The Tomorrow’s Value Rating of the world’s 10 largest oil and gas companies shows that many of them are displaying advanced practices in managing their most pressing social and environmental issues. However, the sector as a whole still faces major challenges, and the three state-owned companies in the list trail woefully.
While the seven publicly traded companies have recognised the key sustainability issues for the sector and have systems that allow them to make incremental progress, most have yet to provide solutions that meet stakeholder expectations. The first company to achieve a step change, particularly in addressing the crucial issues of energy security and climate change, is bound to emerge as the clear sustainability leader in the industry.
The companies subjected to this Tomorrow’s Value Rating were the 10 largest oil and gas companies according to the Fortune Global 500 list, which ranks the world’s largest companies by revenue.
1. BP tops the Tomorrow’s Value Rating of the world’s largest oil and gas companies
Although the publicly traded companies discuss a wide range of material social and environmental issues, BP distinguishes itself by linking these issues to its stakeholder engagement. It reports its stakeholders’ concerns and describes its responses. BP also edges the competition by being transparent about its governance of social and environmental performance. Finally, BP, like Shell, has engaged an independent third party to assess its sustainability report.
2. State-owned companies are a long way behind
The rating identifies two tiers of performance. In the top tier are the seven established reporters, all publicly traded companies. They have robust management systems to pursue wide-ranging sustainability targets. In the bottom tier, lagging by some distance, are the three state-owned petroleum companies. While they are open about operational environmental performance, they do not disclose any information on how they address the socio-economic impacts of petroleum exploration, refining and delivery.
3. Companies may recognise the issues but have yet to deliver solutions to satisfy stakeholders
Most of the companies recognise the key material issues for the sector such as climate change, energy security, bribery and corruption, health and safety, environmental performance and community development. Despite this, they have yet to implement effective solutions that meet stakeholder expectations. In particular, while performance on energy security and climate change has evolved, progress remains incremental and fundamental challenges unsolved.
4. Some companies are demonstrating real leadership on sustainable innovation
The sector continues to pursue product improvements that reduce environmental impacts, to look for less invasive ways of finding and extracting petroleum, and to research and roll out new energy technologies. The leading players demonstrate a genuine commitment to innovation that is helping them improve their overall sustainability performance.
5. BP and Shell have embedded sustainable innovation in its broadest sense
For sector leaders BP and Shell, sustainable innovation is embedded into the management of the business. Also, it goes beyond environmental advances such as fuel efficiency and alternative energy to encompass ideas and processes that protect and bring other benefits to society and the communities they operate in.
6. Governance and management is generally strong
Governance and management has always been a strong point of the sector. The top seven companies all have comprehensive management systems that cover key issues including community relations, environmental impacts and health and safety. They also have associated governance structures, although these are not always described clearly at operational level.
7. There is little evidence of robust management of issues in the supply chain
Beyond concern with contractor safety standards and the occasional discussion of local supply chain development, there is little evidence that the sector is addressing the wide range of social and environmental impacts in the supply chain. Full accounts of sustainable procurement efforts are sorely lacking.
8. Discussion of stakeholder engagement is adequate at the corporate level but patchy when it comes to local engagement
Most companies identify their key stakeholder groups and acknowledge and report their concerns. The challenge for the industry remains effective engagement at the local level in a diverse range of markets.
9. Companies need to be more transparent about the full range of important issues
Companies are getting better at disclosing fines and legal actions in their reporting. However, challenges such as local environmental performance, financial transparency in developing nations and preservation of community rights are generally not discussed in a transparent way. Many companies use descriptions of management systems as a surrogate for reporting their specific impacts and responses.
10. Oil sands extraction is not being properly addressed
None of the companies has yet been transparent about the issue of oil sands extraction, despite its impacts on ecology, water and local communities. Discussion is generally limited to methods of controlling environmental impacts at the site of extraction.
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