PETROLEUM REFINING SECTOR Corporate Environmental and Sustainability Reporting PACIFIC SUSTAINABILITY INDEX SCORES

CLAREMONT MCKENNA COLLEGE ROBERTS ENVIRONMENTAL CENTER

2003 FORTUNE GLOBAL 500 AND FORTUNE 1000 PETROLEUM REFINING SECTOR Corporate Environmental and Sustainability Reporting PACIFIC SUSTAINABILITY INDEX SCORES

J. Emil Morhardt Elgeritte Adidjaja Christopher David Frantz Mary Beth Houlihan Sara Leverette Marta E. Young Noah Zogas

Morhardt, J. E., E. Adidjaja, C.D. Frantz, M.B. Houlihan, S. Leverette, M.E. Young, N. Zogas (2004) Petroleum Refining Sector: Corporate Environmental and Sustainability Reporting, Pacific Sustainability Index Scores. Claremont, CA, Roberts Environmental Center, Claremont McKenna College Price: $20.00 www.roberts.mckenna.edu 2004 Petroleum Refining Industry Report 1 CLAREMONT MCKENNA COLLEGE ROBERTS ENVIRONMENTAL CENTER

Contents

Corporate Environmental and Sustainability Report- ing ...... 3 Petroleum Refining Company Rankings ...... 3

The Pacific Sustainability Index (PSI) ...... 4

The PSI Scoring System ...... 4 Environmental vs. Social Scores ...... 4 Intent, Reporting, and Performance...... 4 More Environmental than Social Reporting ...... 4 Distribution of Possible PSI Scores ...... 5 Overall PSI Scores ...... 5 Environmental PSI Scores ...... 6 Publications from Roberts Environmental Center Socioeconomic PSI Scores ...... 7 Voluntary Guidelines and Third Party Verification. 8

The Roberts Environmental Center publishes analyses of Relationship between company size and overall PSI corporate environmental and social reports—together called Scores ...... 9 sustainability reports—on the web and in special re- Analysts’ Comments ...... 10 ports. Amerada Hess Corporation ...... 10 BP...... 10 We also write books about environmental and sustainability ChevronTexaco...... 10 China National Petroleum...... 10 reporting, the first of which is Clean, Green, and Read All ConocoPhillips ...... 10 Over: Ten Rules for Corporate Environmental and Cosmo Oil ...... 10 Sustainability Reporting, available from ASQ Press, and Eni ...... 10 publish articles in academic technical journals. ExxonMobil...... 11 Fortum Oyj...... 11 Frontier Oil Corporation...... 11 For more information please visit our web site at: Giant Industries, Inc...... 11 www.roberts.mckenna.edu. Holly Corporation...... 11 Indemitsu Kosan...... 11 Indian Oil...... 11 To order additional copies of this reportreport, or to obtain Lukoil...... 12 multiple-copy prices, please write, email, or call: Marathon Oil Corporation...... 12 Murphy Oil Corporation...... 12 Dr. J. Emil Morhardt, Director Nippon Mining Holdings...... 12 Nippon Oil ...... 12 Roberts Environmental Center Petrobras...... 12 Claremont McKenna College Petronas ...... 13 925 N. Mills Avenue Premcor Inc...... 13 Claremont, CA 91711-5916 Repsol YPF Group...... 13 Shell...... 13 USA Sinopec Corporation ...... 13 SK Corporation ...... 13 909-621-8190 Statoil...... 13 [email protected] Sunoco Inc...... 13 Tesoro Petroleum...... 14 The goal of corporate report analysis conducted by the Roberts Environ- Total Fina Elf ...... 14 mental Center is to acquaint students with environmental and social issues Valero Energy Corporation...... 14 facing the world’s industries, and the ways in which industry approaches Yukos...... 14 and resolves these issues. The data presented in this report were collected Director’s Comments ...... 15 by student research assistants and a research fellow at the Roberts Environmetal Center. Copyright 2004 © by J. Emil Morhardt. All rights Roberts Environmental Center, Claremont McKenna reserved. College, and The Claremont Colleges...... 16

