The round table of corporate directors, CEOs, and environmental managers and vice presidents that I discussed in my previous post in fact resulted in a fascinating discussion. What I discovered about the directors is that they are very astute, concerned, and dedicated to the companies on whose boards they sit. As personal liability concerns have risen for directors over the last five years, particularly after Sarbanes-Oxley, and some business leaders have decided to pass on invitations to sit on corporate boards, it is reassuring to know that bright business people remain willing to devote their time and energy to publicly-traded companies.
Several issues evolved in the day’s discussion. Not surprisingly, since many of the companies represented were oil and gas related entities in the upstream and midstream business, climate change and restrictions on carbon dioxide emissions consumed a significant part of the discussion. It was clear that climate change and potential regulation in the United States and Canada are strategic issues that management and the boards of oil and gas companies should address.
Developing an adequate strategy on climate change is critical. Each CEO, director, or environmental manager needs to understand the specifics of proposed legislation, how it would affect the company’s industry, and how it would affect the company itself. Engagement in public discourse and legislative development is a critical. I commented that there is no shame in being in the oil and gas business. Our society must have energy to drive our lives and our economies. I stated that the producers, refiners, and marketers of oil and natural gas must address the issue of climate change, and get off the sidelines.
Whatever the controversy over the science, the leading scientific academies across the world have stated that (1) climate change, particularly global warming is occurring, and (2) human activity is contributing to this change. Regardless of the skepticism some scientists and companies feel for these conclusions, the reports of these scientific institutions have resulted in a growing public demand for legislation restricting the emissions of greenhouse gases. The group as a whole believed that legislation in North America appears inevitable. The recent policy shift by ExxonMobil is a an example of this strategic reality.
One of the issues we discussed is that the public in calling for this restriction must itself bear part of the burden as well. It is not possible to simply pass the buck to industry without any life style changes and costs being borne by the public and the energy consumer. One of the key issues I discussed is that the oil and gas industry should consider a public outreach that states that the oil and gas industry is willing to take action and make investments to reduce greenhouse gas emissions and wants to educate the public on how it can contribute to reducing energy use and to becoming more energy efficient. A positive message needs to be presented. One of the directors called on the group to begin developing such a plan.
Another issue that arose was public financing of research to address technological solutions. One is carbon capture and sequestration. (See an earlier post on the work of Total in this area). Even in a carbon cap-and-trade system, the market price for carbon credits would be insufficient for example to pay the costs of setting up a carbon capture and sequestration system at a power plant. Thus, the economics would not support such a system. I suggested an idea, which I will discuss in more detail in a future post, of “Carbon Bonds.” Public bonds could be sold to generate funds to provide low interest, long term financing of carbon capture and sequestration projects. Through such a financing mechanism, the broader public would bear a portion of the financial burden of capturing and storing carbon dioxide underground by spreading the costs more broadly through the economy.
The discussion was lively, intense, and at a high level of intellect, social concern, and business acumen. These folks are clearly leaders in environmental, health, and safety corporate governance. Again, it is reassuring to know that these people are in charge of their corporations EHS issues. Spreading this knowledge and expertise would be of great value to businesses all over the world.
The next post will go into other issues discussed at this roundtable on Environmental Corporate Governance.
