Business / Petroliam Nasional Berhad: A Critical Evaluation Of The Likely Impact On Its Competitive Position Through Sustainable Development
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Autor: anton 27 January 2011
Words: 1562 | Pages: 7
Ð²Ð‚ÑšThe moral issues of distributive justice are unlikely to be realised if biophysical limits to
growth are ignoredÐ²Ð‚Ñœ - Philip A. Lawn, 2001.
This paper evaluates the likely impact on the competitive position of PETRONAS if it were to
strengthen its business strategy based on Sustainable Development.
PETRONAS, acronym for Petroliam Nasional Berhad, is a Malaysian owned oil and gas
company that was founded on 17 August 1974. Wholly owned by the Government, the
corporation is vested with the entire oil and gas resources in Malaysia and is entrusted with
the responsibility of developing and adding value to these resources. PETRONAS is ranked
among Fortune Global 500Ð²Ð‚â„¢s largest corporations in the world. In 2007, its revenue was in
excess of US$51 billion.
Source: Wikipedia and Fortune Global 500
Since its incorporation it has grown to be an integrated international oil and gas company with
business interests in 31 countries. As of the end of March 2005, the Petronas Group
comprised 103 wholly owned subsidiaries, 19 partly-owned outfits and 57 associated
companies. Together, these companies make the Petronas Group, which is involved in various
oil and gas based activities. The Financial Times has identified PETRONAS as one of the
Ð²Ð‚Ñšnew seven sistersÐ²Ð‚Ñœ: the most influential and mainly state-owned national oil and gas
companies from countries outside the OECD.
Source: FT.com, 11 March 2007
The Group is engaged in a wide spectrum of petroleum activities, including upstream
exploration and production of oil and gas to downstream oil refining; marketing and
distribution of petroleum products; trading; gas processing and liquefaction; gas transmission
pipeline network operations; marketing of liquefied natural gas; petrochemical
manufacturing and marketing; shipping; automotive engineering; and property investment.
PETRONAS built the Petronas Twin Towers (opened 1998), the tallest twin towers and once
the worldÐ²Ð‚â„¢s tallest buildings, as its headquarters.
The looming growth of globalisation and continuous development have resulted in a negative
impact on the environment, which will be detriment to the survival of mankind and other
living things on this planet if we do not take the necessary steps to reduce this impact. As for
our planet, it has all the time in the world to regenerate itself, but we donÐ²Ð‚â„¢t.
The threat to our survival has become more apparent with the increasing number of
environmental catastrophe such as earthquakes, flooding, drought, water shortage, depleting
natural resources and ultimately the increase in Greenhouse Gases fueled by rapid
development to meet the current population demands, which contributes to Global Warming.
Global warming is the result of the constant increase in the level of carbon dioxide (CO2) in
the atmosphere measured in parts per million (PPM). Scientists has revealed that if this
measure reaches 450PPM, the world will be at the tipping point of its own survival, and this
number is climbing fast.
Source: The 11th Hour, 16 June 2008 & InterGovernment Panel for Climate Change.
However, this can be mitigated through increasing awareness of how real the problem is, by
the adoption of Environmental and Ecological Economics, alongside mainstream/neo-
classical economics which takes into account the environmental impacts that economic
growth promotes as well. One way of addressing this issue is through Sustainable
According to The Brundtland Report (1987), Sustainable Development is the development
that meets the needs of the present without compromising the ability of future generations to
meet their economic needs (intergenerational equity). Mainstream economics measure a
countryÐ²Ð‚â„¢s development through demand and supply expressed in Gross Domestic Product. However, it does not take into account the depletion of natural, inadequate
treatment of defensive expenditures i.e. pollution abatement and health protection costs, and fails to take into account the effects of environmental degradation. At the same time, we
cannot forget or ignore the needs of the present (intragenerational equity).
Oil and Gas (Ð²Ð‚ÑšO&GÐ²Ð‚Ñœ) companies such as PETRONAS are often seen as one of the major
contributors to the worldÐ²Ð‚â„¢s polluters, directly and indirectly right down from exploration
activities i.e. upstream activities, through to its downstream services or the refining, selling
and distribution of oil and gas products. Conservationist and environmental activist will
highly unlikely stop rallying against O&G companies even though some might prove, in the
future, that they are able to minimize the impact of global warming. This is so because of the
facade that they have built upon themselves since crude oil was discovered, and the role they
played in helping us pollute the world we live in, even though it contributed greatly to the
development of human kind, economically and socially. This has since become the fate of the
future of O&G companies, and the only hope is to find a solution that will someday rectify this
detrimental belief, and we have to face the facts.