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2003 FORTUNE GLOBAL 500 AND FORTUNE 1000 PETROLEUM REFINING SECTOR Corporate Environmental and Sustainability Reporting

uring the past decade, large manufacturing 500 and Fortune 1000 lists, whether or not they corporations have begun to report voluntarily produced formal environmental or sustainability Don the environmental issues affecting their reports. It is based on all environmental and social companies and on how they deal with them. The information available on their web sites on May 15, addition of social issues to these reports has resulted 2004, including annual reports and, for American in some firms designating them “sustainability companies, 10-K forms. The quality of the environ- reports.” Some firms produce these reports yearly, mental and social reporting was characterized by others only occasionally, and some not at all. We students at the Claremont Colleges using the Roberts obtain these reports and any additional information Environmental Center’s Pacific Sustainability Index exclusively from corporate web sites. (PSI). The overall company PSI scores rank as This report covers all of the companies in the follows: petroleum refining sector of the 2003 Fortune Global

Petroleum Refining Company PSI Rankings

1 Statoil 17 SK Corporation 2 Petrobras 18 ConocoPhillips 3 Repsol YPF Group 19 Lukoil 4 Cosmo Oil 20 Yukos 5 Sunoco Inc. 21 Premcor Inc. 6 ExxonMobil 21 Indian Oil 7 ChevronTexaco 23 China National Petroleum 8 Eni 24 Indemitsu Kosan 9 Shell 25 Petronas 10 BP 26 Valero Energy Corporation 11 Nippon Oil 26 Tesoro Petroleum 12 Total Fina Elf 28 Sinopec Corporation 13 Fortum Oyj 29 Holly Corporation 14 Marathon Oil Corporation 30 Giant Industries, Inc. 14 Amerada Hess Corporation 31 Nippon Mining Holdings 16 Murphy Oil Corporation 31 Frontier Oil Corporation

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The Pacific Sustainability Index (PSI)1 The PSI Scoring System The Pacific Sustainability Index (PSI) comprises a list of 140 topics that should be addressed in corporate environ- Overall Score mental and sustainability reports. The topics were derived from the ISO 14000 family of international The PSI has a total of 140 topics, 80 of them on environmental standards, from reporting guidelines, environmental issues and 60 on social issues. The including those of the Global Reporting Initiative overall score is the percentage of the maximum (GRI), and from a variety of other sources. The possible score on all 140 topics. philosophy of the PSI is described in detail in our book, Clean, Green, and Read All Over, published by and available from the American Society for Quality Environmental Intent Score Press2. Each of the topics has a maximum score of Scores from PSI topics 1-27, 54, and 55. These either two or three points. The overall scores are topics reflect a firm’s comittment to environmental presented in the graph on page five, and are used to reporting. create the ranking on page three. The overall score is Environmental Reporting Score calculated as a percentage of the maximum possible score. Scores from PSI topics 28-53. These topics reflect reporting of environmental performance without Environmental vs. Social Scores reflecting the quality of that performance. In addition to the overall score, we have subsetted the PSI into its environmental and social components and Environmental Performance Score reported each of these independently in graphs on pages Scores from PSI topics 56-80. These scores reflect six through nine. The subsetted scores are also calcu- improved environmental performance, or perfor- lated as percent of maximum possible score for each mance better than the average of a firm’s peers, or subset, and have been arranged in the same rank order both. as the overall scores on page five. Combined Environmental Score Intent, Reporting, and Performance Scores for all 80 environmental topics in the three Both environmental and social subsets of scores reflect categories above. intent, reporting, and performance. Intent scores are derived from topics in the PSI that reflect a stated willing- Social Intent Score ness to perform well, to monitor that performance, and to Scores from PSI questions 81-108, 124, and 125. report it. Reporting scores reflect presentation in the They reflect a firm’s committment to social reportreport of data on specific environmental and social topics, ing. but not on how good that performance was—they indicate transparency in reporting independent of success in Social Reporting Score making improvements. Performance scores reflect Scores from PSI questions 109-123, reflecting better performance on specific environmental and amount of reporting of social performance without social topics since the previous reporting period, reflecting the quality of that performance. better performance than peer companies, or both. Social Performance Score More Environmental than Social Reporting Scores from PSI topics 126-140. These scores reflect improved social performance, or performance better Inspection of the subsets shows that more companies than the average of a firm’s peers, or both. report environmental information than report social information—that is, more are producing purely environ- Combined Social Score mental reports than are producing sustainability reports— Scores for all 60 social topics in the three categories and that the scores for environmental and social perfor- above. mance are far lower than those for either intent or reporting.

