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Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors
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Making the 'People' Content of Sustainability Reports Work - The Case of the Nigerian Oil Majors

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The paradox of voluntary conformance often has challenges. In the case of sustainability reporting by companies, a still largely voluntary activity of global businesses, the closest framework to a …

The paradox of voluntary conformance often has challenges. In the case of sustainability reporting by companies, a still largely voluntary activity of global businesses, the closest framework to a gold standard is the G3 of Global Reporting Initiative, an institution based in The Netherlands. In this presentation, using the example of the ‘people’ content of the 2009 sustainability reports of 4 IOCs operating in Nigeria – Shell, Eni, Chevron and ExxonMobil – we demonstrate the fudging effect of the inconsistency in the application of the workforce performance indicators of the G3 framework and its consequence for an overall transparent reporting on the subject. This becomes poignant in view of the near perennial industrial crises in the Nigerian petroleum industry due to allegation of unethical labour practices of the local operations of these companies. The presentation concludes by drawing out lessons for all three constituencies – (1) reporting standard setters which must now clarify their ‘people’ reporting requirements to elicit material and transparent information on the global workforce, (2) local stakeholders and the civil society who must adopt the new tool of reporting engagement besides the traditional strike action and (3 reporting organisations which must move towards a more result-oriented conformance with reporting frameworks.

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  1. Making the People Content of Sustainability Reports Work The Case of the Nigerian Oil Majors Based on Technical Paper 150781presented at National Annual International Conference and Exhibition of Society of Petroleum Engineers, Abuja, Nigeria, August 2011 Deji Olatoye Partner, The Lodt Law Offices, Lagos, Nigeria deji.olatoye@thelodt.com 1 NAICE 2011
  2. ObjectivesThis presentation will Introduce audience to the principles of Sustainability and Sustainability Reporting Give a theoretical background to the GRI reporting framework (G3) Highlight the performance indicator for the „people‟ content of Reports in accordance with G3 Review the „people‟ content of 2009 sustainability reports of four international oil companies (OICs) with Nigerian operations Draw out lessons for various categories of stakeholders in the sustainability reporting on the Nigerian oil and gas industry 2 NAICE 2011
  3. IntroductionThe paradigm of business is changing… 3 NAICE 2011
  4. Introduction – The Old ParadigmThe old paradigm of business: Other  Business exists for Shareholders Stakeholders profit motive alone  Financial indicators are the only bases for measuring corporate performance  Managers are accountable to only shareholders 4 NAICE 2011
  5. Introduction – Emerging ConsensusThe new, emerging consensus: Other  Corporate performance Shareholders Stakeholders should be measured by non-financial as well as Return on Social Investment contribution financial indicators  Such indicators include Capital Appreciation Environmental contribution the social, environmental Other financial Economic and economic indicators benefit  Corporate accountability should embrace the broader stakeholders 5 NAICE 2011
  6. Introduction – Emerging Consensus One key feature of the new consensus is SUSTAINABILITY REPORTING It is a tool for effecting conformance with BEST PRACTICES and EMERGING STANDARDS in the non- financial aspects of business operations It focuses on the company‟s POLICIES on economic, environmental and social issues and the progress made by the company in the IMPLEMENTATION of such policies, including the RESULT of investments made thereby 6 NAICE 2011
  7. Introduction – Emerging Consensus The consensus is moving even further Experts are already talking about the need for INTEGRATED REPORTING Integrated reporting incorporates both the traditional financial report and non-financial report into a SINGLE DOCUMENT targeted at all STAKEHOLDERS Since March 2011, South Africa has made integrated reporting a requirement for companies listed on the JOHANNESBURG STOCK EXCHANGE 7 NAICE 2011
  8. Introduction – Emerging ConsensusIntegrated Reporting Shareholders Financial Indicators Employees CommunitySocial Indicators Customers Environment Environmental Non-Financial Government Indicators Indicators Supply Chain Economic Future Generation Indicators etc NAICE 2011
