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Shell & Exxon Mobil: Who Tells The Best Social Responsibility Story?

Corporate social responsibility reporting is increasing, but can companies do this in a credibly manner?  Ethicsworld compares the new Shell Sustainability Report 2005 and the ExxonMobil “2005 Corporate Citizenship Report.”

Oil companies are facing particularly difficult publicly credibility challenges at this time of record high earnings and record high gas pump prices to consumers. Both Shell and ExxonMobil are responding in part by seeking to demonstrate that they are operating as excellent corporate citizens. While both companies post a good deal of information on their websites, the leading edge of their efforts are their annual CSR reports.

CEO Letters: Both reports are detailed. They cover a comprehensive range of issues. In their cover letters ExxonMobil Chairman and CEO Rex Tillerson and Shell Chief Executive Jeroen van der Veer highlight achievements, underscore the seriousness with which they take key social responsibility issues and conclude that their companies are performing well. They do not highlight external criticisms in this section, but both imply that they recognize that still better performance can be achieved and that this is an important challenge for the period ahead.

External Review Committee of the CSR Reports. The credibility of these reports, especially among non-governmental organizations and the media, may well relate to the efforts that the companies make to demonstrate substantive external verification of their claims.  The Exxon Mobil report does not contain comment from NGOs, nor is it subject to rteview by them, although it contains an "Assurance Statement" from Lloyd's Register Quality Assurance, Inc. that explains how data in the report was externally reviewed, but does not make critical comments. ExxonMobil also points out that in its efforts to improve reporting its 2005 report reflects comments that it received on its 2004 report from Business for Social Responsibility.

By contrast, the Shell report highlights the role played by a special NGO external review committee that analyzed the presentation and the material provided by the company and engaged in discussions with the top management of Shell. The review group publishes a letter in the new Shell report that generally praises Shell’s efforts and notes a number of areas for improved future reporting. The committee’s existence, especially given its participants, is clearly a serious effort by Shell to secure external credibility and it is quite effective, although greater detail on the verification methodologies used by the experts would have been helpful. The committee consisted of Jermyn Brooks, as the chair. He is a member of the board of directors of Transparency International and plays the lead role for TI in promoting anti-bribery approaches to business. His colleagues on the committee were Margaret Jungk of the Danish Institute for Human Rights, Dr. Li Hailai of the Institute for Environment and Development, Roger Hammond of Living Earth, and Jonathan Lash of the World Resources Institute.

Employee Safety. The 2005 reports of both companies note this critical area. The Shell report does not devote as much space nor detail to this issue as the Exxon Mobil report. However, it is significant that its Chief Executive felt bound in his introductory letter to highlight a serious problem and note, “I deeply regret that three employees and 33 contractors lost their lives at work in 2005. Ten of these fatalities occurred in road accidents, despite our major programmes in this area.”
A similar statement of regret is not to be found in the Exxon Mobil CEO’s cover letter, but the reporting on this topic in the body of the company’s report is impressive. ExxonMobil underscores its Nobody Gets Hurt policy and reports that “Tragically, we had eight workforce fatalities in 2005 – three employees and five contractors.” It then goes on to provide detailed information on occupational injuries and illnesses and resulting lost work time. Moreover, it provides several country examples (France, Malaysia, Hong Kong) to highlight the pro-active approaches that it is taking in this area.

Corruption. ExxonMobil provides clear statements in support of transparency and against corruption. It notes its support for the Extractive Industries Transparency Initiative and its agreements with a growing list of governments to publicly provide greater disclosure on its royalty and other payments. In addition, its highlights the approaches it has in place to detect bribery and counter it. The Shell report, however, goes far further when it comes to detailed disclosure. It notes that in 2005 there were 107 reported violations of the company’s anti-bribery principles and as a result Shell ended relationships with 175 staff and contractors. The report says that the company runs an extensive confidential survey of all of its staff on the issue of corruption every two years and it has also introduced a global whistleblowing helpline and supporting website to encourage staff to report bribery when they see it.

Climate Change. Here again the companies take strikingly different approaches. Shell devotes a larger number of pages to its climate change section than to any other section in its report, it openly acknowledges the severity of the problem and it provides a substantial amount of data within the text on its performance in lowering GHG emissions. It clearly states and explains where it has failed to meet targets and where challenges need to be overcome (for instance the high frequency of flaring in its Nigerian operations). Shell reports that it is well on their way to meeting its target in the European Union’s Emissions Trading Scheme, which was launched after the Kyoto Protocol came into force.

