environmental in business

8/9/2019 Environmental in Business

1/11

INTRODUCTION

The implementation of the sustainability reporting has commenced back in the

80s. The establishment of such practice is to focus on the gauge, disclose, and the

responsibility towards the internal and external stakeholders for organizational

performance in order to accomplish the statement of sustainable development. In order

for an organization to be competitive in this ever-changing business environment, one has

to go beyond rather than just maximizing of profit and assets for the stakeholder.

Consumers nowadays are more conscious on what the corporate has in return for the

public rather than just focusing on the quality and prices it products. Hence, the report

has expanded its coverage and comprises not only the economical and environmental but

also included the social impacts. For instance, it reports on corporate responsibility, the

triple bottom line, and etc.

Corporate Social Responsibility refers to an ongoing commitment by businesses

to behave ethically and contribute to its economic, social and environment development

while demonstrating respect for its stakeholders, including investors, customers,

employees, business partners, local community, the environment and the society.

(Focusing on the triple bottom line 2005, 6). At the moment, there are firm rules

designated for major corporations that it is require to present an annual report. There is

also a growing concern in business transparency as consumers now are putting strong

pressure on corporations to establish more formal management and reporting system that

address their CSR programs and its social impacts. Companies ought to increase their

profits if their production vastly that is located in developing economic countries where

the standard of living, wages and conditions are lower of, in certain cases much worse

than the organizations home country. It is also rational and adequate for the organization

to contribute more for the host countries where their production factories are located totheir employees and the society of the host country (Grossmanx 2004, 5). Due to the

increase of knowledge among consumers, stakeholders, investors and those involved in

CSR are becoming more and more common in the present day; brand identity now comes

first when consumers are evaluating a product without hesitation or consideration

towards the price. They can easily access to a particular companys CSR which in turn

1


2/11

reflects their decision on making a purchase for a product. Therefore the CSR is a

significant element which every company should take into accounts. In this report,

PETRONAS would be the corporation chosen for doing the evaluation towards its

sustainability report. PETRONAS- having known as Petroliam National Berhad which

was merged on 17 August 1974 and currently owned by the government of Malaysia,

PETRONAS operates in more than 30 countries worldwide (PETRONAS group

sustainability report2007).

2


3/11

USEFULNESS OF SUSTAINABILITY REPORTING

The popularity of sustainable reporting had constantly increased within the past

decade. Nowadays, public demand the company to disclose their corporate values,

policies and direction, impact data, governance and stakeholders engagement clear and

accurately. In fact, sustainable reporting will bring benefits to several parties, the

organization, public, government and environment only to mention a few. From the

organization point of view, they will gain all kinds of benefits from it. The most common

pro for company engaging in sustainable reporting is the economic factor. Companies

that engaged in sustainable reporting usually will be the more favorable choice in

investing by the public. After having a clear view of the companys achievement in

environment, economic and social responsibility, people will gain more confidence

towards the companys operation and secure to success. For some people, the companys

engagement in triple bottom line will be the main criteria for them in making an investing

decision. Especially in the Europe and US, people in the western world are more

conscious towards the organizations achievement in corporate social responsibility. In

addition, sustainable reporting will enhance employee motivation. Clarifying the

organization mission and achievement to the public, is another form of recognizing and

appreciating the employees effort. Besides expecting a reasonable reward from the

organization, employees also want their effort to be recognized by the organization. If the

company is able to disclose all of the employees effort in social responsibility, it will be

a good motivator to the companys employees, hence producing a higher quality job.

Nowadays, companies are trying to develop brand loyalty among customers

towards their product. Companies are using up million of dollars in adopting all kinds of

marketing strategy in order to strive for accessibility, awareness and also loyalty among

their target market. By doing sustainable reporting, organizations name and brand will

indirectly being advertised and thus developing goodwill towards the company. Goodwillis also a form of asset for company; therefore by investing into sustainable reporting, it

will bring profit to the company. Moreover, company will become a talking point among

public if they are incredibly committed in corporate social responsibility. Then by letting

the public know the companys effort through sustainable reporting, it will easily enhance

a form of cost-free and effective advertisement, formerly known as word of mouth.

