Oil & Gas survey

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F O C U S

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O I L

A N D

G A S

S E C T O R

K P M G s
I n t e r n a t i o n a l
S u r v e y o f
C o r p o r a t e
S u s t a i n a b i l i t y
R e p o r t i n g 2 0 0 2

G l o b a l

S u s t a i n a b i l i t y

S e r v i c e s

T M

2002 KPMG LLP, a UK limited liability partnership, and the UK member firm of KPMG International, a Swiss nonoperating association. All rights reserved.

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Introduction

Page 1

Since the publication of KPMGs International Survey of Environmental Reporting in 1999, there
has been significant change in the number, scope and quality of reports1 produced by companies.
The KPMG 2002 International Survey of Corporate Sustainability Reporting shows that reporting is
now becoming mainstream for big corporations, with 45 percent of Global Fortune Top 250 companies
now publishing a report. The focus of these reports is gradually shifting from the inclusion of only
environmental performance to combined environmental, social and economic issues (i.e. sustainability
reports), and an increasing number of reports are being externally verified. Companies are also adopting
new approaches to reporting, such as web-based reports, developing reports for specific stakeholder
groups or issues, and preparing shadow accounts that incorporate social and environmental costs.
In todays business environment, companies are facing increasing pressure to make the right financial
decisions while demonstrating their legitimacy and sustainability. Stakeholders are also becoming
increasingly concerned about the way in which decisions are made, and are asking for greater
accountability and involvement.
There are still many companies, for whom sustainability is not a core business issue, but a compliance
with legislation or nice to have accessory with little business relevance. However, companies included
in KPMGs 2002 survey (hereafter, the main survey) report that embracing sustainability can enhance
business performance in many ways, including:
Reducing operating costs and improving efficiency
Developing innovative products and services for access to new markets
Improving reputation and brand value through integrity management
Recruiting and retaining excellent people
Gaining better access to investors capital
Adding to the value of the company through the financial markets appreciation of good
sustainability performance
Reducing a companys liabilities through integrated risk management.

This Oil and Gas Sector briefing report highlights some of the results from the main survey that relate
to the oil and gas sector, and compares the performance of oil and gas companies to that of the global
corporate world. Graphics presented in this report may differ slightly to those presented in the main survey.
The aim of this report is to offer an insight into the current trends in reporting within the oil and gas
sector and, together with the results of KPMGs main survey, to provide convincing material regarding
the importance of Sustainable Development.

Survey methodology

The main survey focused on the state of reporting for the following companies:

The Global Top 250 companies from the Global Fortune 500 (hereafter, the GFT250)
Top 100 companies in 19 countries2 (1,900 companies)

The Top 100s database included 114 oil and gas companies and the GFT250 included 19. In order to
obtain a more complete and global picture of the state of play in this sector additional analysis was
conducted for this briefing report on a further 12 oil and gas companies that were not included in the
main survey. The oil and gas samples included in this briefing report are therefore:
Those companies included in the Top 100s database (114 companies);
Those companies in the GFT250 (19 companies); and
An extended sample containing all Top 100s and GFT250 companies and the additional 12 companies
(132 companies - companies in both the Top 100s and the GFT250 have only been counted once).

The reports surveyed were analyzed by country, sector and the level and type of reporting. More detailed
explanation of the methodology employed can be obtained from the main survey.

1 The term reports in this survey includes environmental, health, and safety, social, community and
sustainability reports, and a combination of these. Annual reports will specifically be referred to as such.
2 Australia, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hungary, Italy, Japan,
Netherlands, Norway, Slovenia, South Africa, Spain, Sweden, United Kingdom, USA.
2002 KPMG LLP, a UK limited liability partnership, and the UK member firm of KPMG International, a Swiss nonoperating association. All rights reserved.

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Sector comparison

Page 2

The Top 100s sample was analyzed to discover which sectors are leading the field with respect to the
number of companies reporting. The results, which are presented graphically in Figure 1, show that the
Utilities sector is leading with 50 percent of companies publishing reports. Analysis of the oil and gas
companies in the GFT250 and the extended sample revealed that reports were produced by 68 percent
and 37 percent, respectively. These results suggest that the larger oil and gas companies are ahead in
respect to reporting with smaller companies trailing. The oil and gas companies in total are, however,
still well ahead of the Top 100s sample (23 percent), thus suggesting that reporting is more important
in this sector than in many others.

Sector analysis of the percentages of Top 100s companies producing

corporate reports

Figure 1 :

Source: KPMG International Survey of Corporate Sustainability Reporting 2002, The Netherlands.

