1. INTRODUCTION
In the last few decades, global warming has become an increasingly
prominent issue and a significant threat to the natural environment.
Since the pre-industrial time, anthropogenic emissions are believed to
have increased the tropospheric concentrations of greenhouse gases
(GHGs), including carbon dioxide (C[O.sub.2]), methane,
chlorofluorocarbons (CFCs), nitrous oxide, tropospheric ozone and other
gases (CDIAC, 2010). With the economic development the industrial sector
has been identified as a major contributor to the GHG emissions.
Therefore, the industrial sector plays a critical role in reducing GHG
emissions and in driving innovations for new clean technologies.
Corporate efforts for managing corporate GHG emissions are
currently underway worldwide. In June 1992, the First UN Conference on
Environment and Development in Rio de Janeiro (UNCED, also referred to
as RIO 92) called for "harmony of nature" and brought
developed and developing nations together to strive for sustainable
development (United Nations, 2011). Companies in developed countries are
dedicated to developing environmental strategies and innovations to
mitigate GHG emissions (Vredenburg, 1997; United Nations, 2011), as
required by Kyoto Protocol. Voluntary report of GHG emissions are being
carried out at different developed countries. Similarly, some oil
companies have included information such as real GHG reductions, energy
efficiency improvements, fuel substitutions, changes in production
level, and changes in estimation methodology in their GHG report (CDIAC,
2010). It was suggested that since Kyoto Protocol in 1995, more
companies have adopted proactive environmental strategy instead of the
"wait-and-see" attitude (Kolk, 2008).
RIO 92 has also advocated implementing sustainable development
practices in participating countries. As suggested by Westley et al
(2011) in the 3rd Nobel Laureate Symposium on Global Sustainability,
significant efforts to transform institutions that shape our culture,
politics and economy must be accelerated in order to support 9 billion
people without transgressing critical planetary boundaries. With a
population of over 1.3 billion people, China has been targeted as a
critical participant in sustainable development issues.
Historically, China has put economic growth ahead of the
environment protection (Zhang & Stening, 2010). For many years,
there was a corperate attitude that environmentally conscious
investments would hinder a firm's financial performance. As a
result, carbon emissions in China are among the highest level of any
country. Environmental pollutions have become so a serious problem in
some places that social and political stability is at risk (Zhang &
Stening, 2010). These domestic pressures, along with pressures from
international organizations, have been put on Chinese government to
mitigate GHG emissions. In November 2009, the Chinese government
announced a 2020 target reduction target of 40% to 45% of carbon dioxide
emissions per unit of GDP, compared with emissions levels in 2005. To
achieve target reductions, the Chinese government has set up
corresponding regulations, such as Synergy Operational Schemes of Energy
Conservation and Emissions Reduction (Li, 2009). According to
regulations, the oil industry is required to establish monitoring and
evaluating systems which reduce GHG emissions and energy consumptions.
IPCC (Intergovernmental Panel on Climate Change) fourth assessment
report in 2007 and IEA (International Energy Agency) annual energy
outlook in 2007 indicate that global GHGs emitted by the downstream oil
operations worldwide consist of 11% of the global GHG emissions, and
that carbon emissions from petroleum and natural gas industries make up
64% of the total fossil fuel emissions. These results are displayed in
Figure 1 and Figure 2. Dixon et al (1996) also pointed out that energy
sector is a primary source of GHG emissions in most developing countries
and there are numerous opportunities to mitigate GHGs emissions.
It is suggested by Lertzman, Garcia and Vredenburg (2011) that
Chinese state oil companies have not emphasized sustainability and CSR
practices when compared with western publicly traded oil companies that
require a social license to operate and thus are subject to public
scrutiny. Due to the rapid economic development and high national
demands for natural resources in China, Chinese oil companies are
seeking investments in oil and gas in more than 30 countries around the
world where they are operating with western publicly traded oil
companies (CNOOC, 2009; PetroChina, 2010; Sinopec, 2009). For example,
Chinese state oil companies have built over 9 joint ventures with Total,
Suncor Energy Inc., Imperial Oil, and so on in Canada. In Iraq, they are
cooperating with western companies such as BP, Shell, and ExxonMobil.
