Why you should care
Investments in clean energy aren’t leading to revenues yet, underscoring a growing struggle over their future.
It has been nearly 20 years since BP launched its “Beyond Petroleum” advertising campaign, which included a new sunburst logo and a plethora of videos about making solar panels. The logo endured; the solar manufacturing business did not. Now BP and other global oil majors are again embarking on advertising sprees — but this time with a twist. Unlike previous efforts to burnish their green credentials, these new ads reflect the existential crisis the fossil fuels business is in.
The multimillion-dollar campaigns in recent months from groups including Equinor and Royal Dutch Shell come at a time when the industry is facing increasing investor pressure to act on climate change, difficulty in recruiting talent and mounting legal challenges related to greenhouse gas emissions.
The new BP campaign, in particular, is indicative of a pervasive theme across the industry — how to produce more energy with fewer emissions. The U.K. major is highlighting its legacy oil and gas business as well as new investments into wind and solar power.
“We wanted to communicate the challenge we saw but also that we’re doing something about it,” says Duncan Blake, director of brand at BP, adding that the ads are the company’s first global campaign in 10 years. “We’re not just focusing on the new, interesting shiny stuff, but the core business that keeps the world moving day to day.”
Blake said this was not a disingenuous attempt to cover up the dirtier parts of the business, as companies had sought to do in the past, but a reflection of the current debate.
The industry is struggling with how to change their product lines, services and actual business.
Paul Bledsoe, former White House climate adviser
Norway’s Equinor has also tried to show the benefits of its gas business as well as its offshore wind venture. Shell meanwhile is promoting its “Sky” scenario — a way it believes the world could achieve the Paris climate targets but one that still sees a place for oil and gas.
As energy executives gathered recently in London for International Petroleum Week, they praised the oil and gas industry for helping improve the livelihoods of the world’s population — a message they felt had become lost in the climate debate. However, cutting emissions was the topic on everyone’s lips.
“Our ambition is to gradually reduce the carbon intensity of the energy products we sell to our customers over their full life cycle,” said Arnaud Breuillac, president for exploration and production at French energy major Total.
But no matter how polished the advertising and convincing the talk, some believe the energy companies have a bigger hill to climb. Climate change is seen as a “near and present danger” for the world that can’t be fixed with ad campaigns, says Manfredi Ricca, chief strategy officer of brand consultancy Interbrand. “Short of a significant overhaul in business strategy, these companies will fail to meaningfully change public opinion.”
For most energy majors, it is unclear how they plan to evolve their businesses — if at all — and whether they can reduce emissions significantly while also maintaining shareholder returns. Simply put, BP and its peers have yet to find ways to generate revenues from renewables and low-carbon technologies that match their legacy businesses.
A year of bumper profits has left them with plenty of cash but their investments are still primarily in maintaining fossil fuel production. On aggregate, the oil majors allocated just over 1 percent of their total 2018 capital expenditure to low-carbon ventures, according to CDP, an environmental nonprofit.
“I think the industry is struggling with how to change their product lines, services and actual business,” says Paul Bledsoe, a former climate adviser in the Clinton White House. “It’s almost as if they’re trying to convince themselves to start serious investments in alternatives before it’s too late for both the climate and their own long-term viability.”
Oil companies also face investor pressure to set emission reduction targets and increase transparency about the impact of climate change on their businesses.
“The imperative for the industry is to stand up and be very clear about how it is managing transition risk,” says Nick Stansbury, head of commodity research at Legal & General Investment Management. “We need to rapidly decarbonize our global energy system, and that means that we will be consuming ever decreasing amounts of their most valuable product.”
But not everyone agrees with this scenario. Amin Nasser, CEO at state energy giant Saudi Aramco, said last week there was a disconnect between rising global demand for oil and gas, and campaigns to curtail supply. He said the traditional energy industry faced a “crisis of perception” despite the world’s enduring reliance on their products and growing demand in Asia and Africa.
Comments from executives also suggest that part of the reason for increasing their messaging — showing not only how vital fossil fuels are today but also how companies are adjusting to the new world — is to entice new, often younger, people into the oil and gas sector.
“We need to listen carefully … especially to young people as they will be our future employees and leaders,” says Eldar Saetre, CEO of Equinor. “Young people are more impatient.” But even as Equinor aggressively promotes its renewable power business, oil and gas remains its priority. “Fossil fuels used in industry, petrochemicals and by trucks and airplanes would be difficult to displace,” Saetre says. While it was easy to call for a stop to production, he says, “it won’t go away.”
For environmental campaigners, this new wave of messaging is just another example of green washing at a time when companies are seeking to grow their oil and gas businesses.
“Slick ads don’t erase decades of multimillion-dollar disinformation campaigns,” says Jean Su, energy director at the Center for Biological Diversity, a nonprofit group. “Fossil fuel companies now admit climate change is happening only because the public and shareholders have backed them into a corner.”
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