  9. Introduction – Emerging Consensus By way of caution, let us note that it is an EMERGING CONSENSUS and the landscape is yet unsettled  Emerging rules vary from mere values to authoritative standards Values Principles Codes of Conduct Norms Standards[1] . Leipziger, D. 2010, The Corporate Responsibility Code Book, Second Edition. Sheffield: Greenleaf Publishing Limited, p.38 9 NAICE 2011
  10. Introduction – Emerging Consensus By way of caution, let us recall that it is an EMERGING Consensus and the landscape is yet unsettled 2010 Survey of 142 Standards with Reporting Requirements Not all Standards have from 30 countries been adopted by Mandatory national/regional standards regulators and of those 35% Voluntary standards adopted, not all are 65% mandatory [2] . With information from Carrots and Sticks – a report by on trends in voluntary and mandatory approaches to Sustainability Reporting by UNEP et al. 2010. 10 NAICE 2011
  11. Introduction – Emerging Consensus Only in South Africa has INTEGRATED REPORTING become mandatory for companies listed on the JSE 11 NAICE 2011
  12. Introduction – Emerging ConsensusThe Lessons: Binding laws and regulations The current unsettled nature of sustainability standards is NO BOUNDEN DESTINY Social It is a reflection of the typical State Pressure trajectory of norms in the GOVERNANCE TRIANGLE Modern Corporation The overall drivers of corporate decisions can now be found in the interaction/intersection of Business Civil Society the STATE, BUSINESS and CIVIL SOCIETY NAICE 2011
  13. Introduction - GRIAn example of a civil society initiative which has now travelledfar in the governance triangle trajectory is the GLOBALREPORTING INITIATIVE framework (G3) G3, an entirely non-governmental initiative, is now globally acknowledged as “the most comprehensive guidance on sustainability reporting” (UNEP, et al) Increasingly cross-referenced by other national, international and multi-stakeholder instruments have increasingly cross-referenced Ten countries have formally referenced it in their governmental CSR guidance documents (UNEP, et al) 13 NAICE 2011
  14. Theoretical Background What is G3? GRI‟s mission is “to elevate the quality of reporting to a higher level of comparability, consistency and utility” (Leipziger, D., 490).” In sum, reporting on economic, environmental, and social performance by all organizations should be “as routine and comparable as financial reporting” (GRI). G3 is a reporting framework, a procedural mechanism which sets rules for communicating the conduct of business. Unlike a performance standard, it does not propose to set a code for such conduct. However, an effective procedural mechanism could be used to assess conduct or measure performance. Therefore, its ultimate, practical implication is to influence conduct. 14 NAICE 2011
  15. Theoretical Background What is G3? To be useful for the foregoing purposes, a reporting framework should comprise sound GUIDELINES and PRINCIPLES. The guidelines stipulate the substantive and procedural rules for collating and verifying, even communicating, the content of a report. The principles stipulate qualities which should characterise both such guidelines and content. 15 NAICE 2011
  16. Theoretical BackgroundG3 Framework Reporting Framework National annexes [3] . Adapted from GRI Sustainability reporting Guidelines (2006). www.globalreporting.org 16 NAICE 2011
  17. Theoretical Background G3 FrameworkGuidance Principles Guidance for defining report  Principles for defining report content content Guidance for setting report  Principles for ensuring report boundary qualityStandard Disclosures Profile Management Approach Performance Indicators [2] . With information from Carrots and Sticks – a report by on trends in voluntary and mandatory approaches to Sustainability Reporting by UNEP et al. 2010. 17 NAICE 2011
  18. Theoretical BackgroundSchematic of label for reporting „In Accordance‟ with G3Requirement for Reporting “In Accordance” Sign of If How Checked Reportin External g Level Assurance Self 3rd Party GRI Checked Checked Checked• Disclosure of Profile matters same as „B‟ level reporter „A‟ „A+‟ „A+‟ „A+‟ „A+‟• Disclosure of Management approach same Self 3rd Party GRI as „B‟ level reporter• Report on all core and supplemental Checked Checked Checked performance indicators• Disclosure of „C‟ level profile matters + more „B‟ „B+‟ „B+‟ „B+‟ „B+‟• Disclosure of Management approach on each Self 3rd Party GRI indicator category required• Report on minimum of 20 core and Checked Checked Checked supplemental performance indicators (including 5 specified indicators)• Disclosure of stipulated profile matters• Management approach not required to be „C‟ „C+‟ „C+‟ „C+‟ „C+‟ disclosed Self 3rd Party GRI• Report on minimum of 10 core and supplemental performance indicators Checked Checked Checked• (including 3 specified indicators) 18 NAICE 2011