The Exxon Mobil report, which is also substantive on this issue, involves a rather polemical approach. It contains an essay that raises questions about direct links between GHG emissions and climate change (indeed, in this essay it refrains from using the term “climate change,” but instead opts for “climate science”). It notes that it has supported substantial scientific research and it then argues that, “climate science is complex…As a result, the extent to which recent temperature changes can be attributed to greenhouse gas increases remain uncertain.” In a box in its report it then states its opposition to the Kyoto Protocol, which it asserts, “is [not] the right approach to reducing greenhouse gases. We are concerned it will impose significant economic costs in the developed world while doing little to achieve its goal of climate change.”

Moreover, while Shell states that it follows the Global Reporting Initiative’s (GRI) reporting guidelines, Exxon Mobil notes, “while we recognize the value of the initiative we focused on an approach we believe is more relevant to the issues and indicators particular to our industry.” To be sure, Exxon Mobil then details its actual environmental approaches and, perhaps reluctantly, admits that, “Recognizing the risk of climate change, we are taking actions to improve efficiency and reduce greenhouse gas emissions in our operations.”
Political Involvement and Contributions.  Shell notes that one of its revised 2005 General Business Principles is that, “We will make no payments to political parties or campaigns.” Exxon Mobil devotes an entire sub-section to this topic, evidently sensitive to the recent plethora of scandals involving Washington politicians, lobbyists and corporate donations.  The company reports the existence of its Exxon Mobil Political Action Committee. It says that this group, as well as the company’s lobbying efforts, are fully within the law. It reports that it disbursed $281,900 in contributions to federal candidates in the first half of the 2005-2006 election cycle.

Conclusion: These are serious reports by companies that recognize that they can no longer just say “trust us,” but need to account comprehensively for their actions and their approaches. The Shell report appears to be far more directed to social responsibility activist, while the Exxon Mobil report never drifts too far from indicating that it is sensitive to the views of U.S. politicians (such as the Bush Administration’s opposition to the Kyoto Protocol) and its shareholders. For example, Shell decides not to address the issue of its record profits in this report, leaving it instead to its other communications tools. But, the Exxon Mobil report includes a detailed section entitled, “Investments, Prices, and Profits.” The release of its record fourth quarter earnings sparked a high-profile debate among lawmakers responding to public criticism that big oil companies were hugely enriching themselves as the American public suffered the burden of extremely high gas prices. Exxon Mobil says bluntly: “We believe that a fundamental aspect of corporate citizenship is using the company’s earnings to responsibly meet the world’s growing energy needs while delivering value to our shareholders and competitive prices to our customers.”

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MERCK Publishes Its First Corporate Responsibility Report

Merck, stressing integrity, ethics and transparency, has published its first annual corporate responsibility report and a newly updated CSR section on its website. The new report under the slogan of “Committed to Making a Difference,” Provides the company with the opportunity to articulate its core values, to explain its approaches to corporate governance, to highlight its philanthropic endeavors around the world and to provide insights into its approaches to the environment, health and safety.

President and CEO Richard T.Clark writes that, “This report is part of an intense commitment to conduct ourselves responsibly and transparently. In addition to holding ourselves to our own strict standards and commitments, Merck also relies on insights from others – such as the UN Millennium Development Goals (MDGs) – as we develop, execute and measure our own programs and initiatives.”

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WPP Report: How We Behave

WPP – one of the world’s largest marketing companies - sets an example by succinctly highlighting its ethical concerns in a box at the start of its 2004 Annual Report headlined “How we behave – Corporate responsibility.” Three priorities are stressed in concise fashion. 1. “The Impact of our work including marketing ethics, compliance with marketing standards, protection of consumer privacy, social and caused-related marketing…2. “Employment including diversity and equal opportunities, business ethics, employee development, remuneration, communication and health and safety. Our goal is to have a talent base that reflects the communities in which we operate. We believe diversity contributes to creativity….3. “Social investment including pro bono work, donations to charity and employee volunteering…”

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Dell Highlights Commitment

The latest Dell Annual report stresses commitments to corporate governance, global diversity, community engagement and sustainability. On the latter topic, for example, the company highlights its Fiscal 2005 Sustainability Report and noted among other issues that it has joined the Global Business Coalition on HIV/AIDS and endorsed the Calvert Women’s Principles. In December 2004, Calvert announced that Dell and Starbucks were the first corporations to endorse these Principles (See Article).

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