Corporate Social Responsibility in the Oil and Gas Industry

Corporate social responsibility is the concept that has been increasingly used in present day business rhetoric. Although the concept itself is relatively new, it has become widely present and today there are no major companies that do not have some kind of CSR agenda.

The role of CSR in the oil and gas industry has been at the forefront of promoting the idea of CSR. The oil companies today devote attention to sensible issues related to the society and environment in which they operate. The main reason why the companies today try to behave, or at least try be seen as behaving more responsible, is that such behavior is favorable to their financial success. Hence, although they behave more responsible to some extent, it would be wrong to claim that they are more ethical and moral. This is evident from often present manipulation of CSR actions and the fact that a lot of CSR rhetoric is geared towards advertisement purposes. As some companies devote more resources to the external communication of CSR practices, this creates an image that they are more responsible.

In order to get the insight into the real role of CSR in the industry, a critical analysis of the CSR strategy of Exxon is presented below.

Exxon is a major global oil multinationals that have significant influence on the oil industry and is a trend and standard setter. The concept of CSR itself is divided into two main spheres – macro and micro. Former deals with more global topics, mainly the company’s stance over the issue of climate change. Later is focused more on social aspects of the CSR, such as community development, relations with the governments etc.

Exxon-Mobil Company Overview

Exxon-Mobil is one of the world's largest companies and is currently ranked no.2 in the
Fortune 500 global companies. The sheer size of the company is indicated by its financial flows. Despite the recession and drop in oil prices -- ranging from more than $146 a barrel to around $45 a barrel -- Exxon pulled in $443 billion in revenues and $45 billion in earnings in 2009. With more than 100,000 employees, Exxon-Mobil conducts business in gas, oil, coal and chemicals. The company has upstream activities in more than 50 countries worldwide with estimated reserves at 72 billion oil-equivalent barrels. With 2007 rate of production these reserves are expected to last over 14 years.

Critical Analysis: Exxon-Mobil and CSR

Macro sphere

As the problem of global warming entered mainstream public and academic debate, oil multinationals have formulated varying strategies to tackle the problem. Exxon-Mobil is generally perceived as the reactive company that has not fully acknowledged the potential impact of GHG emissions and has been actively opposing the Kyoto Protocol. Exxon-Mobil has aimed to prevent a strong US climate policy and put the entire Kyoto Protocol out of action by lobbying against any binding targets and timetables for the US. Therefore, Exxon-Mobil and other US companies in the fossil fuel industry were instrumental in Washington’s rejection of the Kyoto Protocol. Furthermore, according to the Union of Concerned Scientists, Exxon-Mobil alone has channelled nearly $16 million between 1998 and 2005 to a network of 43 advocacy organizations that seek to confuse the public on global warming science – a similar tactics adopted by the tobacco industry a few decades earlier.

In sharp contrast to the European oil giants, Exxon-Mobil has been actively opposing mandatory GHG regulation, most intensively between 1998 and 2005. Although the company recently acknowledged that climate change is an important issue, it did not formally admit that there is scientific evidence that could justify mandatory restrictions. Hence, its climate change strategy was clearly reactive as it dismissed Kyoto as an unrealistic alternative, and Exxon-Mobil did not establish explicit GHG emission reduction targets.

Today, the company, despite its softened stand on climate change, still advocates voluntary approach to environmental issues. According to CSO Tillerson (2007), Exxon-Mobil has acknowledged that “climate change poses risks to society and ecosystems that are serious enough to warrant action — by individuals, by businesses, and by governments.” Yet year after year, the company fails to take serious action in producing quantifiable targets to reduce their production and operational GHG emissions.