  19. Review We will be reviewing the following Sustainability Reports of international oil companies (IOCs) for the period 2009: The Sustainability Report of Royal Dutch Shell Plc (Shell Report) Sustainability Report of Eni (Eni Report) Corporate Citizenship Report of ExxonMobil (Mobil Report) Corporate Responsibility Report Chevron (Chevron Report) 19 NAICE 2011
  20. ReviewWhy there Reports should interest Nigerians: Nigeria hosts MAJOR OPERATIONS of the IOCs, e.g., 9% of Shell‟s production in 2009. Obversely, REVENUES from oil and gas form about 80% of Nigeria‟s total income, and 95% of its foreign income (CIA). The imminent FRAGMENTATION of the industry by the local content policy may create a regulatory nightmare unless the sustainability practices of major players such as IOCs are minded. 20 NAICE 2011
  21. Review Additional reasons are that the following two major crises in the Nigerian industry have sustainability implications:  Environmental degradation in the Niger Delta.  Industrial dispute over „casualisation‟.„Casualisation‟, according to industry unions, means thatcompanies:  Phase out full, direct employment for junior workers  Engage their services through temporary contracts or outsourcing  Limit worker‟s Freedom of Association and social entitlements  Erase clear career path for such workers 21 NAICE 2011
  22. ReviewBasis of review: This review is not an assessment of the overall quality of the four Reports. The review is anchored on a single core performance indicator of the G3 on scoping and dimensioning of the workforce (paragraph LA1). We believe that a balanced assessment of disclosures made on people-centred investments by the IOCs can only be made with a proper scoping and dimensioning of the workforce in the Reports 22 NAICE 2011
  23. ReviewWhy anchor review on G3? We acknowledge the disparate application of G3 by the four IOCs Frame-work Application External How Used Level Assurance Checked Shell Report G3 A A+ A+ GRI Checked Eni Report G3 B B+ (limited B+ 3rd Party assurance) Checked Mobil Report IPIECA Lloyd‟s API Register Chevron Report Informal G3 and IPIECA IPIECA: Oil and Gas Industry Guidance on Voluntary Sustainability Reporting developed by IPIECA, API and API: American Petroleum Institute‟s Compendium of Greenhouse Gas Emission Estimation Methodologies for the Oil and Gas Industry (2004) 23 NAICE 2011
  24. ReviewWhy anchor review on G3? We are of the view that the G3 is a proper tool to use for a comparable assessment of the four Reports. Firstly, all the reports, at a minimum, informally referenced the G3 framework, including using its content index. G3 is the most globally acceptable framework for its comprehensiveness The industry-specific IPIECA is fast converging with G3 with the development of an oil and gas sector supplement for G3 in 2011 24 NAICE 2011
  25. ReviewThe Questions to be answered in this Review: How do the portions of the Sustainability Reports on labour-related matters (THE „PEOPLE‟ CONTENT) address employee issues? How do the Reports conform to, say the labour-related performance indicators of the G3 framework (LA1)? Are there loopholes in the framing of the LA1 which allow for non-clarity in reporting? How are the IOCs using the tool of sustainability reporting to address the crisis of „casualisation‟ in their industrial relations? 25 NAICE 2011
  26. ReviewKey requirements of the LA1 performance indicator: Reports should capture total workforce by employment type (full- or part-time), employment contract. (indefinite/permanent or fixed-term/temporary), and region. While excluding supply chain workers, the LA1 associated protocol requires disclosure where “a substantial portion of the organisation‟s work” is performed by persons not falling within the foregoing categories. Persons in the latter category would include self-employed persons and, presumably, supply chain workers. 26 NAICE 2011
  27. ReviewThe objectives of the LA1 performance indicator: Breaking down the workforce by employment type, employment contract, and region (region refers to „country‟ or „geographical area‟) demonstrates how the organization structures its human resources to implement its overall strategy. It also provides insight into the organization‟s business model, and offers an indication of job stability and the level of benefits the organization offers” (see paragraph 1 of the associated protocol). 27 NAICE 2011
