Facing pressure from policy makers and investors, oil companies have started to put sustainability at the top of their agenda and to reposition themselves as trusted clean energy brands. In this blog post, we analyse the recent media conversation around renewable energy and the way oil giants communicate their green credentials.
Can Big Oil become Big Power? That is the question which comes up more and more often in the media conversation around the oil and gas industry. In recent years, factors such as stronger government action, increasing demand from investors, growing consumer awareness and the emergence of electric vehicles have made sustainability a central strategic priority for major oil companies, leading to a re-evaluation of business models, portfolios and operational practices.
The prevailing opinion circulating in the media is that the “oil age” will come to an inevitable end and that the future low carbon economy will compel the oil giants of today to transform into the energy giants of tomorrow.
A crisis of perception
The International Energy Agency (IEA) forecasts that upcoming regulations on carbon emissions will mean that the need for electricity will grow much faster than that for oil. Most business outlets interpret such forecasts as worrying for fossil fuel investors, who would need to redirect their investments towards green energy.
Similar opinions have also been voiced by prominent corporate representatives – for instance, Amin Nasser, the CEO of Saudi Aramco, the world’s largest oil producer, said that the oil industry faces a “crisis of perception” and there’s a growing risk the financial community will turn against fossil fuels: “There is a worrying and growing belief among policy makers and regulators, investment houses, NGOs, and many others that we are an industry with little or no future.”
But more conservative-minded publications seem to be more reserved, saying that the low carbon economy will not come so soon and that it will take time for renewables to deliver the profits oil investors are used to. Investment in oil and gas will remain vital even if renewables take up a larger portion of world energy consumption.
However, green energy seems to be winning in the court of public opinion. Even in the US, the hotbed of climate change denial, the majority of citizens across the political spectrum are in favour of expanding renewable energy sources, as the Pew Research Center has found. In the UK, the government’s Public Attitudes Tracker has indicated that support for renewable energy has climbed to 85%.
A very European discussion
The media conversation focuses on the developments in Europe since the pressure from investors has in general been stronger there, with European companies decisively outmatching their US and Asian competitors in the renewables game. The political climate in Europe continuously points towards clean energy, as exemplified by the 2019 European elections, after which the Greens became a substantial political force.
The largest oil and gas companies spent around 1% of their 2018 budgets on renewables, with European giants accounting for around 70% of the industry’s renewable capacity, according to CDP, a climate-focused research provider working with major institutional investors. CDP said US companies face less domestic pressure to diversify and have not focused on renewable energy in the same way.
The media discussion in both Europe and the US really took off in 2015 when the landmark Paris Climate Agreement was introduced in a bid to reduce net emissions to zero by the end of the century. Since 2016, many publications have been concentrating on companies making deals in clean energy and areas such as carbon capture, utilisation and storage (CCUS).
Business outlets have associated the trend with the rise of ethical investing and the focus on environmental, social and corporate governance (ESG) policies. BlackRock estimated that ESG investment funds had grown 50% in the past five years to more than $750bn in assets in the US and Europe. Climate activists are now well-organised and motivated investment managers, while environmental groups like Climate Action 100+ and Follow This have hundreds of institutional investors on their side.
While the growing number of green investments have been covered with a positive sentiment, the media often cites lobbyists and campaigners who criticise the sector for not doing enough. For instance, campaign group ShareAction said that the green investments pale in comparison “with the amount of money Big Oil spends blocking climate initiatives and regulations”.
Some old allegations also tend to resurface: oil majors have also been historically criticised for setting up climate change denial campaigns to promote climate change scepticism. Such strategies have been compared to the tobacco industry’s denial of the dangers of smoking. There are even suggestions that Big Oil and Big Tobacco used the same scientists and publicists to downplay the public health dangers of their products and operations.
For instance, it was revealed that ExxonMobil, the world’s biggest oil company, knew about climate change since at least 1981, seven years before it became a public issue, but nevertheless spent millions over the next 27 years to promote climate denial. Shell was also accused of spreading disinformation despite being aware of the risks of global warming.
A new report by non-profit organisation InfluenceMap claimed that since the Paris Agreement was signed, ExxonMobil, Royal Dutch Shell, Chevron, BP and Total have invested over $1 billion of shareholder funds in misleading climate-related branding and lobbying.
Such revelations, alongside industry accidents such as the infamous Deepwater Horizon oil spill in 2010, have contributed to the deteriorating reputation of the oil industry. According to an EY survey, just 37% of adults and 33% of teens trust the industry to do the right thing, and even though most consumers think the sector is important for the economy, they see it as a problem causer, not a problem solver.
In addition, 76% of industry executives expect the public to not trust the sector and give themselves lower marks for communicating with the public, particularly around regulatory issues.
