Old Lens – Shell Scenarios in Turbulent Times

Scenario planning is a strategy tool that helps organisations think about the future. Scenarios are not ‘predictions’ but the different narratives that emerge from scenario exercises can help organisations looking at the world in new and original ways. In a world that is probably more dynamic than ever, finding new perspectives and new language to interpret the world is a key asset.

Pierre Wack, who was one of Shell’s scenario pioneers, has in that sense beautifully described scenario planning as ‘the gentle art of re-perceiving’. Now an interesting perspective on scenarios in relation to business-as-usual perceptions can be seen in the New Lens scenarios that Shell published in 2013.[1] The analysis of the New Lens scenarios’ is a key element in Shell’s current reasoning in debates about climate change.

The New Lens scenarios come up with two basic plots, with some tweaks leading to a limited number of possible worlds. This is about energy obviously, and one of the key observations that the scenarios make is that actually none of the two narratives leads to sustainable outcomes (less than 2 degrees Celsius warming) in terms of greenhouse emissions. The variety is that, well… one is even worse than the other.

The scenarios’ reasoning is simple[2]:

  1. ‘The New Lens Scenarios describe plausible developments in the socio-political-economic spheres and then push to explore longer-term energy and related boundaries.’
  2. ‘If unsustainable outcomes are to be avoided, the key lesson is the need to accelerate proactive and integrated policy implementation (…)’
  3. ‘A positive outcome requires a series of proactive, far-sighted, and co-ordinated national and international policy developments that, to date, seem beyond the bounds of plausibility. ‘

So – why not include a scenario that does lead to sustainable outcomes? Well – and that is an approach to scenarios that is honest and brutal: because it is not plausible. Shell is not alone in expressing this view. Take e.g. ExxonMobil: ‘(…) although there is always the possibility that government action may impact the company, the scenario where governments restrict hydrocarbon production in a way to reduce GHG [Greenhouse Gas] emissions 80% [the 2 degrees pathway, D.S.] during the Outlook period is highly unlikely.’.[3]

So: Unpleasant perhaps, but realistic: well done.

But ‘realism’ and plausibility can of course also very well be an expression of a mind-set that believes in the inevitability of what is. In scenario thinking realism is your friend, it helps you to rule out sheer fantasy and to set limits to the forces of imagination. But it is a friend that you need to be cautious with – because what you would want to avoid on the other hand is a lack of imagination and getting trapped in business as usual thinking.

Because stuff is happening. Let’s take the element of agency. Confronting the New Lens futures with Shell’s stated sustainability policies and with actual behaviour, the External Review Committee of Shell’s 2013 Sustainability Report[4] states on page 39 that ‘the predicted [sic] path of global GHG emissions begs clearer explanation of how the company will deal with climate change challenges’. Indeed: at the scale at which Shell operates in the energy sector, in public debate and in politics, it is not simply a spectator to its scenarios. It can influence what will happen and hence it could do something about the inevitability of what is.

At another level: this set of scenarios is of course part of much wider expectations that ‘things will go terribly wrong’ with the climate. And this is where an observation of Peter Schwartz, another old hand from Shell, is relevant: in cases where a doom-scenario seems to develop in front of our eyes one should be wary of the ‘unbroken line’, where the scenario narrative evolves nicely in a linear way: ‘ It is the prophecy itself that leads to change and the prophecy’s negation.’ [5]

And indeed: much bigger stuff is happening. Like the divestment movement that started in 2012, and connected to that the discussion around ‘stranded assets’ (projected fossil reserves that cannot be used if greenhouse emissions are to be kept under safe limits). Stuff like the emerging discussion around the viability of fossil fuel companies’ business models, where rhetorical questions are already being asked around Shell perhaps being ‘the next Kodak’.[6]

There is a certain nervousness in the company’s response to all that. CEO Van Beurden, who is still very much leaning on the New Lens scenarios, has already stated that ‘provoking a sudden death of fossil fuels isn’t a plausible plan’.[7] And he seems to be almost (and quite originally) reverting to a rights-based approach to energy: ‘The issue is how to balance one moral obligation, energy access for all, against the other: fighting climate change.’.[8] And finally there seems to be almost an element of desperation in his tone of voice, looking at what may be happening if climate change is taken too seriously: ‘The potentially devastating impact of climate change, if unchecked, is a concern for all of us. But is there a danger of allowing that concern to obliterate the energy story?’ [9]

But in the end, like in the scenarios, there is no uncertainty and we see a more basic business-like approach: ‘it [divestment] may mean less universities and churches but more hedge funds. Shell will always find new investors…’.[10]

I think that this sentence might be remembered as a crucial one. What happens here is that Shell disconnects itself quite openly from wider society. And on top of that Van Beurden completely misses the point here: yes there will always be investors, yes there will still be huge demand for fossil fuels and yes technological challenges related to an energy transformation are enormous. But divesting is not about money – it is about eroding the social license of the company, it is about stigmatisation.[11] What we see happening here is precisely a change in the ‘socio-political-economic spheres’ that are such key parameters in the New Lens scenarios. Of course it is not at all sure that these social movements could change dominant political-economic arrangements. But I would say that flatly rejecting that option points at what is probably the biggest sin in scenario thinking: a lack of imagination.

One of the interesting outputs of Shell’s scenario thinking in the past was when it considered (in the first halve of the 1980s) the option that the USSR would dramatically open up. A major feat at the time – but also a thing that was probably easier to imagine for people outside the Soviet system than for people inside it. We may be seeing the same thing here: something really dramatic might be coming our way in terms of the erosion of the socio-political role of fossil fuel companies. What will happen is not certain – it could be moderate change or indeed it could be revolutionary change. But being on the inside it seems to be difficult to imagine any change at all.

Let’s see what happens – I think it is possible that in the history of Shell scenario thinking the New Lens scenarios will turn out to have a very special place: they could be the ones that lacked imagination and in that sense: the ones that failed at a crucial moment in time.



[1] New Lens Scenarios. A shift in perspective for a world in transition, available at http://www.shell.com/global/future-energy/scenarios/new-lens-scenarios.html

[2] Idem, page 70-71, ‘reflections on development and sustainability’

[3] Energy and Carbon – Managing the Risks, ExxonMobil 2014

[4]http://reports.shell.com/sustainability-report/2013/servicepages/welcome.html. In the 2014 Sustainability Report the External Review Committee cannot do much more than basically repeat the same question:‘…the ERC would like to see Shell disclosing how the energy transition will further impact the company’s business strategy, influence its targets and determine its future actions.’ (p.55).

[5] Schwartz, P., The art of the long view, Crown Business New York 1996, p. 159

[6] See http://www.rsm.nl/about-rsm/magazines/rsm-outlook/rsm-outlook-articles/rsm-outlook-winter-2014/detail/3379-managing-disruptive-innovation/

[7] Speech by CEO Ben van Beurden 12 February 2015

[8] Idem. Compare the Intergovernmental Panel on Climate Change (IPCC) CLIMATE CHANGE 2014 Synthesis Report, Summary for Policymakers: ‘From a poverty perspective, climate change impacts are projected to slow down economic growth, make poverty reduction more difficult, further erode food security, and prolong existing and create new poverty traps (…). (p. 16).

[9] Speech by CEO Ben van Beurden 2 September 2014

[10] Dutch newspaper Volkskrant 30 January 2015

[11] Stranded assets and the fossil fuel divestment campaign: what does divestment mean for the valuation of fossil fuel assets? Stranded Assets Programme, Smith School of Enterprise and the Environment, University of Oxford.