1PSI scoring sheets are available on our web site 2http://www.qualitypress.asq.org/perl/catalog.cgi?item=H1145

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Distribution of Possible PSI Scores ENTA ONM L T The pie diagram to the right shows the quantitative IR O V PI distribution of possible points for the 140 topics in N Environmental C E S the PSI scoring system. Environmental topics make Reporting up a little more than half of the total and social topics the remainder. Environmental and social intent Environmental Environmental topics make up 41 percent, reporting topics make up Intent Performance 24 percent, and performance topics make up 35 percent of the total possible score. Two thirds of the Social Social possible performance score requires that firms Performance compare their performance to that of their peers and Intent

do better than peer average. Because few companies Social compare themselves to their peers, the performance Reporting scores tend to be low, and drive down the overall S O C S scores. C I A L T O P I Overall PSI Scores

Statoil 2003 Petrobras 2002 Repsol YPF Group 2003 Cosmo Oil 2003 Sunoco Inc. 2003 ExxonMobil 2003 ChevronTexaco 2002 Eni 2002 Shell 2002 BP 2002 Nippon Oil 2003 Total Fina Elf 2002 Fortum Oyj 2003 Marathon Oil Corporation 2001 Amerada Hess Corporation 2002 Murphy Oil Corporation 2004 SK Corporation 2004 ConocoPhillips 2003 Lukoil 2003 Yukos 2003 Premcor Inc. 2004 Indian Oil 2004 China National Petroleum 2004 Indemitsu Kosan 2004 Petronas 2004 Valero Energy Corporation 2004 Tesoro Petroleum 2004 Sinopec Corporation 2004 Holly Corporation 2004 Giant Industries, Inc. 2004 Nippon Mining Holdings 2004 Frontier Oil Corporation 2004

01020304050 Percent of maximum possible score

The overall PSI score includes all 140 environmental and social topics. Because both environmental and social performance scores, which make up 35 percent of the total possible score, tend to be low, the overall scores are seldom above 50 percent for any company. Nevertheless, there is a very large range of scores among these companies on the Fortune lists.

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ENVIRONMENTAL SCORES

Statoil 2003 Petrobras 2002 Repsol YPF Group 2003 Cosmo Oil 2003 Sunoco Inc. 2003 ExxonMobil 2003 ChevronTexaco 2002 Eni 2002 Shell 2002 BP 2002 Nippon Oil 2003 Total Fina Elf 2002 Fortum Oyj 2003 Marathon Oil Corporation 2001 Amerada Hess Corporation 2002 Murphy Oil Corporation 2004 SK Corporation 2004 ConocoPhillips 2003 Lukoil 2003 Yukos 2003 Premcor Inc. 2004 Indian Oil 2004 China National Petroleum 2004 Categories* Indemitsu Kosan 2004 Petronas 2004 Environmental Intent Valero Energy Corporation 2004 Environmental Reporting Tesoro Petroleum 2004 Sinopec Corporation 2004 Environmental Performance Holly Corporation 2004 Giant Industries, Inc. 2004 Nippon Mining Holdings 2004 Frontier Oil Corporation 2004

0 20 40 60 80 100 120 140 160

Percent of maximum possible score * Maximum possible score for each category is 100%

nvironmental intent scores include remediation, waste produced, and water topics about the firm’s products, used. They also include use of life cycle Eenvironmental organization, vision analysis, environmental performance and and committment, stakeholders, environmen- stewardship of products, and environmental tal policy and certifications, environmental performance of suppliers and contractors. aspects and impacts, choice of environmental Environmental performance scores are performance indicators and those used by the based on whether or not the firm has im- industry, environmental initiatives and proved its performance on each of the topics mitigations, and environmental goals and discussed under the heading of environmen- targets. tal reporting, and on whether the quality of Environmental reporting scores are based the performance is better than that of the on the degree to which the company dis- firm’s peers. Scoring for each topic is one cusses its emissions, energy sources and point if performance is better than in previ- consumption, environmental incidents and ous reports, two points if better than industry violations, materials use, mitigations and peers, three points if both.

