The Future of Energy and the Role of Corporate Citizenship

Remarks by Rex W. Tillerson
Chairman and CEO, Exxon Mobil Corporation
Houston World Affairs Council
April 19, 2010

It is a pleasure to be here – and on behalf of the men and women of ExxonMobil, I am proud to accept this award from the Houston World Affairs Council.

Jesse H. Jones and Mary Gibbs Jones, for whom this award is named, are wonderful examples of a cherished American ideal – that citizens of a free and democratic nation can make a difference whether they serve in government, business, or in philanthropy.

Jesse Jones served in all these capacities – working in the energy industry, in the banking sector, in the U.S. government, and in international relief work with the Red Cross. 

He once said, “Success is measured by the service you render and the character of citizen you make rather than by the amount of money you amass.”

This afternoon I’d like to talk about these two components of Jesse Jones’ ideas about success – and how they can be applied to corporations and companies such as ExxonMobil.

While running a successful business enterprise is our primary obligation, to our shareholders and to society, we know our business success is derived not just from our financial results – but by how those results are achieved.

The “service we render” and the ongoing investments we make from our earnings are critical to economic growth, economic development, and social progress.  Simply put, delivering energy in a safe, secure, and responsible manner improves the lives and opportunities of billions of people the world over.

At ExxonMobil, we are also dedicated to the second part of Jesse Jones’ definition of success.   We are proud of our character as a corporate citizen operating in diverse countries and cultures around the world.  

We have a well-established history of going beyond our primary responsibility of delivering the energy that benefits our consumers, shareholders and business partners.  As a company and as individuals, the men and women of ExxonMobil are dedicated to being good corporate citizens wherever we operate.  I know that where ExxonMobil and our people go, good things happen in those communities.

We believe this ideal is so integral to our long-term success that we have built it into our business model and our corporate governance.  We know maintaining our commitment to citizenship is fundamental to our year-to-year success as a company.

For decades there has been a debate in the United States about the role of business in driving social and economic progress.  Some still see a tension between the contributions of business and the role of government in spurring development, progress, and economic opportunity.  Many draw a clear divide between the public and private sectors, and see the relationship between them as mutually exclusive.  The answer for some is more private enterprise and less government – while the answer for others is more government and less private enterprise.

But a close look at U.S. history reminds us that when government promotes the climate for business success and innovation, individual citizens and industry itself are better able to reach out in the kind of citizenship efforts that can transform communities for the better.

By promoting free markets, free trade, and the rule of law, the United States fostered an atmosphere in which citizens and businesses could take risks, innovate, build, and achieve unprecedented success.  The result was a dynamic, world-leading economy that delivered prosperity and progress for generations.  In turn, businessmen like Jesse Jones saw the value of this unique American experiment and they were driven to promote and extend these opportunities to others who were in need.

The simple lesson: When government and industry respect the rightful role of the other – and trust each other to faithfully fulfill their respective roles – progress is possible.   Looking to the challenges our nation faces today and in the future, deepening understanding and building trust between the public and private sectors is more important than ever.

Leaders in government and in business agree we face an urgent need to revitalize our economy and spur job creation.  To achieve these goals, we must unleash the extraordinary power of private citizens to seize new opportunities in free markets.  Industry can achieve this by taking risks, investing in the future, hiring new workers, expanding operations and making our economy more competitive.  But we can only achieve this when government creates a level playing field for competition and upholds a stable policy framework conducive to long-term investments.

Nearly one in ten Americans is currently unemployed – with millions more underemployed or in fact no longer seeking work.  To be able to create jobs, America’s businesses – both large and small – need to be able to plan for the future with confidence.

Every business leader faces challenges in assessing the future – but in tough economic times government can help by keeping a steady hand on the rudder.  If the private sector knows that government will stay the course and resist the temptation to over regulate, it can invest with confidence.

Such investments by the private sector ultimately create jobs that are sustainable over the long-term.  Public sector jobs are important. Governments play a role that the private sector cannot and should not play.  But job creation focused primarily on increasing employment in the public sector is not a sustainable solution.

When government creates an environment where businesses, both small and large, can be creative, take risks, and grow, the private sector will not only create millions of new jobs, but America’s businesses and citizens have demonstrated, time and time again, they will reward this trust in private markets with unequaled acts of private charity and corporate citizenship.