The purpose of this paper is to examine the efforts of Chinese
state oil companies to mitigate GHG emissions and the impacts of these
actions on financial performance. A historical analysis of these
companies is included in this paper. Issues such as changes of financial
performance, efforts to mitigate GHG emissions, history of CSR and
sustainability reports, and changes to investments for environmental
protection will be addressed. A brief literature summary will be
provided in the next section, followed by a description of the
methodology. The case of three Chinese state oil companies will be
presented in the fourth section. Finally, a discussion of the results
will be presented in the conclusion section.
2. LITERATURE REVIEW
2.1 Corporate environmental strategies towards GHG mitigation
Corporate environmental strategies have been developed in the past
few decades as a response to the call for sustainable development. The
concept of sustainable development was first developed at the UN
Conference on the Human Environment, Stockholm in 1972, and later
popularized in 1987 with the publication of Our Common Future, commonly
known as the Brundtland Commission (WCED, 1987), and it emphasizes an
interdependent and balance amongst economic development, environmental
concerns and social issues. Furthermore, the Brundtland Commission
Report recognized that environmental problems need a systematic approach
and cooperative effort from government and non-government organizations,
corporations and the general public (Lertzman & Vredenburg, 2005).
After the Brundtland Commission's report, the concept has been
widely interpreted and generally adopted as a framework for policy
makers and business strategists.
Within a corporate context, various researchers have examined
corporate environmental strategies in the oil and gas industry (Levy
& Kolk, 2002; Sharma & Vredenburg, 1998), agricultural sector
(Smith et al., 2008), hotel sector (Brown, 1996), and the automobile
industry (Levy & Rothenberg, 2002). From these studies, different
corporate environmental strategies and classifications have been
developed. Based on previous environmental management literature, Sharma
and Vredenburg (1998) have examined corporate environmental strategies
in oil and gas industry and summarized 11 strategies. These strategies
include material use reduction, use of alternative fuels, energy
conservation, and less environmentally damaging products. Responses to
these strategies from different companies vary from resistance and
passive compliance to proactive and innovative (Levy & Kolk, 2002;
Sharma & Vredenburg, 1998). Proactive companies are able to
associate their environmental strategy with positive outcomes, such as
gaining competitive advantage (Esty & Winston, 2009; Sharma &
Vredenburg, 1998), building reputation and public acceptance (Kanter,
1999) and achieving economic returns (Russo & Fouts, 1997).
Technology development and innovation have been widely discussed as
major approaches to address environmental protection and to solve the
dilemma of economic development with environmental protection
(Vredenburg & Westley, 1997). Investing in research and technology
is thus a very important indicator to judge corporate environmental
strategies. According to a Clean Energy Progress Report by International
Energy in 2011, key technologies for reducing C[O.sub.2] emissions
include: CCS (carbon capture sequestration), renewable energies, nuclear
power, and power generation efficiency and fuel switching, etc. (as
indicated in Figure 3).
[FIGURE 3 OMITTED]
Corporations in developing countries face less internationally
environmental pressures than corporations in developed countries. For
example, the Kyoto Protocol is a protocol to combat global warming that
was directed to developed nations and the industries operating within
(Petersen et al, 2006). However, the Kyoto Protocol suggested some
potential means to reduce global GHG emissions through Clean Development
Mechanism (CDM). CDM enables the corporations in developed countries
bring advanced technologies to developing countries and in exchange of
carbon credits. Some researchers, such as Petersen et al (2006), have
suggested environmental strategies involving carbon trade and CDM will
bring advanced technologies, first mover advantages and competitive
advantages to corporations operating in developing countries.
2.2 Environmental strategies and corporate financial performance
Numerous researchers have discussed measure of corporate financial
performance and the relationship between environmental investment and
corporate financial performance (e.g. Cochran & Wood, 1984; Feldman,
Soyka, & Ameer, 1997; King & Lenox, 2001; Orlitzky, Schmidt,
& Rynes, 2003; Pava & Krausz, 1996). Different measurements of
corporate financial performance have been used in previous studies
(shown in Table 1).
