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Corporate Sustainability Presentation

oil industry

Veer Raghava Kumar Marthy

on 22 July 2013

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Transcript of Corporate Sustainability Presentation

Company Overview
Headquartered in London, United Kingdom
4th largest company in the world according to Fortune’s Global 500 ranking in 2011
Two main business segments:
Exploration and Production
Refining and Marketing
Invests in renewable energy sources
Produces over 3.4 million barrels of oil equivalent per day
Operations in over 80 countries
21,800 service stations worldwide
Business Segments by Region
Oil Statistics

Lukoil sets itself the objectives to create
new value
, maintain business
and provide
with high return on their investments through asset value appreciation and cash dividends. Lukoil will use all available means to achieve these objectives, including further efforts to
reduce costs
, operating
of product and service
, and application of the latest
Mission Statement:
Our purpose is to harness
natural energy resources
human benefit
. We aim to support
long-term economic growth, social stability, prosperity
in the regions where we operate, as well as caring for the
and ensuring sustainable use of
natural resources
.  We want to achieve consistent and long-term growth of our business, transforming LUKOIL into a
leading global energy company
. We want to be a reliable supplier of hydrocarbons on the international
Supplements a company’s financial measurements with non-financial measurements

Translates the vision and strategy of a business unit into objectives, and measures variables in four different perspectives:
Financial Perspective
Customer Perspective
Internal Business Process Perspective
Learning and Growth Perspective
Balanced Scorecard Defined
Content Analysis Concept Synonyms
Content Analysis Perspectives and Concepts
Examines words and phrases in documents for important trends and patterns

Words mentioned most frequently are the ones that reflect the greatest level of corporate concern
Content Analysis Defined
Importance of the oil industry in the global economy

How to evaluate multinational corporate sustainability?
Content analysis using the balanced scorecard technique

Does corporate sustainability imply financial success?
Compare content analysis results with ROE
Company Comparisons
Net Income &
Shareholder’s Equity

Valero strives to be a world-class competitor in the global energy business, generating industry-leading returns on its investments in an employee-focused, socially conscious, community-minded, safe, reliable and environmentally responsible way.
Ranked 12th largest American corporation by Fortune 500

Based in San Antonio, Texas

With its subsidiaries included, it is the world’s largest independent petroleum refiner and marketer

Valero has 16 refineries and 10 ethanol plants located in the U.S., Canada, the United Kingdom, and the Caribbean

Diversified products support dozens of industries including health care, plastics, transportation, beauty products, and manufacturing
Company Overview
Focus on the Customer and Financial Perspectives of the balanced scorecard

Important to focus on the Customer Perspective because the 2010 Deepwater Horizon oil spill may have caused customers to view BP negatively

The effects of the oil spill may also have caused shareholders to lose confidence in the company
Final Analysis

The 2010 Deepwater Horizon oil spill in the Gulf of Mexico is considered the largest accidental release of oil into marine waters
The well spewed an estimated 172 million gallons of crude in the Gulf, fouling marshes and beaches, killing wildlife and shutting off vast areas to commercial fishing
BP announced 11/15/12 that it will pay $4.5 billion in settlement with the US government and plead guilty to criminal charges related to the deaths of 11 workers and lying to Congress
Deepwater Horizon Oil Spill
Business Segments by Region
Responsible for the direction and oversight of BP on behalf of shareholders

Committees include:
Gulf of Mexico Committee
Safety, Ethics, and Environment Assurance Committee
Audit Committee
Remuneration Committee
Nomination Committee
Chairman's Committee

Also have an Independent International Advisory Board that advises the board on strategic and geopolitical issues relating to the long-term development of the company
Board of Directors

“Our objective is to create value for shareholders and supplies of energy for the world in a safe and responsible way. We strive to be a safety leader in our industry, a world-class operator, a responsible corporate citizen and a good employer.”
Company Objective
Balanced Scorecard Results
Business Segments by Region
Lukoil has 120,300 employees worldwide
Company Statistics

Sales and Marketing Guidelines:

Logistics optimization: reduction of
Transportation expense
Tight management of trade flows
Increase of trading operations efficiency
Increase of retail sales of petroleum products
and related goods and services
Retail network optimization
The world consumes over 30 billion barrels of oil per year

Vital to many products and industries across the globe

The industry includes the exploration, extraction, refining, and transportation of petroleum products

Also used as a raw material for chemical products such as pharmaceuticals, fertilizers, and plastics
Industry Analysis
Financial Perspective:
Emphasizes wealth maximization for shareholders

Customer Perspective:
Determines how a company wishes to be viewed by its customers

Internal Business Process Perspective:
Describes the business processes that the corporation has to be proficient in so as to satisfy its shareholders and customers

