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13SUSTAINABILITY REPORTS OF MULTI-NATIONAL OIL COMPANIES IN NIGERIA
OLUWATAYO ENAHORO AGBEDE PhD. Candidate, Institute of Environmental Engineering, RUDN University, Moscow, Russia.
Abstract: This study seeks to evaluate the role of multinational oil companies (MNCs) in Nigeria and their contribution to economic development through the reports generated by these companies. The study focuses on six major oil MNCs operating in Nigeria. The data used for the study were sourced through content analysis of annual reports (global and local), stand-alone sustainability reporting, and other triple-line reporting publications. The study aims to provide a detailed analysis of the contributions of these oil MNCs to the Nigerian economy. Specifically, the study looks at the strategies these companies have employed to ensure sustainable economic development, the impact of their operations on the environment, the role of these companies in promoting social responsibility, and the measures taken to ensure transparency and accountability. Overall, the study provides a comprehensive evaluation of the role of oil MNCs in Nigeria's economic development.
Keywords: Petroleum, Natural resources, Sustainability, Operations and Marketing.
Introduction
Nigeria is a country blessed with abundant natural resources. These resources provide the country with a wealth of raw materials and energy sources, instrumental in fueling its financial and economic growth. The most significant of these resources is petroleum, which has played a pivotal role in the country's economic development.
Nigeria is a major exporter of Crude oil and petroleum products to the United States of America. Crude oil from the Niger delta basin comes in two types: light, and comparatively heavy -the lighter around 36 gravity and the heavier, 20-25 gravity. Both types are paraffinic and low in sulfur.
Nigerian oil is also sweet, meaning that is has a low sulfur content of only 0.05-0.55%. Nigeria has largely quantity of oil located relatively close to the US and Europe and outside the Middle East, making it not only chemically attractive, but geographically and politically desirable as well. The Nigerian State perception of the region as a satellite resource for the inflow of oil rents and for the consolidation of the economic interest of the ruling elites is making the implementation of the report problematic[5]
The multinational oil companies who have been engaged in upstream activities in the area for many years have degraded the environment of the Niger Delta and have done little to improve the lot of the people[4]
Despite the oil companies' claim that they are doing enough in terms of bringing development to the communities as part of their Corporate Social Responsibility, the host communities remain at variance with the oil multinationals, thus creating unconducive business environment[2].
Sustainability Reports oil of Companies in Nigeria
Nigeria is not an exception in the introduction of sustainability reporting in the business community with reference to the oil and gas sector in view of its role in economic development of the nation. The oil and gas sector are the backbone and mainstay of Nigeria's economy, accounting for over 95% of her foreign exchange earnings, 40% of her GDP and 85% of the Federal Government's collectible revenue[8].
The major oil producing companies are Shell Petroleum Development Company of Nigeria Ltd., Mobil Producing Nigeria Unlimited, Chevron Nig. Ltd., Nigerian Agip Oil Company Ltd., Elf Petroleum Nig. Ltd., and Texaco Overseas Petroleum Company of Nigeria Unlimited. The south-south geopolitical zone of Nigeria comprises of nine states, known as the Niger Delta Region Several years of economic and political victimization by the Nigerian government has increased poverty in the region.
Additionally, the initial attitude of oil MNCs toward social and environmental stewardship deepened the injustice in the region[7] Shell petroleum Development Company of Nigeria (SPDC) started operations in 1930s, and today controls the largest share of Nigeria's crude oil SPDC, ExxonMobil, Chevron-Texaco, Agip, and Total-Elf operate over 5,284 oil wells, including thousands of miles of pipelines across the region [6]
These oil MNCs started corporate stewardship programs dating back to the 1960s and 1970s; however, the region remains grossly underdeveloped. The basic infrastructural deficit continues to make life unbearable for the local people. Because it is a wetland, the predominant occupation in the region is farming and fishing[3] Thus, the lackadaisical attitude by the Nigerian government and oil MNCs toward development is not helpful to the local people[1]
Multinational companies have been involved in Nigeria's petroleum industry for many years, primarily through joint ventures with the Nigeria National Petroleum Corporation (NNPC). As either operators or contractors, these companies work in Nigeria's deep waters under production-sharing contracts (PSC), failing to address the triple bottom line aspect of sustainability reporting. In one instance, multinational companies operate under a service contract with NNPC.
