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table 4.6: Changes in greenhouse gas emissions and production levels
by selected companies, 2002 6 (percentages)

Change in greenhouse Change in crude oil Change in natural
gas emissions production gas production
BP +32 +94
Norsk +15 +38
Shell 8 14 10
Chevron* +13
2 9
Exxon** +6 0 8
Gazprom +20 +328 +7
Repsol +21 +45
OMV*** +24 +45 n/a
Petrobras +66 +25 +37
Notes: * 2002 5 change, 2006 data not comparable as a result of the purchase of
Unocal by Chevron in August 2005.
** 2003 6 change, 2002 data not available.
*** 2002 5 change, 2006 data is not comparable as a result of the purchase of
Romania™s Petrom by OMV; 45 per cent is a combined figure for oil and natural gas

and natural gas production increased by 32 per cent and 94 per cent,
respectively. The Norwegian company Norsk Hydro was the only
other company able to achieve significant reductions in emissions
despite an increase in oil and gas production. The other companies™
performance was far less impressive than that of BP and Norsk Hydro.
Shell™s and Chevron™s gas emissions also declined from 2002 to 2006,
but this could be attributed to declining oil production. The gas
emissions of other companies such as Exxon and Repsol have actually
increased significantly (see Table 4.6).
The contrast between the performance of BP and the other com-
panies points to the importance of the corporate will and the need for
The environmental challenge 83

changes to internal management systems for achieving environmen-
tal improvements. Even if examples such as BP and Norsk Hydro are
an exception rather than the rule, they demonstrate the great ability
of multinational companies to restructure internal operations and
redeploy resources in order to achieve significant improvements in
environmental performance.
None the less, our discussion also demonstrates the constraints to
the current CSR agenda: lack of convergence of reporting standards,
the huge variations in environmental practices between different
companies and the lack of progress on key environmental indicators
by many companies. Therefore, there are limitations on voluntary
measures to tackle the environmental challenges, which will be
discussed in the rest of the chapter.

The limitations of corporate environmentalism

This section does not attempt to dismiss the environmental improve-
ments made by companies, but rather aims to understand the limi-
tations of the current CSR agenda. We shall discuss the three main
limitations of CSR revealed by existing research: limitations of envi-
ronmental reporting, regulatory constraints and end-user consump-
tion of oil.

Limitations of environmental reporting

There is a recognition that CSR reports are better at covering envi-
ronmental issues than social ones and environmental reporting has
been practised by companies for longer than social reporting
(Blowfield 2007; KPMG 2005). Yet criticism of corporate reporting
comes both from academics and mainstream organisations such as the
Association of Chartered Certified Accountants (ACCA).
Despite the standardisation of environmental reporting mentioned
earlier, there is evidence that corporate reporting has provided
84 Beyond Corporate Social Responsibility

stakeholders with relatively little useful data. A recent study that analysed
the links between corporate reporting and the environmental perform-
ance of nine oil companies concluded that corporate reports have three
key shortcomings: (1) specific performance metrics are often absent; (2)
the available data do not allow comparability between companies; and
(3) CSR commitments cannot be readily related to the environmental
outcomes that are achieved or not achieved (Gouldson and Sullivan
2007, 10).
Even among the sustainability ˜leaders™ in the oil and gas sector
such as BP and Shell, it was not possible to systematically compare the
environmental performance between companies. Companies some-
times measure different things and sometimes use different units of
measurement for the same environmental indicators.
Furthermore, while companies provided macro-level data (e.g., on
global greenhouse gas emissions), they often failed to provide data on
specific locations (e.g., a specific refinery). In the words of Andy
Gouldson and Rory Sullivan, ˜even the leading companies in the
sector examined rarely disclosed site-level data and, where they did
so, these data were not provided on a consistent basis or in a common
format™ (Gouldson and Sullivan 2007, 5).
Most worryingly, while environmental indicators such as emissions
levels are reported by companies, there is almost no emphasis on the
actual impact on the natural and human environment. The study by
Gouldson and Sullivan concluded:
Within the corporate and site level reports, little or no reference
was made to key outcomes such as levels of local air quality or
the health of local populations ¦ The focus on emissions rather
than, for example, local air quality, also meant that it was impos-
sible to evaluate social or environmental outcomes at the local
level, thereby restricting the ability of stakeholders to make
informed decisions or to focus their engagement with the com-
panies on individual sites or on particular aspects of their
performance. (Gouldson and Sullivan 2007, 5)
The environmental challenge 85

Michael Blowfield from the University of Oxford Smith School of
Enterprise and the Environment recently assessed the existing infor-
mation on the social and environmental impact of companies.
Blowfield™s conclusions echoed those of Gouldson and Sullivan:

We know much more about the business case, and company attitudes,
awareness and practices, than we do about how CSR affects the major
areas of social and environmental change where its proponents claim it
has an impact. (Blowfield 2007, 693)

