The aims of this assay report is to critically explore and evaluate practical and analytical interaction of a chosen company Corporate Responsibility Report in relative to the role of an accountant.
Objectives: Identifying what Corporate Social Responsibility means, what it means to an accountant, and examining in relationship between accountant and Corporate Social Reporting. Consequent to increasing globalization, greater environmental and social awareness and more efficient communication, the concept of companies’ responsibilities beyond the purely legal or profit-related has gained new impetus. The duty to provide an account or reckoning of those actions for which one is held responsible (Gray Owen and Adam 1996).
As instructed this assay report will comprises three sections:
Part one examine the chosen company, ‘Chevron’ Corporate Responsibility Report (2009) and to what extent is committed to ‘accountability’. This report will be limited to what is published in their corporate responsibility report.
Part two of the report will explore the role of Chevron corporate responsibilities in tackling ‘global warming’ (climate change) for the past five years, this part will be concerned with projects that shows improved accountability.
Part three of the report will attempt to examine assured evidence that the chosen company ‘Chevron’ has an increasing social responsible investment in areas or regions it operates, should that lead to increase in social and environmental accounting and will recognised the importance of better social and environmental behaviour from companies.
Part 1 – Accountability
Chevron Corporation (Chevron)
Chevron was incorporated in 1926, it manages its investment in subsidiaries affiliate, is listed on the NASDAQ CVX Exchange in New York, employs approximately 58,000 highly skilled employees around the globe and provides technology support to the United States of America and international subsidiaries that engage in petroleum operations, chemical operations, mining operations, power generation and energy services. [Company website] [UK. Reuters]
Chevron has a major consumer present around the globe as one of the world largest consumer fuel retailer with about 4,000 fuel stations, and ambitions to further activities in developing and supplying fuels to the wholesale market and its strategies “ to invest in people, execute with excellence, grow profitably, and invest in profitable renewable energy and energy efficiency solutions”. [Company website]
The Chevron Corporate Responsibility Report 2009 (CCRR) represents the Chevron’s eighth corporate responsibility report; to share its history on environmental, social and governance system reporting. It seems noted that Chevron has evidence of accountability and sustainability reporting, but how proven can that be The report provide descriptions, data, and perspectives on communities and stakeholder engagement, environmental management, energy efficiency, health and safety, human right, and renewable energy and biofuels.
Extractives corporations, especially those involved in oil and gas exploration and production lie at the bottom end of environmental and social concerns, having such a significant opportunity to either contribute to or mitigate environmental and social issues. In the oil and gas sector, in recent years, many companies have sought to report upon their activities in the fields of mitigating the impacts of conventional fuel production and supply and also demonstrating their commitment to reduce impacts and use renewable energy sources.
Chevron’s approach to the challenges of sustainability is to provide fuel which utilise the same infrastructure and technology as conventional fuels but which utilise either significant proportion of advanced biofuels, geothermal energy and solar or are entirely renewable sources. A key part of this strategy is their investment in geothermal energy in Indonesia and the Philippines, which is generate electricity from radioactive decay of volcanic activity, and from solar energy absorbed at the surface and which is reported to reduce greenhouse gas emissions by 80 percent compared to conventional fossil fuel. [CCRR p.13-14]
Chevron Corporate Report 2009 seeks to represent the corporation’s approach to the development of a leadership position in renewable energy and fuels and the opportunities and challenges inherent in such a commitment.
The corporation faces significant challenges if it is to achieve its target of becoming one the world leading producer and supplier of consumer fossil fuel, geothermal energy and advanced biofuels. Specifically because of the challenges of sustainability sourcing fossils fuel and biofuel feedstock. The feedstock that the corporation is committed to is forest-based sources, which has become a hugely controversial because of its association with forest clearance in places like the Amazon forest of South America and pressure on wild life species.
In the context of responsibility, the report contains the following: “we are deeply committed to conducting business in socially responsible and ethical manner”. This is a laudable goal, yet it is difficult from the report to identify just what the company’s current net impacts are, or how they will get from the current position to the implied destination. Such statements are very common and do not stop here: Chevron’s approach to corporate responsibility also states: “demonstrate commitment to its seven pillars of corporate responsibility: the environment, health and safety; human rights; stakeholders engagement; community engagement; workforce; supply chain; and ethic”.
Given the concerns of stakeholders, the corporation significantly develop its disclosure of stakeholder engagement and communication. The report does include overview list of a variety of groups together with the type of interactions undertaken and evaluation and feedback from those interactions. In practice, however, interactions are predominantly communications based and do not really present a picture of either what issues are of concern to different stakeholders or indeed the depth of concerns and implications for Chevron’s plans.
Accountability is build around the relationship between owners, management of the company and its stakeholders;
“those groups without whose support the organization would cease to exist,” and the list of constituents comprising stakeholders originally included “share-owners, employees, customers, suppliers, lenders, and society”(Freeman and Reed 1983).
