Ask a project team in a consumer goods company to draw a stakeholder map, and they will put the consumer in the middle. A retail team in our own downstream business will do the same. Now ask an upstream development team to create a stakeholder map and they will put the oil company in the center.The company-centric stakeholder model still
belongs to the time when an oil company had to communicate its good intentions (“tell me”) and had to demonstrate it was also executing them (“show me”). Our industry adapted well to this company-centric period with, for example, impressive gains in operational excellence and safety performance.
But the world continues to change. Society is more than ever aware of the many challenges that it faces, whether it is reducing poverty or illiteracy, improving human rights, or responding to climate change. Society nowadays expects business to take on more responsibility than just operating safely and paying taxes and salaries. Local communities are more vocal in asserting their co-ownership of the mineral resources that oil and gas companies produce by demanding a share in that wealth. The United Nations Sustainable Development Goals are the global expression of the need for societal actors to team up and address the complex issues that the world has to resolve. In short, we have firmly entered the “join me” world.
The “join me” world demands a different mindset in which business no longer focuses on its priorities, but operates in partnership with new societal partners, and in which its core business is more aligned with societal priorities. This new external mindset can only be effective if it is supported by a re-alignment of internal processes and decision-making practices of the company.
The challenge, therefore, is twofold. We need to:
- Change our mindset from the “show me” to the “join me” world
- Integrate external realities better with our core business activities
Change Our Mindset
The company-centric model is easy, because it shows a simple boundary between “us” and “them,” i.e., between what the company wants to do and what it needs and expects from its stakeholders to achieve the company goals. Being in the center gives the feeling of being in control, but that position makes us more vulnerable, too. Indeed, we face more budget overruns and schedule delays in capital project delivery due to external stakeholder issues, which, in turn, results in reputational damage and loss of trust. Too often we find ourselves at odds with the society in which we operate.
To be an active part of society rather than outside it requires a shift from the company-centric model to the society-centric model (Fig. 1 above).
In the societal model, one develops a perspective that positions societal needs at the center. The stakeholders involved, including the company, create a level playing field whereby continuous engagement by all actors results in progress in a certain community, region, or country.
This approach is beneficial for a company in several ways:
- It ensures awareness of issues and opportunities at an early stage.
- It moves the company from being reactive to being proactive.
- It creates a constructive dialogue in which facts and science prevail over emotions.
- It helps neutralize unrealistic demands from activists.
- It stimulates the application of a common approach and/or a standard.
- It puts the company in a position where it can build trust.
Integrate External Realities
Application of the societal model needs a higher level of internal alignment and better integration of external realities in core business processes. However, two developments have made this more difficult than before. First, today’s multitude of regulations and external demands requires a large number of in-house and contracted specialists in environmental, social, political, regulatory, and security disciplines. This functional fragmentation has created not only distance among these specialists, but also with the technical, commercial, and operational teams. Second, connectivity between external stakeholders has increased dramatically due to the Internet and social media. Communities and nongovernmental organizations connect easily and actively use social media to influence politicians and the private sector. As a result, we need to respond earlier, faster, and in a more coordinated way to external challenge and pressure.
The solution is to integrate external realities directly into internal decision making. This requires streamlining internal processes, such as the risk management framework, to fully integrate societal (or nontechnical) risks, improving collaboration among technical, commercial, and HSE specialists, and requiring managers to fully balance technical, commercial, and societal considerations in decision making. Above all, it needs visionary leadership that fosters all these changes.
Reap the Benefits
There are many examples of the company-centric model that resulted in significant value loss. The Brent spar, Dakota Access Pipeline, and Groningen gas field earthquakes are well-known examples. Unfortunately, positive examples of the application of the societal model are hardly published and replicated. Let me share with you two of my favorite examples.
The Obio Community Health Insurance Scheme in the Niger Delta is a novel way of offering health care to poor communities. It is a multi-stakeholder initiative initiated by an oil and gas operator in partnership with communities, local and state government, and an international health care specialist. It continues to grow, now employing more than 100 staff members and providing health services to more than 30,000 community members. The insurance scheme is only partly subsidized and guarantees stable funding for the clinic. With this approach, the oil company responds to community requests for health care without shouldering all the responsibilities. It is now a nonoperating, co-funding partner in a successful clinic, while reaping the full reputational benefit as a partner in progress. Operational benefits for the company are healthier employees, improved security, and good community relations.
A cross-industry example of another successful multi-stakeholder initiative is the Rigs-to-Reefs program in the Gulf of Mexico. An offshore operator can save decommissioning costs by leaving a platform substructure offshore as an artificial reef instead of transporting it to shore for dismantling. The cost savings are split between the operator and a public fund. The overriding motive is to contribute to a healthier marine ecology. This is a true win-win that serves nature, sport fishing, and industry. I wish that, in the face of the forthcoming decommissioning wave, this program would be further replicated around the world.
These are just two examples of how the societal model will help our industry to build more sustainable relationships and regain trust at the local, regional, and national level. It will help us to secure our long-term license to operate as responsible energy companies.