Different opinions exist regarding the relationship between
environmental investment and corporate financial performance.
Previously, it was believed that investing in environmental practice
would not necessarily lead to better financial performance as the
investments often exceed the profits generated by energy saving and
efficiency improvement (e.g., Aupperle, Carroll, & Hatfield, 1985;
Freedman & Jaggi, 1982). It was believed that investing in the
environment was a cost with little to no return and these practices were
not a meant for optimizing shareholder wealth. Misconceptions that
impede firms chose environmentally responsible operations that mitigate
GHG emissions are internally inferred, while mostly of the benefits
belong to society. Therefore, few companies will aim to reduce GHG
emissions without being incentivised.
Contrarily, it has been argued that firms with high environmental
performance tend to be profitable (Black & Cordingley, 2007; Dowell,
Hart, & Yeung, 2000; Russo & Fouts, 1997; Sharma &
Vredenburg, 1998). Research suggests that environmental investment and
financial performance are not trade-offs. Investing in environmental
practices will enable firms not only to improve short-term profitability
through reduced energy and material consumption (Walley & Whitehead,
1996), but also to increase long-term market value and competitive
advantages through stakeholder integration, continuous innovation and
higher-order learning (Sharma & Vredenburg, 1998). Conclusions from
a meta-analysis study on company's social and financial performance
also showed that corporate social performance is positively correlated
with corporate financial performance (Orlitzky, et al., 2003).
3. METHODOLOGY
GHG mitigation strategies are relatively new to China. However,
concerns on global warming and the increase of public pressures for GHG
reduction in industrialized countries have also influenced Chinese state
oil companies to address environmental issues. This study addresses the
following questions: (1) How/Why Chinese state oil companies are
addressing GHG mitigation, (2) What theoretical framework may explain
the strategies implemented by these state oil companies, and (3) What
consequences will these strategies have on corporate financial
performance.
This study was conducted over a two-year period between January
2009 and December 2010. It is based on corporate reports as primary
sources and data from an in-depth interview as the supplement sources.
This study uses data on mitigating GHG emissions effort and the
financial performances of three Chinese state oil companies. Eighty two
corporate reports were used as primary sources and were content
analyzed. These reports include corporate social responsibility (CSR),
sustainability and health, safety and environment (HSE) and corporate
annual reports. It is suggested by Bettman and Weitz (1983) that
corporate reports are most useful to study organization behaviours and
firm's strategies, as opposed to interviews which rely on memory
and often include a retrospective bias. Escobar and Vredenburg (2011)
also indicated that annual reports are appropriate to be used for
analyzing corporate behaviour when the focus is on descriptive themes.
One in-depth interview, using semi-structured (open-ended)
questionnaires, was conducted with a senior manager in one of the oil
companies' overseas joint ventures. The use of the interview
allowed for multiple sources of evidence. However, this study was
limited by the number of interviews because the companies were reluctant
to participate. The secondary data review covered two main areas: (1)
GHGs mitigation efforts and strategies; and (2) the financial
performance. Data coding was conducted by the first two authors. In case
of any discrepancies, discussions were carried out until a consensus was
achieved. According to Yin (2002), the coding process consists of
reviewing all the information through inspecting, categorizing,
tabulating, and recombining.
Combined with the previous literature and the data coding process,
a framework for categories and subcategories on corporate environmental
strategies to mitigate GHGs emissions in the three Chinese state oil
companies was developed, as shown in Table 2. First, the data was coded
into five categories, (1) management, (2) research, (3) technology, (4)
environment, and (5) public information. Next, subcategories were
created in each of these five categories. For example,
'research' was subcategorized into: (1) projects, (2)
investment and (3) partnerships with educations and institutions.
Similarly, the GHG emissions mitigation category--'technology'
was subcategorized by (1) energy conservation, (2) energy efficiency
improvement, (3) renewable energy development and application, (4)
carbon capture technology development, and (5) CDM development
investment.
