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table 4.5: Number of oil spills by selected companies, 2002 6

2002 2003 2004 2005 2006
BP 761 635 578 541 417
Chevron 1,502 1,145 986 846 803
Exxon n/a 466 475 370 295
Norsk Hydro 87 70 54 70 75
Petrobras 197 276 530 269 293



provide figures for the number of oil spills, but the volume of oil spills
has declined from 7.4 to 5.7 thousand tonnes. The only emerging
market company for which 2002“6 data were available (Petrobras)
reported an increase in oil spills (see Table 4.5).
The most impressive evidence on environmental improvements in
the oil and gas sector is provided by a historical comparison of oil spills
from oil tankers. Since the 1970s, the number of large oil spills (above
700 tonnes) caused by oil tankers and other vessels has dramatically
decreased, from 25.2 spills per year in the period 1970“9 to 3.6 spills per
year in the period 2000“7. During the 1970s a figure of about thirty
major oil spills per year was not unusual. During the period 2000“7, the
highest annual number of major oil spills was five (2004). The volume
of oil spills has also dramatically decreased over the last three decades,
except for the year 2002, when the Greek-owned oil tanker Prestige
sank off the coast of Spain (see Figures 4.1 and 4.2).
The data presented above suggest that oil companies have made
significant environmental improvements, although environmental
improvements have not been unequivocal. For instance, company
reports show that Exxon™s total greenhouse gas emissions increased by
6 per cent between 2002 and 2006, while the hazardous waste gen-
erated by Shell more than doubled between 1998 and 2006. BP was
fined US$50 million by the US Government for an explosion at a
Texas oil refinery in 2005, and the company pleaded guilty to US
The environmental challenge 77
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1970“9
25.2 spills per year
on average
35

30
Number of spills




25
1980“9
9.3 spills per year 1990“9
20 on average 7.8 spills per year
2000“7
on average
3.6 spills per year
15
on average
10

5

0
1970 1975 1980 1985 1990 1995 2000 2005
Year

Figure 4.1: Number of marine oil spills over 700 tonnes, 1970 2007
Source: The International Tanker Owners Pollution Federation website at
www.itopf.com (accessed 27 February 2008).



700
Atlantic Empress
ABT Summer
600 287,000 tonnes
260,000 tonnes
Castillo de Bellver
500 252,000 tonnes
(™000s of tonnes)




400
Khark V
80,000 tonnes
300 Prestige
Exxon-Valdez 63,000 tonnes
37,000 tonnes
200
Erika
20,000 tonnes
100

0
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006
Year

Figure 4.2: Quantity of marine oil spills (tonnes), 1970-2007
Source: The International Tanker Owners Pollution Federation website at
www.itopf.com (accessed 27 February 2008).
78 Beyond Corporate Social Responsibility
*




criminal environmental charges, while BP also faced criticism over
other environmental practices in the United States, including the
safety of its pipelines in Alaska (Davis et al. 2007). Above all, there is
evidence that even the ˜best-in-class™ Western multinationals have
used substandard environmental practices in their operations in
developing economies, including showcase projects such as the BP-
led Baku“Tbilisi pipeline project “ an oil pipeline from Azerbaijan to
Turkey (Thornton 2004). Furthermore, the previous discussion sug-
gests that environmental improvements among emerging market
companies have been rather limited.
None the less, the improvements that have been achieved deserve
credit and it may be useful to ask why improvements were possible.


The basis of environmental success

The success of CSR in addressing various environmental issues can
be explained by the convergence of environmental and business
interests. Both companies and the environment can benefit from
energy efficiency and a reduction in gas flaring, as the sale of pre-
viously flared natural gas or energy savings can lead to better financial
performance.
Indeed, the general evidence for a business case or win-win out-
comes of CSR is strongest with regard to environmental issues, as
opposed to ˜social™ issues such as health and safety, labour standards or
local development. Findings by the organisation SustainAbility show
that the most demonstrable business benefits from CSR are in the
area of eco-efficiency, which includes reduction in the use of materi-
als and emissions, recycling and reuse and other ˜new™ practices.
These relatively ˜new™ practices have been shown to increase share-
holder value, operational efficiency, access to capital and improved
reputation (SustainAbility 2001, 2002). The investment group
Innovest has asserted that 85 per cent of studies show a positive
correlation between environmental governance and financial
The environmental challenge 79
*