(101)

50%

(93)

46%

(67)

45%

(28)

43%

(114)

38%

(68)

37%

(42)

33%

(47)

30%

(109)

28%

(126)

25%

(131)

25%

(141)

24%

(241)

15%

(340)

12%

(108)
(144)

9%
6%

(250)
(1,900)

Global trends

Figure 2 :

45%
23%

The prevalence of reporting was also analyzed by country in both the Top 100s and enlarged oil and gas
samples. The result of this analysis is shown in Figure 2. Results for the extended samples are only shown for
those countries that had more than five oil and gas companies as sample sizes smaller than this are not thought
to be representative of the performance in that country. The numbers in brackets after the country names in
Figure 2 represent the number of oil and gas companies included in the extended sample for that country.

Reporting in the Top 100s and extended oil and gas samples, analyzed by country
Source: KPMG International Survey of Corporate Sustainability Reporting 2002, The Netherlands.

(4)
(5)
(16)
(7)
(8)
(2)
(11)
(6)
(6)
(3)
(21)
(6)
(9)
(5)
(6)
(2)

Top 100s from the main survey - all industries

(1)
(7)

Extended oil and gas sample

(only showing countries with more than 5 oil and gas companies)

(1)

The high proportion of Top 100s companies across all industries reporting in Japan could be as a result
of the guidelines on environmental reporting and environmental performance indicators issued by the
Ministry of Environment in Japan in 2001.
The results in Figure 2 show that for most countries with more than five oil and gas companies, the
percentage of companies producing reports was higher in the extended oil and gas sample than in the
Top 100s sample. This clearly shows that the oil and gas companies are leading with respect to the
number of companies reporting in most of the countries. This may be as a result of the pressure that this
sector is under to show responsible performance due to the severity of the impacts that can arise from
irresponsible behaviour.
2002 KPMG LLP, a UK limited liability partnership, and the UK member firm of KPMG International, a Swiss nonoperating association. All rights reserved.

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Page 3

Further analysis of the results shows that countries leading the field in the production of
full sustainability reports across all industries in the Top 100s sample were Canada (42 percent),
USA (19 percent) and Germany (19 percent). Countries leading the field in this respect in the oil
and gas sector were Canada (44 percent) and USA (40 percent).

Code of business conduct

A code of business conduct describes the responsibilities of a company towards its stakeholders and the
way in which staff (should) put this into practice. Codes vary from half a page to sometimes as much as
80 pages. The linking of a code of business conduct to sustainability performance is an indication that a
company recognizes the relationships between sustainability performance and business performance. The
results presented in Figure 3 suggest that while oil and gas companies in the GFT250 are in line with the
other GFT250 companies with respect to recognizing the importance of discussing their code of conduct,
the oil and gas companies in the Top 100s database and in the extended sample performed even better,
with 81 percent and 70 percent, respectively, of companies discussing their codes.

Percentage of companies referring to a code of business conduct in their reports

Figure 3 :
Source: KPMG International Survey of Corporate Sustainability Reporting 2002, The Netherlands.

85%
81 %
80%

75%
70%

70%
65%

63%

64%
60%
55%

50 %

45%
43%
40%
Top 100s

Verification

Figure 4 :

GTF 250

Oil and Gas

- Top 100s

Oil and Gas

- GFT250

Oil and Gas Extended sample

There is an increasing focus on sustainability information which is critical for management of the
company and is vital for stakeholders to form their views. This calls for a corresponding increase in the
robustness of assurance provided. A rigorous assurance process enhances credibility of the information
reported and highlights opportunities to improve reporting processes and the information they generate,
thus ensuring that future reporting cycles are more efficient and less resource intensive - in terms of both
time and costs. If carefully implemented and fully integrated into existing assurance processes,
verification can become a strong component of the overall corporate strategy to manage, monitor and
report on key business risks.

Comparisons of the prevalence of verification in non-financial reports

Source: KPMG International Survey of Corporate Sustainability Reporting 2002, The Netherlands.

60%
54%

55%
50%
45%
42%

37%

40%

35%

30%

29%
27%

25%
Top 100s

GTF 250

Oil and Gas

- Top 100s

Oil and Gas

- GFT250

Oil and Gas Extended sample

The results presented in Figure 4 show that while just over one quarter of the companies in the original
Top 100s and the GFT250 samples from the 2002 survey have subjected their reports to verification, the
oil and gas sector is leading with 42 percent of companies in the Top 100s and 54 percent for GFT250
companies obtaining verification over their reports. This suggests that verification is considered to be
more important to oil and gas companies than to many other sectors, probably due to the sensitive
nature of the business which they conduct. There is scope for companies to evaluate the business case
for verification and consult their key stakeholders in order to determine whether verification would add
value and credibility to the data presented for their business.
2002 KPMG LLP, a UK limited liability partnership, and the UK member firm of KPMG International, a Swiss nonoperating association. All rights reserved.

