Lukoil Oil Company, Research Paper Example

Introduction

The UN Global Compact puts in place principles that it asks companies to support, embrace and implement within their organizations and sphere of influence. These are principles that relate specifically to standards of labor, human rights, environmental principles and values for anti-corruption. Lukoil Company represents one of the globe’s largest crude oil and gas production companies that is vertically integrated. The Company holds substantial market share in Russian and international markets. The company has millions of people in over 30 countries worldwide, with over 150,000 employees. The company’s stated goals entail the creation of new values, the maintenance of business stability, and providing the shareholders with high return on investments through the appreciation of cash dividends and asset value. The mission of the company is to utilize natural forms of energy for human benefit. The company claims to want to focus on social stability, progress in prosperity, and economic growth in the regions they operate and reducing costs through using advanced technology, but more focus can be placed on environmental policy. In 2009, Linkoil Company published their environmental policy plans. The following will take a look at those plans, their potential environmental impact, as well as some proposed policies for future improvements.

The following represents some of the current potential environmental impacts that the Global Compact attempts to mitigate through ten key principles. These principles are:

Principle 1 precludes that all businesses need to respect and support the protection of internationally proclaimed human rights. This is followed up by principle 2, which includes ensuring no business is involved in the abuse of human rights. In regards to labor standards, principle 3 notes that businesses need to maintain and uphold freedoms and each countries right to collective bargaining. The environmental principles are 7-9 and they dictate that, “Principle 7: Businesses should support a precautionary approach to environmental challenges; Principle 8: undertake initiatives to promote greater environmental responsibility; and Principle 9: encourage the development and diffusion of environmentally friendly technologies” (U. G. Compact, 2011).

The LUKOIL Group 2009 environmental policies ensure dynamic sustainable development, which corresponds with global oil majors in respect to levels of competitiveness and efficiency. LUKOIL Group’s social responsibly policy entails providing adequate work environment for their employees, preservation of cultural heritage, upholding environmental safety standards and providing appropriate compensation to workers. The company demonstrates its awareness to environmental protection responsibilities by placing an emphasis on the efficient use of natural resources. Through this 2009 write up, the company expressed their hope that the public would sympathize with the complexity and scale of the environmental challenges facing them. The company’s top priority entailed employee health protection and environmental protection, as well as stipulations put in place guarantee accomplishments of the set objectives. Through this policy, the company developed a Safety and Environment Management System, Health, as well as an Environmental Management System. These terms included compliance with emergency response and fire safety.  The company directly complies with Russian law, and it’s drafted based on Russian environmental standards and practices. The goal of the 2009 Environmental Policy, entailed: 1) the objective to enhance petroleum gas utilization rates through the growth of methods used to process gas and power production methods; 2) applying zero-discharge principle to offshore fields; 3) increase the production of environmentally friendly fuels, which are compliant with the European standards; 4) greenhouse gas reduction compliance according to Kyoto Protocol; 5)  introduce techniques that are power efficient and that utilize sources of alternative energy that also ensure natural resource management efficiency in the Lukoil Company production houses; 6) reduce emissions toxicity, pollutants and waste, through the introduction of innovative techniques, increased process control and  by introducing new cutting-edge techniques, materials and equipment to better control automation. The 2009 policy further states it seeks to “ensure continuous improvement of HSE performance, including without limitation, through increased reliability of process equipment, its safe and accident free operation, introduction of new technologies and automated emergency systems” (Lukoil Company, 2009). Another aspect of the policy involved personnel, specifically implementations necessary to guarantee rescue personnel are in place to counteract potential accidents such as fires ore other emergencies that require response.

Guidelines were set within the policy to handle such events. The company sought to provide more advanced equipment and procedures for large forest fires or fires that could be caused due to faulty procedures. OAO Lukoil standards were set to find critical response objective for environmental and health safety emergencies. This entails the reduction of ”anthropogenic environmental load resulting from operation of newly commissioned facilities by ensuring better quality of front end and design documents” (Lukoil, 2009). The policy explicitly sought to perform more efficient control measure related to efficient environmental procedures through auditing programs that would ensure that Safety and Environmental regulations were sound and capable of mitigating community exposure to pollutants. The company felt this could be accomplished through imploring cutting edge information and technology.

