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Transforming Business for Tomorrow's World

ExxonMobil: “The Road Not Taken”

By Saurabh Tripathi

It was the summer of ‘77. Scientist James Black had the unenviable task of informing some powerful oilmen (Exxon’s Management Committee), that the pursuance of fossil fuel-based energy was only going to end one way. His message was clear: “There is general scientific agreement that the most likely manner in which mankind is influencing the global climate is through CO2 release from the burning of fossil fuels”1. Exxon received this news well before the average person on the street and even in government. A year later, Black presented to a larger audience an updated version of his findings, which included the forecast that a doubling of CO2 in the atmosphere would entail catastrophic implications for average global temperatures - 2oC to 3oC rise, and nearly 10oC rise at the poles. He went on to imply that we had about 5-10 years “before the need for hard decisions regarding changes in energy strategies might become critical”1.

But that’s just what Exxon’s top scientist said. The question is what did they do about it? The answer might not be what you were expecting. Interestingly, they did not begin spending millions of dollars immediately promoting climate scepticism – but we’ll come to that soon enough. They spent a decade researching the issue further and carried out a programme that included empirical CO2 measurements and extensive climate modelling, all in an attempt to understand what the consequences of fossil fuel burning really were. They even validated their scientists’ findings through shipborne CO2 measurements in the early 1980s.1

Then came a sharp U-turn in their approach to global warming. Towards the mid-1980s, Exxon decommissioned the research, and spearheaded climate change denial at the highest levels. They cited lack of government R&D funding and full-compliance with government regulation at the time as reasons to not investigate the issue any further. These excuses are convenient for the records, but what about the moral obligation a corporation owes to the society in which it operates, and from which it derives all of its profits? Should a company not have to secure its social license to operate? As a people, if we had been made fully aware of Exxon’s actions and their potential impacts on our lives back in the 1970s, would we have been okay with their continuing “business as usual” for the next 40 years?

Source: Seppo Leinonen

Why did Exxon choose the road that they did? It is down to some essential behavioural traits that have come to define today’s corporation: relentless pursuit of size, aggressive lobbying, leverage without limits, and advertising without ethics – the defining features of “Corporation 1920”. Understanding these traits and their genesis can help us see why such scandals are becoming increasingly commonplace and how we might be able to control the flow of negative externalities from corporations to society: today’s pervasive model of “private profits, public losses”. 

ExxonMobil generated $98 billion in gross profits in 2013-14. If it were a country, it would be in the top third on the list of countries by nominal GDP. That is how large some of today’s biggest corporations have been allowed to become. The pursuit of size through the use of financial leverage and political leverage though aggressive lobbying has transformed companies into “too big to fail” institutions which can essentially operate in any way that best serves their motives. Is this the construct of an equitable and inclusive society? The company spent $860,000 on political lobbying in 2014, of which 85.5% was directed towards the Republican Party. Are we okay with large corporations swaying the outcome of our elections? This is a seemingly endless cycle of big companies lobbying for economic policies to be aligned with their interests so that they can grow even bigger. What is the logical conclusion to this thirst for more? Where do we draw the line? This relentless pursuit of profit growth does not take into account social welfare and has in the process, pushed some very real and sensitive environmental boundaries.

The change in ExxonMobil’s research policy was driven by an opportunity they saw - “make hay while the sun shines”. Most citizens and governments were not fully aware of the extent of the problem, so they concealed the research and generated massive profits until awareness of the issue grew in the late 2000s.

Figure: ExxonMobil contributions to US political parties

When the reports of this scandal surfaced in the Los Angeles Times (LAT) and Inside Climate News (ICN) in September 2015, Exxon published a blog post refuting their claims. In this blog, Ken Cohen, VP of Exxon’s Public and Government Affairs, argued that their scientists’ climate research has been thorough and extensive for decades since the early 1970s, and that that should surprise no one. If that really were the case, why is Exxon also accused of having spent about $31 million between 1998 and 2014 to push climate scepticism and denial at a global level? Greenpeace has listed Exxon’s nexus with think tanks and organisations in promoting “the hoax that is climate change” at Cohen proceeded on his vague harangue about how LAT/ICN didn’t bother to talk about their “broad portfolio of biofuels research” and significance in developing the lithium-ion battery. Again, if Exxon was so committed to clean energy, then why did they continue extracting oil at record rates while ignoring the possibility of engineering vehicles that could operate on the same lithium-ion batteries that they helped pioneer?

Exxon’s choices were not socially responsible. But are they the only company whose choices aren’t? These are “Corporation 1920s”, whose fundamentals are based on the Friedman Doctrine which argues that a company owes no social responsibility to the public, but is instead only answerable to its shareholders, and thus must unapologetically pursue profits. Today we are looking at a scenario where we are almost certainly headed into a 3oC hotter planet by 2100, and it is exactly this sort of corporate behaviour that has led us to this point. If we are to change the state of affairs, we have to think big and act fast on several fronts.

Companies must be obliged to come clean: measure their externalities, and report them in their annual reports. Corporate taxation must “tax the bads, not the goods” as a disincentive for excessive or dangerous depletion of resources - including our atmosphere’s ability to absorb CO2 emissions without a change in climate. Checks and balances must be effective, to ensure transparency in lobbying and ethics in advertising. The system of campaign financing during elections needs to be radically transformed. And as consumers, we should be made acutely aware of the implicit support we offer to a company by purchasing its products. Our individual decisions can collectively make a difference.

One might, and rightfully so, feel dejected about the scale of the problem and powerless about their ability to effect change. The key is in realising that on the one hand, as citizens, we choose our government, and on the other, as consumers, we choose which corporations to associate with. Demand more from the government you elect and the corporation you buy from. An aware consumer who doesn’t give in to “their” narrative of consumerism is what “they” fear. In a system that is blind to any consideration other than profit, we owe it to ourselves and to future generations, to take this fight upon ourselves and reform our society for the better.





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