Total Clean Up

By Peter Gumbel

In his 30 years at Paris-based oil company Total, Jean-Noel Dairon has gathered a wealth of expertise in oil refining and marketing. But on a rainy Monday in October, the veteran executive shows up at the Hilton Hotel in Milan, Italy, with a rather different agenda: he has come to talk about business ethics. Dairon, 56, stands in front of 100 managers of the company's Italian subsidiary and gets straight to the point. "Is this a new era of capitalism," he asks provocatively, "or is it hypocrisy in action, a cynical response to the company's critics?" Thus starts an ethics road show that Total, the world's fourth largest

oil company, has begun taking to its subsidiaries around the globe, from Angola to Belgium, with a stop in the U.S. this year. The mission is to drive home to managers everywhere that Total has a goal besides making money: it wants to become a better corporate citizen. That means being more responsible and responsive in the way it deals with the environment, with its employees, customers and vendors--and with the governments and peoples of the countries in which it operates, including more than 40 in Africa. Bribery and leaky old tankers are out. Codes of conduct and wind energy are in. Closer to home, Total has begun conducting newfangled audits of some plants to identify ethical and social weak points.

Across Europe, corporate social responsibility and sustainable development are hot trends that have spawned a fast-growing industry of consultants, accountants, and legal and p.r. specialists. All but six of Britain's top 100 companies now publish details of their environmental or social policies. Some firms, including Total's European rivals Shell and BP, are even making ethics a focal point of their marketing. "Profits. Principles. Or Both?" reads the tag line in a series of recent Shell ads that advocate striking a balance between affordable energy and the social and environmental costs of providing it.

The big question, as Dairon suggested, is whether all this marks a tangible change in the way corporations behave or whether it's simply "greenwash," an elaborate public relations exercise designed to make firms appear more sensitive than they really are. Total, with sales of $125 billion, could certainly stand to burnish its image. Several former managers were just convicted in a sensational corruption case in France, and the company stands accused of using forced labor to build a gas pipeline in Myanmar, which it vigorously denies. Total's image at home was especially sullied by a devastating oil spill that polluted some of France's best-loved beaches.

Total officials insist that, these incidents aside, their efforts to clean up and green up are both sincere and vital for the firm's long-term health. The main reason: they're feeling pressure from investors, not just activists. There's a small but growing industry of politically correct stock funds in Europe, with an estimated $40 billion under management, that invest only in companies they consider socially responsible. "Investors want the best possible investment. Even if ethics is not their cup of tea, they consider companies that take into account good ethical principles to be well managed," says Jean-Pierre Cordier, the senior Total executive in charge of the ethics drive.

Big Oil long resisted calls to clean up its act. Almost alone among its peers, the U.S.'s ExxonMobil still takes a hard line on many environmental issues, such as global warming, although it too publishes a corporate-citizenship report. BP and Shell were the first to change, in the mid-1990s. In Shell's case, the firm was shaken by two scandals in quick succession: the 1995 execution of dissident Nigerian writer Ken Saro-Wiwa, who vigorously contested Shell's oil operations in Nigeria, and the company's plans that same year to sink the disused Brent Spar oil rig in the North Sea. Both sparked huge international protests and boycott calls that led to a management change and a complete revamping of Shell's ethical and operating standards.

Disaster also underwrites Total's epiphany. In December 1999 the oil tanker Erika sank off Brittany, spewing Total oil up and down the French Atlantic coast. With TV showing agonizing pictures of oil-drenched beaches and suffocating seabirds, Total went into denial. We're not technically liable because it's not our tanker, was the official legalistic response. Total even prevented its employees from volunteering for the cleanup. The ensuing wave of anger against the company sparked some intense soul-searching by senior management. "What we didn't know at the beginning was that we had a genuine catastrophe on our hands," Thierry Desmarest, Total's chief executive, said later. "We were caught on the wrong foot, and from then on no one listened to us or believed us."

