Ten Key Energy System Dynamics – And the Implications for Global Energy Company Communications
Burson-Marsteller Global Energy Practice April 2012
Access to affordable and reliable sources of energy, with minimal environmental and social-political impact, is the most important challenge facing humanity in the 21st century. The global energy system has to be transformed fast and fundamentally for a variety of reasons. Yet the actors that arguably play the most important role in effecting this transformation – global energy companies – are being held back and constrained by a range of factors that can be classed as communications and political challenges.
and life more challenging for energy companies in many ways.
Rarely, if ever in history, has energy been so politicized, so interwoven with wider issues and so high on the agenda. The Fukushima nuclear accident, the Arab Spring, the Gulf of Mexico oil spill, concerns about hydraulic fracking, oil sands and drilling for oil in the Arctic, sanctions against Iran, trade disputes over subsidies for renewables, solar and wind projects blocked over environmental concerns, grievances about the price of energy and the profits of energy companies, global wrangling over carbon targets and commitments – this is just a sampling from a complex set of issues with a major energy dimension from the past year.
In view of this situation, energy companies need to adapt and evolve by upgrading and better utilizing communications and public affairs capabilities. This is essential for them to fulfill their role in transforming the energy system and in delivering the energy needed to fuel sustainable global development. They need to be better communicators to deliver the business success that makes them viable enterprises and keeps their shareholders happy in an increasingly competitive and challenging global environment.
The stakeholder landscape is also evolving rapidly. Global energy companies now face stiffer opposition from NGOs and other opponents that are becoming more powerful, sophisticated and creative globally. In many respects, global energy companies now face an increasingly uphill battle to build the credibility, trust and acceptance that enables them to succeed.
Adapting and Evolving
As these energy companies transform themselves to meet the evolving global energy challenge, communications have to be an integral part of business and operational strategy if they are going to deliver both for humanity – and for their investors – on a continuous basis.
Meanwhile, the energy system and the role of energy companies are not well understood by the majority of people, even though energy is so central to our very existence. This makes transforming the energy system more difficult
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In this series, we explore 10 important dynamics of the global energy system, as it is currently evolving, and the implications for communications and positioning for global energy companies.
ecosystems? Are conflicts over energy resources and volatile energy prices going to make the world a less stable, worse place to live? The answers to these and other questions about our energy system are among the most important we are seeking and trying to influence globally.
Ten Key Dynamics:
It is mind-boggling to think about the extent to which many of our core challenges for global development are in fact largely, or to a significant extent, energy challenges. Food, water, healthcare, education, the environment and climate change, military conflicts, urbanization, industrialization and poverty are all, in various ways, greatly impacted by the energy system.
1. More challenging energy 2. Globalization of energy 3. Technology and innovation imperative 4. Increasing role of gas 5. Integration 6. Efficiency equation
World Energy Consumption, 1990-2035
7. Doubts about the alternatives
(quadrillion Btu)
8. Growing focus on energy access 9. Green and carbon agenda 10. Energy jobs Before addressing the first dynamic in Part One of this series, we will touch briefly on why the transformation of our energy system is so vital and so urgent. We will also consider why global energy companies have such an important role to play and why communications matters so much to their success.
Foundation for Development
Source: EIA International Energy Outlook 2011
To start, abundant, affordable energy powers our lives and makes our modern, complex societies possible.
As the above chart indicates, most of the growth in energy consumption is expected to come from countries outside the Organisation for Economic Cooperation and Development (OECD) such as the BRICS countries (Brazil, Russia, India, China and South Africa). This is linked to the fact that a number of them are expected to grow and develop their economies faster than OECD countries. It is important to note that most members of the OECD are already very wealthy by global standards and are regarded as developed countries (as opposed to developing countries). People in OECD countries typically consume much more energy per person than people in non-OECD countries.
It is the foundation – the pre-requisite – for being able to achieve sustainable development and prosperity for a fast growing global population. Energy demand is set to double by 2050 for a projected population of 9 billion people – up from 7 billion today – many of whom will have recently risen up out of poverty to live in more energy-intensive societies. With fossil-based energies being depleted and becoming less acceptable, where is all this energy going to come from? Who is going to deliver it? Will consuming double the energy we use today wreck our environment and
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Transformation
unprecedented opportunity and responsibility to help shape better understanding of the energy system and energy challenges – and ultimately the development of a more sustainable and secure energy system. If energy really is the most important challenge facing humanity, then few industries have a higher purpose!
The answers to these questions depend on whether we are able to effect a historic and fundamental transformation of the global energy system. The mission is to diversify, integrate, stabilize and extend the energy system – with more secure, cleaner and renewable energy, and with radically expanded energy access. We need to reduce our reliance on fossil fuels while optimizing the production of those that remain (with limited options, fossil fuels are expected to decrease only from 81 percent of the global energy mix in 2008 to 74 percent in 2035).
