If I were the new CEO of Chevron, I would stop listening to the lawyers and bring the engineers into the boardroom to develop a strategy to invest a good portion of last year’s record $24 billion profit into inventing solutions to the adverse environmental and social impacts of the company’s operations around the globe.
It is clear that Chevron’s historical reliance upon litigation to get what it wants is being eclipsed by new activist strategies that have effectively boxed Chevron into a corner.
Chevron appears to be on the verge of being handed down a judgment in Ecuador that could total $27 billion for polluting practices of Texaco operations dating back to 1984 – but which Chevron’s assumed liability for in 2001 when it swallowed up Texaco. An unprecedented campaign to make Chevron the post child of corporate irresponsibility has already persuaded pension funds in California, New York, Maryland and Pennsylvania to consider votes on withdrawing $12 billion in Chevron shares on the grounds that the firm is mismanaging its operations around the globe.
New Chevron CEO John Watson has inherited a mess from outgoing CEO David O’ Reilly – but with challenge comes opportunity.
Here are just three examples of proactive initiatives that may moot criticisms, starting with Ecuador.
- Amazon Watch maintains that pollution from oil operations in Ecuador “is one the largest environmental and social disasters on the planet,” claiming that 18 billion gallons of toxic wastes have been dumped in an area the size of Rhode Island, threatening the livelihood of 30,000 indigenous peoples belonging to five different tribes. There is no easy way out of this legacy liability, but just fighting the proposed settlement does not send the right signal to activists – or shareholders. Why not come forward with a plan to address these issues before the proposed judgment?
- In Burma, the brutal military junta ruling the country is siphoning off revenues from oil operations and, according to Earth Rights International (ERI), stashing it in banks in Singapore. Here, the issue is not so much environmental impacts, but rather, the ruthless killing and looting of nearby villages. Why not disclose where proceeds of operations go – that’s just good governance – and cease relying upon Burmese military as the police force for pipeline operations.
- Kazakhstan is the largest private oil development area in the former Soviet Union. Over six years ago, the village of Berezovka , comprised of 1,300 people, was promised to be moved to a “village of the 21st century,” since it was located within 5 kilometers (km) of these expanding oil drilling operations. National and international laws requiring the relocation of any village that close to such facilities. While Chevron only owns a 20 percent share in the oil production consortium operating here, it is time for someone to show leadership. Why not follow through on implementing the relocation? The cost is small, but the gesture would surely signal the company respects the law as well as communities it does business in.
There are other hot spots, with Nigeria being another major embarrassment for the firm, but making real progress in meeting the environmental and social demands in Ecuador, Burma and Kazakhstan would be a great start. Let’s not forget Angola, Chad, the Philippines and Iraq. Closer to home, there are plenty of opportunities to show Chevron is a model corporate citizen in Alaska, California, Colorado, New York, New Jersey, Mississippi, Utah and Wyoming.
If I was CEO, I might not think the charges against Chevron are all legitimate, but that really doesn’t matter at this point. The public relations battle has been lost, and the longer the company delays in changing its business practices, the longer it will take to reinvent itself to become a global leader on energy, environmental and social innovation.
To put this all into perspective, remember only 36 other countries have a larger Gross Domestic Product (GDP) than Chevron. Based on annual revenues, Chevron is the largest corporation operating in California and the fifth largest corporation in the world. Chevron was the second most profitable U.S. corporation last year, edging out General Electric, which has made its green “Ecomagination” campaign a cornerstone of GE’s future business strategy.
If anyone is capable of showing the world that business can truly deliver environmental and social value in the oil business, that company is Chevron.
[photo credit: Roo Reynolds]