4. CASE STUDY FINDINGS OF THREE CHINESE STATE OIL COMPANIES
4.1 Case descriptions
There are three large state-owned oil corporations in China: China
National Petroleum Corporation (CNPC), China Petroleum & Chemical
Corporation (Sinopec) and China National Offshore Oil Corporation
(CNOOC). The main characteristics of the three major companies are
described below and summarized in Table 3.
CNPC is dominant in the upstream activates of oil production, with
majority of the oilfields and refineries located in the northeastern
regions of China. Oilfields located to the south and coastal regions as
well as downstream activities of refining and petrochemical production
are conducted by Sinopec. CNOOC's production and business
concentrate in offshore crude oil and gas producing territories like the
Bohai Sea and South China Seas. A number of liquefied natural gas and
oil refining/petrochemical production projects have been undertaken in
recent years by CNOOC. These projects are focused mainly in principal
coastal cities such as Shanghai, and in the provinces of Guangdong and
Hainan (Guo, 2007).
The three Chinese state oil companies have listed themselves on
Hong Kong, New York and London stock markets since the spring of 2000.
These companies have also developed numerous overseas projects through
building joint ventures with western oil companies and acquisition of
small overseas oil companies. In 1992, CNPC built its first overseas
project in Canada's Alberta North Twing oil field. This project was
widely regarded as the first step for China's petroleum industry to
advance business overseas. Since then, Chinese state oil companies have
already invested and acquired exploration rights in more than 30
countries in the Middle East, South America and North America (Guo,
2007; PetroChina, 2010; Sinopec, 2009). In 2010, Sinopec's overseas
assets constituted of 31.4% of its total assets with overseas'
sales income making up 27.3% of its total sales income.
4.2 Oil companies' environmental strategies to mitigate GHGs
emissions
In this section, the efforts of these three major oil corporations
towards mitigation of GHGs emissions are presented case by case
according to the categories and subcategories developed in the process
of data coding. The efforts toward GHGs emissions mitigation by the
three oil companies from 2003 to 2009 are fairly consistent, as
summarized in Table 4. Each company's annual report, corporate
social responsibility report, sustainability report and HSE report
described particular corporate attitudes toward GHG emissions, the Kyoto
Protocol, innovations, energy conservation and renewable energy
technologies. All three companies developed environmental protection
strategies, such as trees planting and marine biodiversity protection,
as well as employees training programs related to energy conservations.
CNPC has taken a firm stand regarding GHG control and government
supported environmental regulations. In CNPC, efforts for mitigating GHG
emissions include promoting internal energy efficiency, conducting fuel
replacement research, and developing carbon capture technology. In order
to improve its performance on HSE practices, CNPC have worked with
DuPont Company since 2008. CNPC has also increased their budget for
environmental protection from 1.1 billion RMB (180 million USD) in 2003
to 4.63 billion RMB (770 million USD) in 2006.
Since 2006, Sinopec has formulated several company policies related
to environmental protection such as Energy Conservation Law and the
State Council's Decision to Step up Energy Conservation.
Environmental strategies included upgrading facilities, improving energy
efficiencies, reducing energy consumption, protecting natural
environments and shutting down small refineries. Sulphur Dioxide (SO2)
emissions have decreased from 11.98 kg per 10,000 output value to 4.11
kg per 10,000 output value during the period of 2003 to 2009 (Sinopec,
2009). A renewable energy replacement project has also been in place
since 2008.
CNOOC emphasizes most on the renewable energy development in an
attempt to reduce GHGs emissions. In 2007, Renewable Energy Investment
Ltd. Corporation of CNOOC was established to research wind power,
biomass energy, clean coal-base energy, solar energy, and hydrogen
energy. Research investments have increased from 0.78 billion RMB (130
million USD) in 2004 to 4.45 billion RMB (740 million USD) in 2009. In
the same time frame, the number of environmental protection research
projects has increased from 112 to 786.