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SOCIOECONOMIC SCORES

Statoil 2003 Petrobras 2002 Repsol YPF Group 2003 Cosmo Oil 2003 Sunoco Inc. 2003 ExxonMobil 2003 ChevronTexaco 2002 Eni 2002 Shell 2002 BP 2002 Nippon Oil 2003 Total Fina Elf 2002 Fortum Oyj 2003 Marathon Oil Corporation 2001 Amerada Hess Corporation 2002 Murphy Oil Corporation 2004 SK Corporation 2004 ConocoPhillips 2003 Lukoil 2003 Yukos 2003 Premcor Inc. 2004 Indian Oil 2004 China National Petroleum 2004 Categories* Indemitsu Kosan 2004 Socioeconomic Intent Petronas 2004 Valero Energy Corporation 2004 Socioeconomic Reporting Tesoro Petroleum 2004 Sinopec Corporation 2004 Socioeconomic Performance Holly Corporation 2004 Giant Industries, Inc. 2004 Nippon Mining Holdings 2004 Frontier Oil Corporation 2004

0 20 40 60 80 100 120 140 160 180 200

Percent of maximum possible score * Maximum possible score for each category is 100%

ocial (socioeconomic) intent scores include reporting, and on whether the quality of the topics about the firm’s financials, employees, performance is better than that of the firm’s Shealth and safety reporting, social management peers. Scoring for each topic is one point if organization, social vision and committment, stake- performance is better than in previous reports, holders, social policy and certifications, social aspects two points if better than industry peers, three and impacts, choice of social peformance indicators points if both. and those used by the industry, social initiatives and mitigations, and social goals and targets. Social reporting scores are based on the degree to which the company discusses various aspects of its dealings with its employees and contractors. They also include social costs and investments. Social Performance scores are based on whether or not the firm has improved its performance on each of the topics discussed under the heading of social

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Use of Voluntary Guidelines and Third Party Verification

Rights

n of Human nterprises Declaratio of Force

rds 1 Universal Multi-National E on the Use tion AS 2 ed s for y Valida ertifi Compact, eline abor StandaPrinciples

Third Part AA 1000 ISO 14001 orSA EM 8000 C UN Global OECD Guid ILO Core L UN Basic GRI Guidelines Statoil 2003 Petrobras 2002 Repsol YPF Group 2003 Cosmo Oil 2003 Sunoco Inc. 2003 ExxonMobil 2003 ChevronTexaco 2002 Eni 2002 Shell 2002 BP 2002 Nippon Oil 2003 Total Fina Elf 2002 Fortum Oyj 2003 Marathon Oil Corporation 2001 Amerada Hess Corporation 2002 Murphy Oil Corporation 2004 SK Corporation 2004 ConocoPhillips 2003 Lukoil 2003 Yukos 2003 Premcor Inc. 2004 Indian Oil 2004 China National Petroleum 2004 Indemitsu Kosan 2004 Petronas 2004 Valero Energy Corporation 2004 Tesoro Petroleum 2004 Sinopec Corporation 2004 Holly Corporation 2004 Giant Industries, Inc. 2004 Nippon Mining Holdings 2004 Frontier Oil Corporation 2004 1 Open circle if at least 50% of operations certified, solid circle if 100% 2 Open circle if the report is "in adherance" with the 2002 or later GRI guidelines, solid circle if the report is "in accordance" with the 2002 or later GRI guidelines.

any of the higher scoring companies Declaration of Human Rights; none subscribe to have chosen to have their the Organization for Economic Cooperation and Menvironmental or sustainability Development Guidelines for Multi-National reports verified by third parties, although none Enterprises; two subscribe to the International has asserted that this verification is done in Labor Organization Core Labor Standards; and accordance with the AA 1000 verification one to the United Nations Basic Principles on standard. the Use of Force—all guidelines with Many are also in the process of, or have components similar to those of the SA 8000 completed, adoption of an International standard. Organization for Standardization (ISO) 14001 The Global Reporting Initiative (GRI) environmental management system. Only one, Sustainability Reporting Guidelines are an Petrobras, has signed on to the SA 8000 social important part of the basis for the PSI, but only accountability standard, the basis for much of three of these companies have written their the socioeconomic score in the PSI. reports in accordance with them. Four others Six companies formally subscribe to the partially subscribe to them. United Nations Global Compact Universal

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Relationship Between Revenue and Overall PSI Score