  28. ReviewImplication of the requirements of the LA1 performanceindicator and its associated protocol for reporting by IOCs: Where a substantial portion of the IOCs‟ workforce are drawn from contract/temporary or outsourced hands, disclosures should be made regarding these. 28 NAICE 2011
  29. Review – Shell ReportLA1 disclosures and reticence: As an „A‟ level reporter, Shell is required to report on LA1 indicators or give reasons for non-disclosure. Global figure for the workforce include 101,000 employees and 400,000 contractor staff. However, there is no definite figure for suppliers as the scope of their contribution to the workforce is captured by the clause: “a huge number of suppliers” (see page 18). 29 NAICE 2011
  30. Review – Shell ReportImplication of partial non-disclosures and reticence: Shell Report fails to account for supply chain workers in definitive terms. This has a negative implication for other workforce-related information in terms of its applicability to the entire workforce. For example, Shell Report on fatality, while showing the figure on employees and contractors, is silent on fatality with respect to independent contractors working on sites controlled by Shell, a requirement of the associated protocol to Indicator LA7. Suppliers would, for the most part, constitute that category of the workforce. 30 NAICE 2011
  31. Review – Eni ReportLA1 disclosures and reticence: As a „B‟ level reporter, Eni is required to report on LA1 indicators or give reasons for non- disclosure Eni Report also fails to disclose figures on the size of its contractors although acknowledging that contractors “represent a constantly increasing work force at the oil and gas exploration, development and production sites.” Also, the Eni Report does not make any disclosure on the proportion of suppliers in its workforce. 31 NAICE 2011
  32. Review – Eni ReportImplication of partial non-disclosures and reticence : The admirable visualisation of the breakdown of employee figures by gender, professional category and geographical area does not remedy the reticence on supply chain and contractor workforce (see p. 63 of the Report). The real value of regional breakdown under Indicator LA1 is to account for national/regional disparity in the legal definition of employee, contractor and related categories with a view to properly contextualising the global employee-contractor ratio (see paragraph 2 of the associated protocol). 32 NAICE 2011
  33. Review – Chevron ReportLA1 disclosures and reticence: Chevron Report only applies the G3 informally and declares only a limited application of Indicator LA1. Therefore, there is no breakdown of Chevron‟s workforce according to employment and contract type. So also is the Report silent on the proportion of supplier within the workforce. However, instructively, the figures on fatality show that only contractors are affected in the nine such incidents for the year. 33 NAICE 2011
  34. Review – Mobil ReportLA1 disclosures and reticence: Mobil Report applies the IPIECA and API guidelines and does not consider the directions of Indicator LA1 protocol in reporting „people‟ issues. For example, its workforce disclosures are basically with respect to employees (broken down mainly by gender, region and ethnicity, with some of these categories based on the figure for new hires. See pages 22 – 23). It however breaks down figures on fatality and incident rates by employees and contractors. The report is silent on supplier contribution to its operations. 34 NAICE 2011
  35. Review – Observations The IOCs have yet to reconcile themselves to the need for incorporating information of supplier/supply side workers to report on the global workforce This has negative implications, including:  The Reports fail to satisfy the objectives of LA1 indicator  The Reports fail the tests of the key principles of G3 and other standard reporting frameworks  Poor workforce scoping negatively affects the applicability of other people-centered information for the purpose of assessing global impact of workforce policy and investments. 35 NAICE 2011
  36. Review – ObservationsFailure to satisfy the Objectives of LA1 indicator Breakdown of workforce information should be with a view to accomplishing the following objectives:  Demonstrating how the organization structures its human resources to implement its overall strategy.  Providing insight into the organization‟s business model  Offering an indication of job stability and the level of benefits the organization offers” (see paragraph 1 of protocol) Reticence on or facile disclosure of supply side workforce information does not satisfy the above OBJECTIVES of indicator LA1. 36 NAICE 2011