Collaboration Partnerships are vital to securing our energy future. Governments, companies, investors, researchers and scientists, non-government organizations and all of us as individuals have a role to play in the energy transformation. We live with and are part of an increasingly complex global energy system characterized by increasing mutual dependencies, and shared risks and benefits.
We need to make the system smarter with new technologies and with better policies and management. We need the system to be much more efficient – to do much more with less, and to eliminate massive energy waste.
Going it alone is not an option. There is no single solution. The level of complexity and the issues at stake mean we need everyone to do their bit as partners and individuals, on multiple fronts. The solution is multi-faceted.
We need to do all this while avoiding various environmental and economic collapse scenarios facing humanity, many of which are linked on some level to how we find, produce and consume energy.
Energy Enterprise
While optimists may well argue that necessity is the mother of invention and that we will indeed find a way through it all, there is no denying the magnitude of the potential energy challenges ahead and the transformations needed to meet them. In many aspects, the energy system transformation requires people and stakeholders to transform their thinking – and to learn and understand much more about the whole energy system and their role in it. We need to look at the system holistically – at the big picture – not just at parts of it.
While government and non-government actors and other stakeholders all have critical roles to play, it is companies and corporations that will arguably do the most to secure our energy future. Among all of these energy actors, global energy companies have the potential to make the biggest impact by addressing the energy challenge on a global scale and disseminating knowledge and technology solutions around the world.
To effect the transformation, we also need people to be bold and imaginative, to have better and bigger energy ideas, and to embrace new paradigms and innovations. With energy challenges becoming tougher, we have to overcome inertia, resistance and short-term thinking, to understand common interests, and above all, to act to secure them. Compelling, credible communications are key to all of this.
They will do this by developing and applying the technologies and expertise we need, by making investments, and by partnering and cooperating in more complex industry value chains, effectively and efficiently, to make the transformation a reality. So while we need to make sure that their incentives are right, that rewards and punishments are adequate, and that they are accountable to society and their stakeholders – we also need them to get on with the job.
Indeed, global energy companies not only need more than ever to be effective communicators to compete and succeed. They also have an 3
There is an ongoing challenge to get beyond the rhetoric, myths and illusions – and the competing interests that often spawn them – to arrive at practical, science-based understanding of the constantly evolving energy system and our role in it.
Energy Understanding The fact that the general public does not have a very deep understanding of the energy system is not surprising, perhaps, when we consider its daunting complexity – and the multiple dimensions of science and technology, business and politics, and other dynamics that it weaves together.
Note: This is the first part of a 10-part series on key energy system dynamics and the implications for global energy company communications.
As various experts have noted, however, a likely more decisive factor is that the majority of people (at least in the developed world) have been able to take affordable hydrocarbon energy largely for granted for a long time. Compared to the energy options that are emerging or have recently arrived, they also have not had a lot of choice. They also didn’t have the threat of climate change to spur thinking and motivate action. Why bother when energy has been there when I need it and hasn’t cost that much – economically, environmentally or politically? And whether it is there or not, it’s not like I can have much of an impact on it as a consumer with such limited energy options …
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More challenging energy
Finding and producing energy is now much more difficult than it used to be. Most of the easy hydrocarbons have already been found and will not be enough to sustain global growth and development – even if we overlooked the environmental impacts. Therefore, we need to find and access the more challenging and difficult hydrocarbons (including deep offshore, shale gas, oil sands and other unconventional fossil energy sources) and to maximize production of identified resources (on average only around 35 percent of an oil field is recovered using available technologies, and sometimes only around five percent is recovered).
The times have changed fast, bringing a much greater sense of urgency to address and understand a complex set of related energy challenges. Indeed, energy issues have rarely, if ever, been so high on the agenda during the past 100 years – as they are now – even accounting for oil shocks and the extreme energy imperatives of two catastrophic world wars.
We should remember that some of the main challenges are not simply technical or a matter of securing the money needed for what are often truly massive projects.
The amount of time presidents and prime ministers, global thought leaders and mainstream media and culture industries spend talking about energy (along with the paired issue of climate change) is one obvious example of the growing importance attached to energy issues nowadays.
Indeed, opposition from stakeholders to such developments on environmental or nationalistic grounds can pose just as big an obstacle. Such stakeholders, including international NGOs, are becoming increasingly powerful and effective in mobilizing opposition to energy developments, for example by using digital technology and integrated communications platforms.