The petroleum industry in Nigeria is heavily reliant on crude oil production, which comes from several small producing fields situated in the swamps of the Niger Delta. Despite the significant contributions of multinational companies, they have faced numerous issues. These issues range from a lack of transparency to environmental degradation and insensitivity to stakeholder concerns. As a result, multinational companies have been the target of community unrest and public criticism.
Oil MNCs must integrate environmental and social performance into their economic pursuits to achieve sustainable value. This need has become increasingly apparent in recent times. Integrating the expectations of local people into corporate stewardship strategies should enable sustainable development in the long run. It is essential for multinational companies operating in Nigeria's petroleum industry to take these steps to ensure they meet the needs of local communities while also promoting economic growth. These multinationals participate in the petroleum industry in joint ventures with Nigeria National Petroleum Corporation (NNPC) as operators/contractors in the Nigeria deep water under production sharing contracts (PSC), which did not address the triple bottom line aspect of sustainability reporting and in one instance under a service contract with NNPC. All the crude oil in Nigeria comes from numerous small producing fields located in the swamps of the Niger Delta. However, the multinationals have had to contend with several issues, including lack of transparency, environmental degradation, and insensitivity to stakeholder's concerns and have continually been targets of community unrest and public criticism.
Increasingly, oil MNCs faced the growing need to integrate environmental and social performance into economic pursuit to enable sustainable value. Integrating the expectations of the local people into corporate stewardship strategy should enable sustainable development. Research Results and Discussions Methodology
A study of six major oil and gas multinationals operating in Nigeria. Qualitative method was used in this study. Data were sourced through content analysis of annual reports (global and local), stand-alone sustainability reporting and other triple line-reporting publications.
The Global Reporting Initiative and the International Petroleum Industry Environmental Conservation Association (IPIECA) oil and gas industry guidance on voluntary sustainability reporting served as the basis for the development of an evaluation method. The study only used limited criteria deemed relevant within the Nigerian context.
Result and discussion
The following scaling ratings were applied in assessing the degree of reporting in the sample.
Companies Rating/Score
Issue not reported at all 0
Issue reported locally but in general terms 1
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Issue reported locally and in specific terms Issue reported globally with no specific mention of Nigeria Issue reported globally and with specific mention of Nigeria Issue reported in both global and local reports
3
4
5
Criterion 1: Organizational Profile, Strategy, Report and Governance
Most of the surveyed multinational companies performed well in almost all categories except for governance. These companies provided detailed information about their profile, strategy, and reporting parameters. However, while they established a connection between sustainability and company strategy in their global reports, they still need to do so at the local level. This indicates a need for more consistency in the companies' reporting practices and the ability to align their global and local strategies.
Half of the sampled companies reported significant impacts, risks, and opportunities at both local and global levels. However, the other half only addressed these issues on a global scale. This highlights the need for companies to provide comprehensive reports covering both local and global levels and their ability to identify and manage the risks and opportunities associated with their operations.
Regarding reporting parameters, the companies only described their reporting cycles at local and global levels. However, they should have also provided information on the contact person at the local level and their policies on seeking external assurance for the report. This would have ensured that stakeholders were aware of the responsible parties and the procedures followed to ensure the report's accuracy.
Regarding governance structure, all companies reported globally. However, their Nigerian affiliates should have reported on critical issues such as the list of stakeholder groups, approaches and frequency of engagement, the basis for identifying and selecting stakeholders, and the main topics and concerns raised. They should have also explained how the organization responded to these issues. This would have ensured stakeholders access to detailed information about the company's governance practices and commitment to transparency and accountability. Criterion 2: Economic Performance Indicators
During the survey, it was revealed that all companies provided detailed economic performance indicators in local and global reports. However, it was discovered that the companies still needed to fulfill their responsibilities in their local reports to mention policies and advocacy programs for the promotion of transparency of payments to the host government. This omission is particularly significant considering the concerns raised by stakeholders over the years regarding the multinationals' lack of transparency in their dealings with the Nigerian government. These criticisms led to the introduction of the Nigeria Extractive Industries Transparency Initiative (NEITI), which was created to promote transparency in the activities of the multinationals in their dealings with the Federal Government. However, despite the introduction of NEITI, during our research, we found that the initiatives needed to be more cooperative. This lack of implementation raises questions about the effectiveness of NEITI in promoting transparency in the activities of multinationals.