4.3 Financial performance of the three oil companies
Based on the adoption of financial performance indexes in previous
literature (e.g., Escobar & Vredenburg, 2011; Hart & Ahuja,
1996; Russo & Fouts, 1997), corporate financial performance were
represented by return on total assets, return on equity, return on
investment and EBITDA margins (earnings before interest, taxes,
depreciation and amortization). In this research, total assets, sales
income, net income, return on total assets and returns on shareholder
value were calculated and adopted to illustrate the financial
performance of the three Chinese state oil companies. These results are
illustrated in table 5.
Return on assets can be used as an indicator of the profitability
of a company. Return on assets is a particularly useful number for
comparing competing companies in the same industry as it gives an
indication of the relative capital intensity of the companies. Companies
that require large initial investments will generally have lower return
on assets. Returns on equity (ROE) measures a corporation's
profitability by revealing how much profit a company generates with the
money shareholders have invested (West, 2007). Since the result of the
environment strategies lags investments, we calculated profitability
indicators for the period 2003 to 2009.
5. DISCUSSIONS
According to Gladwin and Walter's (1980), two dimensional
typology, assertiveness and cooperativeness, can better describe
corporate strategic options. In the context of climate change,
cooperation requires support for mandatory GHGs emissions controls,
investments in renewable energy technologies, and investments in other
environmental research such as carbon capture and storage. Assertiveness
refers to the degree to which a company supports or opposes the
government regulatory efforts. The three Chinese state oil
companies' corporate environmental strategies were classified based
on the level of assertiveness and cooperativeness, and according to the
efforts of the three oil companies on GHG emissions mitigation. The
results can be seen in Table 4 and Figure 4.
The history of CSR development in China is comparatively short.
Chinese Corporation Law, effective on January 1, 2006, first stipulated
that Chinese corporations must assume social responsibilities. In 2009,
the China securities regulatory commission encouraged all
publically-traded corporations to present CSR reports annually. CNOOC,
CNPC and Sinopec started to publish their CSR report in 2005, 2006 and
2007, respectively, and they have been publishing sustainability report
since 2008, 2006 and 2005, respectively. Additionally, CNPC has
published HSE reports since 2002. It should be noted that senior
managers in these oil companies also hold government positions, which is
likely responsible for the pre-empted cooperation with government
policies related to environmental issues.
[FIGURE 4 OMITTED]
Based on the analysis of the different strategies that these three
state oil companies have implemented, they were all grouped as
'more assertive' in their efforts to mitigate GHG emissions.
Therefore, the pressures of a shifting domestic social environment, have
caused oil companies to become more proactive when dealing with
environmental issues.
Further analyses of the efforts of the Chinese oil companies have
found a convergence in these companies' environmental strategies.
It has occurred since 2000 as the oil companies abandoned geographic
structures and moved toward integrated business units (Guo, 2007).
Escobar and Vredenburg (2011) argued that in international domain,
multinational oil enterprises such as BP, Shell, Exxon Mobile and
Chevron are less likely to be influenced by coercive isomorphism,
normative isomorphism and mimetic isomorphism that institutional theory
suggests (DiMaggio & Powell, 1983) because of various regulations
and interpretations in the different countries in which they operated.
However, in the context of a single country, the three state oil
companies face the same domestic and institutional environment
pressures, have senior managers and researchers from the same
university, and the same cultural background. In accordance with
institutional theory, the state oil companies have developed similar
strategies with respect to reducing environmental uncertainty.
Decreases in net income, return on total assets, and return on
shareholder value were identified. A possible explanation is that the
short timeframe in which Chinese oil companies have been involved with
environmental protection. Some researchers, including Aupperle et al
(1985) and Vance (1975), argued that CSR investment entails short-term
cost which reflect the identified deficits. However, long-term returns
from investing in research and technology development may still exist.
Further research to analyze the long term financial performance would be
more indicative of the effect of environmental investment in Chinese oil
companies.
