Strong brands can smooth navigation to new businesses

It’s no secret that our global energy system is changing. As the world looks to tackle the potentially devastating consequences of climate change and driven by technology and policy changes, our energy is being supplied in increasingly varied ways. Ways that lower carbon dioxide and other emissions, ways that put control in the hands of consumers, ways that reduce waste and better use the capacity of our energy system.

The rate of change is perhaps best illustrated by the extraordinary growth in renewable energy sources. Initially this was a developed market phenomenon, but the cost of renewables is now reduced to such an extent that renewable technologies like onshore wind and large scale solar are quickly taking an increasing share of new investments in developing markets around the world.

According to the International Energy Agency, solar and wind power provided 6 percent of the world’s electricity in 2017. By 2040, they are projected to provide 21 percent in the IEA’s New Policies Scenario, which reflects governments’ announced policies and targets. These rates of change are now also being seen in technologies like electric vehicles and battery storage, which will have a significant impact on our global automotive business and enable storage of electricity from renewable sources to remove problems of intermittency.

This year’s BrandZ™ category name change, from oil and gas to energy, reflects the convergence of interests in the real world. The oil and gas industry will remain vital to the world economy for decades to come. Demand for oil and gas continues to rise with a growing global population and growing economies, and in subcategories like aviation fuel, lubricants, bitumen and plastics there are not yet an abundance of alternatives to replace oil and gas. It is far too early to write the obituary of an industry that has fuelled our economies and will continue to.

Ultimately though, oil and gas businesses will have to shift their brands and their businesses. Shell’s recently stated ambition to be world’s biggest power company by 2030 and investments by Shell, Total and BP among others in renewables and electricity infrastructure like electric vehicle charging, show the gradual shift in investment. These companies have been criticized for the pace of that shift by groups looking for a more significant quantum of investment to turn to low carbon, but the shift has begun and will continue to grow.

There is, however, an added dilemma for these groups. BrandZ™ shows that brand contribution to company value in the energy category is the lowest for any category that is measured. This is true even though brands like Shell have among the highest levels of brand recognition of any brand in the world. So, there is an intrinsic value in the brand for the likes of Shell, but are the brand attributes going to support the transition and future direction of these companies? Does reliability as a provider of oil and gas translate to reliability for charging infrastructure or reliability for supplying solar panels? Perhaps. But the more difficult question is: Will consumers buy products from a company leading the transition to a low carbon future, if that same company is also still contributing a significant volume of emissions that cause climate change?

Energy brand leaders will likely need to borrow from brand strategies in other categories where brand makes a larger contribution to company value. In the end transition will require a degree of trial and error. Perhaps Shell Energy will be the largest power company by 2030, but perhaps there will be a suite of brands delivering the transition and building the new energy giant brands of tomorrow. One thing is for sure, the required investment in brand will only increase for these giants.

Chris is the Managing Director of H+K UK’s Energy + Industrials division. This article was first published in the BrandZ Top 100 Most Valuable Global Brands Report 2019.

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