50 Statoil

Petrobras Repsol YPF Cosmo Oil ExxonMobil 40 Sunoco ChevronTexaco Eni Shell BP Nippon Oil Total Fina Elf 30 Amerada Hess Fortum Oyj Marathon Oil Murphy Oil

20 SK

Overall PSI Score Overall ConocoPhillips Lukoil Yukos 10 Premcor Indian Oil China National Petroleum Tesoro Petronas Sinopec Holly Valero Energy Indemitsu Kosan 0 Nippon Mining Holdings Frontier Oil Giant Industries

0 20 40 60 80 100 120 140 160 180 200 Revenue (kM$, from 2003 Fortune lists)

here is a statistically significant Many smaller companies have higher PSI positive relationship between scores than the industry giants: Statoil, T company size (depicted here as the Petrobras, Repsol YPF, Cosmo Oil, and Sunoco revenue reported in the Fortune 2003 lists) and all have scores higher than ExxonMobil and PSI score, but it is not very strong, accounting ChevronTexaco, the highest scorers among the for only about 18 percent of the variability largest firms. All five of the largest firms have among PSI scores. very similar scores, although none are in the Moreover, the slope of the regression line is upper 25 percent of the field as a whole. The entirely driven by the five largest companies. If sixth largest, ConocoPhillips, has a PSI score they were removed from the figure there would considerably lower—well below the median be essentially no relationship between size and score—perhaps reflecting its recent merger. PSI score. The spread of PSI scores is striking, The regression line itself can be interpreted particularly in firms with revenues below $50 as the size-specific mean score: those billion. Many firms at the lower end of this companies whose scores are above the line are range make very little effort to report on doing better than average for companies of environmental and social matters, but others do similar size. so more aggressively than firms many times their size.

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Analysts’ Comments well-organized health, safety, and Amerada Hess 2002 Environment, environment management system with set Health, Safety and Social pollutant control targets. No further details or Responsibility Report actual number are provided, accounting for CNPC’s low PSI overall score. -Young Amerada Hess’s Environment, Health, Safety, and Social Responsibility Report is decent, but ConocoPhillips 2003 Commitment to lacks information on a number of topics. There Sustainable Development is not enough detail about its environmental ConocoPhillips’s sustainable development management, there is little quantitative data report is very brief and provides minimal about the environmental and social impacts, and environmental and socioeconomic data. Prior to there is no comparison to industry standards. the 2002 merger that formed ConocoPhillips, Although the report is insufficient in these areas, the separate companies had quite extensive it does provide a clear environmental and social sustainability reports. It has been over a year policy. - Young since the merger, and we would hope that more BP 2002 Environmental and Social information will be available soon, including Review explicit targets and goals for improvement in both environmental and social aspects of the BP has a very dense environmental and social company.- Young report filled with case studies and information obtained from stakeholders. Although it contains Cosmo Oil 2003 Environmental Report many hard facts about the company’s socio- Cosmo Oil’s Environmental Report economic qualities, it contains very little comprehensively incorporates quantitative data information regarding environmental impacts. in both environmental and social categories. By using outside auditors, creating goals to The report also has a well-diagramed become more transparent, and ending its presentation of its environmental and social political contributions, BP is becoming more policies as well as its environmental socially and environmentally responsible. management organization. However, there are a Hopefully the report will provide more few shortcomings: primarily, the report lacks information in the future. - Houlihan quantitative comparisons at an industry wide ChevronTexaco 2002 Corporate level, and is also bogged down with extensive Responsibility Report text. It would be much more effective to have more graphs and images. Overall, the report is This is a very well written and comprehensive quite impressive and will, we hope, be even corporate responsibility report. It outlines a more impressive in future years. - Young clear plan to provide more information and to become more transparent in the future. In order Eni 2002 Health Safety Environment for the score to improve, it needs to provide Report more industry- and company-wide information Eni’s Health Safety Environment Report has an rather than relying on case studies which seldom excellent HSE management section, as well as allow comparison of changes between years. - solid sections regarding the community and Houlihan environmental sustainability. The report could CNPC 2004 Environmental web pages be improved by including information about environmental and socioeconomic stakeholders, China National Petroleum Company (CNPC) as well as comparing Eni’s data to industry does not have a formal environmental or social averages. The report is significantly lacking in report and has limited information available socioeconomic performance data. However, it online. On the web site CNPC claims to have a does provide a clear and concise summary of

