Rising to the sustainability challenge

Remarks by Sherri K. Stuewer
Vice President of Environmental Policy and Planning, Exxon Mobil Corporation
Business and Sustainability Conference, Washington, D.C.
June 17, 2009

Thank you. It is a pleasure to be with you.

Three years ago, I spoke at this conference about the future of sustainable development from the perspective of an energy company. At that time, I made a prediction — that sustainability would be an enduring challenge for both business leaders and policy makers. I thought at the time that was a safe prediction.

In the intervening years there have certainly been a lot of changes that I could not have predicted, however. Since making those remarks, our industry has seen unprecedented volatility in world energy markets. This was followed closely by an extraordinary period of uncertainty in the financial markets. And now we are experiencing an economic downturn that has affected almost every nation in the world.

Rapidly changing market realities are nothing new, of course, but I believe the magnitude of the recent changes has added to the challenges of addressing sustainability — for both business leaders and policy makers. Given the attendance at this conference, I think it is apparent that U.S. businesses believe that sustainability is an enduring issue that deserves our focus — even in the most difficult economic circumstances.

So being mindful of the current economic backdrop, I’d like to talk with you today about some of the challenges we see in addressing sustainability. But first, I think it is important for me to explain how ExxonMobil defines sustainability for our industry and our company.

Energy and Sustainability
To understand the full extent of the sustainability challenge for our industry, it is necessary to understand that energy and economic growth have long been intertwined. Affordable and accessible energy supports long-term economic and social development. At the same time, economic growth drives increased energy usage.

Today, the world uses energy equivalent to approximately 245 million barrels of oil per day to fuel transportation, run farms and factories, power schools and businesses, heat and cool homes, and importantly lift living standards. And despite the current economic downturn and projected energy-efficiency improvements, global energy demand in 2030 is likely to be about 30 percent higher than it is today.

It is important to understand that the vast majority of this increased demand will occur in developing countries where populations and economic output are growing most rapidly.

The core sustainability challenge for the energy industry is how to provide the energy which enables economic development while at the same time reducing the environmental footprint of energy. Too often, however, the magnitude of this challenge is understated. The enormous anticipated growth in energy use will mean increased emissions, much of it in the developing world. If we are to make progress reducing the environmental footprint of energy, it is imperative that we find ways to address the emissions challenge in both the developed and the developing world.

In addition to the challenge of energy supply and its environmental impact, the oil and gas industry is also at the intersection of many other complex and diverse issues facing society today – including social development, human rights and transparency. Thus, any solutions we seek to the broad energy challenges need to address these complex social issues, also.

Defining “Sustainability” at ExxonMobil
It is these views on the challenges for our industry that have shaped how we at ExxonMobil define our commitment to sustainability. To us, sustainability is a balancing act — balancing economic growth, social development, and environmental protection so that future generations are not compromised by actions taken today. This is largely the Brundtland definition framed in the context of an energy company.

In the industrialized world, this means ensuring that our grandchildren can have access to reliable supplies of energy just as we do today, while mitigating the impacts on society and the environment. In the developing world, it means helping facilitate the economic growth that citizens of these nations understandably demand and deserve, while mitigating the negative impacts that can accompany rapid, large-scale growth.

The Challenges of Sustainability
So how do we translate this definition of sustainability into action?

The answer is: Not easily. There are clearly challenges and complexities that we face in the energy industry when we attempt to address sustainability. I’d like to talk about three of these challenges that we have experienced and talk about how these have shaped and influenced some key sustainability actions by ExxonMobil.

The first significant challenge is managing many diverse expectations. In today’s global economy, increased technology, communication, and access to information have expanded the range of groups and individuals who have an interest in our business.

To effectively address the wide range of issues that affect our operations, we must understand and quickly address emerging topics of concern to stakeholders. To do this, we engage citizens and opinion leaders in communities where we operate. We also seek to work with governments, NGOs, shareholders, customers, suppliers, and employees to help identify and manage issues of mutual concern.