Total assets and sales income have increased since 2003 for the
Chinese state oil companies. To support the economic growth and maintain
national and political security in China, CNPC, Sinopec and CNOOC are
investing in projects in the Middle East, Southeast Asia, South America
and North America (Chaw, 2005; Downs, 2004). Since the oil industry is
considered critical and strategic for stable economic development and
national security, most countries are wary of allowing foreign companies
to have full ownership on an oil company (Efstahiou, 2005). Different
forms of cooperation with western public traded companies, such as joint
ventures and partnership, have been developed recently. With increased
overseas business, the total assets of the three Chinese oil companies
have increased since 2003.
On the other hand, cooperation with western oil companies has
influenced Chinese oil companies to emphasize environmental strategies
and CSR reputations. As suggested by Lertzman, Garcia and Vredenburg
(2011), sustainable development strategies are more likely to be carried
out for national oil companies in Latin America who are seeking foreign
investment and cooperating with western public traded oil companies with
well-established proactive environmental strategies (Escobar &
Vredenburg, 2011). Similar results have been observed for Chinese oil
companies where the state owned companies will imitate the successful
environment strategies adopted by the western companies. The imitation
process will likely continue as long as the environmental investments
are associated with a positive financial performance. Therefore,
institutional pressures will occur for state owned oil companies in
developing countries which are seeking cooperation with western oil
companies.
However, not all countries where Chinese companies invest and
operate have the same environmental standards. The interpretations and
requirements of sustainable development in western countries that rely
more on market forces are stricter and broader than those in developing
countries (Escobar & Vredenburg, 2011). Therefore, Chinese oil
companies that are operating in Canada face greater pressures from
stricter environmental regulations than similar operations in Sudan or
Ecuador. Accordingly, Chinese companies are more likely to develop more
matured environmental strategies through projects in Canada compared
with similar operations in Sudan. Therefore, the development of
environmental strategies is dependent on numerous factors including
partnering companies and location of operation.
6. CONCLUSIONS
Through a multiple case study of three Chinese state oil companies
(CNPC, Sinopec and CNOOC), this paper describes the environmental
strategies and efforts developed by these companies for GHGs emissions
mitigation and the subsequent impact on these companies' financial
performance. Various environmental strategies were developed by the
state oil companies, including: (1) energy conservation, (2) upgrading
older facilities, (3) investing in the research of renewable energies
and carbon capture and storage technologies, (4) looking for CDM
development and (5) cooperating with western public traded oil
companies.
Chinese oil companies are addressing environmental issues more than
ever before. The most significant influences include: (1) Various
pressures of a shifting domestic social environment with the RIO 92
requirements have made these companies, such as RIO92 requirements,
which resulted in a shifting domestic social environment and caused
state oil companies to invest more on environment protection and GHG
emissions mitigation strategies. (2) The institutional pressures for the
Chinese state oil companies to improve their CSR reputations in order to
successfully carry out the overseas business partnerships with western
oil companies. (3) Coercive isomorphism, normative isomorphism and
mimetic isomorphism among the three Chinese state oil companies is
another explanation to understand their efforts to reduce GHG emissions.
The literature has identified several indexes to measure financial
performance of the firms. In Table 1, we listed 5 indexes. The data from
the three companies suggest that the efforts of the three Chinese state
oil companies to mitigate GHG emissions are positively correlated to
total assets and sales income and negatively relate to net income,
return of total assets and return of shareholder value. A common
explanation for this suggests environmental performance will have more
long term impacts on the financial performance (e.g., Becker-Olsen, et
al., 2006). The three Chinese oil companies are in the early stage of
addressing environmental issues and improved financial performance will
lag environmentally responsible measure by a number of years.
Limitations of this study primarily stem from two aspects. First,
the number of interviews is geographic limited, and because the
companies were reluctant to participate in the research. Second, since
the adoption of the environmental strategies for Chinese state oil
companies is in a short time period, the impact of such strategies is
more long-term financially and therefore cannot be analyzed at this
time. Future research can be furthered on these two shortcomings.