One way of turning this image around is to show concern about the environment and taking
measures to reduce the impact of businesses such as the one PETRONAS is operating,
Leading By Example
There is a growing number of oil companies that are revising its business strategy to include
SD policy in order to tackle Global Warming. For example, Royal Dutch Shell is one of the
first energy companies to acknowledge the threat of climate change and is constantly
promoting its environmental policy to limit green house gas emissions through control of
green house gas emissions, investing in new technologies to produce renewable fuel which
reduces the depletion of natural capital and reduce their carbon footprint.
Source: Shell Global
As mentioned earlier, PETRONAS is emerging as one of the top energy companies in the
world. This is a good time and opportunity to revise its business strategy to include SD policy.
In practice, this commitment requires PETRONAS to both delivery benefits and reduce its
impacts. Importantly, it covers what is produced as well as how it is produced. Through
PETRONASÐ²Ð‚â„¢s portfolio and products, benefits are delivered by providing the modern energy
that people need to prosper, and help reduce energyÐ²Ð‚â„¢s impacts by offering cleaner products
like natural gas, better biofuels, and petrol and diesel that help customers drive more fuel
Through operations, PETRONAS should look to create lasting social benefits by employing
local people, using local contracts and suppliers, and setting good example through its
business practices and ethics.
To work to reduce environmental and social impacts out its operations by safeguarding the
health and safety of its employees and neighbours, reducing disruptions to the community,
lowering its emissions including greenhouse gases, reducing its impact on biodiversity and
depletion of natural capital through using less energy, water and other resources to produce
the energy the world needs for development.
There is no trade-off between being economically responsible (profitable) and socially and
environmentally responsible. In fact, it is the combination of both that will make PETRONAS
even more profitable. By adopting SD, the company is less seen as the big bad wolf. It will
earn the license to operate and grow. By listening to the communities in which it exist and
addressing their expectations, it significantly reduce the chance of project delays, approval
failures or disruption in existing operations. These are significant risks to PETRONASÐ²Ð‚â„¢s
business. Contributing to SD also helps attrach and retain staff, customers and business
partners who are central to its business success and future growth.
By being aware of emerging changes to its customersÐ²Ð‚â„¢ values and changes in regulatory
requirements, it can develop products and services before competitors that meet its
customersÐ²Ð‚â„¢ needs for clean, convenient and affordable energy.
By adopting new or cleaner technologies it can improve the efficiency of its operations,
reduce costs, avoid current and guture costs of emissins, and even create new income streams
like carbon credits.
Clearly, by adopting SD, not only will PETRONAS gain the competitive advantage that most
energy companies require at this important stage in time, it will also ensure the protection
that the environment needs for us to co-exist a little bit longer on this planet and safeguard the
future of our generations.
However, one must be wary of the fact that the sentiment of some group of people i.e.
environmental activists, will not diminish entirely and will take a very long time for this to
change. One must also be wary of the term Greenwashing i.e. Ð²Ð‚Ñšnot walking the talkÐ²Ð‚Ñœ, which
can ultimately hinder the turnaround of energy companiesÐ²Ð‚â„¢ negative image that they have
been carrying all these years.
For example, Chevron had been accused of Greenwashing because they claimed that they are
taking all the steps necessary to go green, but at the same time dumping toxic waste as well as
violating human rights in Ecuador and other parts of the world.
Source: Cleanup Ecuador Campaign
It is imperative that PETRONAS take the necessary actions to operate a sustainable business
and be mindful of the impacts on the environment. There are steps that can be implemented
immediately so it will not lose out on its competitive advantage. Changes must take effect
from the top level management and instilled right down to the people working on the ground
level. Leaders should first to make the move so there will be less resistance to change.
Bringing about changes to PETRONASÐ²Ð‚â„¢s business strategy to include SD will not be easy,
and greenwashing should be avoided. However, when done properly, the company will not
only thrive but also looked upon as an eco-friendly greenie rather than a master-less genie.
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