  37. Review – ObservationsMateriality and Sustainability Context are two key principles indefining the boundary of reporting under the G3 framework. TheReports fail relevant test of these principles for at least two reasons:  The evidently significant scope of the contributions of supply chain workers to the organisation‟s operations.  The industrial crises precipitated by the human resource model of the IOCs in an important country to the operations of the IOC.  Example:  Although Shell demonstrated leadership by providing a special national context on Nigeria (pp. 22&23), nothing in the spotlight shows that Shell considers the „casualisation‟ crisis a significant risk to its operations.  Recall that „casualisation‟ is one of the two sustainability crises in the Nigerian oil and gas industry.  Note also, significance of risk and geographical contexts are key tests of Materiality & Sustainability Context. 37 NAICE 2011
  38. Review – ObservationsImpact of poor workforce scoping other people-centeredinformation such as health, safety and general welfare  For example, figures relating to injuries and fatalities shows that the burden of such incidents on contractors far outstrips that on employees.  For Chevron, the 2009 fatality figure shows 100% for contractors while that of Shell is 95%.  For Shell, the contractor contribution to the workforce is outstripped by its fatality burden by some 15%.  Shell‟s 2009 fatality ratio for the contractors itself represents a more than 3% escalation over the average of 92% for the decade up to 2009. The four Reports disclose the IOCs‟ efforts – policies and investments – in improving the health, safety and general welfare of the workforce, many of these often incorporating suppliers within the coverage of such efforts. However, the effectiveness of such measures can not be properly measured without the willingness to report on the entire gamut of the workforce in a comparable manner 38 NAICE 2011
  39. ConclusionLessons for Reporting Framework developers: The need to continuously move towards more contextualised frameworks, including sector and national/regional specific supplements. For example, the preponderance of contractor and supply chain workers in the global workforce should receive special attention in both sectoral and national contexts of the oil and gas in Nigeria. A suggestion is to consolidate the „people‟ information of certain categories of providers in the supply chain with that of their IOC clients for the purpose of sustainability reporting. For example, suppliers whose businesses with IOCs represent an overwhelming percentage of their turnover or whose size means that they could easily escape national regulations or industry self-regulations on labour-related matters. In essence, the IOCs should begin to take responsibility for the labour practices in their supply chain 39 NAICE 2011
  40. ConclusionLessons for Civil Society actors engaging with the industry: Labour unions and other advocates of sustainable labour practices by the IOCs need to adopt new tools of engagement beyond traditional call-outs. Engagement through study and critical review of sustainability report could be a new, useful tool of engaging and altering the conduct of the IOCs in view of the globalisation of sustainability reporting and the growing convergence of its standards. This requires the development of new competencies in preparing, assuring and checking sustainability reports. For example, none of the external experts or firms engaged for checking and assurance purposes in the four reports reviewed for this paper is identifiably Nigerian even where there are special Nigerian spotlights. 40 NAICE 2011
  41. ConclusionLessons for IOCs and other sustainability reporters: Reporting organisations should strive to gain on the full benefit of the largely voluntary efforts put into sustainability reporting. Sustainability reporting should not just be a tool of stakeholder engagement and communication alone. It should also be seen as a tool of risk assessment and management. The example of the four reports reviewed for this paper shows how possible it is to underplay or even completely ignore a major, brewing sustainability crisis in a country hosting some of the largest operations of a global industry 41 NAICE 2011
  42. AcknowledgmentThe Institutionalisation team atThe Lodt Law Offices, Lagos 42 NAICE 2011
  43. 43NAICE 2011
  44. Thank You 44 NAICE 2011

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