What's Hot In.... Public Affairs
Charting the future of public relations
Holmes Report
News and insights from the global PR industry

What's Hot In.... Public Affairs

Hot: elections, restoring trust, developing markets, energy. Not so hot: public spending.

Holmes Report

The Holmes Report's six-part trends forecast looks at how trends in consumer marketingcorporate reputationpublic affairstechnologyhealthcare and digital are shaping the public relations industry.

In case you missed it, 2012 is an election year in the US—and not only in the US. The year ahead is likely to be a turbulent one around the world, with more than one regime change.

Historically, that has not been good news for public affairs practitioners—at least until it’s clear how (or whether) things are going to change, and the experts can weigh in with their predictions about hot button issues and the kind of steps companies and trade associations need to do in order to influence the new order.

But 2012 is shaping up to be a little different, if public affairs industry insiders from around the world are to be believed.

“This year will be a pivotal one for the global economy and the world's political system, and as a result, for public affairs,” says Jamie Moeller, managing director of the global public affairs practice at Ogilvy Public Relations. “With elections and government changeovers set to take place in many of the world's most important economies—from the US presidential election and China's central leadership transition, to presidential elections in France, Russia and Mexico—2012 shapes up as a year of political posturing and global uncertainty.”

Usually, so much electoral activity would put major regulatory and policy action on hold. And there are those who expect a similar effect in 2012. “Washington faces a long year of polarization and paralysis,” says Ranny Cooper, president of Weber Shandwick Public Affairs.

Not everyone agrees, however. “In the past, presidential election years have proven to be somewhat stagnant in terms of growth for public affairs business, particularly in the United States,” Kathy Jeavons, senior vice president of public affairs at Ketchum. “I do not see that trend continuing. In fact, 2012 may prove to be a growth year for public affairs here and in other key markets across the globe because the relationship between business, government and the consumer/voter has irrevocably changed.”

“Government inaction is not an option,” Moeller agrees. “The significant economic challenges facing Europe, the US and China mean they will be forced to act in ways that will likely have a lasting impact on the world's economy and on companies of all sizes across virtually every industry. We are advising clients to not sit on the sidelines and watch the politics unfold, but to be proactive and aggressive: building relationships with those who may assume power and strengthening ties with those who may remain in government, while developing specific policy agendas to advance in the earliest days of
the numerous new governments set to take power at the end of 2012 and into 2013.”

Jeavons cites the aftereffects of the global financial crisis of 2008 and related regulation, and what she calls the “democratization of influence” as evidenced by the Arab Spring, and protests such as the global “occupy” movement. “Individuals are using the tools of the information age to their advantage in ways and to greater effect than they have never done before. Issues that once could be contained locally now ignore geographic boundaries and gain momentum overnight.

“Public affairs naturally plays at the intersection of these three constituencies—Wall Street, Main Street and K Street—and is thus particularly well placed to help the reputational risks and complexities faced by corporations, trade associations, NGOs and sovereign governments in this brave new world.”

Loss of Trust

One reason a lull in public affairs activity seems unlikely is that trust in institutions—including corporations—has broken down in the wake of the global financial crisis, and regulators are still considering the need for action to restore public confidence.

“Public approval of our elected officials is virtually non-existent,” says Michael Gaughan, chairman of Denver-based MGA Communications. “Government can barely function with any degree of efficiency and success. Bankers and Wall Street executives are viewed with hostile suspicion. Top corporate executives are seen as individuals filling their pockets with cash while firing low paid workers. There are “99 percent Occupiers” in parks across the county.

“If we are to see the beginnings of change in 2012—and we had better—it will be the result of the hard work of public relations practitioners, their employers and clients along with a hefty dose of transparency and straight talk. Reputation management is the foundation upon which companies, politicians and governments build loyalty and achieve success. It uses all the talents and tools of professional communicators. Reputation management is a certain investment. It can provide the best outcome for our employers and clients.”

If the US so far appears to be handling Wall Street with kid gloves—what regulatory change there has been stops far short of what the financial sector’s critics had expected—Europe is unlikely to be so forgiving.

“The revival of the state, progressive regulation, and a Europe in need of growth-oriented reform will drive public affairs growth in 2012,” according to Gunnar Sonesson of Swedish counseling firm Diplomat Communications. “The sudden resurgence of Keynesian government intervention is reaching not only troubled countries like Greece, Italy and Spain but also seemingly prosperous ones like Sweden and Finland.

“With the strong state back in fashion, politicians have more clout and more room for maneuver,” he says. “The banking and finance industries are facing increasingly harsh regulation in the wake of the financial crisis. Energy, transportation and manufacturing industries are facing tighter environmental regulation due to climate concerns. An aging European population is changing the frameworks of pension regulations and also affecting healthcare and life science regulations.”

It’s the same story in the Pacific region.