At ExxonMobil, we operate in most of the world’s countries — countries that are at various stages of development. Understandably, expectations vary greatly within these diverse operating environments, not just at the national level but at local level and within civil society. Managing these expectations is a constant challenge — especially when some believe that a new resource discovery is going to make everyone rich and solve all exiting social problems. This challenge is often exacerbated by the difficult economic circumstances at the outset of a project.

From our experience operating around the world, we see many needs — especially in developing areas. We have seen firsthand how widespread poverty, restricted access to education, inadequate business and technical skills, lack of employment opportunities and corruption can be significant barriers to individual opportunity and economic growth.

To address many of these issues, we employ a variety of economic support and incentive programs for capacity building — which we collectively refer to as “national content development.” This strategy focuses on workforce development, supplier development, and strategic community investments to address current economic and social needs while supporting the growth of our in-country business.

One of our most significant efforts is to increase the number of national employees over the life span of a project and to train them in technical and professional skills necessary for working on existing and future projects.

We also seek to create economic opportunities for local businesses by investing in developing the capabilities of local contractors, suppliers, and vendors to help them meet global industry standards to qualify for contracts with ExxonMobil and others.

By purchasing goods and services in-country and developing long-term supplier relationships, ExxonMobil supports the development of the local business community and reduces costly delays by easing demand on the global supply chain.

But in many emerging economies this is easier said than done.

While our goal is to nationalize the workforce and contract with as many local suppliers as possible, often the local capacity simply does not exist. So we must invest significant amounts of time to train both employees and suppliers with the technical and professional skills to meet our high business standards. In many cases, we must start from scratch because adequate training facilities do not even exist.

For example, at our Sakhalin-1 Project in Russia’s Far East, we helped establish a rigorous two-year training program for Russian technicians. And in Nigeria, we set up a technical training center for local recruits. To date, nearly 500 students have graduated from this program.

These initiatives and others like them help create a stable operating environment and contribute to economic growth beyond the fence-line of our own business. But even as we do this work, we also recognize that there are no quick fixes and that our efforts cannot change a whole country – but we believe that our efforts for national content development applied carefully can to meet those diverse expectations in the communities where we operate.

A second challenge in working toward sustainability is defining boundaries of responsibility.

The reliable execution of responsibilities — both by the public and private sector — is essential for creating an economic climate that is conducive to attracting the large-scale investments necessary to support economic growth. However, in many of our major investments, the traditional roles of government, business, and society can be blurred, making it increasingly difficult to determine where the responsibility of one group ends and where those of another group begin.

Governments have clear responsibilities to serve their citizens. They also have unique capabilities to do so, which business cannot and should not take on. Businesses also have their own accountability to customers and shareholders that governments and NGOs do not share. Likewise, NGOs can have unique capabilities through connections with local communities that can help them define and articulate needs.

In our experience, there are many sustainability issues where it is impossible for any one organization to be able to meet the needs, demands, or expectations of all stakeholders.

For these issues, the only effective solution lies in a pooling of abilities and resources – and sometimes in reaching across the boundaries of responsibility — to form partnerships for progress.

A good example of this kind of issue is the effort to confront malaria, a disease that not only destroys lives, but also retards the growth of entire developing economies. At ExxonMobil we are humbled by the difficulty of this challenge. We know we cannot take on the responsibility for public health. Nevertheless, we are working to build the capacity of local public health efforts in many places.

As one of the largest investors in Africa, we have seen the devastation caused by malaria. Malaria kills more than one million people a year in Africa. Each of these lost lives places a tremendous burden on families, communities, businesses, and even government. Malaria accounts for a staggering 40 percent of Africa’s healthcare expenditures. The disease also costs an estimated $12 billion in lost productivity each year. It hurts long-term growth and undermines social development.

Yet, despite the urgency of improving health and protecting lives, international anti-malaria efforts often hit substantial obstacles in execution. Different governmental desires, different NGO priorities, differences in strategies and tactics, as well as local and regional differences, make it hard to provide the sustained help needed to eradicate this deadly disease.

To address these issues, ExxonMobil works at several levels and on several fronts. We are actively partnering with governments and agencies at a global and country level, helping them to combat malaria with the same disciplined, results-based business practices that ExxonMobil employs in its global operations.

