Esso has operated in the United Kingdom for over 100 years and today has about one sixth of the market, ahead of BP and Shell. Unlike those companies, Esso has been less in the public spotlight in Britain, perhaps because its ultimate owner is the Exxon Corporation of the USA. The Exxon Valdez accident in 1989, the world’s most costly environmental clean-up operation, had limited impact on Esso. More recently, little reported was the fact that Esso actually has a half interest in the Brent Spar, although Shell has prime operational responsibility.
If foreign ownership lessens the immediate public pressure, paradoxically it strengthens the resolve of UK management not only to secure a licence to operate as a responsible business but also to demonstrate through an active community programme full participation in social and economic life in Britain.
Esso operations
Esso’s upstream division (exploration and production) has an interest in 29 off-shore oil and gas fields. In 22 of these, Shell is the operator under the Shell-Esso joint venture agreement. Downstream operations are refining, distribution and marketing, with the main centres of employment at the Fawley refinery, Southampton, and in Leatherhead, Abingdon, Thurrock and corporate headquarters in London.
Retail fuel sales make up 40% by volume of Esso’s petroleum products, sold through some 2,100 service stations, of which only 950 are directly owned by the company.
Policy definition
Esso defines its policy for community support as “meeting obligations to community at large”, subject to four criteria about contributions; they must:
truly benefit the community and not simply be a way of raising Esso’s profile;
be compatible with business interests and enhance the perception of the company as a good corporate citizen;
stand comparison with other companies of similar standing in the UK economy and in the oil industry;
not be to organisations sponsored or related to political parties.
In common with many, the programme has undergone profound change in recent years. Initially this was the (now near universal) transition from philanthropy to strategic focus, looking for business benefit. The process now continues into a third phase, with the programme seen as an extension of the business operations, yielding community benefits, rather than vice versa.
Stakeholder audiences
A distinctive feature of Esso’s programme is the restricted range of stakeholder audiences it seeks to address. Externally, the focus has been on opinion leaders, not the general public; the rationale is that the communication of a ?3 million programme must be focused to have any impact at all. This focus is now under review; the new Esso Living Trees campaign was publicised in newspaper adverts (but still only in the broadsheet press).
As a capital intensive industry with fewer than 4,000 staff, the scope for major employee involvement activities is limited. Esso does support a network of employee school governors and offers monetary awards for personal involvement in charities of up to ?250 pa. It is also experimenting with using community assignments as a development tool for young graduate recruits. However, it also has 12,000 pensioners who could be involved more.
A third distinctive stakeholder feature is the lack of need for a UK investor relations function, although there are some UK-based Exxon shareholders. The public affairs and investor relations tasks are simpler with no City audience. The lack of a public AGM removes the occasion to communicate with small investors – and be lobbied by pressure groups.
Flagship programmes
The main themes of the Esso community programme are education, environment and local neighbourhoods, roughly balanced 30:40:20.
In education, the programme is targeted towards science, technology, maths and engineering, from primary level through to university, with strong links with local schools in Esso locations. Project partners include the Royal Society, the Standing Conference on Schools’ Science and Technology, the British Association’s National Week of Science and the Association for Science Education.
In the environment, the new flagship is the Esso Living Tree campaign which brings together 15 organisations to conserve forests and trees and raise awareness of their utility to enhancing the environment. This encompasses improving air quality, preserving wildlife, enhancing landscape and expanding outdoor activities. Esso has marshalled a flotilla of smaller projects into coherent whole, with the added benefit of bringing organisations together and overcoming historic rivalry.
One of the longest standing environmental projects is NEA (Neighbourhood Energy Action). This goes back ten years, with total donations of ?500,000 to support energy efficiency work in low income households. The centre-piece is now Conservenergy Week which introduces MPs to practical benefits of the Home Efficiency Scheme to their constituents.
Another partner organisation is Groundwork and projects include a young energy conservers scheme (Esso YES) and local links between schools and business (Esso Greenlink). Esso also participates in a world-wide tiger conservation and research programme; and Exxon Corporation is contributing 61 million a year for five years. Fewer than 7,000 tigers now remain and some sub-species are extinct.
The third main area is community links, supporting employees and local organisations in the main locations.