Criterion 3: Environmental Performance Indicators
All the companies surveyed reported some information on their environmental performance indicators in their global reports. However, when it came to their local affiliates, no reports were made on their environmental performance. This lack of reporting was particularly evident regarding spills and discharges. In their local reports, multinational companies failed to mention the volume and number of hydrocarbons that were spilled or present in regulated discharges to water environments. This lack of transparency makes it difficult to hold companies accountable for their environmental impact and makes it harder for regulatory bodies to monitor compliance.
Another area where companies fell short was in their reporting on wastes and residual materials. Companies did not report on the quantity of hazardous and non-hazardous wastes disposed
of, toxic releases, or the total quantity of recycled, reused, or reclaimed materials that would otherwise have been considered waste. This lack of reporting can make it difficult to assess the impact of a company's operations on the environment, and it can also make it more difficult to identify opportunities for improvement.
Regarding emissions issues, international best practices require that individual quantities of emissions by type, the total volume of hydrocarbon gas vented and flared to the atmosphere, and annual emissions of greenhouse gases reported as total CO2 equivalent be appropriately accounted for. However, multinationals did not adhere to this requirement in their local reports. This lack of reporting makes it difficult to assess the impact of a company's operations on the environment and to identify areas where improvements can be made.
The multinationals only reported the implementation and coverage of an Environmental management system in their local and global reports regarding resource usage. They did not report the quantity of primary energy and freshwater consumed in their operations, except in their global reports. This lack of reporting can make it difficult to assess the impact of a company's operations on natural resources and to identify areas where improvements can be made.
Companies should have reported their operations locally in areas of high biodiversity. They should have reported on the impact of their operations on biodiversity and their strategies for managing the impact on biodiversity associated with their activities, despite already reporting on this in their global reports. This is important because it can help to identify areas where companies can make changes to reduce their impact on biodiversity. Criterion 4: Health and Safety Performance Indicators
The multinational operations in Nigeria have claimed to put an occupational health and safety management system in place, but their system description needs to be more detailed. They have yet to provide any specific information regarding the participation of employees in health dialogues, the existence of programs to understand the general health risks affecting the local workforce, or a system for reporting occupational injuries. These details are crucial for assessing the effectiveness of their health and safety management system. In addition, they have not provided any data on the total injury rate, total illness rate, lost time injury rate, and fatality rate, which are essential metrics for measuring the safety of their operations. Without this information, it is not easy to evaluate the impact of their health and safety management system on the well-being of their employees and the local community. Criterion 5: Social Responsibility Performance Indicators
In their local reports, multinationals could have done better on their Social Responsibility performance Indicators. Regarding Human Rights, there were neither policies and procedures for addressing human rights nor employees training on the issue of human rights. There was no report on the number of incidents of discrimination and violation involving the rights of indigenous people and action taken (if any). In terms of employment practices, while multinationals reported on the availability of a policy for preventing discrimination among employees, there was no program to gauge employees' satisfaction.
On the community issue, there was no description of the processes engaged. Addressing the needs of indigenous communities, resettlement and land rights of impacted communities, and managing the positive and negative impacts on communities in areas affected by core business activities, the total number of legal actions against the companies should have been reported. However, the companies provided contingent liabilities (for issues like fines, non-compliance with laws and court cases) in their local reports.
Conclusion
The study conducted on sustainability reporting disclosures revealed significant variations in the reporting practices of companies despite the absence of any known local regulation to support the standardization of such disclosures. While multinational companies reported extensively on sustainability practices in their global reports, their local affiliates needed to follow suit and report locally on the same issue. Additionally, multinationals differed in their reporting mode, making it difficult to compare companies and assess their sustainability performances. Among the
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multinationals operating in Nigeria, the study found that they performed poorly in their Environmental and Social reporting indicators, which partly explains the criticism and unrest that characterized their operations in the last decade. These findings highlight the need for standardized sustainability reporting practices and the importance of local reporting to provide a comprehensive picture of a company's sustainability performance. The study's findings will be helpful to policymakers, stakeholders, investors in the Nigerian oil and gas industry, and other stakeholders interested in sustainable economic development in Nigeria.
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