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Shaping a vision of the future
The world will face increasingly tough challenges: rising energy demand, tightening energy supplies, the growing impact of climate change, and intensified economic volatility. Companies and governments are developing new ways of looking into the future to decide how to meet people’s energy needs, while preserving the health of the planet.
Companies routinely monitor the factors that influence their business prospects, and try to predict what may lie ahead. But Shell takes this to a new level, developing detailed visions of the future for society, the environment and the energy industry.
Creating plausible scenarios of how the world is likely to evolve over the next three to four decades helps executives make strategic choices. It’s a far-reaching approach others increasingly follow, including government policymakers.
“People across the energy industry and beyond have followed Shell’s example to model what might be plausible in the future,” says Sir David King, Director of the Smith School of Enterprise and the Environment at the University of Oxford, and former Chief Scientific Adviser to the British Government.
“In my own scenarios work for the government on a range of important issues, we first looked at what had been done already in the area of futures analysis, and Shell’s scenarios were one of the outstanding examples we had to learn from."
From natural gas to biofuels
To build visions of the future, Shell’s scenarios team focuses on long-term trends in economics, energy supply and demand, geopolitical shifts and social change. Their work helps Shell understand how consumers, governments, companies and regulators are likely to behave and respond to developments in the future.
Scenarios play a role in every strategic company decision. In 2005, for example, they raised the probability of a looming gap between society’s surging demand for energy and global supplies.
This helped encourage executives to significantly expand production of cleaner-burning natural gas. Shell moved before some other companies to invest in new technology and buy or explore for new gas fields.
Shell’s move in 2011 into the production of low-carbon biofuel from Brazilian sugar cane is another case in point. Scenarios had highlighted a mix of circumstances that made biofuels look an attractive business opportunity that also addressed society’s concerns over the environment.
These included rising energy demand and prices, and growing government mandates to reduce greenhouse gases. This bolstered Shell’s confidence in becoming involved in biofuels production. A joint venture, Raízen, was the result.
World-Total primary energy supply. A wide range of energy sources will be needed to meet rising global demand in the decades ahead. Source: Signals & Signposts, Shell scenarios publication 2011
Shaping society’s future
Policymakers increasingly use scenarios thinking to help guide society into the future. Shell regularly shares results of its long-term energy scenarios with governments. In China the scenarios team has taken a further step, partnering with government agencies to help develop long-term energy policy alternatives.
Work is now under way at Shell on new global scenarios for the 21st century. As the world’s population booms, growing demand for sustainable energy, water, land and food may fuel tensions over scarce resources. Due to be completed in 2012, these scenarios will focus on two main uncertainties: the pace of change, both in regulations and in technology within the energy system; and the response of the world to increased economic and political volatility.
*This story includes input from Angela Wilkinson, Programme Director of the Futures Directorate at the Smith School of Enterprise and Environment, University of Oxford.