Exxon-Mobil has made progress in incrementally reducing operational emissions and investing in research partnerships, but it has yet to develop a comprehensive target and strategy to significantly reduce GHG emissions from its products. In 2008, CSR report Exxon-Mobil indeed acknowledges the importance of reducing GHG emissions and states that:” The risks to society and ecosystems from increasing greenhouse gas (GHG) emissions are significant.” The company claims to support the efforts of reducing GHG, but these efforts must not undermine the economic priorities of the enterprise. As CEO Rex Tillerson put it in regards to GHG policies: ”We must be mindful that sound public policy must not impede innovation, inhibit competition, or add market uncertainties. ”

Micro-sphere

In external communications, Exxon-Mobil has kept relatively low profile on ‘macro’ issues which are primarily related to the environment and climate change. Therefore, most of the company’s external communications and internal management procedures are oriented towards local communities. In the foreword to 2008 CSR report, CEO Tillerson emphasizes that:” Exxon-Mobil’s role is to provide energy to sustain and improve standards of living for people worldwide while delivering a return to our shareholders”

Much in the line of Friedmanite economic principles, the company’s main message has been that the company achieves the greatest good for society by doing its job well. The previous CEO Lee Raymond argued that the mission of Exxon-Mobil is to:”… work hard to make a world a better place, supplying vital energy to fuel economic growth.”

If Exxon-Mobil’s CSR publications in comparison to their European counterparts were relatively sparse and lacked clear commitments in the sphere of environment and global climate, the micro CSR issues represent the main focus in their reports. It contributes to social welfare worldwide by efficient production of energy and chemicals, community outreach programs and high performance on SHE (Safety, Health & Environment). Since the early 2000s, the company has emphasized their responsibility over the human rights issues as well.

While on the one side Exxon-Mobil has not yet developed management systems directly related to “macro” CSR, the company has clearer vision of their mission in the “micro” sphere, geared towards the community level. In addition, Exxon-Mobil is recognized as a leader in looking after its employees via health and safety practices and employee training.

Following the scandalous Exxon Valdez incident in 1989, the company initiated Operation Integrity Management System (OIMS) which meets the ISO standards and they have been implemented throughout the organization. It is used in the facilities worldwide and enables the company to measure progress, ensures management accountability for results, and establishes common worldwide expectations for controlling operations integrity risks inherent in the business. The system provides a framework for managing safety, security, health and environmental risks. The framework has 11 elements, each with clearly defined expectations that every operation must fulfil. The main goal of OIMS is to introduce a system through which the company could monitor performance and progress to the CSR goals to which it is formally committed.

Conclusion

Exxon-Mobil is a giant multinational deeply rooted into the American corporate culture. The company has played an important role in developing and supporting energetically highly demanding “American way of life” which is today proven to be unsustainable in the future. In financial terms, the company has been performing rather well and has been steadily increasing its shareholders’ value. The company has pragmatic and business focused agenda in which initially CSR did not play a visible role. Such reactive stance was most apparent when it came to the issues of global warming when Exxon-Mobil was exposed to severe critics from various groups and circles.

Today, however, Exxon-Mobil does try to present itself as a responsible company, concerned with the negative environmental and social impacts of its operations. Although it is still not at the forefront in the battle against the global warming, it acknowledged the problem and committed itself to do its best to mitigate and reduce GHG emissions.

Furthermore, in the micro-sphere, the company ranks in the top tier engaging in social projects and taking care of its employees. In order to avoid the “evil corporate” reputation, the company is often even more careful in considering social impacts of new projects and certainly displays greater care for CSR than before.

The main reason for increased strategic importance of CSR is certainly not related to the genuine moral intents of its management but rather the response to bad publicity and severely tarnished public image. Media debacles which followed incidents such as Exxon Valdez oil spill and revelations of corporate lobbying compelled the company to give CSR more important place in its strategy. Hence, the company’s strategic orientation has been aimed at protecting its image and corporate reputation which have been already severely damaged, especially when compared to other oil multinationals such as BP and Shell. As any other oil multinational, Exxon-Mobil today produces extensive environmental and social reports which are used to inform the general public about its actions and reveal its commitments. Although the standard in these reports is increasing, there still is a great deal of issues that could be improved and which could make company’s actions more transparent and accountable.

References:

1. “Strategic importance and the role CSR plays in large oil and gas Multinationals”
Universiteit Maastricht, Faculty of Economics and Business Administration,
Aljaz Vrabic, International Business – Strategy and Innovation

2. www.exxonmobil.com/