Leonardo DiCaprio vs Suncor Energy: Managing Political Pressures for Corporate Success

What steps should oil sands giant Suncor Energy take to grow both their bottom Line and sustainability in the face of large pressure from environmental groups and public figures like Leonardo DiCaprio?

Background

Five days ago, Leonardo DiCaprio’s film Before the Flood premiered on the National Geographic Channel [1]. As DiCaprio flew over Alberta Canada’s oil sands with Suncor Energy’s Mark Megaeu, DiCaprio remarked that the scene “reminds him of Mordor from Lord of the Rings” [2]. Although most oil companies are disliked by the environmental movement, oil sands companies are particularly disliked because producing oil from the oil sands releases more greenhouse gasses and effects the Earth’s surface more than traditional oil wells. How does a company like Suncor Energy navigate the political landscape while seeking to have a strong bottom line and improve its environmental performance? I worked at Suncor Energy for multiple years and got to witness first-hand how Suncor’s CEO, Steve Williams, managed political concerns to seek to set up the corporation up for long-term success.

Suncor Energy and the Oil Sands

Suncor Energy is Canada’s largest oil company with a market valuation of $45.2 Billion [3]. Suncor was the first company to utilize the oil sands to produce crude oil and still holds one of the largest positions in the oil sands. To extract crude oil from oil sands, surface mining is traditionally used to collect the tar-like substance. Later, it is upgraded using a chemical process that requires energy into a form of crude oil [4]. Crude oil is then separated into gasoline, diesel, chemical feedstocks, and many other products at refineries located around the world.

Economic Effects of Politics

In recent years there have been multiple political actions to help the environment that had the potential to hurt Suncor’s performance. President Obama used the “dirty” label of oil sands crude oil as part of the justification for not allowing the Keystone XL pipeline to be built [5]. There is insufficient pipeline capacity for Oil Sands Crude because of the political rejections of Keystone and other proposed pipelines. Transporting oil by rail is more expensive than transporting oil by pipeline [6]. Because the price of crude oil is set by supply and demand at the location where it is sold, Suncor has to absorb the extra cost of shipping oil which can significantly decrease their profit margin.

Additionally, in recent years the European Union considered putting an official dirty label on oil from the oil sands. If they had put that label oil sands crude, it had the potential to lower demand for the crude and reduce the value of Suncor’s oil [5].

The Suncor Response

Steve Williams, Suncor’s CEO, took multiple public actions to try and sway politics in Suncor’s favor. Steve Williams made public statements that global warming was real and that something needed to be done about it [7]. Additionally, Suncor opened a biofuels plant and six windfarms [8]. Although these assets are of small value compared to Suncor’s oil sands operations, they changed the company from an oil company to an energy company with environmentally friendly assets.

Steve Williams also was part of a council for Alberta’s government that created a new carbon tax for the province. Alberta’s carbon tax structure was relatively innovative and seen as a step forward for climate change [9]. The tax structure opposed a tax on carbon polluters anywhere hydrocarbons were consumed (ex. The gas pump) instead of only taxing oil companies. This structure better aligns incentives for all consumers and puts less of the tax burden on oil companies. Being part of the solution gave Suncor excellent press and helped to frame the company as an innovative, sustainable company. All of these actions put Suncor in a better position to have good public opinion, maximize the value of its assets, and improve its sustainability [10].

Suncor’s Path Forward

As Suncor moves forward I would recommend taking the following steps:

  • The new tax structure rewards all reductions in carbon emissions. There are likely many quick wins for carbon reductions that will have a good ROI. Implement them and publicize all actions taken.
  • Utilize Suncor’s environmental employees and network to seek innovative means to improve the environment. Spread any discoveries freely and make it clear that Suncor funded them.
  • As a supporter of the environment, I considered multiple times if working for an oil company was consistent with my values. I concluded that it was better to be “in the arena” instead of being a critic from the sideline [11]. Improving the reliability of my refinery’s equipment improved Suncor’s bottom line and reduced SO2 emissions on a scale that was significantly larger than any sustainability action I could take at home. Consistent with this reasoning, Suncor should work to change their public image so they are seen as a company who is solving the climate change problem and not creating it.

