Shell & Stress Nexus: Balancing Natural Resources with Human Needs

Shell & Stress Nexus: Balancing Natural Resources with Human Needs
Can Shell’s ‘stress nexus’ change the conversation about natural resources? Green Biz chief  Joel Makower talks to Ruth Cairnie, Shell’s executive vice president for strategy and planning, about the link between energy, water and food: why this had become a strategic focus for Shell, and what the company hoped to achieve from talking about it. Read More

By Joel Makower (17 December 2012):

When the opportunity presented itself to interview a senior executive from one of the world’s major oil companies, my initial inclination was to pass. I’ve watched oil companies enter and exit the global sustainability scene over the past 25 years, and I haven’t been impressed. They arrive with an aspirational slogan — Beyond Petroleum, People Do — along with a CEO speech extolling the company’s commitment to a better and responsible future. And, as if on cue, environmental and human rights activists decry the messaging as disingenuous at best, fraudulent at worst. And away we go.

Then something happens — an incident or lawsuit involving indigenous people in developing countries, a spill or other “event,” or maybe just the ephemeral cycles of marketing campaigns. And the company’s outreach fades away, with only a digital archive of articles, images and blog posts to show for itself. As for the company itself, not much has changed, sustainability-wise.

But something about Royal Dutch Shell piqued my interest. I’d been hearing for the past year or so company execs talking about a “stress nexus” involving energy, water, and food, and the implications of those stresses for the environment, the economy and society. It didn’t sound quite like the same-old, same-old. It took a cross-sectoral, multidisciplinary systems view of the world: not just beyond petroleum, but beyond energy. At minimum, I thought, it was a message worth hearing out.

It’s not that Shell has been exempt from controversy. It is currently under attack by activists for its plans to drill for oil and gas in the Arctic. It is being scrutinized and criticized for its human rights record in Nigeria. Like other oil and gas exploration and production companies, it is the subject of protests related to the drilling process known as fracking.

But in a world where fossil-fuel energy companies aren’t going away any time soon, and where there’s a hunger for leadership, a longer-term vision and an open dialogue about sustainability problems and solutions, the “stress nexus” seemed a provocative conversation for Shell to be having.

And so began my recent conversation with Ruth Cairnie, Shell’s executive vice president for strategy and planning, about the link between energy, water and food: why this had become a strategic focus for Shell, and what the company hoped to achieve from talking about it.

A little background: Since the 1970s, Shell has used scenario planning as part of a process for generating and evaluating its strategic options. Scenario planning is itself an exercise in systems thinking that combines many factors — social, technical, economic, environmental, educational, political — to envision possible, and sometimes surprising, futures.

Over the years, Shell has used scenario planning in thinking about sustainability. For example, in 2008, the company looked at visions of 2050, including two scenarios: one called “Scramble” (in which world governments react to changing sustainability impacts but fail to establish long-term climate strategy, and where energy companies largely set the rules), and another dubbed “Blueprint” (where international bodies have set global frameworks, laws, and trading systems that scale renewables and manage greenhouse gases). The goal, of course, is to assess the company’s sustainability goals and strategy within each scenario.

Last year, in the wake of the financial crisis, Shell released Signals and Signposts (PDF), a report that analyzed long-term energy scenarios in an era of volatility in the economic, political and social spheres. The stresses building in our global systems, such as water, food and energy production, will make industrial and social transformations inevitable, the company said. But what and how? That became the basis for the stress nexus conversation.

“In the water-energy-food stress nexus, you have quite important linkages,” Cairnie told me. “You need water to develop energy. You need energy to treat and to transport water. You need energy and water to produce food. So, it’s a recognition that you need to look at all of these issues in a joined-up way. Because if you try to find solutions for just one of the issues you’ll find unintended consequences, perhaps making the others more of a problem.”

By Shell’s reckoning, by 2030 the world will need 30 percent more water, 40 percent more energy, and 50 percent more food than today. “It’s an enormous challenge, and ultimately governments will need to play a very strong role in finding solutions. But we see Shell having a role to play, both in our own areas of direct responsibility but also to look at how we can use our capabilities to help creatively find different solutions.”