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Eni’s achievements in the past year and its health, safety, and environment organizational Giant Industries, Inc. 2004 web pages management. - Young Giant Industries, Inc. has almost no information ExxonMobil 2003 Corporate Citizen on environmental and socioeconomic issues in Report, Meeting Environmental its web pages or annual report. Giant’s PSI Expectations, and 2004 Report on scores would be greatly improved by Energy Trends environmental and socioeconomic reports that address more of the company beliefs, struggles, ExxonMobil has recently published three well- and visions on environment and socioeconomic organized and informative reports: Corporate responsibilities. - Adidjaja Citizen Report, Meeting Environmental Expectations, and most recently, A Report on Holly Corporation 2003 Annual Energy Trends, Greenhouse Gas Emissions, and Report and 2004 web pages Alternative Energy. Although very Holly Corporation has very little information on comprehensive, there remain key topics that are its environmental and socioeconomic aspects in not included. There is little information on its web pages or annual report. Although the environmental and socioeconomic stakeholders, company posted its vision that demonstrates a no data on key environmental and social commitment to the environment and indicators, and finally, no comparisons to socioeconomic responsibility, the company industry-wide averages. - Young needs to report more on its actual performance Fortum in Society 2003 and 2004 web to demonstrate its commitment to fulfill this pages vision. - Adidjaja Fortum in Society 2003 covers both the Indemitsu Kosan 2004 web pages environmental and social aspects of the The Idemitsu Kosan 2004 web pages contain company. The report is rich with narrations of very little information on the environmental and how the company strives to be the leader “in socioeconomic aspects of the company. Under building a sustainable energy future through the Environmental Protection Activities section, open and active interaction with the company’s the company seems to have a clear policy on the customers and stakeholders.” The report also environmental and socioeconomic issues. includes a key figures section on social and Nonetheless, there is no discussion or reporting environmental performance throughout the on the company’s environmental and course of the year. In order to improve the socioeconomic performance, the health and overall scores, it would help to include industry safety information of the employees, averages. The company also needs to provide information on stakeholders, or thorough more information on its environmental and discussion on significant environmental aspects social procedures, rationale behind corporate of the company. The report definitely has much policies, environmental and social indicators, room for improvement, but has the basis to goals and objectives, and quantitative become more comprehensive in the future. - environmental and social information. -Adidjaja Adidjaja Frontier Oil Corporation 2004 web Indian Oil 2004 web pages pages Indian Oil Corporation does not have an The Frontier Oil Corporation 2004 web pages do environmental or social report, nor does it have not identify any environmental or sustainability significant amounts of data online. There is a report, nor is there any environmental or brief webpage about its commitment to the socioeconomic information included in the environment and its employees, but beyond that, annual report. - Adidjaja there is little information. Indian Oil should

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develop an environmental and social report Murphy Oil Corporation 2004 web that outlines specific goals and targets that pages provide a clear vision of the company’s In these web pages Murphy Oil Corporation environmental and socioeconomic plan in the goes beyond many companies in reporting coming years. - Young various environmental and social initiatives Lukoil 2003 Environmental through voluntary programs and partnerships. Management Report The company’s web pages also thoroughly narrate how the company strives to meet its Lukoil’s Environmental Management Report environmental and social commitments, but outlines its management plan and briefly there is a significant lack of reporting of both touches on some key environmental and social environmental and social performance. There is statistics. However, the length and amount of no record of past performance in comparison to text in the report is excessive for the the current performance, let alone a comparison information that is provided. In particular, the to the industry as a whole or to other peer report does not address many environmental and companies within the same sector. - Adidjaja social aspects, nor does it compare its performance to the entire petroleum refining Nippon Mining Holdings 2004 web industry. Although the report is well done in its pages description of environmental and social Nippon Mining Holdings, a newly established management, there is a significant amount of corporation, provides no data on its information that still needs to be elaborated in environmental or social impacts. In addition, it the report. - Young provides no commitment to socially responsible Marathon Oil 2001 Sustainable behavior in the future. - Houlihan Global Performance Report & 2004 Nippon Oil 2003 Sustainability Report web pages Nippon Oil’s Sustainability Report provides Although dated, Marathon’s 2001 Sustainable much informantion, and many objectives and Global Performance Report acheives a truly case studies. From its policies and investments, international feel by duplicating the text in Nippon Oil appears to be more environmentally English, French, and Spanish. Although the and socially focused than the petroleum report chooses languages which may not be industry as a whole. However, to improve its prominent in many of the areas in which PSI scores, it needs to uphold its claims with Marathon operates, the internationally sensitive numbers and show improvements in relation to intentions are clear. By including industry-wide previous years and to the rest of the industry. - performance measurement for a health and Houlihan safety metric Marathon does what few Petrobras 2002 Social Responsibility companies yet do: it places itself in relation to Report its competitors. This is a bold move, which This report provides a broad, comprehensive should be encouraged and expanded upon in view of Petrobras’ attempts to be an future reports. Overall, this report lacks environmentally and socially responsible numerical characterization of Marathon’s company. It affirms the firm’s commitment to environmental and socioeconomic performance sustainable practices and to Brazilian society. and would be greatly improved with additional Through its investments in technology and depth and breadth. - Leverette social programs, Petrobras clearly shows a concerted effort to be a responsible corporation. Although it includes its responses to the indicators created by the Global Reporting

