ENERGY INDUSTRY INITIATIVE:

Transcription

1 ENERGY INDUSTRY INITIATIVE: RESEARCH TO DEVELOP A SOCIAL CONTRACT FOR THE ENERGY INDUSTRY JANUARY 2012 BUSINESS SOCIETY GOVERNMENT IN COLLABORATION WITH THE WORLD ECONOMIC FORUM

2 Introduction Industry leaders have a unique opportunity to redefine the role of industry in civil society, changing public perception for the better through collaborative engagement with civil leaders and the local citizens in the communities in which they operate. The World Economic Forum, together with its Energy Industry Partners, called for a common practice and dialogue through the creation of a Social Contract for the energy industry; the overarching objective was to establish industry-wide guidelines for transparency, accountability, sustainability, and community engagement. Over the last six months the Energy Community has been working on developing a set of principles that could underpin improved industry society relations. Recognizing that a successful compact requires commitment from multiple parties, the World Economic Forum engaged FTI Consulting to conduct research with industry constituents and other key stakeholders to develop a Social Contract and Governing Principles of the Energy Industry, an implicit agreement between industry and civil society. FTI conducted in-depth interviews with industry leaders and public interest partners from around the world to gain understanding about key considerations for the Social Contract. Industry partners of the World Economic Forum convened in Davos on Thursday, January 26, 2012, to consider the research findings and proposed Social Contract in a Joint Energy Governors Session entitled Building Trust Towards Improved Energy Industry Society Relations. Methodology FTI conducted in-depth interviews by telephone from October 24, 2011 through November 25, A total of 21 interviews were completed with industry and public interest representatives from a range of sectors and geographic locations (refer to table below). Organization Type Segment Sector Geographic Location Oil and Gas - 7 Europe 11 Industry 15 Public Interest 6 Total Interviews 21 Electricity - 4 Renewables - 4 NGOs - 5 Expert - 1 Asia/India 5 North America 4 South America 1 2 FTI CONSULTING RESEARCH AND DAVOS RECAP

3 Key Findings Public Perceptions and Communications While the industry must address concrete problems, such as energy scarcity, climate change and affordability, genuine challenges are also posed by public misperceptions and informational gaps. As anticipated, participants believe those outside the industry have negative perceptions of the industry. Moreover, negative public perceptions and lack of effective communications are paramount issues currently facing the energy industry. Public perception is everything: Effective communications are necessary to bolster society s understanding A majority of respondents (18 of 21) believes that collaborative, open dialogue should be pursued to improve public understanding of the energy industry and the ways the industry improves standards of living around the world. Virtually all of the business and public interest leaders with whom we spoke believe that corporations have a duty to operate efficiently while providing energy security and promoting social and economic development. Almost all respondents (19 of 21) say energy companies should be transparent and accountable. Ideally, government agencies can serve to facilitate these goals in order to improve relations with civil society. Efficiency, Accessibility and Transparency Nearly all respondents believe corporations have a duty to operate efficiently while providing energy security and promoting social and economic development. Three quarters of our respondents believe that a Social Contract should support the industry s efforts to provide secure and sustainable access to energy throughout the world. Do the most good with the least harm: Operational efficiency, accountability and responsibility About a quarter of all interviewees, unprompted, say a Social Contract can help companies maintain their license to operate, while ensuring sustainable and environmentally-friendly energy solutions into the future. There is also a shared understanding that energy companies should be transparent and accountable. Almost all respondents (19 in total) agree that standards fostering responsible practices are needed to ensure transparency across the industry. 3 FTI CONSULTING RESEARCH AND DAVOS RECAP

4 Key Findings from the Qualitative Research Include: Respondents almost unanimously agree that negative public perceptions and lack of effective communications are paramount issues currently facing the energy industry. While the industry must address concrete problems, such as energy scarcity, climate change and affordability, genuine challenges are also posed by public misperceptions and information gaps. A majority (18 of 21) believes collaborative, open dialogue should be pursued to improve public understanding about the energy industry and the ways it improves standards of living around the world. Virtually all respondents believe corporations have a duty to operate efficiently while providing energy security and promoting social and economic development. Almost all respondents (19 of 21) say that energy companies should be transparent and accountable. Ideally, government agencies can facilitate these goals to improve relations with civil society. Research FIndings Secure and Affordable Access to Energy The vast majority of respondents agree that corporations have a duty to operate efficiently while providing secure access to energy. In exchange, government and policymakers should ensure the market conditions needed to sustain healthy operating environments are Constant and reasonably priced sources present. Three quarters of respondents (15 in 21) say that the industry should be enabled to provide access to secure and affordable energy sources. The same number believes a Social Contract should promote the development of multiple energy sources to increase access around the world. As one industry executive notes, Probably the first thing we must have is security of supply. Consumers must have the energy when they need it. The second thing is that we have to provide that energy in a condition that is affordable for the user and for the development of the country or the region. 4 FTI CONSULTING RESEARCH AND DAVOS RECAP