Therefore, we know how companies such as Shell or BP are improv-
ing their overall environmental performance and whether they
achieve their own targets (e.g., for reductions in greenhouse gas
emissions), but there are no systematic attempts to measure the actual
impact of oil operations on air quality, water quality or the health of
local communities. The local stakeholders “ for instance, the local
residents who live near an oil refinery or a drilling rig “ are not
provided with the specific information that is most vital to them.
While companies such as Shell and BP provide at least some
tangible data on their environmental performance, the quality of
reporting by some companies is highly superficial. In particular, many
oil companies from developing economies provide little concrete
data on social and environmental issues, as the examples of China™s
CNOOC and Malaysia™s Petronas demonstrate. The 2005 CSR report
by CNOOC (running to forty pages) provides only figures on pro-
duced water, while the 2007 sustainability report by Petronas fails to
provide any environmental indicators (see Table 4.4).
The introduction of CSR or sustainability reports by many firms from
developing economies (such as CNOOC or Petronas) suggests that there
has been some imitation of Western practices in line with the ˜isomor-
phic pressures™ discussed in Chapter 2. Indeed, KPMG predicted that
social and environmental reporting by developing nation firms will
continue to expand, as more firms will seek a listing on a foreign stock
exchange and will be forced to be more transparent about their social
86 Beyond Corporate Social Responsibility

and environmental performance (KPMG 2005). However, imitation of
Western practices cannot be taken for granted, given that firms from
developing economies are often subject to very different domestic pres-
sures. Above all, many oil companies in developing economies are either
state-owned or the state has an important interest in them. Many oil
companies in developing economies “ particularly state-owned oil com-
panies “ will not require a foreign stock market listing.
The adoption of better environmental practices by oil companies
from developing economies is vital, given that half of the world™s
known oil and gas reserves are controlled by just five national oil
companies from developing nations. Therefore, a crucial limitation of
current reporting is that some of the world™s more important pro-
ducers of oil from the Middle East or Asia may decide not to publish
Western-style CSR reports and may not conform to international
standards such as the 2002 sustainability reporting guidelines of the
Global Reporting Initiative or the 2005 Oil and Gas Industry
Guidance on Voluntary Sustainability Reporting.
The major national oil companies of the Middle East “ where most
of the world™s oil is located “ such as Saudi Aramco and the National
Iranian Oil Company “ still do not publish CSR or sustainability
reports. The notable exception in the Middle East was the Abu Dhabi
National Oil Company, which has published annual health, safety
and environment reports since 2004. Some of the leading multina-
tional oil companies from developing economies such as Venezuela™s
PDVSA and Indian Oil “ both of which are listed in the Fortune
magazine ranking of the world™s 500 biggest corporations “ also do not
issue CSR or sustainability reports.
While commenting on the low number of multinational companies
that publish CSR reports, Bennett and Burley (2005) asked provocatively:
˜In what realm of life other than the strange world of [corporate social
responsibility] would a 2“3% take-up rate be considered to be a success?™
(Bennett and Burley 2005, reported in Blowfield and Murray 2008, 353).
The number of multinational oil and gas companies with a CSR report is
The environmental challenge 87

probably much higher than 3 per cent (the figure provided by Bennett
and Burley for all multinational companies), but the value of environ-
mental reporting will be greatly limited if the majority of oil compa-
nies cannot be persuaded to use some commonly agreed indicators.
The lack of an environmental report does not necessarily imply
that a company is irresponsible. For instance, it has been acknowl-
edged that Saudi Aramco has responsible environmental protection
measures in place. In addition, Saudi Aramco has invested in scien-
tific research into fuel cell technology, carbon sequestration (captur-
ing emitted carbon and storing it) and innovative measures for
desulphurising petroleum (Marcel and Mitchell 2005, 158“9).
However, without regular publication of consistent environmental
data, it will be more difficult to compare the performance of compa-
nies and to encourage them towards improvements.
More serious than the publication of environmental reports is the fact
that state-owned companies rarely pursue ˜green™ entrepreneurial oppor-
tunities, as we already identified in Chapter 2. Valerie Marcel™s book on
state-owned oil companies in the Middle East concluded that ˜many
producers lack an understanding of how they can benefit from proactive
action on ¦ environmental fronts, notably on the climate change
regime, emissions trading and energy efficiency programs™ (Marcel and
Mitchell 2005, 159). In other words, there is relatively little understand-
ing of the win-win outcomes of pursuing environmental improvements
and technical innovations in this area. Furthermore, the example of
Venezuela™s PDVSA in Chapter 2 suggests that a state-owned company
may reverse its environmental initiatives as a result of government
policy. This raises the importance of appropriate government policy to
encourage environmental improvements.

Importance of government regulation

Critics of voluntary CSR initiatives from the NGO community often
have an ideological preference for government regulation and legal
88 Beyond Corporate Social Responsibility

liability as the desirable alternatives for improving corporate stand-
ards of behaviour (Christian Aid 2004; International Council on
Human Rights Policy 2002). In contrast to this position, the author
of this book believes that we need a clear cost-benefit analysis of
regulation or ˜hybrid™ voluntary“regulatory solutions. Indeed, many
developing nations may not have the capacity to effectively regulate a
technically sophisticated industry, and voluntary initiatives may offer
a better hope of addressing environmental issues. Therefore, our
starting point here is simply pragmatic, asking to what extent the
intrinsic motivation of companies can replace government regulation
as the determinant of responsible corporate behaviour.
The earlier discussion already suggests that companies can carry out
many environmental improvements without the need for actual
regulation. The oil and gas sector was able to develop its own
environmental reporting standards without government involvement
(2005 Guidance), specific companies were able to achieve much
greater environmental improvements than those prescribed by regu-
lators (for instance, BP™s emissions reductions) and government offi-
cials often lacked the technical knowledge available to company
engineers with regard to the feasibility of improvements to plant
and equipment (for instance, replacing steel tubes with chrome
tubes). All of these arguments support the case for CSR.
At the same time, the earlier discussion provided evidence that


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