3


4/11

Take the example of The Body Shop. Its founder, Anita Roddick preserves practicing

CSR as the companys main mission since its establishment in the early 1970s. Since

that, The Body Shop had gained a huge popularity through its success in sustainable

reporting. Today, The Body Shop owns more than 2100 stores in 55 countries worldwide,

enclosed with over 1200 products and also being the second largest cosmetic store in the

world (The Body Shop 2006). As what have been mentioned previously, sustainable

reporting will bring goodwill and profit to the company, as a result the company can also

improve their market position. Profit and investment from the public will strengthen the

financial position of the company, while goodwill will be a form of competitive

advantage compared to its competitors in the market. In the long run, it will be huge

benefit for the company to survive and compete in the market.

4


5/11

PETRONASS ACHIEVEMENT IN CSR

PETRONAS has earned the title of Environmental Management System

(ISO14001 Certification) in which its operations were involved in several major local

companies. This management system brought PETRONAS numerous HSE awards,

whereby its the motive of establishing such practice is to effectively facilitate better

services, management and performance with testified quality (PETRONAS group

sustainability report2007). The HSE awards gained are as follow:-

Prime Ministers Hibiscus Award for Environment 2004/2005

Chemical Industries Council of Malaysia (CICM) Responsible Care Awards 2005

- Winners of Corporate Awards for the Six Codes of Management Practices

Malaysian Society for Occupational Safety and Health (MSOSH) Award 2005

Royal Society for the Prevention of Accident (RoSPA) Award in Occupational

Safety 2006

5


6/11

CRITICISM ON PETRONAS REPORT

A survey on 15 major oil and gas companies conducted by a Spanish-based ethics

research and rating company Management & Excellence in 2006 has revealed that

PETRONAS rank 15

th

, which was last among all the other oil companies including Shell,which was in the 1st placing. Shell scored 89.01% which was the highest score ever

achieved by any other companies whereas PETRONAS has only accomplished 20.15%.

Furthermore, forEnvironmental Policies, PETRONAS attained a total score of 25%

which indeed was the lowest compared to other oil companies and the average scored for

this is 83%. PETRONAS had also the lowest score for Corporate Governance that is

4.17% given that the average scored was 58.61%. Again, PETRONAS scored the lowest

in Transparency with 21.43% provided that the average score for this is 67.54%. Next,

forEthics, PETRONAS earned the lowest score of 19.23% and the average score was

73.33%. Last but not least, for sponsorship, this was the only part that PETRONAS did

not get the last ranking; PETRONAS came out as second last placing with the total score

of 42.86%. Nonetheless, it was still far from the average standard score which was

72.74% (Petronas, the world's orang minyak2006).

There are criticisms against the transparency of PETRONAS sustainability report.

The term transparency creates a major role in leading the company to gain a massive

profit or either breakdown. It is significant as investors or the publics have the right to

know where all the money has invested to. At this point, it also support the company to

be able to well-managed its resources and endorse enhanced domination (Veer 2005).

They did not reveal its environmental policies in the report yet only implemented with the

guidelines on the paper. They also did not manage to correspond and execute the code of

conduct and ethics. It is stated that PETRONAS also did not open its accounts for the

purpose of examination and not using the profits being the finance support for

governments mammoth development or project and supporting the failing GLCs. It is

also reported that PETRONAS is eager to increase the gas price after subsidizing around

50 billion ringgit for several sectors all this while (Malaysias Petronas pushing for gas

hike 2007). In the report, it mainly states about how to attract investors and satisfy any

particular criticisms. However, it is expected that PETRONAS employ this kind of

6


7/11

attitude after all it belongs to Malaysia that possess culture which lack of accountability

and performance unlike any other western companies. Despite all the facts that

PETRONASs weakness in processing a transparent report, it shall not be judged and

compared with other oil companies such as Shell or BP. Unlike Shell, PETRONAS is a

government-owned body and they have the right to keep their operational and financial

result confidential by law. PETRONAS is still devoted on accomplishing its objective

which is to effectively managing the nations oil resources.