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Initiative, it still needs to reveal more contained in the body of the report, the data information regarding its impact on the tables on page 46-48 are particularly useful for environment. - Houlihan evaluating the corporation’s performance and Petronas 2004 Environmental web getting an idea of its progress as a whole. - pages Zogas Petronas, although ISO 140001 certified, failed Sinopec Corporation 2004 to include an environmental or socioeconomic Environmental web pages report on its web site. The only information Sinopec Corporation does not reference an provided online is a mission statement and brief environmental or sustainability report on its web pages about its environmental and social web site, nor does it provide much information policies. This lack of information is reflected in on these topics in its web pages. This lack of Petronas’s low PSI score. - Young information is apparent in the low score on the Premcor Inc. 2003 Annual Report and PSI. - Young 2004 web pages SK 2004 web pages Although Premcor does not have a formal Although its web pages make it clear that SK environmental or sustainability report, its has made many environmental and social annual report does contain some minimal investments, its web site provides almost no environmental and sustainability information in information on the results of these investments. a two-page section discussing the company’s - Houlihan environmental performance. There are also Statoil 2003 Sustainable Development some discussions addressing the company’s Report environmental concerns, elaborating on how Statoil’s 2003 report is the second sustainable government regulations set standards that development report published by the company, require the company’s responsible and the highest scoring report in our analysis. environmental practices. There is no indication, Not only is the report thorough on most topics however, of how well Premcor has actually of the PSI, it specifically mentions previous performed. - Adidjaja targets, whether the goals have been met, and Repsol-YPF 2003 Environmental and what future plans Statoil has to improve its 2003 Social Report performance. Furthermore, Statoil could have Repsol-YPF 2003 Environmental Report and scored well above its nearest competition 2003 Social Report follow the GRI reporting simply by quantitatively backing up its guidelines and cover many of the environmental assertions that its environmental performance is sustainability aspects of the company. Overall, the highest in the industry. Overall, the report is the reports are very systematic, outlining very comprehensive and well organized. - Young important environmental indicators in the most Sunoco 2003 HES & CERES Summary straightforward way. They provide outstanding Report historical documentation on past environmental Sunoco 2003 Health, Environment, & Safety performance measures and make very effective (HES) and CERES Summary Report is an use of charts and diagrams, which reinforce excellent example of a brief yet comprehensive their appeal and user-friendliness. - Adidjaja report of a company’s HES performance. In the Shell 2002 Shell Report separate notes posted in the company’s The 2002 Shell Report is both environmentally corporate web site, there is a matrix to quickly and socially comprehensive, and shows positive assess the comprehensiveness of Sunoco HES performance. Although much information is report according to the Global Reporting

