On June 21, 2007, the chairman and CEO of ExxonMobil, Rex Tillerson made the connection that his company’s main products contribute to climate change. (Exxon, 15) Unfortunately, almost all of ExxonMobil’s products are essential to the current world economy as they include crude oil, natural gas and petroleum products. After years of not admitting to the eminent challenge of facing climate change, ExxonMobil is finally making small gestures to acknowledge its social responsibility. This corporate citizenship micro-audit of ExxonMobil will examine how the company has addressed this challenge and propose additional actions that the company may take to manage future risks from this challenge.
Regardless of the admission by Tillerson that his products may contribute to climate change, ExxonMobil is not well known for its leadership on environmental issues. The biggest company in the oil industry has a poor environmental corporate citizenship image stemming from twelve years of executive leadership by former CEO Lee Raymond who was more committed to the core product rather than, “spending shareholders’ money to diversify into businesses that aren’t yet profitable.” (Ball,1) Even under new executive leadership, ExxonMobil is still debating what to do about climate change and the company firmly believes that fossil fuels will provide the majority of energy consumed for at least the next 20 to 30 years.
While reluctant to be a leader in developing more environmentally friendly energy products ExxonMobil is very aware of how the world perceives the threat of climate change. Many international governing bodies and individual counties have begun to increase their scrutiny of larger companies that produce measurable amounts of pollution. The majority of the actions taken by ExxonMobil to improve its environmental impact have been in production where the improvements have not only made production cleaner, but also more efficient.
ExxonMobil has reported a decrease in the amount of hazardous waste and spills as well as lower percentages of harmful greenhouse gas emissions released during production as seen in Table 1. ExxonMobil is the only oil company that is a member of the United Nations Intergovernmental Panel on Climate Change and is an active member of the World Bank’s Global Gas Flaring Reduction Partnership. They have also developed many best practices for reducing emissions during production that are now used industry wide. However, the company’s mantra continues to be that by 2030 the demand for energy is set to rise 40% and that oil and gas will have to meet 60% of the need arguing that renewable energy sources lack technological scale.
As climate change becomes a pressing issue, management may find themselves forced to address these issues sooner, not by government, but by shareholders. A poll, at the company’s 2008 annual meeting in Dallas, “demonstrated that a sizeable chunk of Exxon’s investor base is uncomfortable with the Texas-based company’s hardline attitude towards climate change and alternative energy.” (Clark, 1) Improving the efficiency and spillage is great for the bottom line of any company, but as an international corporate citizen and the largest provider of petroleum products, ExxonMobil position itself to be ready for change.
Table1. Click to enlarge
ExxonMobil has been given a good indication by its shareholders of society’s demands in the not to distant future. As Ian Davis writes in his paper, “What is the Business of Business,” “Social pressures can also serve as early indicators of factors essential to corporate profitability; for example the regulations and public-policy environment in which companies must operate, the appetite of consumers for certain goods above others, and the motivation of employees—and their willingness to be hired in the first place.” Instead of continued cynicism, ExxonMobil should invest in developing products that meet future demand for more sustainable energy sources.
As a model for developing new products, ExxonMobil can use the United Nation’s Global Compact to help guide their actions. The Global Compact, “seeks to advance responsible corporate citizenship so that business can be part of the solution to the challenges of globalization.” There are three principles that this compact regarding environmental stewardship:
Principle 7 – businesses should support a precautionary approach to environmental challenges
Principle 8 – undertake initiatives to promote greater environmental responsibility; and
Principle 9 – encourage the development and diffusion of environmentally friendly technologies. (United Nations, 6)
As motioned before, ExxonMobil has developed many best practices for better production standards and continuing to be a role model with production will satisfy principles seven and eight in the global compact within the oil industry. ExxonMobil has only just started investing in battery technology which is one of the first deviations from its base product petroleum. As seen in Table 2, ExxonMobil is planning future diversification of its product offerings, but not until 2030 when it will be playing catch-up to its competitors who are investing these technologies today.
Table 2. ExxonMobil’s Action to Reduce Greenhouse Gas Emissions
“In many instances, a ‘business of business is business’ outlook has blinded companies to outcomes, or to shifts in the implicit social contract that often could have been anticipated.” (Davis, 107) To become a better corporate citizen ExxonMobil should invest larger portions of its $40 billion after tax profits into reducing emissions from energy production and improving consumer energy product offerings. This will keep ExxonMobil ahead of the regulation curve and position the company well to continue record profit making as the desire for cleaner energy becomes more popular.
Works Cited
Ball, Jeffrey. “Exxon Chief Makes A Cold Calculation On Global Warming.” Wall Street Journal. June 15,2005. http://online.wsj.com/article/SB111870440192558569.html.
Cattaneo, Claudia. “Exxon Mobil CEO takes aim at environmentalists.” Financial Post. May 29, 2008. http://www.financialpost.com/story.html?id=547068.
Clark, Andrew. “Exxon investors reject green initiatives.” The Gaurdian. May 29, 2008. http://www.guardian.co.uk/business/2008/may/29/exxonmobil.oil.
Davis, Ian. “What is the business of business.” The McKinsey Quarterly. Number 3. 2005.
ExxonMobil. “2007 Corporate Citizen Report.” www.exxonmobil.com.
United Nations. “The Global Contract.” www.unglobalcompact.org.
