How companies have responded to environmental issues over the last ten years
In his 1970 article in the Scientific American G. Evelyn Hutchinson wrote “Many people are concluding that the biosphere as an inhabitable region for organisms is to be measured in decades rather than in hundreds of millions of years. This is entirely the fault of our own species”.
Although the same warning ha already been voiced by the Club of Rome, an informal group of scientists, economists, scholars, national and international civil servants that met in Rome to discuss the future of mankind in face of the socio-environmental problem composed of a series of varied yet interlinked parts, as early as April 1968 in their Project on the Predicament of Mankind (Meadows et al), no signifigant improvements were obtained throughout the 1970’s and 1980’s.
Indeed, in the 1970’s the scientific communities attempts to measure the effects of pollution were at an infancy, and it is, no doubt, this lack of conclusive and tangible evidence that led to this period of indifference during which the few kinds of pollutants that had been measured over time were growing exponentially. However, towards the late 1980’s the scientific communities’ fears on the effects began to get backing from increasingly accepted research.
Finally, twenty years after the Club of Rome’s call to arms against the global and detrimental effects of Mankind’s reckless ways these issues were discussed on a truly global platform at the United Nations Conference on Environment and Development (UNCED), Rio de Janeiro, 3-14 June 1992. For many the Earth Summit was a beacon of hope, a realisation that would make Mankind, governments, and companies realise the extent of the environmental problem at hand.
The Rio Conference certainly did raise public awareness on the environmental problem, and government legislation has toughened when compared to the rather lax laissez-faire attitude of the 1970’s and 1980’s. However, when one accounts for the population growth between the Earth Summit and today, pollution still seems to have increased. Many observers believe that this is the result of too little action taken by companies and industries as a whole.
This essay will, therefore, evaluate how companies in the automobile and oil industry (two of the major sources of green house emissions) have responded to environmental issues over the past ten years that followed the Rio Conference. Economics (with an emphasis on profitability, growth, and long-term prospects) and public relations/marketing will be the criteria upon which the oil industry will be evaluated, whereas the automobile industry’s response will be measured with examination of its reaction to statutory requirements and technological change/innovation.
As the world begins to understand and begin to digest the link between greenhouse emissions and atmospheric climate change there is a growing consensus on the fact that fossil fuels will run out and that Mankind should strive to reduce its dependency on the abovementioned energy source. Gas is seen by many scientists as a transitional fuel while existing renewable energy sources are explored so as to make them commercially viable when compared to other commercial sources of energy.
In this part of the study the response of three of the major oil suppliers in the world will be examined with special focus on the economic side of the question, special attention on growth, profitability, and long-term prospects, as well as how these companies have responded in their public relations/marketing. The companies to be evaluated are Exxon, and BP. Upon examination of the above mentioned companies economic response to environmental issues over the last ten years two diametrically opposed views become quite apparent.
Whereas, BP has renewable energy sources as an integral part of its long term business vision, translating in high investment into research and development of existing technology so as to make them increasingly profitable, Exxon has seemed to distance itself from this paradigm and has rather opted to invest in smaller quantities in the improvement of their current methods of fossil fuel extraction.
BP has a very similar track record to Shell with regard to renewable energy sources: as the draining of the world’s fossil fuel resources becomes inevitable it is researching, investing and building its renewable energy business with a specific focus on solar and wind. Indeed, BP has been in the solar energy business for nearly 30 years now and today it accounts for approximately 20% of the world solar market.
Similarly to Shell, it has set progressive goals and aims produce 300MW of solar energy by 2007 (one year’s production of this amount of environmentally friendly energy is the equivalent of having 75000 less cars roaming the streets of the world). Moreover, BP Solar expects their returns to grow by approximately 40% in the next few years and is therefore investing heavily in the creation of new sites for the creation of solar power. It is currently building a $100 million plant in Spain that will produce approximately 60 MW of energy a year, and it is improving its existing site in Sydney with an investment of $12 million. BP Solar website) BP also shares Shells commitment to the development of wind energy. It uses the brownfield sites, areas of land developed for the purpose of industry then subsequently abandoned, of its petrochemical forages to install windmills there and provide cheap, environmentally friendly energy. BP has also signed a $23 million, 22. 5 MW deal to build a windfarm at the Nerefco oil refinery near Rotterdam, the Netherlands. It s estimated that it will generate enough electricity to power 20,000 households, displacing 20,000 tonnes of CO2 a year.
Whereas, BP has integrated renewable energy into its business Exxon has taken a very different approach. Ironically enough, BP Solar, currently one of the top market leaders in that field was originally purchased from Exxon in the mid 1980’s. This is in line with Exxon’s policy with regard to renewable energy sources and the climate change in general. Whereas BP has a much more long-term vision of the issue Exxon has chosen a strategy involving a combination of limited voluntary actions in the short-term as well as research into improving their currently methods of fossil fuel extraction.