Moreover, future research can address these two limitations. Moreover,
future research can be done to analyze the three state oil
companies' environmental strategies in different countries to
understand if multiple environmental standards will lead to different
environmental strategies.
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Xiaoyu Liu, University of Calgary, Calgary, Alberta, Canada
Percy Garcia, University of Calgary, Calgary, Alberta, Canada
Harrie Vredenburg, University of Calgary, Calgary, Alberta, Canada
Xiaoyu Liu is currently a Ph.D. student in Haskayne School of
Business at the University of Calgary, Calgary, Canada. Her current
research interests include corporate social responsibility,
international business, sustainable development in energy sectors.
Dr. Percy Garcia Ph.D. Earned his Ph.D. degree in Natural Resources
and the Environment in 2006. Currently, his is a Senior Research
Associate at Haskayne School of Business, University of Calgary and is
affiliated to the Institute for Sustainable Energy, Environment &
Economy (ISEEE). His current research interests include corporate social
responsibility, international business, environmental and social issues,
and development policies.
Dr. Harrie Vredenburg is a Professor of Strategy and Suncor Energy
Chair in Competitive Strategy & Sustainable Development at Haskayne
School of Business, University of Calgary. He is affiliated to the
Institute for Sustainable Energy, Environment & Economy (ISEEE). His
current research interests include corporate social responsibility,
corporate governance and ethics, and environmental and social issues.
TABLE 1 MEASUREMENT OF CORPORATE FINANCIAL PERFORMANCE
Measurements Descriptions Authors
Return The ratio of net income Hart and Ahuja (1996)
on Assets to total assets Rosso and Fouts (1997)
Escobar and Vredenburg
(2011)
Return The ratio of net income to Hart and Ahuja (1996)
on Equity firm shareholder's equity Rosso and Fouts (1997)
Escobar and Vredenburg
(2011)
Return on The ratio of operating income Rosso and Fouts (1997)
Investment to book value of assets
Return The ratio of net income to Hart and Ahuja (1996)
on Sales sales income
EBITDA Earnings before interest, Escobar and Vredenburg
margins tax, depreciation and (2011)
amortization divided by total
revenue
TABLE 2 CATEGORIES AND SUBCATEGORIES
ON CORPORATE ENVIRONMENTAL STRATEGIES
Categories Subcategories
Management Regulation driven
Market driven
Innovation driven
Research Projects
Investments
Partnerships with educations and institutions
Technology Energy conservation
Energy efficiency improvement
Renewable energy development and application
Carbon capture technology development
CDM development
Environment Employee training programs for
environmental preservation
Habitat/biodiversity preservation
Risk of environmental accidents reduction
Public CSR report
Information Sustainability report
Sources: Sharma and Vredenburg (1998); Westley and
Vredenburg (1996); CSR and Sustainability report
from CNPC, Sinopec and CNOOC.
TABLE 3 PROFILES OF THE THREE
CHINESE STATE OIL COMPANIES 2009
Sales Profit Assets EmployIncome
ee No.
CNPC 1019.3 103.4 1450.3 1,587,900
Sinopec 1392 39.3 1288.9 1,037,000
CNOOC 209.6 52.4 518.3 65,800
Net Listed No. of
crude stock abroad
oil market Countries
invested
CNPC 103.13 Hong Kong 29
New York
Sinopec 42.42 Hong Kong 35
New York
London
CNOOC 36.97 Hong Kong N/A
New York
London
Sources: Corporate annual report of CNPC,
Sinopec and CNOOC (2009)
Unit: billion RMB for the first three
financial indexes; Million tons for
net crude oil
TABLE 4 ENVIRONMENTAL STRATEGIES ADOPTED
TO ADDRESS GHG EMISSION PRESSURES
Environment CNPC Sinopec
al strategies
Management Regulation driven; HSE Regulation driven; HSE
management; 6 management; 6
research center for research center for
research management. research management.
Research Build partnership with Build partnership with
universities on research; universities on research;
Investment increased Investment increasing
from 1.078 billion RMB from 0.4 billion RMB in
in 2003 to 4.63 billion 2005 to 3.196 billion
RMB in 2009. RMB in 2009.
