Energy Sector Shortsightedness Threatens Global Energy Consumers
The Energy Information Agency projects that global energy consumption will increase 56 percent by 2040. Yet, energy companies' collective failure to engage proactively with a global population jeopardizes sustainable energy solutions and hydrocarbon development. This shortsightedness presents strategic risks for energy companies and global energy consumers.
This is not simply a "dirty" energy problem, though oil and gas provide particularly easy targets. A 2011 study identified 351 US energy projects that were delayed or abandoned due to public opposition or regulatory issues; 45 percent were renewable energy projects. Globally, there is growing opposition to windpower, biofuel and solar energy solutions. Australia's goal to generate 20 percent of its electricity from renewables by 2020 is threatened by windpower opponents. Biofuels raise sustainability and cost issues. Solar development on public lands in the western US has encountered strong opposition. And these are day-to-day issues, not reactions to world-changing events such as the Deepwater Horizon spill or Fukushima.
To mitigate future strategic risks, energy leaders might consider the following points:
- Think strategically. "Community Relations" should be a subset of "global relations." A local and global divide is increasingly artificial. Local issues can rapidly become global issues so the more productive approach might be to start at the macro level.
- The public are consumers. The relationship between energy producers and consumers is unlike most market relationships; this diffuses the industry's sense of serving customers. The lack of a direct relationship creates an "us/them" mindset and complicates consumers' abilities to hold producers accountable; thus, energy producers typically lack incentives to embrace the public as consumers. One notable exception was the Brent Spar incident when a boycott of its products led Shell to reverse its decision to sink an aging platform at sea. A public boycott would be even easier to organize in today's digital world.
- On a related note, energy consumers will be the real victims of energy sector shortsightedness, not the energy industry. Missing is acknowledgment and understanding that the energy sector provides services to the public.
- Embrace social media; be active social listeners and active participants in public discourse. The energy industry currently reacts rather than proactively engages the global public in meaningful ways. Perception is reality - and perception management is not something to be neglected until there is a public incident. Energy companies and projects are captive to social-mediated information cascades that can turn "quiet doubts into open skepticism and reluctant accommodation into passive resistance." Social media is a critical vulnerability for the energy sector, so influencing information cascades must be a core communications competency of energy executives.
- CEOs must engage early and continuously to generate public awareness. Public engagement cannot be outsourced to PR firms. Reactive approaches cede the tone and form of social discourse to opponents who may not accurately represent issues or the science behind issues.
- Support informed discussions and an informed public. Current information campaigns are largely lobbying activities; they are industry-centric rather than addressing serious public concerns about the future. And there is a credibility issue, particularly with the oil and gas sector. Passive one-page print advertisements are ineffective. Without continuous and credible senior-level engagement, public information campaigns like Chevron's "We Agree" campaign appear disingenuous and provide fodder for commentators and activists.
- Industry associations must actively engage the public. Associations can fill a public information void and provide depth to renewable energy companies', smaller exploration and production companies' and utilities' public information efforts.
- Partnering with environmental groups to develop policies that mutually serve the public and the energy sector works. CASE (Clean and Safe Energy) educates people on nuclear energy (one of its co-chairs is a Greenpeace founder). Similarly, industry partnered with environmental organizations in the US to codify hydraulic fracturing best practices.
- Stop saying NIMBY (Not in My Backyard). It understates and misstates issues, particularly when non-local opponents are involved, and disparages those affected by a proposed energy project. Industry empathy is more meaningful than disparagement.
- Finally, honesty truly is the best policy. There is no room for obfuscation, incomplete answers, boilerplate or disingenuousness when dealing with the global public.
Energy companies are still largely wedded to 20th century global stakeholder engagement approaches in a dynamic, digital 21st century world. The old rules of influence no longer apply. "Transparency, community building, preemptive engagement are all parts of the emerging stakeholder multi-polar world with which energy projects and the companies that build them must contend," writes Peter Gardett, of Breaking Energy. Energy companies are certainly challenged to build public trust and confidence - yet this is an absolute imperative to meet 2040 global energy requirements. Failure to focus on this jeopardizes future energy development and increases strategic risks for energy companies and global energy consumers.