I asked Cairnie, of all the scenarios the company has developed over the years, why the stress nexus became a topic of public conversation for Shell. After all, company executives have been talking about the stress nexus for the past year or so at everything from World Water Week to various energy and engineering forums. (Just last week, Shell CEO Peter Voser discussed the topic at a UK event on “21st century challenges” at the Royal Geographic Society.)

“As we become more and more aware of the stress nexus, first of all we see that it’s relevant for us,” she said. “While, 70 percent of water use is in agriculture, for the share that has been in industry, energy is an important part of that. So, our role in reducing the water requirements for our processes is important, and we think will be increasingly important. There’s a lot that we can do and should be doing.”

This isn’t a topic for any one company to tackle, she added. “The stress nexus crosses between different countries, different government departments, different industries, and so we see the importance of finding new ways of collaborating. We think it’s important to engage people, to get more awareness of these challenges and look for new ways of collaborating. We’ve got a lot of examples of different types of collaboration that we’re working on to build understanding and to build new ways of finding solutions.”

So, for example, in British Columbia, Shell collaborated with the City of Dawson Creek to build a reclaimed water facility that virtually eliminated its need to draw on local freshwater sources for the operation of a natural-gas venture. The project treats a volume of municipal wastewater that had previously been released to a standard suitable for industrial, agricultural and municipal uses. In another project, Shell worked with the World Business Council for Sustainable Development and the University of Utrecht to develop a new methodology that can estimate more accurately the amount of water needed to generate energy from different sources — oil, gas, coal, nuclear and biofuels — using different technologies and in different locations. In Brazil, where Shell has a major sugarcane biofuels business, the company is working with local governments on water and land-use issues.

“Our core business is producing energy,” says Cairnie. “But as a relatively significant user of water, and recognizing the increasing stresses, we want to make sure we’re very responsible in the way that we’re developing our projects to minimize the impact that we put on scarce resources. And in the same way, businesses in general will be using energy, water, and probably land — and so this is about them becoming aware of how they can be more efficient and, therefore, reduce their call on those resources for their future operations.”

I asked Cairnie: Cynics would likely point to the stress nexus as a fig leaf to distract attention from fracking, which right now is a hot-button issue, related in large part to water use by energy companies, and the disposition of spent water back into the water tables. And that by bringing attention to water and agriculture Shell is pointing a finger in the other direction.

“We use water in many different parts of our operations, so this is not specifically about fracking,” Cairnie responded. “We believe that to make the dramatic increase in energy demand, the world is going to need resources of energy to be developed, including the type of gas through fracking. And we believe that that can be done responsibly.” She reiterated the water solutions in Dawson Creek as an example of how planning and collaboration can get everyone what they want and need.

So, how does a conversation about the stress nexus help Shell reputationally? What does the company hope to get from the exercise?

“We want to see a broader appreciation of the importance of these issues and the importance of moving forward in a very collaborative way,” said Cairnie. “We’d like to see better collaboration and working together between government and business because we think that that will be very important in finding solutions. We want to find new ways of collaborating with other companies, and we expect to find new opportunities and new partnerships that will come out of this, which will also be good for our business in the future.”

How all this inures to Shell remains to be seen. One key challenge for the company will be to balance talk with action — how much (and how loudly) Shell is talking about the problems relative to how much it is actually seen to be doing to solve them. Achieving that balance has tripped up other energy companies, for whom the say-do gap was simply intolerable in the minds of many.

There’s more to come. Cairnie says that Shell will unveil a new set of scenarios in early 2013. “We will be focusing very much on these volatility questions, and very much on the increasing importance of these stress-nexus issues.”

Whatever you think of Big Oil in general, or Shell in particular, the energy-water-food stress nexus is a conversation worth having about balancing natural resources with human needs. It goes beyond knee-jerk sound bites, feel-good marketing campaigns, and meaningless slogans, delving into the messy complexity of what’s needed, what’s achievable, and how to get there. In a world seemingly inundated with bullying and bluster around our most pressing problems, there’s a critical need for such grown-up conversations.


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