To re-establish credibility, Desmarest put in place a high-level team to devise new standards of behavior and ensure that they are implemented. These measures include tough new rules on tanker safety and the establishment of an ethics committee headed by Cordier, 56. He reports directly to Desmarest, and his committee has written a new code of conduct and initiated the ethics road show. Employees who see corruption or other misdeeds at work but are nervous about telling their superiors are encouraged to report directly to the committee. Cordier says that it fielded 18 complaints and 26 requests for advice last year alone and that several people have been fired as a result of committee investigations. He won't give details.

Jean-Michel Gires, 46, who heads the company's sustainable-development efforts, points to a recent $4 billion project in Venezuela, which produces and refines extra-heavy crude from the Orinoco basin, as evidence of Total's new philosophy in action. As part of its efforts to support people living in the area, Total not only built schools, medical facilities and roads but also employed experts to study public-health issues there. Total discovered that safeguarding the water supply would vastly decrease local diseases, and it is seeking to fund several projects to improve the infrastructure. The $2 million annual cost is part of an estimated $95 million that Total spends on such societal projects yearly, according to the company's first corporate social-responsibility report, published last year (on recycled paper, naturally). That's about 1% of its 2002 profits of $8.3 billion.

Total's biggest critics are watching this activity with interest, but not without skepticism. "It's good they are going through the motions," says Gavin Hayman of Global Witness, a British group that has been fiercely critical of Big Oil's actions in Africa. "They are moving in the right direction but nowhere near fast enough."

That Total is talking with such groups as Global Witness and Greenpeace is a novelty. "We'd never been sought out by them before," says Hayman. The company is trying to identify relief groups and other nongovernmental organizations (NGOs) in poor countries that could work with the firm to help smooth relations with local people. In Africa's Niger delta, Total is funding a project by a Brazilian-French NGO called Pro-Natura that is trying to help local communities set up democratic decision-making bodies and develop their economies. "They are not doing this to save the planet," says Guy F. Reinaud, Pro-Natura's president, of Total's motives. "But they've understood that it's in their own interest."

Some of this activity is for internal consumption only. Total has retained a British consultancy called GoodCorporation, which over the past few months has been conducting ethics audits of Total's subsidiaries. These consist of a 76-point checklist that examines whether the companies have clearly written policies on a wide range of issues, from racial discrimination in its hiring practices to paying suppliers on time.

Not everyone is won over. Greenpeace, which kicked up a big fuss over the Erika spill, is frustrated because Total continues to use a leaky pipeline in Siberia and wants the company to show a greater commitment to developing renewable-energy sources such as wind and solar power. "The level of dialogue with BP or Shell is totally different," says Bruno Rebell, Greenpeace's head of international programs. At Henderson Global Investors, which manages about $127 billion in assets, fund managers also think Total needs to do more. A September 2001 accident at a Total fertilizer plant in Toulouse that killed 30 people raised questions about the company's safety record, says Henderson's Nick Robins, and its continuing presence in Myanmar puts it off limits for some of Henderson's socially responsible funds. "We're looking for consistent year-on-year improvements," Robins says. "We recognize Total is trying to change, but we need another two to three years" to ensure that it is changing.

Total can use the time too. Back in Milan, Dairon spends 45 minutes talking about Myanmar, a continuing black mark on the company's international reputation. Total insists that it has done nothing ethically wrong in setting up a big gas project there--after all, there are no official U.N. sanctions. But the taint of working with an especially despotic regime and allegations about forced labor raise difficult questions. "Can a company invest in a country that is considered not democratic?" Dairon asks. "Should it substitute for international organizations in judging a country in the first place?" One manager suggests that Total has to publicize the positive things about investing in a military dictatorship: jobs, development, even the hope of change. Good point, Dairon says--and one that is a nonstarter for Total's critics, who can't see any good in making a deal with the devil. "We are a company of engineers," says Dairon. "We are very rational. Perhaps we work too rationally." Changing culture, it seems, is easier said than done.