Energy Companies Look to Contracts and AI to Power Business Relationships

Energy companies across sectors rely on complex business relationships to achieve profitability—relationships defined by contracts.

In fact, contracts are so central to energy companies’ success that one in three employees work with contracts, according to a new study on contracting trends in the industry.

“Contract and Commercial Management in the Energy Sector”, published by World Commerce & Contracting (WorldCC) and based on the largest contracting benchmarking survey in the world, delves into how energy companies are evolving their contract management practices to meet the challenges of regulatory uncertainty, market volatility, and increasing demands for ESG compliance. 

The report showcases a clear trend toward digital transformation, contract simplification, and leveraging data-driven insights to drive greater value and strategic alignment. Here’s a closer look at how energy sector leaders are achieving contract excellence.

1. Embracing Digital Transformation for Strategic Advantage

Digital transformation is a top priority for energy companies looking to handle the complexities of modern contracting. The report shows that 75% of energy companies are investing in digital tools and systems to enhance contract management capabilities, significantly higher than the cross-sector average of 68%. By adopting advanced CLM technologies, companies are not only improving efficiency but also ensuring compliance and gaining better visibility into contract data.

This investment is paying off by reducing risks, streamlining processes, and allowing for real-time insights into contract performance. In an industry where regulatory requirements are constantly evolving, the ability to quickly adapt through integrated digital solutions is proving to be a game-changer.

2. Simplifying Contracts to Unlock Greater Efficiency

Another major trend identified in the report is the emphasis on contract simplification. Over 55% of energy companies are prioritizing efforts to streamline contract creation and reduce the time spent on negotiation and review—compared to 45% across industries. 

The report authors note that this push for simplification may be grounded in a desire for energy companies to be better business partners.

“Contract simplification and the development of new or revised terms and templates reflects a growing sense of the need for greater levels of collaboration and, in some cases, for greater empathy,” the report notes. “While such sentiments are not universal, there is appreciation by many that traditional approaches to risk result in adversarial relationships which often damage the results achieved.”

Simplified contracts not only expedite project timelines but also help mitigate misunderstandings and disputes, which are costly in a capital-intensive industry like energy. This approach leads to stronger, more resilient partnerships and helps ensure that projects are completed on time and within budget.

3. Leveraging AI for Enhanced Contract Performance Monitoring

AI clearly stands to change how business manage contracts, with other reports showing that 90% of companies agree that AI will impact their contract management processes.

For the energy sector, the benchmark report shows a particular interest in using AI to enhance performance monitoring and compliance. The energy sector, often lagging in CLM adoption, is now embracing AI-driven solutions to gain deeper insights into contract obligations and performance metrics.

AI applications, particularly in utilities and renewable energy, are being used for contract portfolio analysis, identifying trends, and managing complex compliance requirements. By leveraging AI for real-time monitoring and analysis, companies can proactively address potential issues, optimize contract value, and reduce the risk of disputes.

Conclusion: Redefining Contract Excellence in the Energy Sector

With a clear shift towards post-signature value realization, increased digital investments, and tailored strategies for diverse market challenges, the energy sector is redefining what it means to achieve contract excellence.

By focusing on simplification, leveraging AI, and adopting flexible contracting models, companies are better equipped to navigate regulatory pressures, market volatility, and evolving ESG demands. These best practices provide a roadmap for how energy companies can harness the power of effective contract management to drive strategic growth and long-term stability in a rapidly changing landscape.

Access the full report here.