The fact that UN Secretary-General Ban Ki Moon has made energy a key focus of his current five-year term is one such indicator of where energy sits now on the global issue agenda. Still, this does not necessarily mean we have entered an age of more enlightened understanding of energy issues.
In some cases, the challenge centers on governments or national companies that want to limit participation by foreign players for nationalistic or protectionist reasons.
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Sometimes the energy is located in regions that are simply too unstable politically and militarily (although energy companies have shown remarkable adaptability in confronting such risks).
as well as the various efforts they are making to produce energy cleanly and safely. If people understand the energy system and energy challenge better, the value proposition of energy companies will be clearer.
It is important to note that these challenges do not just apply to fossil energies or nuclear – the best known targets for scrutiny and concern. So-called ‘clean energy’ projects – for example with wind, solar or carbon sequestration projects (mitigating CO2 from fossil fuels) – have also frequently been opposed by environmental and community groups and others.
Energy companies also need to educate and mobilize stakeholders who can help deliver the message and make the case to others, often more credibly than they can. Global energy companies also need to show and communicate how they themselves are transforming to meet rising stakeholder expectations and tougher energy challenges.
In some parts of the world, opposition to energy development and other human or political risk factors are very serious impediments to developing the energy capacity required to fuel development and sustain modern societies.
They need to master the art and science of rational and emotional persuasion in the 21st century. This means being digital, integrated, global and strategic – with campaigns and plans to achieve specific objectives with specific audiences.
From a different perspective, we also face a huge challenge to develop paradigm-changing new energies that can be deployed to reduce our reliance on hydrocarbons at a much faster rate. Indeed, the challenges facing new energies are just as great. How to get them to scale? How to get required policy support, approvals and incentives to enable them to get up and running? How to get people to understand their potential, use them and allow them to be produced near where they live?
It means using evidence-based communications, while being able to tell a good story that speaks to both hearts and minds. It also means helping to educate about energy and the energy industry. Energy companies cannot afford to be continually taught lessons in modern communications by their adversaries and critics – or let them define the narrative.
Communications Implications Global energy companies need to use communications as a strategic driver and enabler. This means, for instance, building acceptance and removing constraints for what can be riskier and more costly energies, and securing support and investment to enable relevant technologies to mature and be integrated within the energy system.
They need to make sure they deliver on their promises and commitments over time by meeting stakeholder expectations for responsible behavior. They equally cannot afford for there to be glaring gaps between the substance of their actions and the company’s communications.
And when things do go wrong or become controversial, they need crisis and issues management capabilities suited to today’s 24/7, digital global communications environment.
In building credibility and trust, energy companies need to be better at getting recognition for the very positive role they play in securing our energy. They need to convey a sense of mission and purpose and help people understand just how tough the challenges are and the consequences of not meeting them –
Douglas Dew, Chair, Burson-Marsteller Global Energy Practice – with Ryan Fenwick, Senior Associate
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About Burson-Marsteller Burson-Marsteller (www.burson-marsteller.com), established in 1953, is a leading global public relations and communications firm. It provides clients with strategic thinking and program execution across a full range of public relations, public affairs, reputation and crisis management, advertising and web-related strategies. The firm’s seamless worldwide network consists of 74 offices and 81 affiliate offices, together operating in 108 countries across six continents. Burson-Marsteller is a part of Young & Rubicam Brands, a subsidiary of WPP (NASDAQ: WPPGY), one of the world’s leading communications services networks.
About Burson-Marsteller’s Global Energy Practice Burson-Marsteller’s Global Energy Practice is an unrivalled global network of communications professionals focused on the energy industry and energy issues. Drawing on our worldwide Practice network of more than 100 communications and public affairs professionals with expertise and experience in the energy sector, the Global Energy Practice helps clients: • • • • • • • • •
Build compelling narratives that articulate value propositions and positions of energy sector players Develop and implement communications programs that impact energy sector stakeholders Map and identify energy sector stakeholders Develop common-cause partnerships Foster markets for new products and services Protect and extend licenses to operate Win public acceptance of needed energy infrastructure development Manage critical relationships with decision / policy makers Anticipate what’s coming next – and be prepared
Website: www.burson-marsteller.com Twitter: @BMGlobalEnergy Contacts: Asia-Pacific Douglas Dew (douglas.dew@bm.com)
North America Jim Cunningham (jim.cunningham@bm.com) Laura Sheehan (laura.sheehan@bm.com) Beth Diamond (bdiamond@national.ca)
Middle East Stephen Worsley (s.worsley@asdaa.com)
Latin America Ramiro Prudencio (ramiro.prudencio@bm.com)
Europe Roland Bilang (roland.bilang@bm.com) Diederik Peereboom (diederik.peereboom@bm.com)
Africa Hemant Lala (hemant.l@arcaybm.com)
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