Accountability is the duty to provide an account of those actions for which one is responsible, not necessarily financial. It has various definitions, but the word is typically used to denote responsibility for acquiring results.
“In Stakeholders – Accountability Oriented Governance Process (SAOG), the board of directors must take all stakeholder interest into account and make sure they are built into the company’s vision, mission, policies, codes, practices, compliance mechanisms, and feedback arrangement” (Leonard J. Brooks, Paul Dunn 2009)
Accountability is an essential element of the business and corporate world, and Chevron corporate responsibility report 2009 it have been developed in consistency with the Global Reporting Initiative (GRI) G3 guidelines, International Petroleum Industry Environment Conservation Association (IPIECA), and the American petroleum institute (API). The use of GRI G.3 guidelines represents a useful set of key issues for the corporation to consider in the development of it approach to reporting.
Dow Jones Sustainability Index (DJSI) defines corporate responsibility as
“a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental social developments”.
This definition does not appear to induce firms to aspire for sustainability goals above and beyond their financial interests (P. Ekins, S. Simon, L. Deutsch, C. Folke, R. D. Groot 2003).Such data is also heavily dependent on what firms wish to disclose through annual questionnaires, third party documents and personal communications.
The report [CCRR 2009] is visually well designed and presented, most striking aspects of the report is use of pictures and numbers of quotes seeking to reinforce the themes is vision, change, evolution and general creative thinking.
Part 2 Climate change
“Global economic prosperity and quality of life depend on secure supplies of reliable, affordable energy. Everyday Chevron employees produce and deliver energy in a safe, environmentally sound and socially responsible manner, creating enduring economic and social value” said John S. Watson, Chevron chairman and CEO
The fundamental challenges for Chevron Corporation lies in the implications of its commitment to become a global player in the development and supply of fossils fuel and biofuel and the requirement to source forest product responsibly. The corporation’s approach to this appears strong. Chevron is an active member of FTSE 500 and has committed to using FTSE performance rating index; 2010 Chevron total emission was 65,853,377 metrics tons, index G,S (Global 500, S&P 500)and carbon disclosure score was 80.
In this report Chevron shows its commitment action plan to tackling climate change and manage to reduce Green House Gas (GHG) emissions. In 2009 the total emissions recorded were 57.4 million metric tons, better than previous target of 60.5 million metric tons, Chevron GHG emissions was approximately 33 metric tons of CO2 equivalent of per 1000 barrels of net-equivalent production from the upstream operations, down from 37 metric tons in 2008. The downstream intensity was approximately 36 metrics tons of CO2 equivalent per 1,000 barrels of crude oil that was input into their refineries, the same as in 2008. The preliminary target for 2010 is 59.0 million metric tons.
One of key target of reducing emissions for Chevron is reducing flaring; flaring is an act of safety device to protect vessels or pipes from over pressure on pipes due to unplanned upset. When plant and equipment are over-pressure, pressure relief valves on the equipments automatically releases gases which are routed through large pipes runs called flare headers to the flare stack. Flaring and venting of natural gas from oil and gas well is a significant source of Greenhouse gases emissions.
Chevron have executed projects to capture and use the gas, with the cooperation of industry and government partners like World Bank-led Global Gas Flaring Reduction, they target 80 percent reduction if successful.
In the report it shows result of gas flaring and venting activities for past five years from 2005 to 2009. [CCRR 2009 p.8-9]
Another challenge to the corporation’s presentation of “result” is the limited scope of time covered – best practice is to disclose of 5 years of targets and performance.
Report statements show the net decrease of approximately 2.2 million metric tons of CO2 equivalent emissions from 2008 to 2009 can be attributed to reduced flaring from Cabinda (Angola), and to Nigeria gas processing shut-downs, shut-in offshore wells and pipeline vandalism. Production decrease at U.S.A. Mid-continent and Alaska operations, as well as declining demand for products and shut-downs process units at the Richmond, California, refinery, also accounted for the emission reductions.
Another project the corporation invested as a means of tackling climate change is the Carbon Dioxide injection, the Gorgon project, which will include the world’s largest commercial-scale GHG storage site. The project target up to approximately 3.4 million metric tons of CO2 a year injected and stored underground, and it is anticipated that approximately120 million metric tons GHG emissions will be avoided because of the Gorgon CO2 injection project.
It will not be true to say the report ignores the challenges inherent in oil and gas exploration, however given scope and scale to promote climate change campaign through its activities.
Part 3 Socially Responsible Investment
Socially responsible investment (SRI) is “ an investment that is considered socially responsible because of the nature of the business the company conducts”. [investopedia]
Another definition by Rivoli 2003 states: “ to provide an opportunity to place savings in ethical funds that yield a competitive return while simultaneously shaping tomorrow’s world”.