performance (Innovest and Environment Agency 2004) (reported in
Blowfield and Murray 2008, 132“3 and 138“42).
Interviewed oil company managers and engineers have narrated
various examples of instances when they were proud of their com-
pany™s environmental improvements, for instance reducing carbon
dioxide emissions, implementing a zero-spill policy for the company
or replacing steel tubes with chrome tubes. In many instances,
company staff discovered that there was a convergence of environ-
mental and business interests. For instance, one oil company engineer
pointed out that a steel tube may only last for several years in a
tropical environment, whereas a chrome tube may last for twenty
years; therefore, the use of better quality materials or better quality
equipment helps an oil company both to reduce the likelihood of
environmental damage and to reduce the necessity for business inter-
ventions in future.
Furthermore, previous studies have concluded that environmental
improvements can help companies to innovate. One study compared
seven Canadian oil companies and found that the two companies most
proactive on environmental improvements (Buffalo Oil and Sioux
Oil) greatly benefited from related innovations such as technology
patents in the areas of process improvement, sulphur dioxide recovery,
waste reduction and disposal, soil restoration and less polluting fuels. In
turn, innovations helped the development of new revenue streams for
those companies, such as sales of less polluting fuels (Sharma and
Vredenburg 1998). Statistical analyses further support the view that
the diffusion of environmentally friendly technology enhances inno-
vation (Bhatnagar and Cohen 1997; Lanjouw and Mody 1996). This
type of empirical evidence complements the new ideas of management
thinkers such as Michael Porter, who assert that environmental com-
petences can lead to competitive advantages in business (Porter 1991;
Porter and Kramer 2006; Porter and van der Linde 1995).
Interview data also suggest that companies have been successful at
environmental improvements because the technical and managerial
80 Beyond Corporate Social Responsibility
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capabilities of oil companies are particularly suited to addressing
environmental issues. As the author of this book has previously
argued, when environmental improvements can be reduced to dis-
tinct technical tasks, oil companies can perform CSR tasks to a high
standard (Frynas 2005). Environmental improvements such as new oil
pipelines, improved forms of combustion or new production processes
require similar engineering and managerial skills to those needed by
oil companies in their commercial day-to-day operations, for instance
increasing production levels or reducing production costs. Technical
problems need to be solved, new production processes and patents
need to be developed, project teams need to be formed and so on.
BP™s efforts to reduce greenhouse gas emissions, led by the com-
pany™s chief executive John Browne (BP™s CEO between 1995 and
2007), demonstrate the strength of companies in tackling environ-
mental issues. In 1997, BP set itself the target of reducing greenhouse
gas emissions from its own facilities by 10 per cent from 1990 levels by
2010. The company was able to attain this goal nine years early at the
end of 2001. The company then set itself a new target of ensuring that
net emissions do not increase between 2001 to 2012 (Henderson
Global Investors 2005). Since 2001, BP has made further progress.
According to the company™s 2006 Sustainability Report, BP™s green-
house gas emissions declined by a further 22 per cent between 2002
and 2006, while the company™s oil production increased in the same
period by over 30 per cent and its natural gas production almost
doubled.
BP™s quick success in reducing emissions has often been attributed
to the introduction in January 2000 of an emissions trading system
within the company, which gave BP™s subsidiaries the freedom to
decide how to address emissions reductions within their organisa-
tional unit in the most cost-effective manner (see Box 4.1). The
technical and managerial skills of BP™s staff underpinned BP™s
climate-change effort. In the words of a former BP manager, the
company™s staff reportedly ˜worked hard™ and ˜enjoyed the technical
The environmental challenge 81
*




Box 4.1: BP™s emissions trading system
In 1997, BP™s CEO John Browne announced that BP would drastically
reduce its greenhouse gas emissions, and the company decided to use
internal emissions trading to deliver emissions reductions. In preparation
for the launch of the trading system, a pilot project was started in 1998,
while carbon dioxide and methane emissions were systematically and
reliably measured across BP™s operations as a crucial precondition of
successful emissions trading.
Each business unit was assigned a target for the emission of greenhouse
gases and a number of ˜permits™, each of which gave the business unit the
right to emit one tonne of carbon dioxide. BP™s business units were able
to trade permits among themselves. A business unit that was able to
reduce greenhouse gas emissions was free to sell permits. A business unit
that was unable to find economical methods of reducing emissions could
buy permits. Therefore, the trading system introduced incentives for
pursuing the most cost-effective methods for emissions reductions within
the company as a whole.
A significant part of the emissions reduction was achieved through
reductions in gas flaring and venting. BP estimated that the company was
able to save US$650 million through decreased gas venting and flaring,
either by selling the gas or by increased energy efficiency.
The emissions trading system was operational from January 2000 until
the end of 2001, by which time BP had achieved a 10 per cent reduction
in greenhouse gas emissions.
Sources: Akhurst et al. 2003; Malone 2004; Victor and House 2006.



challenge™ of making improvements to plant and equipment. In
general terms, this example helps to explain why companies are
particularly skilled at dealing with environmental challenges that
are measurable, in contrast to their lack of skills in dealing with social
challenges that are difficult to measure (see Chapter 5).
BP™s efforts to reduce gas emissions are even more impressive, given
that the company was able to reduce emissions at a time when its
commercial operations were actually expanding. In the period 2002“
6, when gas emissions declined by 22 per cent, the company™s crude oil
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