perspective that Julie offered us as part of the company that has completely shifted its mindset on energy use was hugely insightful. What can other companies learn from the way that Fortescue has approached this challenge? Ditlev’s comments reminded us that the onus is on everybody. Politicians, businesses, investors and, of course, the global population, to think differently. Join us very soon for Series 12 of DNV Talks Energy where we explore the human impact of the energy transition and the role that individuals and communities play within this shared global responsibility. To hear more podcasts in the series, please visit dnv.com/talksenergy.