We also support the distribution of long-lasting, insecticide-treated bed nets to ensure bed nets get into the hands of individuals. We support education for health care personnel to ensure local citizens have access to informed healthcare. We promote community education to ensure people know the options they have at their disposal.

In total, we have invested more than $50 million in this fight. Our investments may be outside our core business, but we know they create value for shareholders and for society over the long-term by building healthy communities and prosperous operating environments.

One company cannot defeat this disease alone, of course. It takes many partners, from business, government, NGOs and local communities, working together — and they all must contribute their special skills, while respecting and understanding the boundaries of each player's individual responsibilities.

A third challenge that our industry faces as we seek to address sustainability is the pressure to balance short-term and longer-term needs.

Few industries require longer time horizons for planning and execution than the energy industry. Yet we are routinely confronted with strong pressure from some sectors of society to deliver short-term fixes, sometimes at the expense of longer-term progress.

The projects we undertake can span generations from start to finish, and for our industry to continue to draw investors, these projects must remain viable and attractive throughout different business cycles. Balancing our need for long-term viability, while managing expectations by some in society for quick fixes, can be difficult — particularly when energy prices swing or short-term political interests dominate public dialogue.

There is perhaps no sustainability issue that better captures the pressures to balance the short-term and the long-term than the current debate about how to address the risks of climate change.

With rising global energy demands, energy-related carbon-dioxide emissions are expected to rise by an average of 1 percent per year through the year 2030. This projection leads to the question: How can we continue to provide the energy necessary to help billions of people move up the economic ladder, while mitigating the risk posed by growing CO₂ emissions?

Our conclusion is that we must work both to improve energy efficiency and to develop and deploy new technologies that will provide energy with lower emissions.

For today and for the future, we need to focus not only on reducing emissions from our own operations, but also from our customers' use of our products. This dual focus is essential because about 10 percent of petroleum-related GHG emissions are from industry operations, while 90 percent are from consumer use.

In our own operations, the focus on efficiency, flare reduction and the cogeneration of power and steam contributed to a reduction of 10 million metric tonnes of greenhouse gas emissions from our global operations in 2008 — about a 7 percent reduction. To help our consumers be more efficient today, we are providing light weight plastics for lighter vehicles, new tire lining technology to improve tire inflation, and fuel efficient lubricants.

We also believe that it is critically important — and ultimately most effective — to invest in research for fundamentally new technologies that will be efficient in reducing emissions for the future. We have an active portfolio of research now on a wide range of future technologies — like carbon capture and storage, hydrogen production, battery separators for lithium-ion batteries, biomass conversion, and algae. When we identify technologies that we believe can support a viable business without the need for ongoing subsidies, we have the financial strength and capacity to expand our business portfolio.

We understand that no single technology is going to solve this issue — there is not a silver bullet. But together many new technologies will make a difference. By having a realistic perspective about the need to seek efficiencies and reduce emissions along the entire energy value chain, we can better invest in solutions for the near term, and the long-term. We believe this approach has the chance of best delivering lasting results that will contribute to sustainable energy.

The Solution to Sustainability Challenges
All three of the sustainability challenges I have just discussed are shaped by their own complex forces. And each has provided my company with unique lessons and opportunities for action.

What is common to addressing all of them is the need for businesses to listen and to pursue a balanced, cooperative approach. We have learned that the best way to work toward sustainability is through constructive engagement and partnership.

Like all businesses we must remain true to our values and our commitments to shareholders, and we must engage with other stakeholders to understand their needs. And as the world expands and grows, the different parts of the global community will have to do the same by representing their stakeholders openly and honestly and also listening to the other voices who are working toward sustainability.

No company or industry, or government or NGO, can have all the answers on sustainability. But we all have a role to play.

At ExxonMobil our primary role is to responsibly provide the energy to sustain and improve standards of living for people worldwide while delivering a return to our shareholders. We are committed to fulfilling this role while balancing the three drivers of sustainability — economic growth, social development, and environmental protection.

Focusing on this balance helps to guide our decisions and it helps us anticipate the needs of the future. We believe it makes us a stronger company in all aspects of business.

Thank you, and I look forward to a productive conference together.