The coal seam gas issue has flared up – pardon the pun – and provided a not-so-gentle reminder to boards and CEOs that they must adjust to the increasing demands of their stakeholders. This is a broad market trend and not limited to those companies, such as AGL, Origin and Santos, who are directly caught up in CSG development.
The problem is thus: the population at large, feeling jaded by the global financial crisis, is in no mood to tolerate corporate largesse. In the past, the 'shoot first and ask questions later' approach may have been acceptable, however CSG is further proof that those days are gone and asking questions first is the new normal.
A company that pursues profits by pushing other costs onto society is swimming against the tide. The global head of McKinsey, Dominic Barton, recently warned that the corporate sector must adapt to a more progressive form of capitalism, or have change forced onto it. In effect, he is noting that the corporate, community and government sectors are inter-dependent, not independent, and need to be managed as such.
Michael Porter and Mark Kramer championed the inter-dependence theme in a Harvard Business Review paper: “Any business that pursues its ends at the expense of the society in which it operates will find its success to be illusory and ultimately temporary.”
Where does that leave the boards of energy companies who are developing CSG? They have to weigh up the prospect of brand damage and uncertain project economics against their investments to date and the strength of contractual and exploration rights. Rules and assumptions are changing mid-game.
It would be interesting to know how stakeholder interests were considered and, if so, to what extent? Was there a conscious decision made to try and fly under the radar or did the gas ‘fracking’ issue come as a genuine surprise?
State governments have been caught on the hop. Insiders suggest that governments were blind-sided by CSG developers, with insufficient capacity to understand or address the issues. They are now in an invidious position, wedged between surging community interest and a resource development agenda, an agenda that supports their own sagging revenue projections.
Communities themselves have been vocal. They have mobilised resources at speed, which is impressive considering much of it has been done from scratch. It has been a grass roots campaign, uniting traditional environmentalists, farmers and concerned community members.
Stakeholder management is not new. The extent to which stakeholders need to be managed is.
There is an immense amount of value in the relationships that exist between companies and their stakeholders. Because these assets aren’t easily quantifiable or visible, they tend to be noticed more when they become damaged.
To increase the quality of stakeholder management means that the CEO of the future also needs to be a chief social officer and chief government officer as well. This is a demanding requirement that has a limited pool of qualified applicants.
We need to acknowledge that there is substantial value in the relationships that corporations have with government, regulators and communities. If we own a property, we don’t flinch at the thought of spending on maintenance or even investing in improvements. Likewise, as important assets, stakeholder relationships need to be invested in and maintained.
Phil Preston is a social innovation expert who provides strategic insight into the rapidly changing business and social environment. He can be contacted on phil@philpreston.co
Management Insights
The coal seam gas issue has flared up – pardon the pun – and provided a not-so-gentle reminder to boards and CEOs that they must adjust to the increasing demands of their stakeholders. This is a broad market trend and not limited to those companies, such as AGL, Origin and Santos, who are directly caught up in CSG development.
The problem is thus: the population at large, feeling jaded by the global financial crisis, is in no mood to tolerate corporate largesse. In the past, the 'shoot first and ask questions later' approach may have been acceptable, however CSG is further proof that those days are gone and asking questions first is the new normal.
A company that pursues profits by pushing other costs onto society is swimming against the tide. The global head of McKinsey, Dominic Barton, recently warned that the corporate sector must adapt to a more progressive form of capitalism, or have change forced onto it. In effect, he is noting that the corporate, community and government sectors are inter-dependent, not independent, and need to be managed as such.
Michael Porter and Mark Kramer championed the inter-dependence theme in a Harvard Business Review paper: “Any business that pursues its ends at the expense of the society in which it operates will find its success to be illusory and ultimately temporary.”
Where does that leave the boards of energy companies who are developing CSG? They have to weigh up the prospect of brand damage and uncertain project economics against their investments to date and the strength of contractual and exploration rights. Rules and assumptions are changing mid-game.
It would be interesting to know how stakeholder interests were considered and, if so, to what extent? Was there a conscious decision made to try and fly under the radar or did the gas ‘fracking’ issue come as a genuine surprise?
State governments have been caught on the hop. Insiders suggest that governments were blind-sided by CSG developers, with insufficient capacity to understand or address the issues. They are now in an invidious position, wedged between surging community interest and a resource development agenda, an agenda that supports their own sagging revenue projections.
Communities themselves have been vocal. They have mobilised resources at speed, which is impressive considering much of it has been done from scratch. It has been a grass roots campaign, uniting traditional environmentalists, farmers and concerned community members.
Stakeholder management is not new. The extent to which stakeholders need to be managed is.
There is an immense amount of value in the relationships that exist between companies and their stakeholders. Because these assets aren’t easily quantifiable or visible, they tend to be noticed more when they become damaged.
To increase the quality of stakeholder management means that the CEO of the future also needs to be a chief social officer and chief government officer as well. This is a demanding requirement that has a limited pool of qualified applicants.
We need to acknowledge that there is substantial value in the relationships that corporations have with government, regulators and communities. If we own a property, we don’t flinch at the thought of spending on maintenance or even investing in improvements. Likewise, as important assets, stakeholder relationships need to be invested in and maintained.
Phil Preston is a social innovation expert who provides strategic insight into the rapidly changing business and social environment. He can be contacted on phil@philpreston.co