(World Count: 783)

 

 

[1] Letzter, Rafi. Watch National Geographic’s Stunning climate-change documentary starring Leonardo DiCaprio. http://www.businessinsider.com/watch-before-the-flood-online-documentary-leonardo-dicaprio-2016-10

[2] Volmers, Eric. DiCaprio Visits Canadian Arctic, Alberta Oil Sands in Environmental Documentary. http://calgaryherald.com/entertainment/television/dicaprio-visits-canadian-arctic-alberta-oilsands-in-environmental-documentary

[3] Forbes. The World’s Biggest Companies. http://www.forbes.com/global2000/list/#header:marketValue_country:Canada

[4] Suncor Energy. Oil Sands. http://www.suncor.com/about-us/oil-sands

[5] Bakx, Kyle. Alberta’s ‘Dirty Oil Sands’ Reputation is Fading, Suncor CEO Says. http://www.cbc.ca/news/canada/calgary/steve-williams-oilpatch-cop21-climate-change-dirty-1.3355724

[6] Healing, Dan. Pipelines Much Safer Than Shipping Oil by Rail, Fraser Institute Study Says. http://business.financialpost.com/news/energy/pipelines-much-safer-than-shipping-oil-by-rail-fraser-institute-study-says

[7] Suncor Energy. Climate Change. http://sustainability.suncor.com/2016/en/environment/climate-change.aspx?_ga=1.88101915.1071805801.1478199832

[8] Suncor Energy. Wind Power. http://www.suncor.com/about-us/wind-power

[9] Giovannetti, Justin. Alberta Climate Plan a Major Pivot in Environmental Policy.  http://www.theglobeandmail.com/news/alberta/alberta-to-release-climate-change-policy-at-edmonton-science-centre/article27433002/

[10] Cattaneo, Claudia. Suncor CEO Steve Williams gets Pay Raise to $12.8 Million, Praise for Work on Climate Change. http://business.financialpost.com/news/energy/suncor-energy-ceo-steve-williams-gets-pay-raise-to-12-8-million-praise-for-work-on-climate-change?__lsa=23ba-ced0

[11] Roosevelt, Theodore. Citizenship in a Republic. 23 April, 1910. http://www.theodore-roosevelt.com/trsorbonnespeech.html

Cover Image from https://www.studentenergy.org/topics/oil-sands-mining

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3 thoughts on “Leonardo DiCaprio vs Suncor Energy: Managing Political Pressures for Corporate Success

  1. I agree that Suncor should publicize anything that they may do that even has the appearance of being pro-environment (a better reputation for Suncor might have led to a different outcome for Keystone XL). Case in point, the WSJ had an article back in September on Suncor looking to abandon some oil fields, ostensibly because they were “greenhouse gas-intensive”.

    http://www.wsj.com/articles/suncor-energy-seeks-permission-to-abandon-some-oil-sands-assets-1473286608

    My concern is with the high cost of production associated with oil sands. Although the price of oil has recovered, it wouldn’t be surprising to see continued downward pressure on price over both the near and long-term. If oil is trading at or below $25 a barrel over a decent period of time, will Suncor continue to enact pro-environment measures?

  2. Very interesting blog post – I thoroughly enjoyed watching DiCaprio’s “After the flood” and recommend it to everyone in the class (it is available for free until midnight tomorrow on most sites).

    If I were Suncor’s CEO Steve Williams, I would be very reluctant to follow measures simply to make them “look” more environmentally conscious and to take corporate actions only to have them highlighted in the media. Real impact on climate change is a long-term strategy, especially for industries like the oil industry, where objectives and incentive structures are often in direct contrast with those of environmentalists. I think Suncor’s investment in building wind farms and a biofuel plant is a step in the right direction, but a step that needs to align with the company’s overall strategy. I am interested to follow Suncor’s developments and see the extent to which they now further change into a diversified energy company.

  3. Interesting topic. Managing political pressure with companies that broke environment regulations has happened also in Mexico. A couple years ago, Grupo Mexico, the largest mining company in Mexico and one of the largest worldwide, overlook basic waste disposal measures and spilled contaminants into Rio Sonora, in the northwest of Mexico; per some accounts, it was the greatest environmental disaster in Mexico´s history. The authorities eventually required Grupo Mexico to make up for the damage done (eg. provide fresh water and medical attention to affected families). Though the company committed to meeting the penalty, the local government has complained that GM hasn´t met the conditions imposed yet. Unfortunately, this topic has fallen out of the main media discussion forums and the pressure of public opinion will likely not be there to push for the right cause. (1)

    (1) Excelsior, “Grupo México incumplió compromisos con Río Sonora: Pavlovich,” August 18, 2016, retrieved on November 7, 2016 from http://www.excelsior.com.mx/nacional/2016/08/10/1109975

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