Yesterday's panel discussion in Washington, DC on "The Trust Factor" in energy couldn't have been more timely. The stakes for lost trust seemed especially apparent against the backdrop of an EU probe into allegations of price fixing in the spot oil market, involving some of the industry's largest players, and coverage of the IRS and Associated Press wiretapping scandals. The session was hosted by The Energy Collective and communications firm Edelman, which presented the energy-related findings from its latest annual Trust Barometer. The theme of this year's survey was a "Crisis of Leadership."
Edelman found a small improvement in the US public's trust for the energy industry, compared to last year. Yet energy's trust level of 59%, which is slightly better than government's 53%, falls far short of the 80% trust score for the technology sector, followed by the automotive, food and beverage, and alcoholic beverage industries in the 70%'s. Energy's position isn't encouraging, considering its importance to the overall economy, but the details resist a blanket assessment. Meanwhile, non-governmental organizations (NGOs) enjoyed a big jump in trust from 2012 to 2013, up to 70%.
Trust levels within energy differed widely by energy source, with a 30% gap between renewables, which garnered 65%, and oil at 35%. Natural gas and utilities came in near the average for energy as a whole, reflecting closer customer connections for the latter, and the technology-driven, cost-saving growth of the former, notwithstanding concerns about hydraulic fracturing. Although renewables have been involved in some messy bankruptcies and an ongoing debate over subsidies, their reduced environmental impacts and links to cutting-edge R&D puts them closer to the technology end of the trust spectrum. Oil--arguably just as technology-focused as renewables--suffers from the fallout from events like Deepwater Horizon, and perceptions of inadequate stakeholder engagement. Yet this disparity in trust levels also creates mutually beneficial opportunities for partnership.
I thought the most surprising findings were those describing how the factors that affect trust have evolved in recent years. In the past trust could be earned by simply focusing on operational results, including financial performance and company rankings; now that's just the cost of admission. Engagement with customers and employees, along with business ethics and transparency, topped the list of today's trust factors. This might explain at least part of the gulf between oil and renewables. In my experience, oil executives live and breathe operations and shareholder returns, although broader definitions of stakeholder relations have been gaining ground in the last decade or so. Yet the insular nature of these businesses, which have lived under decades of regulatory and anti-trust scrutiny, works against their embrace of new media and other tools of open engagement with both customers and critics.
The panel discussion that followed the Edelman presentation was also quite interesting. Paula Gant of the American Gas Association memorably described the synergies between natural gas, renewables and energy efficiency as a symphony. Jason Walsh of the Department of Energy's Office of Energy Efficiency and Renewable Energy addressed concerns about the reform of subsidies for renewable energy, while reminding the audience that private investment in renewables stood at $269 billion last year. Peter Nelson, communications director of Resources for the Future, a nonpartisan, highly trusted NGO, offered his thoughts on the politicization of environmental issues, which seems linked to polarization over climate change. Robert Dillon, communications director of the US Senate's Energy and Natural Resources Committee, pointed out that much of the current debate is over facts, asking, "Who owns the facts?" The panel was moderated by Paul Bledsoe, a veteran of Congress, the White House and policy circles. His comment that, "It's a stakeholder world, not a shareholder world," encapsulated what might have been the key takeaway of the day for companies.
As good as the panel discussion was, when I left I was still mulling over an implication raised by Amy Hemingway of Edelman in her remarks at the start of the session. Energy policy involves the intersection of government and energy companies. It surely complicates the challenging tasks we face, with regard to resource management and environmental stewardship, that much of the public doesn't trust government or energy to solve our important problems. Both institutions suffer from serious trust gaps, while NGOs, who as one panelist observed have significantly fewer constraints on their statements and actions, enjoy more trust than either one (or both together?) Especially for the energy industry, getting things done increasingly requires more than good plans and solid returns. Its "license to lead", as another panelist described it, must be earned by engaging in activities that usually aren't second nature for experienced engineers and finance experts.
The energy industry "earns its stripes" every day, when a customer flips a switch, lights a burner or fuels a car. The triviality of those events is a testament to the performance of the energy industry, in spite of the "help" it receives for government at various levels.
ReplyDeleteEd,
ReplyDeleteFor part of my career, I was totally focused on making sure that when customers turned up at my former company's service stations, there'd be fuel for them to buy. We "earned our stripes" through such reliability, whether our refineries were running like tops or down for maintenance or unexpected repairs. Wasn't always easy, either.
However, the point of Edelman's findings, consistent with trends I've been watching for more than 10years, is that that's often not enough. Customers take that level of performance entirely for granted, while non-customer, non-shareholder stakeholders don't particularly care about metrics like on-time, low cost, no interruptions, etc. And if you blow it in some other, non-operational aspect of your business, it can wreck your reputation and undo all the good work you think you've done. The example that brought this home for me was Texaco's "diversity crisis" in the late-1990s: http://www.nytimes.com/1997/11/02/business/how-much-has-texaco-changed.html?pagewanted=all&src=pm
Geoffrey,
ReplyDeleteI believe the overall complexity of the energy industry (transport fuel and/or electricity) creates a burden of understanding for the average person. The average person has (in my opinion) a lack of understanding on what it takes to get a gallon of gasoline in their tank or a kilowatt into their home. Its sort of the "black box" syndrome and its too difficult to get them up to speed. So when we talk about trust it may have a lot to do with lack of knowledge leading to lack of trust. How do we fix this? Education, information, better "table top" style discussions on the challenges we face in energy.
I don't feel its getting better, I feel its getting worse. Just ask anyone you meet on the street in a casual way how the electricity is generated and where the energy comes from. (First they'll think you're weird for even asking). The odds are very much in favor of that person giving you the "I have no clue" sort of response.
Something as important as energy is left to so much misunderstanding.
DT
David,
ReplyDeleteOne of the panelists raised this issue. He cited a common answer he hears to the question of where electricity comes from: "The wall."
I've had numerous convesations with friends and acquaintances about energy. The most frequest questions in the last couple of years have related to shale gas and hydraulic fracturing. After about 10 minutes of explanation of the separation between aquifers and hydrocarbons in the subsurface, and how horizontal drilling and fracing work, the light usually goes on. I don't present it as risk-free, either.
Put these anecdotes together and I conclude that although the energy industry could do more to educate the public--for which trust is a prerequisite--the real failure occurs in our public schools. The production and use of energy is only going to get more complex, yet most Americans seem to leave school without even a basic grasp of energy, geology, etc. It's one reason I do what I can, here.