Shell, being the top oil companies for the third time is nevertheless a brilliant role

model for the other companies to look up to. Shell has made an improvement increasing

from 82% to 89% and all along maintaining the human rights codes ever since 2004. It is

claimed that Shell has out beat all the other oil companies in transparency by publishing

13 different reports concerning impact on environment and animal testing (Shell again

most sustainable/ethical oil company in 2006; Petrobras supplants Exxon in the top-5

2008). Veer has also declared that Shell was previously the first supporter of the

Extractive Industries Transparency Initiatives (EITI), which the establishment of such

firm is to guide the company avoiding misuse of its revenue that could result in any

unwanted incidents, which in turn shape Shell to become such a successful company in

global right now (Veer 2005).

7


8/11

CONCLUSION

In a nutshell, it is necessary that PETRONAS should take further action to

improve its sustainability report so that they would be no longer being graded last place

among all the other oil companies worldwide in evaluation of the sustainability reports.

Firstly, PETRONAS ought to develop more on transparency factor that is providing

much inner details regarding their action or efforts. Shell would be an excellent example

in this case. In the report, Shell stated in its objectives with feature of its target and the

potential performance it shall be taken specifically in various kind of sectors. For

instance, in the part of air and water protection, Shell insist clearly on preventing the

rising of gas emissions unless any emergency and determine to abolish continuous gas

burning in the year of 2008, by the assistance of the strategy implemented ever since

2004 declaring none operational flaring on any normal plant. Shell also issue in the report

how the companys resources were being managed for the year ended that is information

of its energy consumption, water consumption, and the safeguarding of its labor force

(Shell Malaysia sustainable development report2006).

Continuing from the suggestions on how to improve PETRONASs sustainability

report, PETRONAS should take into account that all its employees obey the Corporate

Sustainability Framework, PGBC and the shared values as well as include ethics report

just like what Chevron did in its sustainability report. Chevron claimed in the report that

they supply energy that do not bring any deficiency or damage to people living mostly in

Indonesia and Philippines. The energy provided is geothermal energy where its

operations are to be done in both the Asian region stated previously. Chevron is firm with

its opinion that geothermal energy is hygienic and dependable which can decrease the

possibility of relying on fossil fuel and it also do not generate any greenhouse effect that

could be harmful to the surroundings. The supply of geothermal energy can be restored as

it is the natural heat the earth produce. Chevron also presented in the report on how to

reduce gas emissions while satisfying the peoples demand and also how to create a well-

benefit business environment and enhance the community in terms of health and

economics (Energy > Ingenuity 2007 annual report 2007). PETRONAS should also

make known the downside in the report rather to focus more on the achievement in order

8


9/11

to make the report balance. Last but not least, the company ought to approach any highly

regarded reporting companies to create a better sustainability report in the future.

9


10/11

References:

Energy > Ingenuity 2007 annual report.2007.

http://www.chevron.com/annualreport/2007/documents/pdf/Chevron2007Annual

Report_full.pdf

(accessed April 27, 2008)

Focusing on the triple bottom line. 2005. Business Africa 14 (6): 67. Business Source

Premier. http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN


Grossmanx, L. 2004. Rating corporate social responsibility.Businessdate 12 (4): 5-7.

Business Source Premier. http://web.ebscohost.com.dbgw.lis.curtin.edu.au/ehost


Malaysias Petronas pushing for gas hike.2007.

http://www.asiaone.com/News/AsiaOne+News/Asia/Story/A1Story20070918-

25918.html


Petronas, the worlds orang minyak. 2006.

http://www.aisehman.org/archives/2006/03/petronas_--_the.html


PETRONAS group sustainability report. 2007.