SRI, in in our today’s socially aware times it is almost impossible to find a global corporation that does not convey a commitment to corporate social responsible (CSR) businesses are now made aware of the benefit at hand of practising good ethical stances. It now means companies have moved from their supposed primary objective of profit maximisation and the best interests of the company, its staff and its shareholders, to include a broader obligation to help build an improved society.
The UK is seen as one of the world leading provider of CSR practices internationally. The government has raised and highlighted the importance of social and environmental responsibility; they have also help promote transparency in CSR reporting and its awareness in the marketplace.
CSR encourages businesses to have the interest of a broader stakeholders at heart, of which can widen up their understanding of any potential risk and return available to them. [volunteering England]
The president of the free market economics Madsen Pirie state that “CSR should not be a company,s concern”. She commented that CSR should be determined by society as a whole through the mandatory requirement from the government. There is lack of consensus when it comes to focusing on relationship between CRS and profitability, could be due to weakness posed by the methodologies used for measuring social performance, such as external reputational index, content analysis of corporate annual reports or peer ratings (Burke and Logsdon, 1996).
The FTSE4Good is another effective way to determine SRI, FTSE4Good indices are value-weighted equity security indices, a corporation will be qualified for inclusion if it passes positive or negative screening tests. Companies excluded are those in sectors like tobacco, arms and nuclear power. Companies included are those that are actively in social and environment criteria, such as environmental sustainability, human right, countering bribery, supply chain labour standards and climate change. While providing an investment tool for socially responsible investors and fund managers, the index strives to contribute to the development of responsible business practices around the world.
Socially responsible investment (SRI) is in a very interesting stage
of its development, because from fifteen years ago it is a international movement. where does it goes and as a industry how ambitious is it Am certain, quite concern few people come into the industry, people are prepare to push boundaries as much as some of the early pioneers have done. The flip side is, there is continues to be innovation. For example, there is such a disclosure requirement that are carrying from will it’ in Brazil. The Brazilian stock market driven very strongly by SRI movement encouraging better start of disclosure of companies listed in the Brazilian stock market.
There is a kind of trade severe of the movement that haven’t die, but need to be lifted to the next level of what are we in business to do?
One of the things that inspired me the most is the idea of one planet living, this is where SRI is ahead of most investment industry in understanding planet tree constraints on growth and the fact that it alter the nature of growth. [OECD: new growth doesn’t have to cost the earth]
I don’t think SRI is at full front as ambitious as it is about one planet living collectively defining what could be the management of World bank and United nation be thinking about their own finances in the advices they offer like in their lending policies. How does SRI define the way infrastructure investment are made?
I think SRI have been quiet weak in the area of real estate and there is a huge opportunity for an SRI interpretation of investment of the built environment whether is building houses, homes or infrastructure, is it road or mass transit.
There is a lot in Chevron report that is very impressive, though are a number of places where the report either over claims, over simplifies or fails to provide the required detail in processes and approaches, for example in an NGO, GreenPeace website claims in an article tittle “Chevron: a company that needs to go beyond oil” that the Chevron acts opposite of what its claim its image is.
Chevron clearly wishes to take a responsible approach to its business and its ambition could have a significantly positive effect in both the availability of lower impact fuels. It will better to serve the company’s ambitions to make a clear further step to discuss, disclose and demonstrate the real challenges, areas of disagreement, barriers and progress towards its overall goals that are going to be a key part of its journey to achieve its vision.
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DJSI, “Dow Jones Sustainability Index, Corporate Sustainability”
http://www.sustainabilityindexes.com/htmle/sustainability/corpsustainability.htm. (accessed on 22/04/11)
Chevron Corp (CXV. N). “Company profile”. Available online: http://uk.reuters.com/business/quotes/companyProfile?symbol=CVX.N
About Chevron. Company Profile. Available online: http://www.chevron.com/about/leadership/ (accessed on 2/04/11)
ReportAlert. Chevron corporation (NYSE:CVX) publishes Corporate Responsibility Report 2009. Available online: http://www.reportalert.info/reportprofile.php?ID=30688&year=2010.(accessed on 12/04/11)
Socially Responsible Investment- SRI
http://www.investopedia.com/terms/s/sri.asp.(accessed on 24/04/11)
Corporate Social Responsibility
http://www.volunteering.org.uk/WhatWeDo/Projects+and+initiatives/Employer+Supported+Volunteering/Employers/CSR+and+CCI/CSR/What+is+Corporate+Social+Responsibility (accessed on 22/04/11)
James P. Leape, Director General, WWF International. New growth doesn’t have to cost the earth
http://www.oecd.org/document/45/0,3746,en_2649_34361_46695661_1_1_1_1,00.html. (accessed on 21/04/11)
http://www.ftse.com/About_Us/FTSE_Corporate_Responsibility/FTSE4Good.jsp . (accessed on 21/04/11)