Indeed, Exxon is heavily investing, not in new environmentally sound technologies, but in improving its current methods, and making them cheaper. ( ENDS Report 330, July 2002) Examples of this are: * New refining technologies that allow lesser harm to the surroundings and that improve the quality of the fuel * New lubes that allow customers to cut the harm of operations * SCAN fining technology that allows low sulphur supply . In sum this means that they are focusing on molecular components of crude oil that make higher value oils with less detrimental environmental effects. (Exxon website).
There are no signs of references to renewable energy sources on the companies website: clearly Exxon’s focus is not in renewable energies. However, they are perhaps trying to bridge the gap that exists between them and BP in the area with their donation of $100 million dollars into a joint research venture lead by Stanford University. The Global Climate and Energy Project (G-MEP) is a project to identify the most economically viable technology that have the lowest greenhouse emissions. (Exxon website). Although, the abovementioned example is proof that Exxon is slowly moving towards acknowledging the potential in renewable energy.
This is, nevertheless, a first step. Indeed, in the previous section we saw the progressive stand of BP with regard to renewable energy sources, as opposed to Exxon’s short-term vision. This difference is also very visible in the way the companies market themselves. This is the most visible for BP, formerly known as British Petroleum. The companies current name is Beyond Petroleum, stating that the company is dedicated in the long term as being an energy supplier even when the world’s supply of fossil fuels run out. Visiting their website reveals that this message is being forwarded in their media campaigns. Where doing things differently, listening to the concerns and complaints of real people, letting them know what we as a company are doing. It’s about openness, honesty, and commitment to change” is the driving slogan of their current media campaign aired on the radio and television channels of the world. The campaign is focused on interviews with everyday people voicing their concerns with the current effects on the environment of the energy industry’s activities. (BP website) Exxon on the other hand, does not promote it self as a progressive environmentally sound supplier of energy.
The website is filled with information on their current range of products (most of them being fossil fuel related). They offer many publications on the current state of their operations in the various parts of the world, and once again, the focus is on the short term, not the long. There are quite detailed accounts of the different methods of extraction and their efforts to render them cleaner. The only reference to renewable resources of energy is when the company states its participation in the G-MEP project with Stanford University. (Exxon website).
Quite understandably the companies’ degree of commitment to renewable energy sources is directly equated to the direction of their marketing/public relations strategy. On one hand, who has heavily invested in renewable energy sources are marketing themselves as energy suppliers who see beyond fossil fuels, whereas on Exxon’s website the closest information to marketing is the three dollar reduction for the Exxon Superflo oil change. In sum, the oil industry has responded in two ways to the growing environmental concerns regarding fossil fuels and the harms of greenhouse emissions.
On one hand, companies such as BP have integrated renewable energy sources into their business strategy and are heavily investing in these techonologies not only to improve them, but to also make them more cost efficient, and on the other hand companies such as Exxon who have adopted a much more short term approach to the problem and who are only now beginning to look into the potential of these energy supplies. The second industry to be examined is one very closely linked to the oil industry, very much a complimentary one, is the automobile industry.
This examination will focus on how the automobile industry has reacted to environmental issues over the past ten years with their response to statutory requirements and to technological change/innovation. In 1991, the European Commission (EC) passed a Directive that was to be the cornerstone for the decade to come with regard to the reduction of greenhouse gases resulting from cars. In 1993, it passed another Directive, one very similar to the 1991 one, the difference being that the new version of it made three way catalysts mandatory on all new petrol-engined cars.
This measure aimed to reduce the three regulated gaseous pollutants, carbon monoxide, hydrocarbons and nitrogen oxides by 80-90% in comparison to 1970 levels (first EC legislation undertaken aimed at reducing the emission of greenhouse gases) and by 25% in comparison to the previous piece of legislation. For petrol-engined cars the reductions would have to amount to a 50%reduction in the combined emission of hydrocarbons and nitrogen oxides and a reduction of 20% of carbon oxides compared to the levels of the 1991 Directive.
The commission aimed at bringing these measures in a two-step manner: during the first phase the best available technology would be set in place, and target standards based on the “highest level of protection which can reasonably be envisaged in the light of the most recent scientific and technological developments” would be set. (ENDS Report 216, February 1993). However, due to the massive resistance from the auto mobile industry, who claimed that the cost of further emission reductions via the traditional approach would overweigh the benefits, and due to this these phase 2 targets were not set.
