Marathon Oil’s report ticks boxes but fails to drill down when it comes to big issues
It’s little surprise that only a handful of oil companies use the word “sustainability” to describe their reports on social and environmental performance. It is, after all, a hard sell for a sector whose core business is the extraction of carbon-intensive fossil fuels. Many opt instead for the moniker “corporate responsibility” or “citizenship” report, focusing less on what they do than how they are doing it.
Marathon Oil Corporation is a typical example. Founded in 1887 and headquartered in Houston, Texas, Marathon is an independent international energy company active in exploration and production, oil sands mining and integrated gas. Its growing interest in “unconventional resource plays” – namely fracking and oil sands – have seen it expand strongly into US shale basins in recent years, with all the challenges that entails.
Values upfront
Right from the start, Marathon Oil’s 2013 Living Our Values Corporate Social Responsibility Report underscores the importance of the company’s longstanding core values: health and safety, environmental stewardship, openness and honesty, strong community partnerships and an engaged, solution-driven workforce. The tone is one of responsible “stewardship” – a word that crops up a lot. CSR is seen as fundamental to its ability to do business in the community.
This is the company’s seventh report, which is published in digital format only, and follows IPIECA Oil & Gas Industry Guidance on Voluntary Sustainability Reporting, as well as being “informed” by the Global Reporting Initiative (GRI)’s G4 Sustainability Reporting Guidelines. It is easy to navigate online, via a series of eight crisply presented dropdown menus on topics such as governance, society, environment and workplace, or you can download the full, customisable 87-page pdf. At such a length, readers could expect a pretty good level of detail on how Marathon Oil conceives, manages and applies its CSR approach – but chief among the report’s disappointments is that detail is missing across the board.
Take materiality. Given the reference to G4, this should be front and centre. At the outset it states: “To prepare our 2013 report, company managers identified and prioritised the issues that are most relevant to our operations and to our stakeholders and that we can directly control.” A Stakeholder Engagement Map charts what the company sees as “top priorities” for investors, governments, communities, employees, NGOs and industry. But there follows no matrix to prioritise issues, no description of process and little explicit linkage with decision-making.
The same goes for management systems. Marathon Oil uses a risk-based Global Performance System (GPS) to oversee health, environment, safety and security (HES&S) and social performance. We’re told the GPS has 16 elements covering key focus areas and uses a Plan-Do-Check-Adjust approach to control risks and improve performance. But how it actually works – and the accompanying standards and practices it is designed to support – are not shared with the reader.
With corporate responsibility now well beyond the “trust me, tell me” stage and into a “show me, join me” phase, this lack of transparency makes it hard to gauge whether the company’s GPS and HES&S approaches are fit for purpose.
Progress reporting is equally opaque. Marathon Oil sets general corporate-level CSR commitments, but leaves it to the business units, or local asset teams to “identify specific impacts and issues and then implement CSR programmes to address them”.
The intention is good – to build strong local stakeholder relationships that deliver real benefit, as the Bioko Island Malaria Control Project (BIMCP) in Equatorial Guinea undoubtedly has. But again, the report fails to go the extra mile and connect the dots between performance, commitments, strategy and materiality. Oil and gas is undoubtedly a cyclical industry, but with very few specific, measurable, achievable, relevant and time-based (Smart) targets in evidence, measuring progress made in 2013 is rather hard.
Covering the basics
Marathon Oil shows a solid grasp of the key social and environmental issues relevant to its core business, but don’t expect much mention of the elephant in the room – the role of fossil fuels in climate change. There is no aspiration to shift towards low-carbon energy supply, and discussion of greenhouse gases is production-focused.
Although the company has been reporting for seven years, environmental performance data goes back just to 2011. On the upside, we can see improvements in methane and GHG intensity – key stakeholder concerns in this sector – as well as progress in reducing sulphur dioxide (SOx) emissions. On the downside, energy use is up nearly 50%, and while the number of Global Fluid Spills shrank, the actual volume of fluid spilled increased in 2013, to 4,182, up from 1,107 barrels in 2011. Nitrogen oxide (NOx) emissions also nearly doubled. Very little contextual information is given to explain why. Is it to do with the fact that the company was the US’s second fastest driller in terms of feet per day, with expected oil output set to rise by 30% by end-2014? The reader is left to figure this out.
During 2013, a consolidated Environmental Management Program Standard was developed to “drive more consistent, regular evaluation and implementation of measures to reduce emissions, water use, waste and spills”. Hopefully when implemented in 2014, this will yield the kind of detailed performance data the current report lacks. Also during 2013, as part of its implementation of the Voluntary Principles on Security and Human Rights, Marathon Oil completed a gap analysis of its security and human rights programme.
The current year looks set to be a busy one, with human rights issues being incorporated into training for security forces worldwide, an updated Anti-Corruption standard, and social, environmental and security risk assessments being rolled into a single integrated framework.
All in all, Marathon Oil appears to be in the midst of strengthening and consolidating its CSR risk management processes and accountability systems. This is good, because from a company that sits 188th in the Fortune 500, that faces the kinds of risks and challenges inherent in global oil and gas exploration and production, that is active in high-risk countries such as Iraq and Equatorial Guinea and “unconventional resource plays”, and that is growing fast, one expects absolute rigour.
SNAPSHOT
- Follows GRI? Partially – “informed” by G4
- Assured? No
- Materiality analysis? Early stage
- Goals? No Smart goals – corporate level “commitments”
- Targets? No quantified targets – general “focus” areas
- Stakeholder input? Some
- Seeks feedback? Yes, actively. Comment boxes and email.
- Key strengths? Basic architecture is good
- Chief weakness? Goal-setting & connecting the dots with context
- Pleasant surprise? Asks reader throughout report, “is this content complete, balanced and credible?”
Andrea Spencer-Cooke and Amy Brown are consultants at One Stone Advisors.
andrea@onestoneadvisors.com
www.onestoneadvisors.com