Climate change in the media
Oil and gas companies have substantially increased their media presence due to the growing interest in climate change expressed by both liberal- and conservative-minded outlets. Climate change and global warming have become powerful coverage drivers not only in ecological and scientific discussions but also in political, economic and cultural analyses.
This is in large part due to a public debate over whether global warming is actually occurring, which has been fuelled primarily by right-wing US publications and conservative think tanks which deny the need for strong environmental regulations. Although there is a strong scientific consensus that global surface temperatures have increased due to human activity, climate change has been a controversial political subject since at least the Ronald Reagan presidency in the 1980s.
Much like vaccination hesitancy, many US outlets have initially framed the conversation around climate change as a binary debate with pro- and contra-perspectives in a bid to be “balanced” and “objective”. Such journalistic practices are widespread in reports on morally-charged political and social issues such as gun control or abortion. When writing on such polarised subjects, most top-tier publications usually try to provide equal exposure to arguments from both sides of the respective debate.
But while this might be a good press practice for political and social matters, it certainly doesn’t work well with reporting on hard scientific evidence. Adopting a “balanced” journalistic approach towards such inherently one-sided and uncontroversial cases creates the impression that there is a real debate among scientists while actually, the scientific community is in a consensus.
However, the recent tendency even among the most conservative high-profile outlets is to admit that climate change is indeed an issue which needs to be addressed. Thus, the main point of dispute between liberal and conservative publications is not whether climate change is real but what measures should be taken – the liberal ones tend to reiterate that governments and businesses are not doing enough, while the conservative ones think that they’re going too far.
For example, when criticising Theresa May’s plan to enshrine in law a commitment to reach net zero carbon emissions by 2050, the conservative Telegraph remarked that “this climate madness has to end” and that carbon emissions could cost the UK £1 trillion, but it also noted that “climate change needs a response”.
In the meantime, scientists and liberal politicians are increasingly using the language of risk to convey their messages about climate change and to shift the debate towards the need for timely action. This has been reflected in the liberal-minded media: for instance, the Guardian announced that it would start using “climate emergency”, “climate crisis” or “climate breakdown” instead of “climate change” to reflect the seriousness of the situation.
The newspaper has often talked about the environment using war metaphors – for example, carbon tax proposals are “battles” led by “eco-warriors”. In an opinion piece, the outlet argued that “the climate crisis” needs to be covered in the same way as “the start of the second world war”.
It also joined forces with Columbia Journalism Review and the Nation to introduce Covering Climate Change: A New Playbook for a 1.5-Degree World, which strives to improve US media coverage of environmental issues. While scientists have had mixed responses, some publications have already announced that they will adopt The Guardian’s style.
The Media and Climate Change Observatory at the University of Colorado found that since 2016, US publications continuously focused on climate change in the context of Trump’s presidency. For instance, in 2018’s climate change coverage, ‘Trump’ was mentioned more than twice as frequently as ‘science’, ‘scientific’, ‘scientists’ and ‘scientist’ combined, which illustrates how the media focused too much on Trump-related stories, leaving many other climate developments behind.
Brands going greener
When it comes to corporate messaging around environmental issues, oil giants have distanced themselves from the aforementioned dodgy communication practices and have put sustainability at the centre of their reputation management strategies.
We analysed the media conversation around sustainable energy from October 2018 to May 2019 in the top-tier English-language publications to find the most often mentioned oil companies:
Shell, the world’s second-largest publicly traded oil company after ExxonMobil, is generally presented as the industry leader on the move to renewables. CEO Ben Van Beurden is also seen as more assertive than most other oil executives about positioning his company at the forefront of an industry aligned with the principles of the Paris Agreement.
The Netherlands-based company has surpassed its rivals by investing in solar firms and electric car infrastructure companies, putting a new emphasis on its relationship with lobbyists and accepting carbon tax. In 2017, it acquired First Utility, one of the UK’s biggest energy suppliers, and rebranded it to Shell Energy to reflect the emphasis on clean energy.
Shell’s communications have largely been focused on positioning the company as the world’s largest electricity brand. Maarten Westsellaar, Shell’s director of gas and new energies, told the Financial Times that “the group could develop a power business including supplying customers, trading and providing equipment, that was the same size as its oil or gas operations.”
The company has highlighted that from an industry perspective, going green is a matter of survival: its own analysis sees electricity exceeding 50% of end-use energy consumption by 2070 (from around 22% today), so if companies are out of that business, they would be marginalised.
Westsellaar’s New Energies division, which has existed since 2016, invests up to $2 billion a year in green energy, and the company has declared an ambition to double that amount. Shell will also set short-term targets linked to executive pay to reduce greenhouse gas emissions from the products it sells, not just from its operations, which means that it would be responsible for the emissions produced when its customers use oil and gas.
This move was well-received – for instance, Andrew Logan, oil and gas program director at sustainable investment advocacy group Ceres, said that “Shell is the only company in the industry that has been willing to cross that philosophical divide and actually set a goal for reducing emissions that it doesn’t directly control.”