It is perhaps for this lack of tangible and specific targets that led to its very slow technological development of the three-way catalyst. One example of this slow development is the “cold start” problem. Although the emissions for carbon monoxides, hydrocarbons and nitrogen oxides were expected to fall by 40-60% from their levels in 1993 by 2003, by 2010 the estimated growth of the car fleet will annul this effect and emission levels will begin to rise. On a hot day, a petrol engined car may require 10 kilometres of driving in an urban environment n order for it to warm up and work efficiently.
Naturally, at cold temperatures this “warming up” time is even longer (at 0 degrees emissions of hydrocarbons and carbon monoxides on a short trip can be double the amount than at 10 degrees. Moreover, to add to the problem the Department of Transport estimates that 60% of car trips are below 10 kilometres. Accordingly, the Earth Resources Research estimated that if the auto mobile industry does not undertake progressive measures in reducing the light up times of catalysts, the contribution of cold starts in the total emission of hydrocarbon and carbon monoxide from cars may rise from 30% (in 1990) to approximately one half by 2000. ENDS Report 217, February 1993). Although, in the above-mentioned example the automobiles response was not a very progressive one, however, the industry has also taken some positive measures at reducing the emissions of green house gases from their cars. As early as 1993 the EC has been trying to negotiate with auto-mobile companies for voluntary reductions of emissions from their engines. (ENDS Report 257, June 1996). Finally, in October 2000 most auto-mobile manufacturers signed to voluntary reductions of their cars greenhouse emissions.
European, Japanese, and Korean manufacturers signed voluntary agreements to cut average carbon dioxide emissions from their new cars by 2008/2009. Emissions will have to be reduced by about 2% a year in order to reach t his target. Moreover, to further encourage the companies to strive towards these targets, the EC revealed that the European manufacturers achieved a mere 6% reduction of their cars’ emissions between 1995 and 1999, Japanese manufacturers only 4,6%, and Korean manufacturers performed worst with a reduction of 1,5%. (ENDS Report 309, June 309).
The next part of the evaluation of the automobile industry is how they have reacted to technological change/innovation. The ENDS Report 246, July 1995, reported how gas-powered vehicles were seen as the best alternative to fossil-fuel cars before the switch to fuel cell cars is achieved. The two gases used are compressed natural gas (CNG) and liquefied petroleum gas (LPG). Their chemical formations mean that both of them produce about 25% less of carbon dioxide emissions. (Mazda website). Proponents of this technique claim that urban air quality would be highly enhanced with this technique.
Upon visiting automobile manufacturers websites one quickly sees that most manufacturers already produce such cars, but most of them still claim that the lack of incentives for the end customer (conversion costs and very reduced tanking places are more than enough to discourage the consumer from this environmentally friendlier car. The abovementioned ENDS Report also echoes the same concern: in order for gas-powered cars to become the transitional car during the advent of the fuel cell technology, more incentives are needed.
If the gas-powered vehicles are still lacking huge interest from the general public, the car manufacturers are spending massive amounts on fuel cell technology. A fuel cell generates electricity similar to a battery, that is, it generates it through an electrochemical reaction. Rather than burning something that generates heat and in turn spins something, fuel cells generate electricity with no moving parts. This incredibly environmentally friendly means of powering a car is having investment poured onto it.
The annual industry investment for it is approximately $1billion, with all major companies, DamlerChrysler, Ford, Toyota, and GM expecting to have models out by 2004. In 1990, fuel cells could deliver approximately 150 watts per litre of hydrogen. By the mid 1990’s the Canadian firm Ballard Power Systems had dramatically increased the yield per litre to 1000 watts. Finally in November 2000 DaimlerChrysler presented its prootype NECAR 5, a small Class A (with same passenger space as a normal Class A, a huge improvement from the NECAR 1, which was a van with space for only one passenger) powered by a fuel cell delivering 1,300 watts.
In the area of fuel cell cars the auto mobile industry has continued what it began in the early 1990’s and has made signifigant advances in the technology. In this examination of companies’ responses one is faced with multifaceted approaches within each industry. In the oil industry two opposite paths have been chosen. The progressive one, undertaken by BP, by which it has integrated renewable energy into their strategy for the short and the long term, and the short term one adopted by Exxon by which they chose to reduce the pollution associated with their current methods of extraction.
In the automobile industry the companies seem to have adopted a long-term vision as well. There is a massive in pour of funds into the research of fuel cell cars, cars of the future, where as they have been slower to address the emissions of their current cars. However, the one common denominator in these responses is that the environmental issues can no longer be pushed under the carpet, and that action , be it progressive or focused more on the short term, must be undertaken, as ngo’s and civic associations have begun to raise their voices to the issues surrounding our environment.