Chevron – Global Environmental Standards Report

WHEREAS

The Chevron Business and Ethics Code places the highest priority on the safety of its staff, community members and the environment where it operates. Corporate Policy 530 “commits Chevron to comply with the spirit and letter of all environmental, health and safety laws and regulations, regardless of the degree of enforcement.”

Our company operates in 180 countries, including Africa, Asia and Latin America nations where environmental regimes may be less protective of human health and the environment than in other countries where Chevron operates.

CEO David O’Reilly has recognized the importance of our company’s relationships with oil producing nations in Africa and Latin America. (International Petroleum Finance, 03/09/05, “Chevron Chief Believes the Surplus is Over.”)

Notwithstanding Chevron’s efforts to comply with environmental laws and regulations in developing countries, our company has repeatedly been cited for practices that allegedly have caused environmental damage and harmed the health and welfare of local communities.

• Chevron is on trial in Ecuador for widespread contamination of Amazonian land and water resources in the 1970s. (“Ecuador Keeps Up Oil Cleanup Fight Against Chevron,” Los Angeles Times, 11/17/08)

• A court-appointed expert in the Ecuadorian litigation has recommended that Chevron be held liable for up to $27.3 billion in damages. This amount includes $18.9 billion for environmental remediation and compensation to local people, and $8.3 billion in unjust enrichment penalties. (Technical Summary Report, Engineer Richard Cabrera, Expert for the Court of Nueva Loja- November, 2008)

• Chevron is accused of polluting land and water resources in its ongoing operations in the Niger Delta. According to observers, these persistent environmental problems have fueled civil unrest, protests against our company and a related lawsuit alleging Chevron’s complicity in security forces’ killing of two protestors. (“Chevron Faces Suit Over Nigerian Violence,” San Francisco Chronicle, 10/26/08)
• Unocal’s pipeline operations in Burma contributed to the deforestation of the last primary tropical rainforest on mainland Asia, a recognized ‘biodiversity hot spot.’ (“Unocal-Total Oil Pipeline in Burma Threatens Indigenous People, Animals,” Environmental News Network, 4/27/02)

Chevron’s Environmental, Health and Safety Fines and Settlements have increased from $3.99 million in 2003 to $14.06 million in 2007, according to the company’s latest Corporate Responsibility Report.

Chevron’s three strategic priorities for environmental performance are: “Defining world-class standards, measuring and communicating performance and demonstrating continual performance improvement,” toward the goal of being  “recognized and admired everywhere for having a record of environmental excellence.”

RESOLVED

The shareholders request that the Board prepare a report by November 2008, prepared at reasonable cost and omitting proprietary information, on the policies and procedures that guide Chevron’s assessment of host country laws and regulations with respect to their adequacy to protect human health, the environment and our company’s reputation.

SUPPORTING STATEMENT

We believe that Chevron’s record to date demonstrates a gap between its international environmental aspirations and its performance, which would be narrowed by a commitment to apply the highest environmental standards wherever the company operates. The requested report would play a role in illuminating and addressing the factors accounting for this gap.

Uncovering Slavery in Steel

How far up a supply chain should a company be held accountable?

In Carajas in Brazil’s eastern Amazon region, work is scarce and poverty and lawlessness are widespread. Opportunistic hacienda owners lure the desperate and unemployed to distant charcoal camps with promises of work, wages and shelter. Once at the camp, the owners levy illegal charges on the workers for transportation, equipment, lodging and food. Mario Osava, reporting for Inter Press Service last July described the debt as “pretext to keep laborers on the camp under threat and often under armed guard.” Deep in debt, workers succumb to involuntary servitude, a form of modern day slavery.

Charcoal is the cheapest fuel around to feed pig iron plants. Pig iron is gold to steel manufactures, as it gives mills using scrap higher iron content and durability. Over 1,400 charcoal camps dot the Amazon. Laborers collect hardwood and pile it into kilns. They shovel cured charcoal, through smoke and heat, and load it for travel to pig iron plants. The Carajas region alone exports six million tons of pig iron every year, sending nearly all to the thirsty U.S. iron and steel industry.

Over the past decade, government inspectors have worked to eradicate slave labor with moderate success. Local NGOs complain resources are scarce, inspections are sporadic, and fines and orders to pay back wages are minimally effective penalties. Last year, Bloomberg News investigated reports of slave labor and with the help of government inspectors mapped the life cycle of slave made coal (The Secret World of Modern Slavery December 2006). Bloomberg found unpaid laborers at a work camp making charcoal for Cosipar, a major pig iron exporter. Cosipar exports to Nucor, the second largest U.S. steel company, and to National Material Trading (‘NMTC’) and Intermet, two U.S. brokers who contract with Ford, GM, Toyota, Nissan, and Whirlpool. “Brazilian pig iron is part of almost any product in the U.S. that uses steel,” says a NMTC spokesperson.

As Nucor shareholders, we and investor partners contacted the company to learn how it would prevent future incidents of slave and forced labor in their supply chain. The discovery of slave labor was not new to Nucor. The issue came up a few years ago and CEO Daniel DiMicco told Bloomberg “we were hopeful the government would have remedied this situation.” Nucor told me this summer they were talking with Brazilian officials again, using ‘certified’ suppliers, and asking the Brazil government to keep an accurate list of tainted and untainted charcoal camps. When we and investor partners pressed Nucor on specifics of their certification process and policies the company surprised us by declining to talk further.

If a company has the means to prevent egregious violations in its supply chain, we believe that it has the obligation to do so. Companies should build policies, investigate their supply chains, and use their influence to effect government reforms. Those that source from low cost countries often find themselves operating in environments with weakly enforced local laws. If policies are not adequately set and enforced in their supply chains, companies are ultimately exposed to reputational, financial, and legal risks that can erode shareholder value. Supply chain policies should be transparent and available to investors.

Trillium Asset Management Corporation is co-filing a shareholder resolution with a coalition of investors at Nucor led by Domini Social Investments. We are asking the company to review its human rights policy as it relates to supply chain standards. We are requesting a report on the current system and assurances that the company and its suppliers are implementing human rights policies, monitoring them effectively, and engaging local authorities. With the quest for human dignity at stake, Nucor must set and meet higher standards.