http://www.petronas.com.my/internet/corp/centralrep2.nsf/f0d5fd0d9c25fbdd482

56ae90025ee04/5d68e07aaf04ba814825731e00041b8c/$FILE/Sustainability%20-

%202007-8.pdf


10
http://www.chevron.com/annualreport/2007/documents/pdf/Chevron2007AnnualReport_full.pdfhttp://www.chevron.com/annualreport/2007/documents/pdf/Chevron2007AnnualReport_full.pdfhttp://www.asiaone.com/News/AsiaOne+News/Asia/Story/A1Story20070918-http://www.aisehman.org/archives/2006/03/petronas_--_the.htmlhttp://www.petronas.com.my/internet/corp/centralrep2.nsf/f0d5fd0d9c25fbdd48256ae90025ee04/5d68e07aaf04ba814825731e00041b8c/$FILE/Sustainability%20-%202007-8.pdfhttp://www.petronas.com.my/internet/corp/centralrep2.nsf/f0d5fd0d9c25fbdd48256ae90025ee04/5d68e07aaf04ba814825731e00041b8c/$FILE/Sustainability%20-%202007-8.pdfhttp://www.petronas.com.my/internet/corp/centralrep2.nsf/f0d5fd0d9c25fbdd48256ae90025ee04/5d68e07aaf04ba814825731e00041b8c/$FILE/Sustainability%20-%202007-8.pdfhttp://www.chevron.com/annualreport/2007/documents/pdf/Chevron2007AnnualReport_full.pdfhttp://www.chevron.com/annualreport/2007/documents/pdf/Chevron2007AnnualReport_full.pdfhttp://www.asiaone.com/News/AsiaOne+News/Asia/Story/A1Story20070918-http://www.aisehman.org/archives/2006/03/petronas_--_the.htmlhttp://www.petronas.com.my/internet/corp/centralrep2.nsf/f0d5fd0d9c25fbdd48256ae90025ee04/5d68e07aaf04ba814825731e00041b8c/$FILE/Sustainability%20-%202007-8.pdfhttp://www.petronas.com.my/internet/corp/centralrep2.nsf/f0d5fd0d9c25fbdd48256ae90025ee04/5d68e07aaf04ba814825731e00041b8c/$FILE/Sustainability%20-%202007-8.pdfhttp://www.petronas.com.my/internet/corp/centralrep2.nsf/f0d5fd0d9c25fbdd48256ae90025ee04/5d68e07aaf04ba814825731e00041b8c/$FILE/Sustainability%20-%202007-8.pdf


11/11

Shell again most sustainable/ethical oil company in 2006; Petrobras supplants Exxon in

the top-5. 2008. http://www.prnewswire.co.uk/cgi/news/release?id=164449


Shell Malaysia sustainable development report.2006.

http://www.shell.com/static/my-en/downloads/reports/sdreport_2006.pdf


The Body Shop. 2006.

http://www.thebodyshop.com/bodyshop/company/index.jsp?cm_re=default-_-

Footer-_-About_Us


Veer, J. 2005. Why transparency is important.

http://209.85.175.104/search?q=cache:tK7T_oxLErkJ:www.shell.com/static/medi

aen/downloads/speeches/jvdveiti.pdf+Shell,+transparency&hl=en&ct=clnk&cd=7


11
http://www.prnewswire.co.uk/cgi/news/release?id=164449http://www.shell.com/static/my-en/downloads/reports/sdreport_2006.pdfhttp://ttp//www.thebodyshop.com/bodyshop/company/index.jsp?cm_re=default-_-Fhttp://ttp//www.thebodyshop.com/bodyshop/company/index.jsp?cm_re=default-_-Fhttp://209.85.175.104/search?q=cache:tK7T_oxLErkJ:www.shell.com/static/medihttp://www.prnewswire.co.uk/cgi/news/release?id=164449http://www.shell.com/static/my-en/downloads/reports/sdreport_2006.pdfhttp://ttp//www.thebodyshop.com/bodyshop/company/index.jsp?cm_re=default-_-Fhttp://ttp//www.thebodyshop.com/bodyshop/company/index.jsp?cm_re=default-_-Fhttp://209.85.175.104/search?q=cache:tK7T_oxLErkJ:www.shell.com/static/medi

environmental in business

Documents