In this context, Shell has often been compared to BP, which resisted calls from investors to take a similar step, arguing that while it can provide greater transparency on its alignment with the Paris Agreement, it couldn’t limit its flexibility by taking responsibility for the fuels its customers use. When juxtaposing the two companies, reporters are naturally more likely to present Shell’s approach in a more positive light.
A need for repurposing
Like Shell, BP has made efforts to position itself as a part of the climate change solution, forecasting that renewable energy sources will be the world’s main source of power within two decades. Chairman Helge Lund acknowledged the need to repurpose the business towards a low carbon future and shared his thoughts in an opinion piece published in the Financial Times, warning that the world’s energy consumption is “on an unsustainable path”.
Both Shell and BP are calling on governments to provide investment frameworks, but most business outlets think that investors rather than politicians will ultimately determine the future of the business.
In the meantime, Norway’s state oil company has rebranded itself from Statoil to Equinor to reflect its move towards becoming a “broad energy company”. The company explained that the new name combines ‘equi’, part of words such as ‘equal’, ‘equality’ and ‘equilibrium’, and ‘nor’, conveying a sense of pride of its Norwegian origin which would also be an essential part of its positioning.
CEO Eldar Saetre joined Shell and BP in calling on governments for more renewable energy investment opportunities as he has highlighted the rapid growth of its renewables business: the company plans to increase spending on green energy from 5% to 20% by 2030.
Meanwhile in the US
US giants like ExxonMobil, Chevron and Occidental Petroleum have been criticised by many US and European publications alike for lagging behind European rivals. Part of their response has been joining an international industry initiative to reduce greenhouse emissions.
Exxon and Chevron have the lowest amount of renewable investments, but many sources report that that’s going to change – for instance, Goldman Sachs’ co-head of global natural resources, Gonzalo Garcia, said that with every projection suggesting renewable energy will dominate, they won’t have much choice.
A sign for the beginning of this shift was when Chevron, which has insisted that it is “positioned to win in any environment”, invested in EV charging company ChargePoint and battery storage company Natron Energy. The investments were described as strategic bets by the company’s technology ventures president Barbara Burger.
ExxonMobil’s renewable energy commitments, which include wind and solar investments, have also been praised by the media, but some have argued that this isn’t enough to compensate for the company’s acceleration in the extraction of fossil fuels that has doubled their contribution to global warming since 1988.
Occidental Petroleum was mentioned for its acquisition of oil company Anadarko, which made many commentators wonder why the giant bets on old-school firms. The deal attracted attention also due to the fact that Warren Buffett invested in it, practically placing a $10 billion bet on the future of oil and gas.
All about politics
BP’s CEO Bob Dudley was the most often quoted corporate spokesperson in our research sample. He has said that the transition to renewables is inevitable and, in a rare foray into politics, that the oil industry should engage with proponents of the Green New Deal.
The most prominent spokespeople in the conversation around renewables were US politicians, which underlines the political nature of the debate. Apart from Trump, whom we didn’t include in our research sample in order to cut through the media noise, most of the politicians were Democrats.
Rising Democratic star Alexandria Ocasio-Cortez introduced the Green New Deal alongside Senator Ed Markey and cemented climate change as a central topic for Democrats in the 2020 elections. Presidential candidate Elizabeth Warren said she would issue an executive order implementing a “total moratorium” on new federal oil and gas leases on and build new renewable energy projects on public lands instead.
The Green New Deal was also backed by Democratic presidential contender Kamala Harris, who has characterised climate change as an existential threat. Meanwhile, Jay Inslee has expressed his ambition to be America’s first climate change president, while Beto O’Rourke unveiled a comprehensive climate change plan which has been described as the most detailed climate plan announced by a 2020 presidential candidate.
Given the political nature of the debate, the BP CEO was quoted that much probably because he was keen to express his political position in support for the Green New Deal. Talk about politics was also the reason behind Khalid al-Falih’s prominence in the discussion. The minister of energy, industry and mineral resources of Saudi Arabia and chairman of Saudi Aramco, the world’s largest oil producer, said that Saudi Arabia planned to issue tenders for at least 12 renewable energy projects to diversify its energy mix.
As Shell has pointed out, there is no global brand of power in the world – something which most oil companies would strive to become in the next few years. The question is whether their legacy as fossil fuel producers would deter them from becoming trusted energy brands.
Some analysts say that the oil industry may be facing its “last cycle” and that, if it wants to protect and enhance the many key elements of business success, it needs to earn the trust of consumers and support the transition in business strategy by improving its reputation as corporate citizens.
In the image shift from one of the world’s largest polluters to one of the problem-solvers in the mission to tackle climate change, the oil sector might learn a thing or two from other global industries which are on the road to reinventing themselves.