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The implementation of the sustainability reporting has commenced back in the
80’s. The establishment of such practice is to focus on the gauge, disclose, and the
responsibility towards the internal and external stakeholders for organizational
performance in order to accomplish the statement of sustainable development. In order
for an organization to be competitive in this ever-changing business environment, one has
to go beyond rather than just maximizing of profit and assets for the stakeholder.
Consumers nowadays are more conscious on what the corporate has in return for the
public rather than just focusing on the quality and prices it products. Hence, the report
has expanded its coverage and comprises not only the economical and environmental but
also included the social impacts. For instance, it reports on corporate responsibility, the
triple bottom line, and etc.

Corporate Social Responsibility refers to an ongoing commitment by businesses

to behave ethically and contribute to its economic, social and environment development
while demonstrating respect for its stakeholders, including investors, customers,
employees, business partners, local community, the environment and the society.
(Focusing on the triple bottom line 2005, 6). At the moment, there are firm rules
designated for major corporations that it is require to present an annual report. There is
also a growing concern in business transparency as consumers now are putting strong
pressure on corporations to establish more formal management and reporting system that
address their CSR programs and its social impacts. Companies ought to increase their
profits if their production vastly that is located in developing economic countries where
the standard of living, wages and conditions are lower of, in certain cases much worse
than the organizations home country. It is also rational and adequate for the organization
to contribute more for the host countries where their production factories are located to
their employees and the society of the host country (Grossmanx 2004, 5). Due to the
increase of knowledge among consumers, stakeholders, investors and those involved in
CSR are becoming more and more common in the present day; brand identity now comes
first when consumers are evaluating a product without hesitation or consideration
towards the price. They can easily access to a particular company’s CSR which in turn

reflects their decision on making a purchase for a product. Therefore the CSR is a
significant element which every company should take into accounts. In this report,
PETRONAS would be the corporation chosen for doing the evaluation towards its
sustainability report. PETRONAS- having known as Petroliam National Berhad which
was merged on 17 August 1974 and currently owned by the government of Malaysia,
PETRONAS operates in more than 30 countries worldwide (PETRONAS group
sustainability report 2007).


The popularity of sustainable reporting had constantly increased within the past
decade. Nowadays, public demand the company to disclose their corporate values,
policies and direction, impact data, governance and stakeholders’ engagement clear and
accurately. In fact, sustainable reporting will bring benefits to several parties, the
organization, public, government and environment only to mention a few. From the
organization point of view, they will gain all kinds of benefits from it. The most common
pro for company engaging in sustainable reporting is the economic factor. Companies
that engaged in sustainable reporting usually will be the more favorable choice in
investing by the public. After having a clear view of the company’s achievement in
environment, economic and social responsibility, people will gain more confidence
towards the company’s operation and secure to success. For some people, the company’s
engagement in triple bottom line will be the main criteria for them in making an investing
decision. Especially in the Europe and US, people in the western world are more
conscious towards the organization’s achievement in corporate social responsibility. In
addition, sustainable reporting will enhance employee motivation. Clarifying the
organization mission and achievement to the public, is another form of recognizing and
appreciating the employees’ effort. Besides expecting a reasonable reward from the
organization, employees also want their effort to be recognized by the organization. If the
company is able to disclose all of the employees’ effort in social responsibility, it will be
a good motivator to the company’s employees, hence producing a higher quality job.

Nowadays, companies are trying to develop brand loyalty among customers

towards their product. Companies are using up million of dollars in adopting all kinds of
marketing strategy in order to strive for accessibility, awareness and also loyalty among
their target market. By doing sustainable reporting, organization’s name and brand will
indirectly being advertised and thus developing goodwill towards the company. Goodwill
is also a form of asset for company; therefore by investing into sustainable reporting, it
will bring profit to the company. Moreover, company will become a talking point among
public if they are incredibly committed in corporate social responsibility. Then by letting
the public know the company’s effort through sustainable reporting, it will easily enhance
a form of cost-free and effective advertisement, formerly known as “word of mouth”.

Take the example of The Body Shop. Its founder, Anita Roddick preserves practicing
CSR as the company’s main mission since its establishment in the early 1970’s. Since
that, The Body Shop had gained a huge popularity through its success in sustainable
reporting. Today, The Body Shop owns more than 2100 stores in 55 countries worldwide,
enclosed with over 1200 products and also being the second largest cosmetic store in the
world (The Body Shop 2006). As what have been mentioned previously, sustainable
reporting will bring goodwill and profit to the company, as a result the company can also
improve their market position. Profit and investment from the public will strengthen the
financial position of the company, while goodwill will be a form of competitive
advantage compared to its competitors in the market. In the long run, it will be huge
benefit for the company to survive and compete in the market.