Technology Upgrade producing Upgrade producing
facilities; facilities;
Energy conservation; Energy conservation;
Improve energy Improve energy
efficiency; efficiency;
Wind, solar, geothermal, Wind, biomass energy;
biomass energy; CDM program.
CDM program.
Environment Planting trees; Planting trees;
Close 196 high pollution Environmental
and high energy management system;
consumption product Pollution investigation
lines since 2001. inside company;
Charge on sewage
disposal inside the
company.
Information --Sustainability report --Sustainability report
Disclosure to since 2008; since 2006;
Public --CSR report since --CSR report since
2006; 2007
--HSE report since
2002
Environment CNOOC
al strategies
Management Regulation driven and
innovation driven; HSE
management; 8
research center for
research management.
Research Build partnership with
universities on research;
No. of research projects
increased from 112 in
2003 to 786 in 2009.
Technology Upgrade producing
facilities;
Energy conservation;
Improve energy
efficiency;
Wind, solar, geothermal,
biomass energy;
CDM program.
Environment Protecting marine
biodiversity;
Offer training class on
emission reduction to
managers
Information --Sustainability report
Disclosure to since 2005;
Public --CSR report since
2005
Sources: CSR, Sustainability, HSE, and Group Annual
Reports from CNPC, Sinopec and CNOOC from 2003 to 2010
TABLE 5 FINANCIAL PERFORMANCES FROM 2003 TO 2009
2009 2008 2007 2006
Total
assets
CNPC 1450.3 1196.2 1069.6 880.3
Sinopec 1288.9 1050.6 1006.8 875.6
CNOOC 518.3 409.5 309 250.7
Sales
Income
CNPC 1019.3 1072.6 837.5 691.4
Sinopec 1392 1466.4 1204.8 1061.7
CNOOC 209.6 194.8 162 132.7
Net Income
CNPC 103.4 114.5 146.8 143.5
Sinopec 39.3 13.1 32.8 31.8
CNOOC 52.4 67.8 56.5 49
Return on
Assets (%)
CNPC 7.13 9.57 13.7 16.3
Sinopec 3 1.2 3.26 3.6
CNOOC 10.1 16.56 18.28 19.55
Return on
Shareholder
Equity (%)
CNPC 7.28 8.74 11.9 14.9
Sinopec 7.12 2.72 7.11 8.02
CNOOC 16.1 23.6 33.7 35.7
2005 2004 2003
Total
assets
CNPC 785.4 638.4 557
Sinopec 729.9 620.3 559.2
CNOOC 191.4 153.3 119.8
Sales
Income
CNPC 554.1 200.3 310.4
Sinopec 817 618 -CNOOC
88.9 70.9 53.9
Net Income
CNPC 133.4 107.6 71.9
Sinopec 20.7 10.5 8.7
CNOOC 38.8 24.2 15
Return on
Assets (%)
CNPC 17.0 16.9 12.9
Sinopec 2.83 1.69 1.56
CNOOC 20.27 15.79 12.53
Return on
Shareholder
Equity (%)
CNPC 17.8 18.1 14.5
Sinopec 6.0 5.5 5.3
CNOOC 36.8 29.1 21.9
Resources: CSR and Annual
Reports of CNPC, Sinopec and CNOOC
Unit: billion RMB
FIGURE 1. GHG EMISSIONS BY SECTORS
Waste Treatment 4%
and Disposal
Power Stations 21%
Industrial 17%
Processes
Transportation 14%
Fuels
Land Use 10%
Residential and 10%
Commercial
Fossil Fuel Refining, 11%
Processing and
Distribution
Agricultural 13%
Biproducts
(Source: IPCC Fourth Assessment Report. 2007)
Note: Table made from pie chart.
FIGURE 2. CARBON EMISSIONS BY FUEL TYPE
Natural Gas 20%
Coal 36%
Petroleum 44%
(Source: IEA. Annual Energy Outlook. 2007)
Note: Table made from pie chart.