To achieve these goals the policy committed to some of the following goals. One being that they set out to implement a range of accident and injury prevention measures that would ensure all scheduled steps are carried out to prevention or mitigate the impact of injury on workers, the population as a whole and the environment. are viewed as those of higher priority than emergency response measures targeting such impact. The policy further vowed the company would, “ensure that there is continuous and consistent improvement in terms of  how and to what extent the personnel, residents and environment are impacted by the Company’s operations, products and services, as well as consumption of natural resources in line with the current level of scientific, technological and social development” (Lukoil, 2009). The most significant goal the company felt would lead it to meeting set obligations was to reduce oil and gas losses, and prevent their entry into the environment. The policy set in place an obligation for the company to stay current on the most up-to-date scientific developments and technology capable of reducing the consumption of energy materials and natural resources, while simultaneously sustaining optimum production levels.  “ensure compliance with the applicable Russian law, international treaties, industry-specific and corporate regulations, as well as national laws of the countries of LUKOIL Group operations governing health, fire and environmental safety and emergency response preparedness” (Lukoil Company, 2009). The policy stipulates that it will makes a conscious effort to maintain awareness of how its operations impact the potential health of the community in which it operates, its personnel and the environment through regular assessments, stating it will, “assess the impact that the scheduled business activities, products and services may have on the health of the personnel, population and environment;  assess production, occupational, and fire-safety risks, develop and implement measures to mitigate and offset such unforeseen losses” (Lukoil Company, 2009). The company also vowed to make and implement any managerial and production-related decisions that take into account necessary environmental issues, in addition to occupational and production concerns that might put the community or staff at risk of environmental hazards. The company policy also mandated that all employees operate in compliance with industrial and environmental safety policy. This required advanced training for environmental safety, which the company states in their policy they will provide staff. The policy further points out that all companies contracted by Lukoil Company will be required to comply with the same emergency response and environmental hazard safety standards as the company itself stating that they all are required to do the following: “publicly report to the Company’s shareholders and personnel on industrial, fire and environmental safety, health and emergency response issues;  inform on a regular basis all parties concerned (public at large, executive and legislative bodies, etc.) of LUKOIL Group operations in the field of industrial, fire and environmental safety, health and emergency response” (Lukoil, 2009). The final aspects of the 2009 policy state that the company intends to make an effort to continuously improve Environmental Management and Health Safety parameters and to enforce the policy as it sees fit.

Areas of challenge & Proposed Future Measures

One key challenge that Lukoil company faces going into the future regarding the implementation of their social responsibility policies has to do with transparency. As Frynas (2012) notes, in the past couple of years, a wide range of large oil companies stated in their sustainability reports that, “there were no accidents that caused major pollution to the environment” (Frynas, 2012). The study further notes that Lukoil Company made similar claims about oil spills in 2010, claims that are difficult to believe for a company of Sinopec’s or Lukoil’s size. Many large oil companies use external assurance organizations to verify CSR reports, but the self-reported environmental indicators are normally not questioned.

In 2012, Lukoil Company published a new environmental protection program devised for implementation from 2012-2021. The following are some of those measures as well as some measures proposed for expansion of these proposed future measures.

LUKOIL demonstrates that it’s well aware of its obligation to society to be socially responsible with this policy, noting that it “acknowledges its responsibility to society for rational use of natural resources and preservation of the environment. The Company therefore observes the highest standards of care for the environment and of industrial safety in its operations” (Lukoil Company, 2015). The company put the policy to action through investing more than 1.3 billion dollars USD in environmental safety measures in 2013, more than 68% of which was allocated to protect and improve air quality, specifically in regards to the utilization of gas. Another 19% of the funds were allocated ot accident prevention and impact mitigation.

Environmental security program in 2014-2018

In 2013, Lukoil Company issued some proposed strategies of their-own for 2014-2018. This new program was established for proposed policies to enhance environmental safety. The program establishes the following priorities:  To utilize newly generated waste in such a way that the ratio of waste generated to waste disposed is 1:1. The company proposed the utilization of petroleum gas be at 95% by 2016. The company also demonstrated a desire improve the accounting system in regards to its ability to track greenhouse gas emissions. The company made the following proposed changes to their own environmental policy: “1) promotion of Euro-5-compliant eco-friendly fuel production; 2) prevention of environmental emergencies, preparedness for emergency response, reclamation of impaired and contaminated land plots; 3) introduction of automated industrial environmental monitoring systems” (Lukoil, 2015). The company further placed a greater emphasis on overall compliance with international and national environmental regulations that have been newly formed in response to the impact produced by Lukoil activities as well as those by similar companies outside of Russia. outside of Russia.
The environment program for 2014-2018 envisages over 600 actions with total cost of more than $ 4 billion.

Progress in 2013
• A new environmental safety program for 2014-2018 was designed
• Reduction of wastewater discharge
• Reduction in the area of contaminated land
• Reduction of the number of pipeline failures by 3% (Lukoil, 2015)

Conclusion

In sum, The UN Global Compact puts in place principles that it asks companies to support, embrace and implement within their organizations and sphere of influence. These are principles that relate specifically to standards of labor, human rights, environmental principles and values for anti-corruption. Lukoil Company represents one of the globe’s largest crude oil and gas production companies that is vertically integrated. While the company has made a significant effort to put environmental policy in place, and even allocated funds towards improvements in action, there are still some distinct areas where improvements can be made.

References

Compact, U. G. (2011). Overview of the UN Global Compact. Retrieved, 18, 2011.

Frynas, Jedrzej George (2012) Corporate social responsibility or government regulation? evidence on oil spill prevention. Ecology and Society, 17 (4). ISSN 1708-3087

Luk Oil Company.  (2015). Company information.  Retrieved from http://www.lukoil.com/

Luk Oil Company (2009). Environmental policy. Retrieved from http://www.lukoil.com/static_6_5id_267_.html