Unit Title: Communications in Business 100


Assessment: Critical Essay


Company: ExxonMobil


Essay Title: Corporate Environmental Obligation:
An examination of the performance of ExxonMobil


Student Name: James Citizen


Student Number: 14681357


Semester: 2 2010


Campus: Bentley


Tutor’s Name: Jane Doe


Tutorial Day and Time: Monday 8-10AM
Corporate Environmental Obligation: An examination of the performance of ExxonMobil

Modern consumers are increasingly sensitive to the environmental performance of corporations (Arana and Leon 2009), and recognise that at all stages of business operations, there is the potential to generate a negative impact on ecological systems (Handfield et al., as cited in Setthasakko 2009). For a multi-national corporation like ExxonMobil, recognised as the largest privately owned oil company in the world, (Skjaerseth 2003), the potential for environmental harm as a result of their business practises both immediately and in the long term is of particular concern (Plender 1999). This paper examines how ExxonMobil has performed in relation to the environment. It examines their conduct in the Exxon Valdez Oil Spill (EVOS), and in their dealings with the Save the Tiger Fund (STF), showing both strengths and weaknesses in their operations and their impact on the environment and stakeholders.

The case against ExxonMobil
Most notable is ExxonMobil’s environmental performance in relation to the Exxon Valdez Tanker Oil spill in Prince William Sound, Alaska (Hazardous Materials Response and Assessment Division 1992). This spill of approximately 11 million gallons of oil occurred in 1989 (Graham 2003). It impacted both the environment and human communities considerably. Effects on animal life have included the immediate death of thousands of animals and an overall reduction in the populations of various ocean animals (Graham 2003; Fry 1993). The spill impacted economically on numerous stakeholders, interestingly in both positive and negative ways (Hirsch 1996). On the positive side for business, there were strong, but short term, increases in spill related business in the major clean-up areas and in business sectors such as hotels/ motels, car/ RV rentals, air taxi and boat charters (McDowell Group, 1990). However on the negative side, there was the loss of recreational sports, fisheries and reduced tourism, plus a decrease in the “existence value” of the Prince William Sound region (Exxon Valdez Oil Spill Trustee Council 1990; Carson and Hanemann 1992). These losses are long term and the economic cost arguably inestimable.

While ExxonMobil admitted their culpability in the spill (Hirsch 1996), and in 1991 settled with state and federal governments for damages to the “public’s natural resources” (McCammon 2003), their overall behaviour in dealing with compensation has been questionable. On the one hand, their dealings with the US Federal government indicate that they are complying with all governmental laws, rules and regulations applicable to its business (ExxonMobil n.d.) and have indeed met their legal obligations. Their settlement with the US Federal government included a civil settlement of $900 million to restore the natural resources, criminal restitution of $100 million, and a criminal plea agreement of $25 million. Of note ExxonMobil recovered $250 million for cleanup expenses and $161.1 million in interest through insurance claims (Dolin and Lenhart n.d.; ExxposeExxon 2007).

However, if we examine ExxonMobil’s corporate public policy, ExxonMobil’s treatment of other external stakeholders is not in keeping with their own Code of Ethics and Business Conduct which calls for the Corporation to choose “the course of highest integrity” (Exxon Mobil n.d.). In responding to the litigation by smaller stakeholder groups, Egelko (2006) observes that ExxonMobil has managed to considerably delay the outcomes of individual and class action lawsuits and significantly diminish the monetary awards for actual and punitive damages through successive appeals and oral arguments in various US courts. The delay in resolution of these lawsuits has served to exasperate the emotional, financial and ecological crises being faced by those communities most affected by the oil spill (Hirsch 1996; McCammon 2003; Rodebaugh 2009). Questions surround whether ExxonMobil has met their ethical obligations in this situation.

In managing the cleanup and planning for future rehabilitation of spill affected areas, one of the greatest concerns has been the uncertainty as to the exact nature and degree of harm that has been perpetrated on the local ecology. Indeed quality research is necessary to design, manage and evaluate short and long term environmental rehabilitation and management strategies of the spill. This is particularly important not only for the environment but also to determine the long term needs of the Alaskan economy which depends on a pristine environment for the tourism and fishing industries. Due to the litigation against ExxonMobil, all the damage assessment studies have been kept confidential and have not been subject to the usual methodological scrutiny that most scientific studies are given (McCammon 2003). This lack of publicly available information reduces the quality of restorative and cleanup efforts as a clear understanding of the extent of damage is not known, affecting the ability to forecast what level of ongoing intervention is needed.

