The question of natural resource ownership has been answered in many different ways over the course of human history, with compromises between the interests of societies and individual developers taking on a variety of forms.
While it often seems that the basic parameters of ownership and regulation of ownership have been sorted out in places like the US, comparatively small evolutions in the perception of these relationships can have outsized impacts on specific energy projects or companies.
In recent years, the concept of “stakeholder” capitalism has graduated from the trendy material of sustainability conferences and Davos gatherings to a full-blown fundamental aspect of the contemporary business environment. The traditional strategic approaches of shareholder capitalism, reliant on extracting the most resource from the smallest cost possible within the limits of the law, are increasingly an insufficient way of managing the risks that natural resource projects – and energy companies – face.
Stakeholders, whether environmental groups, publicly owned financial institutions or political heavyweights, are now part of the economic weather for the energy sector.
The traditional roles of competitors, regulators or even civil society are proving increasingly slippery, and traditional legal frameworks that have set the rules for dispute resolution are no longer sufficient to meet the challenges of large and expensive energy projects. Can an energy company sue the Twitter campaign of a local teenager objecting to their nearby multi-billion-dollar drilling project? Traditional mechanisms of engaging these “stakeholders” no longer work, and the traditional advocacy groups for the energy sector are struggling to keep up in the new fast-paced environment.
Read an earlier commentary from this Breaking Energy series here.
The business world is experiencing the early stages of an institutional response to the emerging “stakeholder society:” Richard Branson’s B Team – set to launch this year and consisting of major business leaders and notably tying up with the Carbon War Room – is only the most recent example of efforts to respond to the “stakeholder society.”
The notion of a stakeholder society and how it should be run is at the heart of the US election in 2012, and is evident in the sketched-out energy policy proposals of the largely uninspiring presidential campaigns.
Both parties are in large part speaking to a business and regulatory environment that is showing signs of age: Increasingly unmanageable degrees of complexity are emerging as short-term solutions to problems develop into long-term policy approaches.
The Romney campaign has proposed a return of many permitting rights to states, without much apparent thought as to how such a program might work or whether states are able to handle the new responsibilities. The Obama presidency, borne into office in an atmosphere of fevered tinkering to prevent the nation’s economy from collapsing, is now stuck with a morass of programs whose implementation is often at conflict with their own objectives.
There is no easy solution, but if any business sector is accustomed to complex and changing operating environments, it has to be the energy sector. While pressing for greater regulatory certainty has become standard issue in energy sector CEO speeches, that regulatory certainty will certainly need to be matched with a nimble stakeholder strategy that emphasizes responsiveness, consistency and transparency. Energy is too important to be left to the politicians.