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Published: May 3, 2010
 / Summer 2010 / Issue 59

 
 

Why We Hate the Oil Companies

Even those in the industry who are making serious efforts to diversify the future fuels mix gain little credit for their efforts as long as they continue to drill for more oil and gas, lobby for access to new hydrocarbon resources, and build more infrastructure — all necessary to enable affordable energy during the transition to a new energy age but denied credence by new-energy-age aspirants because of a basic distrust of the industry.

The oil industry’s poor political skills have been neatly complemented by even more abysmal public re­lations. Much of its poor image is self-inflicted; the industry has allowed itself to appear to not care about customers and political stakeholders, an unforgivable transgression in a consumer society and political democracy. Transparency and open communications have never been a strong suit for the oil companies. Yes, they comply with public reporting requirements. But from the earliest days of the industry through the boom periods of the middle of the 20th century, to the secret deliberations of the Organization of the Petroleum Exporting Countries, to the price volatility of recent years, oil companies have generally resisted the candor and forthcoming style of communications that other industries call best practice.

When the oil industry makes operational mistakes, they can be spectacular: refinery explosions, well blow­outs, shipwrecks, and oil spills. Equally spectacular is the industry’s poor handling of such incidents, to the point that they live on as case studies of what not to do in a crisis.

A Commitment to Transparency

Over the decades, the industry has done many good things but then failed to capitalize on them. It has carried the United States to vic­tory in two world wars by supplying its allies with ample supplies of U.S. oil. To this day, oil supplies are a part of our national defense strategy. The industry supplied the fuels that helped power the nation’s industrialization through the 20th century; it enabled the freest people in the world to enjoy virtually unlimited and (usually) affordable personal mobility.

Oil companies have also provided hundreds of millions of dollars in philanthropic support to organizations and communities. One example I know firsthand: After Hurricane Katrina, Shell provided tens of millions of dollars in financial support for rescue, education, and rebuilding, including underwriting the cultural classic of the community, Jazz Fest. The company also pro­vided significant in-kind contributions of fuel and other supplies to first responders. Shell’s monetary and manpower support, which continue to this day, have been a mainstay of the rebuilding of New Orleans.

Best practice doesn’t just mean taking credit for the positive steps the industry has taken. It also requires public exposure by top executives — putting a human face on a complex organization and demonstrating consumer empathy and engagement that is obvious and intentional. A commitment to transparency, which was behind the outreach tour I undertook at Shell, was not an easy initial sell to the Royal Dutch/Shell board, although its members quickly saw how it paid off in reputation improvement. It ended up encouraging similar Shell initiatives in other areas of the world. Until individual companies move their public relations model from providing the smallest amount of information necessary to providing the greatest amount of information possible, the oil industry will continue to rank last in public opinion, and to be the recipient of harsh public policies and sustained criticism as a result.

I’ve focused on the oil industry, which is the arena I know best, but the dichotomy of customer dependence and customer avoidance is just as pronounced in the electric utility industry. And the role of state public utility commissions and similar intermediaries adds a unique barrier between utility companies and customers. Like gasoline buyers, electricity consumers want to spend as little time as possible thinking about electricity supply or reliability or price, unless bad things happen and they are forced to confront their electricity reality. Whether it is an outage or an unexplained spike in billing, it is almost always a negative experience. As a consequence, the electricity company is unlovable and unavoidable, just like the oil company.

 
 
 
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Resources

  1. Stewart Brand, “City Planet,” s+b, Spring 2006: How the profound consequences of increasing urbanization are changing the way we think about demographics, cultural vital­ity, and economic development.
  2. Viren Doshi, Gary Schulman, and Daniel Gabaldon, “Lights! Water! Motion!s+b, Spring 2007: Rebuilding the world’s urban infrastructure can be done only by integrating energy, transportation, and water.Peter Senge, Bryan Smith, and Nina Kruschwitz, “The Next Industrial Imperative,” s+b, Summer 2008: Why facing up to climate change requires a revolution in business thinking.
  3. World Wide Fund for Nature and Booz & Company, “Reinventing the City: Three Prerequisites for Greening Urban Infrastructure,” (PDF) March 2010: More analysis and ideas on why we need to aggressively pursue urban sustainability.
  4. For more thought leadership on this topic, see the s+b website at: www.strategy-business.com/sustainability
 
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