PETRONAS has earned the title of Environmental Management System

(ISO14001 Certification) in which its operations were involved in several major local
companies. This management system brought PETRONAS numerous HSE awards,
whereby it’s the motive of establishing such practice is to effectively facilitate better
services, management and performance with testified quality (PETRONAS group
sustainability report 2007). The HSE awards gained are as follow:-

• Prime Minister’s Hibiscus Award for Environment 2004/2005

• Chemical Industries Council of Malaysia (CICM) Responsible Care Awards 2005

- Winners of Corporate Awards for the Six Codes of Management Practices

• Malaysian Society for Occupational Safety and Health (MSOSH) Award 2005

• Royal Society for the Prevention of Accident (RoSPA) Award in Occupational

Safety 2006


A survey on 15 major oil and gas companies conducted by a Spanish-based ethics
research and rating company Management & Excellence in 2006 has revealed that
PETRONAS rank 15th, which was last among all the other oil companies including Shell,
which was in the 1st placing. Shell scored 89.01% which was the highest score ever
achieved by any other companies whereas PETRONAS has only accomplished 20.15%.
Furthermore, for Environmental Policies, PETRONAS attained a total score of 25%
which indeed was the lowest compared to other oil companies and the average scored for
this is 83%. PETRONAS had also the lowest score for Corporate Governance that is
4.17% given that the average scored was 58.61%. Again, PETRONAS scored the lowest
in Transparency with 21.43% provided that the average score for this is 67.54%. Next,
for Ethics, PETRONAS earned the lowest score of 19.23% and the average score was
73.33%. Last but not least, for sponsorship, this was the only part that PETRONAS did
not get the last ranking; PETRONAS came out as second last placing with the total score
of 42.86%. Nonetheless, it was still far from the average standard score which was
72.74% (Petronas, the world's orang minyak 2006).

There are criticisms against the transparency of PETRONAS sustainability report.

The term ‘transparency’ creates a major role in leading the company to gain a massive
profit or either breakdown. It is significant as investors or the publics have the right to
know where all the money has invested to. At this point, it also support the company to
be able to well-managed its resources and endorse enhanced domination (Veer 2005).
They did not reveal its environmental policies in the report yet only implemented with the
guidelines on the paper. They also did not manage to correspond and execute the code of
conduct and ethics. It is stated that PETRONAS also did not open its accounts for the
purpose of examination and not using the profits being the finance support for
government’s mammoth development or project and supporting the failing GLC’s. It is
also reported that PETRONAS is eager to increase the gas price after subsidizing around
50 billion ringgit for several sectors all this while (Malaysia’s Petronas pushing for gas
hike 2007). In the report, it mainly states about how to attract investors and satisfy any
particular criticisms. However, it is expected that PETRONAS employ this kind of

attitude after all it belongs to Malaysia that possess culture which lack of accountability
and performance unlike any other western companies. Despite all the facts that
PETRONAS’s weakness in processing a transparent report, it shall not be judged and
compared with other oil companies such as Shell or BP. Unlike Shell, PETRONAS is a
government-owned body and they have the right to keep their operational and financial
result confidential by law. PETRONAS is still devoted on accomplishing its objective
which is to effectively managing the nation’s oil resources.

Shell, being the top oil companies for the third time is nevertheless a brilliant role
model for the other companies to look up to. Shell has made an improvement increasing
from 82% to 89% and all along maintaining the human rights codes ever since 2004. It is
claimed that Shell has out beat all the other oil companies in transparency by publishing
13 different reports concerning impact on environment and animal testing (Shell again
most sustainable/ethical oil company in 2006; Petrobras supplants Exxon in the top-5
2008). Veer has also declared that Shell was previously the first supporter of the
Extractive Industries Transparency Initiatives (EITI), which the establishment of such
firm is to guide the company avoiding misuse of its revenue that could result in any
unwanted incidents, which in turn shape Shell to become such a successful company in
global right now (Veer 2005).


In a nutshell, it is necessary that PETRONAS should take further action to

improve its sustainability report so that they would be no longer being graded last place
among all the other oil companies worldwide in evaluation of the sustainability reports.
Firstly, PETRONAS ought to develop more on transparency factor that is providing
much inner details regarding their action or efforts. Shell would be an excellent example
in this case. In the report, Shell stated in its objectives with feature of its target and the
potential performance it shall be taken specifically in various kind of sectors. For
instance, in the part of air and water protection, Shell insist clearly on preventing the
rising of gas emissions unless any emergency and determine to abolish continuous gas
burning in the year of 2008, by the assistance of the strategy implemented ever since
2004 declaring none operational flaring on any normal plant. Shell also issue in the report
how the company’s resources were being managed for the year ended that is information
of its energy consumption, water consumption, and the safeguarding of its labor force
(Shell Malaysia sustainable development report 2006).

Continuing from the suggestions on how to improve PETRONAS’s sustainability

report, PETRONAS should take into account that all its employees obey the Corporate
Sustainability Framework, PGBC and the shared values as well as include ethics report
just like what Chevron did in its sustainability report. Chevron claimed in the report that
they supply energy that do not bring any deficiency or damage to people living mostly in
Indonesia and Philippines. The energy provided is geothermal energy where its
operations are to be done in both the Asian region stated previously. Chevron is firm with
its opinion that geothermal energy is hygienic and dependable which can decrease the
possibility of relying on fossil fuel and it also do not generate any greenhouse effect that
could be harmful to the surroundings. The supply of geothermal energy can be restored as
it is the natural heat the earth produce. Chevron also presented in the report on how to
reduce gas emissions while satisfying the people’s demand and also how to create a well-
benefit business environment and enhance the community in terms of health and
economics (Energy > Ingenuity 2007 annual report 2007). PETRONAS should also
make known the downside in the report rather to focus more on the achievement in order

to make the report balance. Last but not least, the company ought to approach any highly
regarded reporting companies to create a better sustainability report in the future.


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