Learning and Growth Perspective:
Involves the changes and improvements the company needs to realize if it is to accomplish its vision
Balanced Scorecard Perspectives
Describes business practices that consider every dimension of how a business operates in the social, cultural, environmental, and economic environments

Adheres to the belief that any company is better off creating both bottom-line and societal benefits by creating synergies between these often competing interests:
Shareholder interests
Public interests
Corporate Sustainability Defined
Fortune’s “World’s Most Admired Companies” list from 2012 within the petroleum refining industry

Well-rounded global perspective
OECD and BRICs countries represented
Leading Oil Companies
Kumar Marthy
Shannon Reilly
Alana Tantlinger
Corporate Sustainability of International Oil Companies
The sustainability index rank and balanced scorecard rank are associated with corporate sustainability whereas ROE rank is associated with financial success. Because all three companies ranked consistently between these three standpoints, this implies a direct relationship between corporate sustainability and traditional financial measures.
Correlation and Ranking
Perspective Ranking

1. Internal Business Processes
2. Learning and Growth
3. Customer
4. Financial
Balanced Scorecard
Source: Copyright @ 2012 Valero Marketing and Supply Company. All Rights Reserved. 

12 members

Elected by a cumulative vote of the General Meeting of Shareholders

Does not have a general policy with respect to the separation of the offices of Chairman of the Board and Chief Executive Officer

Committees include:
Audit Committee
Compensation Committee
Nominating/Governance Committee
Public Policy Committee

21,836 employees
Board of Directors & Employees


Internal Business Processes
Learning and Growth
Balanced Scorecard Results


Internal Process
Human Capital
Technology and Growth
Content Analysis Results

Industry Averages:
ROE - 14.2%
ROA - 7.8%
Key Financial Statistics

4th largest company in the world according to Fortune’s Global 500 ranking in 2011
Net Income &
Shareholder’s Equity
Business Segments by Region
Business Segments by Region
6. Active portfolio management
7. New projects with higher margins
8. Operating cash flow growth
9. Use of cash flow for reinvestment and distributions
10. Strong balance sheet
1. We will keep a relentless focus on safety and managing risk
2. We will play to our strengths
3. We will be stronger and more focused
4. We will be simpler and more standardized
5. We will improve transparency through our reporting
10-Point Plan
Content Analysis Results
Key Financial Statistics
Net Income &
Shareholder's Equity

Located in Moscow, Russia

2.2% of global output

16.6% of Russian output

R&D of nanotechnologies

Located in ‘BRIC’ country

Technology and Growth
Content Analysis
Key Financial Statistics
Approximately 83,400 employees
Includes 14,600 service station staff
Employment Statistics

Board of Directors

11 members elected by General Meeting of Shareholders

7 board members independent from Lukoil

Committees created to ensure efficient functioning:
Strategy and Investment Committee
Audit Committee
HR and Remuneration Committee
Organizational Information
Corporate Sustainability?

Thank You
Chairman - Carl-Henric Svanberg
Group Chief Executive - Robert Dudley


Bill Klesse, Chairman of Board, CEO, President

Internal Process
Human Capital
Industry Averages:
ROE - 14.2%
ROA - 7.8%

Internal Process
Technology & Growth

Human Capital

Internal Business Processes
Learning and Growth


Problem with corporate offices
PA and NJ fueling stations charged higher prices for gas
Reduces the ability to be competitive
Example of lack of Human Capital Perspective
$9.99 a Gallon!

Needs to improve Customer and Financial Perspectives

Focus on owners of franchises in USA
Final Analysis
Industry Averages:
ROE - 14.2%
ROA - 7.8%
A correlation exists suggesting that corporate sustainability implies financial success

The Internal Business Process Perspective is significantly higher than the other three balanced scorecard perspectives
Oil companies place more importance on the internal aspects of the business rather than external factors
Results may be due to performing content analysis on more words and phrases related to this perspective
The oil industry is lacking in terms of the Financial Perspective
May be skewed because annual reports generally contain more financial information using numerical data rather than words and phrases
The oil industry as a whole should place more emphasis on external segments including customers and shareholders

Corporate sustainability is becoming a more important concern for companies and investors around the world, and it is no longer an issue of doing the right thing - it is now a key element of driving business and financial success

New venture of turning garbage into car fuel

Investing in companies that want to make gasoline components from algae, and diesel fuel substitutes from animal fat
Sustainable Thinking

Focus on the Customer and Financial Perspectives of the balanced scorecard

Must follow their motto, “Excellence in All We Do”
Final Analysis
Total Sustainability Rank = ROE Rank
Full transcript