In the absence of the availability of peer reviewed research, ExxonMobil has pursued and disseminated its own explanation of environmental outcomes. According to media sources ExxonMobil have adamantly denied independent scientific evidence that the effects of the spill are longer lasting than expected (Williamson 2003; MacAskill 2007) and have asserted that any remaining residue will not cause any long term ecological impacts (MacAskill 2007; Reuters 2006). In making this argument, ExxonMobil have relied solely on results of their own studies (e.g. Boehm, Page, Neff and Johnson 2007) to support their claims. Not surprisingly, special interest and other advocacy groups like Greenpeace through the ExxposeExxon campaign dispute the company’s position claiming that the company funds these bodies and therefore the research findings are questionable at best (ExxposeExxon n.d.). While it could be argued that these groups are also biased as their purpose is to discredit ExxonMobil and its operations, the Exxon Valdez Oil Spill Trustee Council, the body formed to oversee restoration of the injured ecosystem, and independent scientific research (e.g. Short, Rice and Lindeberg 2001; Dean et al. 2002) have also contradicted ExxonMobil’s claims.

In addition to running and disseminating research findings, ExxonMobil have released a video, “Scientists and the Alaska Oil Spill”, that describes the efforts that ExxonMobil has gone to in its cleanup efforts. However, this too has been criticised by media sources for its spurious account of events (Fry 1993). This is an example of ExxonMobil using its vast financial resources to manipulate opinion. The lack of credible scientific evidence to underpin cleanup efforts and the delay of payments demonstrate that Exxon Mobil is focussed on minimising expenses and reducing perceived social obligation to the environment and the community stakeholders who continue to be affected by environmental damage.

The case for ExxonMobil
In contrast to their response to the EVOS, ExxonMobil have demonstrated proactive and rigorous performance in relation to tiger conservation. In keeping with the former brand name of Humble Oil and their tiger mascot (ExxonMobil n.d.), EM founded the Save the Tiger Fund (STF) in partnership with the National Fish and Wildlife Foundation in 1995 (Save the Tiger Fund n.d.). STF works in conjunction with numerous environmental groups (e.g. the World Wildlife Fund, Wildlife conservation Society, Conservation International, WildAid and Fauna and Flora International) and local organisations in tiger range countries in order “to develop an effective and ongoing structure to strategically address the threats facing the tiger” (Save the Tiger Fund n.d.). To this end, between 1995 and 2007 the Fund has provided 313 grants totalling $15.7 million to various tiger conservation and education projects throughout the world (Save the Tiger Fund n.d.). ExxonMobil’s contribution to this effort amounts to US$1 million per annum (International Petroleum Industry Environmental Conservation Association. n.d.). It is believed to be the largest single corporate commitment to saving a species (Save the Tiger Fund n.d.). ExxonMobil’s contribution is not simply of a monetary nature and includes management expertise and a long term commitment to the partnership through the provision of counselling on operational, strategic and organizational matters (International Petroleum Industry Environmental Conservation Association. n.d.). Thus Exxon Mobil utilises its vast resources to support STF in such a way that far exceeds a cash donation.

While it could be argued that the STF is simply a public relations manoeuvre, the positive outcomes of STF activities are worth noting. A key element to the work of STF has been the development of community support programs focussed on working with people who live near tiger habitats. In undertaking this work, ExxonMobil delivers on its promise of stakeholder engagement and community investment to reduce barriers to development and ensure the long-term sustainability of communities (ExxonMobil n.d.). By working through the STF in particular, ExxonMobil has endeavoured to link with the different external stakeholders of this project. In order to truly provide benefits to the tiger, they ensure benefits to the communities that immediately engage with this species. ExxonMobil is doing this through providing resources that these various stakeholders might not normally be privy to. Such resources range from educating local communities to lobbying government bodies (Save the Tiger Fund n.d.; International Petroleum Industry Environmental Conservation Association. n.d.). The STF program has had significant successes at both the micro and macro levels, and has engaged a broad range of stakeholders including milk producers’ cooperatives and eco-tourism businesses (International Petroleum Industry Environmental Conservation Association. n.d.). It has also funded work in Myanmar to turn a portion of the Hukuang Valley into a protected tiger reserve, and has sponsored the planting of over half a million trees to restore about 14,000 acres of buffer zone forests and wildlife corridors in the Terai Arc Landscape of Nepal (Save the Tiger Fund n.d.). The development of community support programs demonstrates that ExxonMobil are fulfilling their social obligations to the environment and to communities by developing sustainable and long term responses.

Concluding Remarks
Taken together, the social performance of ExxonMobil in relation to the environment has been mixed. On the one hand, ExxonMobil has engaged in positive social activities outside of their core business in their work with the STF. This is having profound positive environmental impacts and is empowering a range of community stakeholders to improve their social and environmental circumstances.

However, in terms of its core business, the response to the EVOS illustrates that ExxonMobil breached their implicit social contract by the manner in which they managed this situation. Society expects that they do no harm to the various stakeholders and environments in which they work. However, their delaying tactics, their focus on minimising their obligations, and their manipulation of information can be seen as a failure to adequately address the environmental impact that followed the EVOS and indicates a lack of care for the constituent communities (both human and wildlife) that the company operates in. Irrespective of company efforts, there is considerable evidence to show that Exxon Mobil has failed to live up to its end of this social contract, both immediately following the spill and even now in evaluating the ongoing impact. The breaches of their obligations to the environment in their core business overshadows their positive contribution through the STF and results in an environmental contribution that is unsatisfactory to say the least.





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