“In 2012 public affairs will continue to be a hot topic, fuelled largely by the overwhelming volume of social media activity,” says Liz Dougall of Australian consultancy Rowland. “Continuing uncertainty in the world economy will contribute to a growing toxicity in the opinions of the general public towards government and private companies as people look for answers and stability within a fragile economic environment. We predict that gaining traction within this difficult context will be the biggest challenge for public affairs practitioners in 2012.”

One consequence of all that is the companies need to think through the public policy implications of all of their decisions. The dividing lines between consumer marketing, corporate reputation management and public affairs are becoming increasingly blurry.

“The public affairs arena has broken out of its somewhat isolated role as a discreet practice area, and is now infused into nearly every aspect of a brand's business,” says Andy Cooper, principal at New York-based CooperKatz & Company, a firm historically best known for its consumer work. “Today, a company’s success is directly, and frequently, impacted by public affairs issues, from government scrutiny, to advocacy group pressures, to stakeholder demands and, of course, to the constant implications of online transparency.

“Agencies that traditionally positioned themselves as pure marketing firms must now operate—in a fully integrated fashion—as public affairs counselors. In my own prior experience heading a large global agency, marketing PR and public affairs were ‘siloed.’ We would bring in the public affairs specialists when a client faced a specific issue. Now marketing and public affairs are linked dimensions of a brand’s or company’s total marketplace strategy.

“What’s exciting to us about this trend is that client budgets for public affairs work are much more elastic. Whereas marketing investments are often locked-down early, public affairs budgets must adapt to constantly changing marketplace issues, often unpredicted ones. So today, all agencies that deeply understand the environment in which their clients operate and have the capacity to offer strong, strategic issues-based counsel have a significant growth opportunity in the public affairs arena.”

Beyond DC

Another trend likely to keep public affairs practitioners busy in 2012 is a shift away from Washington, DC, with greater focus on the state level in the US, and on emerging markets.

“As we head into an election year in the US, one can expect to see government affairs work around specific regulations to be flat, as organizations assume a wait and see mode while they figure out exactly who will be governing moving forward,” says Jere Sullivan, global practice chair, Edelman Public Affairs. “However at the state level we could see an uptick in activity, particularly in California where there will be no fewer than a dozen ballot initiatives in an issues rich environment.”

There is likely to be even more activity internationally. Cooper, for example, sees particularly opportunity in Asia, where “China’s transition to its “Fifth Generation” of national leadership will create an upturn in public affairs work, with a focus on implementing its WTO commitments, intellectual property disputes, and increasing Chinese outward investment.”

Several firms are focused on helping Chinese and other emerging market companies navigate the sometimes sensitive political environment in the US and Europe.

“Even with the uncertainty in the global economy, Asia-based companies will continue to grow and expand in the West through potential acquisitions,” says Jeremy Galbraith, global public affairs practice chair at Burson-Marsteller. “The political and regulatory issues they face internationally are many and varied and now more than ever, they will need robust communications strategies to support their ambitions.”

Galbraith also sees an opportunity in other developing markets.

“This could be the coming out year for a number of traditionally underserviced PA markets such as Africa, Eurasia and Southeast Asia which are now very much in play for multinationals as new growth markets for products, services and commodities,” he saus. “We will see more and more global companies needing assistance in navigating the labyrinth of regulations and compliance in these markets where traditional public affairs will need to be modified to fit the system of the target market.”

In Latin America, one of the biggest issues is likely to be increased protectionism, says Fiona McCollum, director at Speyside Corporate Relations, which specializes in helping companies access the region’s markets.

“This is relevant in all industry sectors, from FMCG through to pharmaceutical, telecoms, energy and heavy industry, although the highest profile cases are in natural resources,” McCollum says. “Just before Christmas the Brazilian Government introdiuced a law that gives very significant bias to Brazilian companies in public procurement (this will especially impact the pharma sector) and we are seeing a wave of 'national content' laws in manufacturing & even broadcasting.

“While a degree of protectionism is necessary and important in order to prevent a multinational land grab on the Latin American economic infrastructure, effective government relations and stakeholder engagement to ensure multinational interests are fairly represented is an area we see as likely to grow further during 2012.”

Hot and Cold

If there’s one sector—beyond the financial services arena—where public affairs experts anticipate a particularly busy time it's energy.

According to Sullivan: “The ‘sustenance set’ of energy, water and food all present growth opportunities as industry tries to meet the needs of a growing global population. Food security and waste, water rights and needs, and fracking are just a few of the front burner issues that will require PA support around the world.”

Meanwhile, few anticipate a return to the kind of government investment in social marketing and public affairs that was prevalent before the austerity fad took hold.

Government budgets will be flat, Galbraith predicts. “Administrations will be much more concerned about the cost of programs while at the same time that they are under relentless pressure to be better communicators. This may present some public affairs opportunities but they are likely to be limited in scope and fewer in number.”

 

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Public afffairs Energy
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