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August 01, 2006
BP, Suncor, and Shell Top Oil Sector Sustainability Rating; Chevron and ExxonMobil Rank Low
by Bill Baue
The report by Jantzi Research examines 23 oil companies worldwide on environmental issues such as
greenhouse gas emissions as well as human rights and other social issues.
SocialFunds.com --
Oil and gas companies have been fueled by record profits and strong investment returns
recently--and are continuing to be exposed to social and environmental risks. These "above ground"
issues, as they are called by some energy companies, are increasingly understood as having material
impacts on financial performance by mainstream investors. So implementing best practice to address
social and environmental issues is not merely an ethical statement by oil and gas companies to
appeal to social investors, but also a financially savvy risk management strategy attractive to
more conventional investors as well.
Toronto-based socially responsible investing (SRI)
research firm Jantzi Research recently
released a report entitled Oil and Gas in a Bull Market: The Shifting Sands of
Responsibility that rates and ranks 23 oil and gas companies on their social and environmental
performance. UK-based BP (ticker: BP) topped the list with a score of
6.8 (out of 10), with second through fourth places going to Canada-based Suncor Energy (SU--6.5), Nexen (NXY--6.3), and
Petro-Canada (PCZ--6.1) respectively, and
UK-based Shell (RD--6.0) rounding out the top five.
"It is interesting to note that the top performers are dominated by European and Canadian
companies, while all eight of the U.S. companies evaluated for this report received below-average
scores," states the report.
Chevron (CVX) ranks the highest of the
US-based companies at the 12th position with a score of 4.3, followed by Burlington Resources (BR--4.2) in 13th,
Marathon Oil (MRO--3.9) in 15th, and ExxonMobil
(XOM--3.7) in
18th.
Using the best-of-sector approach it helped pioneer to identify social and
environmental leaders in a sector, Jantzi rates companies in four categories: environment (30
percent), community and society (25 percent), human rights (25 percent), and health and safety (20
percent). Reflecting the significance and complexity of environmental issues, Jantzi breaks this
category down into multiple layers of subcategories. For example, under the "impact and
initiatives" subcategory, it looks at greenhouse gas (GHG) emissions, further breaking the down to
GHG emissions record and GHG management systems.
Unsurprisingly, the overall leaders
perform well in GHG emissions reductions. The report highlights the fact that BP set aggressive
targets in the late 1990s (well before its competitors) to reduce GHG emissions to ten percent
below its 1990 level by 2010, and achieved this target within three years, almost a decade ahead of
schedule.
"In contrast, many US oil and gas companies are only in the beginning stages of
acknowledging climate change as a corporate concern and business issue," states the report. "Only
six of the US companies evaluated track or report their GHG emissions."
The report also
pokes holes in the inflated rhetoric of companies whose primary product pollutes the environment
not only under ordinary use but also in the exploration, extraction, and refining of it.
"Despite the claim by some oil and gas companies that they are 'sustainable,' along with their
issuance of annual 'sustainability reports,' the reality is that oil and natural gas are, in every
practical sense, finite resources," the report says. "For these reasons, investment in renewable
(and sustainable) energy is one of the most important social and environmental initiatives a
company can undertake and, consequently, a critical indicator used by Jantzi Research to evaluate
environmental performance."
Jantzi separates companies into three levels of performance on
renewables, with BP, Shell, and Suncor alone in the top level of those investing significantly in
renewables and developing clear strategies. Unfortunately, a majority of the companies evaluated,
including Burlington, Marathon, and ExxonMobil, demonstrate little or no investment in renewables,
with no plans to do so in the future.
The report similarly exposes the harsh impact of oil
exploitation on communities in developing countries and on human rights.
"While some
projects in poor countries can have an overall positive impact, it is increasingly accepted that
oil and gas development has had an overall negative impact in many developing countries," says the
report.
On human rights, BP and Shell again stand out as top performers, while Chevron
comes in sixth-to-last and ExxonMobil next-to-last. The report highlights oil companies' exposure
to lawsuits under the Alien Tort Claims Act (ATCA), a 1789 US law used to redress corporate
complicity in gross human rights violations such as forced labor and rape.
Predictably,
low-ranking companies face ATCA cases--ExxonMobil for alleged complicity with the Indonesian
military torturing residents of the Aceh province, and Chevron for alleged complicity with the
Nigerian military shooting protestors on its offshore Parabe platform. However, even high-ranking
companies are not immune from exposure to ATCA cases. Shell, too, was accused of complicity with
human rights violations in Ogoniland, Nigeria in the early 1990s in an ATCA case.
©
SRI World Group, Inc. All Rights Reserved.
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