Communication
Along with the policy shift to a more strategic focus has came recognition of the need to invest resources in publicity if business benefit is to flow. From a negligible amount previously, now roughly one fifth of total spend is devoted to communication aspects; the proportion is higher on some programmes, such as the Esso Living Tree campaign, which has an explicit public promotion objective. Individual charities can and do add to the publicity effort themselves.
Having set clear objectives for the programme and concentrated resources in a few key areas, evaluation becomes possible. Esso has commissioned Opinion Leader Research on internal and external audiences, including business customers and franchisees. Topics cover attitudes on reputation, ethics, environment, knowledge of the programme and information sources. Evaluation of the local impact on community attitudes is also conducted at the Fawley refinery site.
In addition the education programme has been externally assessed among internal and external audiences, covering its effectiveness, how it is organised and options for improvement. As a result, fundamental changes were made.
International factors
Despite being a wholly owned subsidiary, Esso is left very free is set appropriate policies. Exxon sets no minimum standards for spend nor gives prescriptive policy guidance. Participation in the world-wide tiger conservation project, for example, was a UK decision. However lack of international coordination could be a weakness, since the Esso brand is used world-wide outside USA. As Shell has found, activities in one market can cause criticism elsewhere.
Marketing
Esso has tested the potential and pitfalls of cause-related marketing, despite the majority of service station outlets not being directly controlled. The strongest brand image is the tiger, used in marketing for over 40 years. In 1994 and 1995, the retail promotion catalogue of service station goods included a soft toy tiger; for each one ordered, Esso donated ?1 to the London Zoo Tiger Fund. (Esso’s marketing now focuses back on price reductions, and all token schemes dropped.)
An earlier cause-related marketing regional trial, with Scope (then the Spastics Society) on mobility for people with cerebral palsy, did not prove successful. Lessons are now being learnt on how to promote such schemes internally to generate enthusiasm among service station staff, especially vital for success in a largely franchise operation.
Business conduct
Esso has developed rigourous standards for business conduct, covering compliance with the law, avoidance of political involvement, safety and environment, health and employment practices and responsible business behaviour. This latter covers business ethics, supplier relations and community support. On business ethics, chief executive, Keith Taylor, has made a personal commitment, and sits on the council of the Institute of Business Ethics.
Every four years these standards are fundamentally reviewed, in recognition that public expectations do shift, and this is now underway. One example is payment terms to suppliers. The current standard commits Esso to pay all suppliers invoices within the agreed payment terms and this is routinely monitored. But can small suppliers insist on short payment terms from powerful purchasers? Is there an objective level which responsible companies should meet?
Future challenges
For the future, Esso is not alone in recognising the need for more work on evaluation and on the potential for cause-related marketing. Esso would also do well to look closer at the whole employee agenda, getting human resources more involved.
The greatest challenge lies in the most fundamental and longest standing motivation for community involvement, the licence to operate. This is normally seen as applying to one company only. But now whole industries are under the spotlight, with a breakdown in public trust in science and expert advice and the lack of understanding about the inevitable trade-off between short-term economic prosperity and long term environmental sustainability. Brent Spar demonstrated that for the oil industry. The beef industry is now suffering a parallel problem.
Companies like Esso make major investments in the education of the next generation, both through direct school links and through curriculum content on science and environment. This certainly has a long term beneficial impact, but what about now? Whether responsibility lies primarily with industry as a whole or with government, individual firms like Esso must understand that securing a licence to operate for their company alone is no longer enough.
FactFile
Esso UK plc
Year ended 31 December 1994
Chairman and chief executive: Keith Taylor
Main business: the exploration for, production, transportation and sale of crude oil, natural gas and natural liquid gas and the refining, distribution and marketing of petroleum products.
Turnover: ?4.7 billion
Profit after PRT: ?563.4 million
Employees: 3,929
FT UK Top 500 ranking: not listed
Charitable donations: ?1.56 million
Total community contribution: ?2.88 million
% of profit: 0.28% (donations); 0.51% (total)
Memberships: –
Head of public affairs: Mr G A Sawyer
Address: Esso House, 96 Victoria Street, London SW1E 5JW
Phone: 0171 834 6677 (fax: 0171 245 3222)
Corporate Citizenship Briefing, issue no: 27 – April, 1996
COMMENTS