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Initiative (GRI) guidelines. Some topics information, however, on environmental covered in the GRI guidelines are not addressed performance, indicators, measures, or goals. in the report; however, the company claims to There is no discussion of environmental or have internal policies and procedures addressing socioeconomics stakeholders, including the these areas. By including these unreported areas management of health and safety issues of the that have not yet been discussed in the report, employees. Overall, the report could be Sunoco HES report would definitely gain a improved by incorporating more information on much higher PSI Score. - Adidjaja environmental and socioeconomic performance Tesoro Petroleum 2004 web pages and discussion on how the company plans to improve its overall performance. - Adidjaja The Tesoro Petroleum 2004 web pages contain very little information on the environmental or sustainability aspects of the company. Although the company articulates a policy “to achieve a high standard of environmental care in conducting its business,” there are no data on the web site to support this policy. - Adidjaja Total Fina Elf 2002 Corporate Social Responsibility Report Total Fina Elf’s 2002 Corporate Social Responsibility Report is well-written and well- assembled. However, despite the numerous additions to the previous year’s report, it addresses fewer of the PSI’s environmental issues than the Total Fina Elf 2001 Environment and Safety Report. The information contained within is no doubt useful and educational for investors and concerned parties, but does not report the corporation’s progress with respect to a number of environmental issues. Although the newer report outscores its predecessor overall, its score could be even higher if it contained all the environmental information that the 2001 Report does. - Zogas Valero 2004 Environmental web pages Valero Energy Corporation provides a mission statement and brief information regarding the environment and health and safety. However, there is no environmental and social report published, nor any quantitative data available. - Young Yukos 2004 EHS web pages The 2004 Yukos corporate web site covers the major environmental aspects and social activities of the company. There is very little

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Director’s Comments Do environmental and social performance matter to investors?

Corporate transparency has never been more of an issue, and investors are increasingly scrutinizing more than quarterly financial performance. The concept of risk has taken on new meaning, and the startling lack of ethics by the leaders of some very large companies has led many investors to want to know how a company perceives its business responsibilities, and how it intends to minimize risk. So far, however, Wall Street has not obviously responded to increased environmental and social transparency and performance—much of the reporting we characterize in these sector reports may be directed more at employees and customers than at financial analysts and investors. Will this change? Will Wall Street take more notice of excellent environmental and social performance and associate it with reduced investment risk and the probability of better long-term returns? Despite the prominence of the Global Reporting Initiative and its promotion of comprehensive standalone sustainability reports, some argue that Wall Street will not pay attention until environmental and social performance are incorporated into annual reports along with a firm’s financial information. Only then will environmental and social policies and performance take their places in investors’ minds as essential parts of corporate strategy. Our strategy is to sidestep this question, and to credit substance over form. We examine all information on a company’s web site—annual report, 10-K, all web pages, and any downloadable environmental, social, or sustainability reports—and search them for relevant content. We believe that corporate environmental and social performance are highly indicative of corporate quality, and that transparency in these issues ought to be as important to investors as recent financial performance. Our sector reports provide investors a summary of all environmental and social information presented by companies regardless of the vehicle they use to present it.

J. Emil Morhardt Bishop, California 30 June 2004

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The Roberts Environmental Center Claremont McKenna College The Claremont Colleges

The Roberts Environmental Center Claremont McKenna College

The Roberts Environmental Center, an environmental Claremont McKenna College, a member of the research institute at Claremont McKenna College Claremont Colleges, is a highly selective, indepen- (CMC), is housed in the W. M. Keck Science Center dent, coeducational, residential, undergraduate liberal in the heart of the Claremont Colleges campus. Its arts college with a curricular emphasis on economics, mission is to provide students of all the colleges with government, and public affairs. a comprehensive and realistic understanding of today’s environmental issues and the ways in which The Claremont Colleges they are being and can be resolved, and to identify, publicize, and encourage policies and practices that The Claremont Colleges form a consortium of five achieve economic and social goals in the most undergraduate liberal arts colleges and two graduate environmentally benign and protective manner. institutions based on the Oxford/Cambridge model. The consortium offers students diverse opportunities The Center is funded by an endowment from George and resources typically found only at much larger R. Roberts (Founding Partner of Kohlberg Kravis universities. The consortium members include Roberts & Co. and CMC alumnus), other endow- Claremont McKenna College, Harvey Mudd College, ments, grants, and gifts, and is staffed by faculty and Pitzer College, Pomona College, Scripps College, students from the Claremont Colleges. Center staff Keck Graduate Institute of Applied Life Sciences, and are happy to consult with companies wishing to the Claremont Graduate University—which includes improve the quality of their environmental and the Peter F. Drucker and Masatoshi Ito Graduate sustainability reporting. Center students are often School of Management. looking for corporate summer internships and post- graduation positions, and the center director can aid firms in finding the right student.

16 2004 Petroleum Refining Industry Report www.roberts.mckenna.edu