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Corporate Sustainability Reporting - survey results

Overview

A growing number of companies are including information or narrative about their performance in
sustainable development in their Annual Reports. This shows a commitment to dealing with, and reporting
on, these issues as the Annual Reports are viewed by a wide range of stakeholders, including financial
lenders, customers and communities. The results of the main survey showed that 49 percent of Top 100s
companies and 42 percent of GFT250 companies included environmental, social or sustainability
information in their Annual Reports. Analysis of the extended oil and gas sample showed that 66 percent of
the companies mentioned these issues in their Annual Reports, which shows that they already command a
high profile in the oil and gas sector compared to many other sectors.
The analysis of the Top 100s companies and of the GFT250 revealed that 23 percent and 45 percent,
respectively, of companies produced a separate report. The content of reports is changing from covering
only environment or Health, Safety and Environment (HSE), to including information regarding
performance in social and community development as well. The ultimate aim of some companies is to
produce a fully integrated sustainability report, which covers economic, social and environmental
information. Figure 5 shows the proportion of companies currently publishing the various types of report
that are in existence today.

Comparison of the proportions of different types of corporate reports produced by

all companies in the Top 100s, the GFT250 and the extended oil and gas sample
Figure 5 :
Source: KPMG International Survey of Corporate Sustainability Reporting 2002, The Netherlands.

These graphics show that while Health, Safety and Environment reports are still most popular, more
oil and gas companies are producing sustainability reports.

Summary and conclusions

Corporate Social Responsibility and its reporting is a business reality for todays oil and gas
companies. No one would dispute the fact that methods of operation that were acceptable as recently as
20 years ago may not be tenable today. Many social responsibility issues have long been part of doing
business for the worlds leading oil and gas companies who are accustomed to dealing with
environmental and social issues in their operations, probably due to the heavier scrutiny they receive
from their stakeholders. The survey shows that reporting of performance in these areas is well
established and that this industry is, in many ways, leading the field with regard to managing
sustainability issues and accepting the benefits of reporting.
The industry as a whole is doing particularly well with respect to verification. Good environmental
stewardship and social responsibility are clear examples of good management and there is no disputing
the clear link between good management and business performance. Companies are realising the
benefits of external assurance in providing credibility to their claims and demonstrating to their
stakeholders the seriousness of their intent.

2002 KPMG LLP, a UK limited liability partnership, and the UK member firm of KPMG International, a Swiss nonoperating association. All rights reserved.

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KPMGs Global Sustainability ServicesTM

KPMGs Global Oil and Gas Practice

KPMGs Global Sustainability Services works

with organizations to help achieve outstanding
business performance through enhancement
of environmental, social and economic
performance. We advise and support
businesses and governmental organizations
with the development of new and innovative
ways to deal with environmental and
sustainability issues. We assess
issues from a strategic financial and
organizational perspective. Our team
of over 350 professionals in our
network of international member
firms offers a multi-disciplinary and
industry-focused approach.

KPMGs Global Oil and Gas Practice helps

clients become industry winners by
providing multi-disciplinary services that
are focused on specific needs. KPMG
delivers its services on a global basis
through industry professionals in our
network of international member firms.
These professionals have an in depth
understanding of the industry and the daily
challenges faced by oil and gas companies.

For more information, please contact:

David Shirley,
Global Sustainability Services, KPMG
david.shirley@kpmg.co.uk
or visit our Web site at
www.kpmg.com

The information contained herein is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act
upon such information without appropriate professional advice after a thorough examination of the particular situation.

For more information, please contact:

Wayne Chodzicki,
Global Leader, Oil and Gas, KPMG
wchodzicki@kpmg.ca
or visit our Energy and Natural Resources
Web site at
www.kpmg.com/industries

Focus on Oil and Gas sector

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2002 KPMG LLP. KPMG LLP, a UK limited liability partnership, and the UK member firm of KPMG International, a Swiss nonoperating association.
All rights reserved. Printed in the United Kingdom. The KPMG logo and name are trademarks of KPMG International

October
October 2002
2002
KPMGs UK Creative Services
No: 203 - 581