Statoil is a Global Energy Company which operates in 33 different countries. The company is ranked #39 on the FT Global 500 listing with annual revenues of $124.4B and profit of $11.8B in 2013. Statoil has been in operations for 40 years, with an employee base of 23,000 world-wide and has its corporate headquarters in Norway.
- Natural Gas
- New Energy
- Production Facilities (Oil and Gas)
- Exploration & Production
Statoil takes Corporate Social Responsibility seriously. As evidenced by 2 of the 6 operations. The New Energy segment searches for clean, green energy sources, while the Exploration & Production unit works to stave the effects of Global climate change in developing countries.
In Round 1 of the game, the CEO performs very well and gets thumbs up from all constituents! In this round, the CEO made savvy choices to both boost profits and reduce CO2 emissions. The choices made predominantly were:
- Invest in offshore wind farms
- Carbon Capture investment
- Solar Power investment
In this scenario, the Statoil CEO made clear and decisive decisions to invest in cleaner, greener technology and purposely stayed away from trying to salvage the existing power plants by retrofitting them. Nuclear energy was also avoided because it poses its own concerns and hazards. The Statoil CEO shied away from PR campaigns or other programs that are always good for the customers and Environmentalists, but don’t really have a very positive impact on the stock’s performance. Natural Gas remains a wild card in an overall win-win strategy. With the cost of natural gas on the rise, it can have a negative effect on the stock price. A new Natural Gas Plant is not worth building because the return will never materialize even if the CO2 emission reduction does.
Statoil already has 2 key segments dedicated to cleaner energy and through their efforts in the New Energy segment, it is clear that they would be able to discover that the use of offshore wind farms, solar energy and carbon capture would benefit them with thumbs up from all key constituents. Hence, Statoil is already set up to take advantage of cleaner energy sources and develop a win-win CSR strategy, as was the case in the CEO2 game.
In Round 2 of the CEO2 game, it was now 2020 and the demand for Energy was continuing to soar. In this round, the CEO continues to invest in clean, green energy but additionally invests in a GREEN campaign, Energy Services and also invests in helping the people in developing countries that are hardest hit by increased CO2 emissions due to climate change.
Statoil is dedicating a key segment of their operations to support exploration and production efforts and has dedicated resources to support the effects of Global warming for the people of the developing world. Hence, the approach in Round 2 of the game paralleled what Statoil is already investing in.
As noted earlier, PR campaigns and efforts that are more akin to philanthropic actions please the people, but not the bottom line. This was the case here where the CO2 emission reduction efforts were lauded by the Environmentalists and the Customers, but the Investors were not as pleased as in Round 1 where decisions were strictly kept to investing in clean, green technology and not much more. This is where perhaps the game is different than what Statoil is doing. It is not clear that any of Statoil’s operations are engaged in any type of philanthropic efforts to support messages about clean energy. And that being the case, Statoil’s stock price is likely performing better than the results from the game. But in the game, the win-win CSR strategy was quite successful: the CEO did a good job of balancing seemingly disparate objectives. The overall performance was a decrease of CO2 emissions by 59% while increasing the stock price by $28 a share.
In conclusion, balancing the equation of a win-win CSR strategy requires juggling various priorities for a diverse set of stakeholders. What is good for one stakeholder is likely not the most popular choice for another. A sustainable business is one that can manage profits with an appropriate mix of technology decisions and GREEN PR campaigns. One of the variables that caused the stock price not to rise as much as it could have in Round 2 was massive shifts in technology. For example, a new technology was created for solar panels that were more cost effective and put out as much clean energy. Hence, in addition to balancing the profit/emission equation, companies like Statoil must also constantly evaluate the evolution of existing green technologies and keep an eye out for leap frog technologies that could change the game completely. Statoil’s efforts and especially dedicating 2 key segments of their operations to CSR actions have set them up to be successful now, in 10 years and in 20 years when the overall energy demand will be 40% higher than it is today. Statoil has a win-win CSR strategy.
The chart below (Wikipedia, 2014) describes the value chain for CSR. Many of the takeaways from the CEO2 game are validated with this chart.
Knowledge.allianz.com. 2014. CEO2 Climate Game|Can you reduce your company's CO2 emissions?|Allianz Knowledge. [online] Available at: http://knowledge.allianz.com/ceo2/en_ext.html [Accessed: 11 Mar 2014].
Statoil.com. 2014. Statoil – a leading energy company in oil and gas production. [online] Available at: http://www.statoil.com/en/Pages/default.aspx [Accessed: 11 Mar 2014].
Statoil.com. 2014. Statoil sharpens renewable energy efforts. [online] Available at: http://www.statoil.com/en/newsandmedia/news/2011/pages/27jun_windenergy.aspx [Accessed: 11 Mar 2014].
Wang, U. and Wang, U. 2013. Where the money is in cleantech: oil and gas. [online] Available at: http://gigaom.com/2013/03/22/where-the-money-is-in-cleantech-oil-and-gas/ [Accessed: 11 Mar 2014].
Wikipedia. 2014. Corporate social responsibility. [online] Available at: http://en.wikipedia.org/wiki/Corporate_social_responsibility [Accessed: 11 Mar 2014].