5 Production of Energy with Minimal Environmental Impact Virtually all interviewees agree that corporations have a duty to operate in a commercially-viable way while protecting the environment and its limited resources. While 17 of 21 say businesses can work to reduce their environmental impact with the support of civil society, a handful of participants, unprompted, also highlight the need to pursue business aims and environmental protections in tandem. Roughly one quarter, also Safeguarding the environment and people unprompted, say a Social Contract can help maintain companies license to operate while ensuring sustainable and environmentally-sound energy solutions into the future. A public interest agent summarizes this principle in the following way: I m firmly of the view here that all too often this gets framed up as you could have either economic development or you can have environmental protection. You can have jobs or you can have clean water. We can do both. We have to be able to do both; an energy economy that s predicated to spoiling habitats or creating public health problems is simply not sustainable. Collaboration and Transparency There is consensus that lack of effective communications is a paramount issue facing the energy industry. Paramount, also, is the understanding that the initial first step in addressing ineffectual dialogue involves establishing guidelines for transparency to constitute a benchmark or Responsible measures, honest dialog roadmap for effectual communications. Nearly all respondents (19 in total) believe that energy companies should strive to become more accountable and transparent. A vast majority (18 of 21) agrees the industry should engage in open and honest two-way dialogue to address the public s interests and concerns in a transparent way. 2 in 3 respondents note, unprompted, that government and local authorities can facilitate more transparent interactions between business and civil society. Ideally, governing bodies can support this aim by enforcing regulatory effort to promote more collaborative engagement: We [companies] are trying to work with civil society leaders, with ecological NGOs and we are trying now to convince the government to lay out a roadmap on how we need to pursue [collaborative dialogue]. 5 FTI CONSULTING RESEARCH AND DAVOS RECAP

6 The research findings also highlight the important role of the public, and, in particular, the public s obligation to engage in this process. Certainly, the public also has a vested interest in two-way dialogue. Several interviewees noted the importance of citizens working against general public apathy in order to engage with local industry in a collaborative way. In fact, 16 of 21 respondents volunteer that civil society must commit to partnering with the industry on these efforts in order to achieve these goals and make progress. Betterment of the Community Over half of all respondents say that a Social Contract should ensure sustainable social and economic development. In addition, the respondents note that both economic and social developments are core benefits provided by the energy industry; many comment that Jobs, growth and progress these efforts must be sustained by engaged, self-reliant communities. For example one respondent says, To reach this level of sustainability you have to rely upon the people themselves. They have to manage the project. Most respondents believe that civil society should redress public apathy toward the industry by augmenting public engagement in development initiatives on a local level - this is especially critical for achieving continued engagement and development in the long term. Cultivating Mutual Understanding Almost all respondents note that the public must provide greater Elevate public awareness recognition that energy enhances standards of living around the world; 17 believe the public needs greater awareness and understanding of energy s local and global impact. One company representative claims, The industry is sometimes apologetic about being an industry because it has lost its ability to sometimes explain the benefits a society gets from its presence. More than half of those interviewed also say that the public has a responsibility to become more informed about industry realities, including the economics of energy production and distribution; 18 state that more effective dialogue can augment public understanding about energy. 6 FTI CONSULTING RESEARCH AND DAVOS RECAP

7 Dissenting Voices While our research reveals general agreement on the need for a Social Contract between the industry and civil society, there is a small number of opposing views or skeptics. Though few in number, these opposing views, are worthwhile to note and consider for future industry-wide coalition-building efforts. Our research reveals three areas of dissent or pinch points of debate for consideration While most support the idea of a Social Contract, some express concerns or mixed sentiment concerning: 1) the overarching aims of a Social Contract, 2) whether or how to engage with government and local authorities, and 3) public perceptions in light of the industry s profitability. Social Contract Most support the idea of a Social Contract for the Energy Industry, however, a few detracting voices registered some uncertainty and apprehension about the overarching aim. A wide majority (18 of 21) expresses support for the Social Contract as an effort to foster more symbiotic relations between industry and society. However, roughly the same number, 17, also express some reservations about any such compact, citing various reasons for concern. Approximately three quarters say full commitment across industry and public interest is essential to ensure a successful Social Contract; that type of complete involvement is difficult to achieve, respondents say. One respondent says, To work, it must be bold. It must be brave and different. It would be damaging to do something that would be half baked. Another respondent, especially, expresses strong doubts that a Social Contract would provide any added benefits for industry or society. Regional differences are also evident. A participant from Asia considers the overall aim unnecessary in this area because all business is culturally bound by socially accepted guidelines. Generally, however, participants feel that the potential benefits outweight the potential limitations and therefore decidedly support the effort to develop an industry-wide compact. Role of the Government There is mixed sentiment as to whether, and to what extent, industry should engage government and local authorities as part of a social pact. Many respondents (16 of 21) express various - and often conflicting - views on the role of the government at both the local and national levels; participants perceptions vary among regions 7 FTI CONSULTING RESEARCH AND DAVOS RECAP

8 Roughly half agree that government and policymakers can be stewards of the Social Contract in local communities. However, while a handful of respondents (5 in total) say that support from local governments is essential for legitimizing and sustaining the Social Contract, an equal number state the opposite, claiming officials cannot be trusted to commit and follow through on initiatives. One participant comments, We do understand that government should play here a big leading role in this process and unfortunately that s what we don t have here. Continued attention must be paid to the role and capacity of government in supporting and promoting the aims of a Social Contract for the industry in society. Public Perceptions and Profitability In addition, there is some debate over public perceptions and the role of industry profitability therein. While most respondents (16 in 21) express concerns about negative public perceptions, some regional differences exist. A couple of respondents note that public citizens in Asia and the Middle East generally respect the energy industry and hold energy companies in high regard. Nonetheless, slightly over half say, unprompted, that profitability is an obstacle the industry must address in the public domain. According to one participant, Companies today are [seen to be] narrowly focused on the success of the investment at hand and need to broaden this perspective. A few respondents also tie negative public perceptions to beliefs about a tradeoff between profits and economic development. Conclusion Our research and in-depth discussions with both energy industry and public interest groups underscore the concrete challenges facing the industry; the findings reaffirm the need for a collaborative effort to address these issues and gain public confidence while protecting the industry s ability to operate in a commercially viable way. Edward Reilly Global Chief Executive Officer, Strategic Communications FTI Consulting (212) Edward.Reilly@fticonsulting.com 8 FTI CONSULTING RESEARCH AND DAVOS RECAP