Professor Annie Snelson-Powell examines how organisations navigate sustainability pressures, highlighting gaps between policies and practices. This article explores why oil giants like ExxonMobil support the Paris Agreement, questioning whether their motives reflect genuine change or strategic efforts to influence policies and delay meaningful climate action.
Annie Snelson-Powell is an Associate Professor of Business and Society at the University of Bath. She is interested in how organisations respond to the pressure to be more sustainable in their operations and products. In particular Annie study the gaps that emerge between organisational policies and strategies for sustainability and their activities in practice. This article is republished from The Conversation under a Creative Commons license. Read the original article here.
ExxonMobil chief executive Darren Woods has urged president-elect Donald Trump to not take the US out of the Paris agreement on climate change. “We need a global system for managing emissions”, he said in an interview at the annual UN climate summit in Baku, Azerbaijan.
Though Woods’ words were unusually high profile and direct, some of his equivalents at rival fossil fuel firms have expressed similar sentiments.
On the face of it, big oil and gas firms – and ExxonMobil is one of the very biggest – are a surprise proponent of the Paris agreement, which seeks to defend ambitious targets on climate change. After all, these are the very organisations that have financially benefited from contributing to the crisis, and that fought for decades to kill the climate agenda. It’s hard to believe they’re now working for its survival.
One obvious explanation is greenwashing. When oil and gas firms claim to offset their emissions, for example, many people will intuitively recognise an obvious attempt to improve their reputation that has little credibility in practice. These firms of course continue to intensively extract and supply fossil fuels that directly exacerbate global warming.
But there is more to it than simple greenwashing or chasing a positive headline. There are sound strategic (if not moral) reasons why these firms have now decided to at least appear to cooperate with an agenda to reduce emissions.
A global framework helps global firms
The sheer scale of these firms (ExxonMobil operates in more than 60 countries) means they might naturally benefit from a standardised global framework for addressing climate change. This allows multinationals to exploit coordination efficiencies and reduces their uncertainties.
Woods, the ExxonMobil boss, also warned of a “polarised political environment” and the economic impact of “policy switching back and forth as political cycles occur”. The Paris agreement should, in theory, survive changes of government in any one country.
At the same time, fossil fuel firms have a further interest in being at the table. Their involvement means they can influence things like how quickly we plan to transition to a greener economy and what the transition will involve.
Being part of the emerging discourse about the survival of the Paris agreement perhaps enables them to have a say and build legitimacy for a continued reliance on particular parts of their non-renewable portfolio, like natural gas.
The E in ESG
Even mainstream investors now want firms to explicitly consider so-called environment, social and governance (ESG) impacts. These firms therefore have to be seen to deliver the E in ESG. Whether they’re entirely sincere is less straightforward, and we should interpret their efforts with some caution.
Research my colleagues and I conducted on large firms’ increasing involvement in sustainability initiatives and standards points to a worrying “penalty zone” for the environment. It appears investors do indeed reward some explicit sustainability activities, but they also penalise firms that do “too much”.
After an initial win-win, where firms are rewarded for doing some sustainability, there is a tipping point beyond which being more sustainable weakens financial performance. The implication is that these oil and gas firms must be seen by important stakeholders to be doing just the right amount of sustainability to drive financial performance, and no more.
Large oil and gas firms supporting the Paris agreement is therefore not surprising, especially when we understand it as a strategic response within a politically contested arena.
Now that outright climate denial is no longer an option, influencing the status quo might be their best bet. The involvement of powerful actors can introduce contradictions that delay action, creating what scholars term a “climate impasse”. Such delay serves as useful cover for fossil fuel firms to continue their operations.
Good reason to doubt their motives
There are other good reasons to be sceptical. When colleagues and I researched human rights in the oil and gas industry, we found that claims to be socially responsible often did not reflect the reality. The big firms did have accountability policies but they commonly overstated the actions firms would actually take.
Having human rights policies in place can reassure stakeholders with ESG concerns, yet human rights abuses are still commonplace in the supply chains of large fossil fuel and mining firms, and victims rarely receive an apology, financial compensation or any other remedy.
This kind of hypocrisy is why we must remain alert. When these large oil and gas firms appear to play leading roles as global citizens in addressing climate change, we have perhaps good reason to doubt their motives.
It seems unlikely that their underlying aim is to find the fastest route to reducing emissions. Instead, we might better interpret these moves as tactics to influence the development of norms in the emerging climate change frameworks in ways that can benefit their existing business of extracting and selling fossil fuels.
It will be interesting to follow the public reaction to the apparent incongruence. It’s not yet clear if oil and gas firms will be perceived as making a genuine U-turn, or condemned for showing blatant hypocrisy regarding an increasingly urgent issue of critical societal importance.
All articles posted on this blog give the views of the author(s), and not the position of the IPR, nor of the University of Bath.
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