Good corporate citizenship – focusing on how we conduct our business and how we interact with the communities where we operate – is critical to building trust in the private sector – the kind of trust that is necessary to strengthening our relationship with citizens and government.

Simply put, we all have an interest in the shared effort to balance economic growth, social development, and environmental protection.  And just as important, we all can contribute.

At ExxonMobil, we are proud of our contributions in all three of these areas, contributions made possible with the cooperation of the governments in the countries in which we operate.  

Contributing to Economic Growth
ExxonMobil’s most important contribution has always been to provide reliable, affordable energy in a manner that fuels economic growth and development.  Indeed, for more than 150 years, the oil and natural gas industry has helped drive the U.S. economy by providing reliable energy, well-paying jobs, tax revenues, technological innovation, and shareholder value. 

According to a recent study by PricewaterhouseCoopers, the oil and natural gas industry contributes more than $1 trillion a year to the U.S. economy – in the form of jobs, labor income, and the value added within our industry, as well as in other industries, that provide goods and services to support our activities.  Our industry also directly and indirectly supports more than nine million jobs in the United States. 

These economic contributions are even more important in light of the global economic downturn and the slow job creation of the nascent recovery.  Our industry can – and must – be part of our national efforts to achieve a more robust economic growth.

Of course, much focus has been placed on the role small businesses play in job creation, but studies show that large corporations are also critical engines of job creation and employment.  As big businesses flourish, small businesses are created as the direct suppliers, contractors, and providers of other services essential to the success of the larger businesses.  With the right public policies, the energy industry and companies like ours can lead the way back with our disciplined investments in new projects, new technologies, and new jobs.

And our investments will underpin the global growth and prosperity that energy brings. We know the world will need more energy in the years ahead.  Over the next 25 years – not a very long time – global energy demand is set to grow by about one-third over current levels, as people around the world, particularly the developing world, seek to improve their living standards and increase their prosperity. 

While continued advancements in renewables and alternative sources of energy will be important, the reality is that fossil fuels, and more particularly oil and natural gas, will continue to be the dominant source of economic energy for decades to come. As such, companies like ExxonMobil must maintain our commitment, through good times and bad, to the technology and innovative solutions to reach and deliver ever more challenging new supplies of oil and natural gas. This is something we have done for the last 125 years, and will continue to do.

With this increased energy demand, we also face evolving environmental challenges – such as reducing greenhouse gas emissions associated with energy use and protecting access to clean water supplies.

Globally, we expect energy-related carbon-dioxide emissions to rise about one percent per year through the year 2030.  Much of this emissions growth will come from rapidly developing nations, such as China and India, whose growing populations expect and deserve a higher standard of living. 

Growing populations also require access to greater amounts of clean water – an environmental issue of growing importance and one which the energy industry takes seriously.  Energy and water are inextricably linked – water is needed to produce energy, and energy is needed to extract, treat and distribute water.  Striking the right balance is crucial to addressing this environmental challenge and in providing people around the world access to both energy and water in sufficient amounts to enable economic growth.  

To meet challenges like these, the energy industry has an important role to play by investing in the research and development of integrated solutions – integrated solutions that promote efficient use of our energy resources and increase energy supply diversity by harnessing, improving, and advancing all economically viable energy sources.

Social Development
The quest to develop all economically viable energy sources has taken ExxonMobil and its employees to some of the far reaches of the world. 

Our service to consumers and citizens in countries around the globe has given us an insight into how we not only aid economic development, but how we can help in the communities where we live and work.

To ensure our citizenship efforts are effective, we always begin with a dialogue with communities, governments and others to identify what the most pressing local needs are to allow human progress.

In some countries where we operate, our corporate citizenship investments are directed at providing basic health care and medical support, in other nations we are helping increase economic opportunities for women and here in the United States we are supporting education in science, technology, engineering and math.   

We also strive to help local communities develop what we call National Content – the jobs, training, skills, and management experience that enables them to build capacity and sustain economic growth beyond the lifecycle of our projects and long after we may be gone.   

In Africa, long-term prosperity is hampered by malaria. ExxonMobil has been engaged in the fight to eradicate this disease, which devastates the lives of millions and accounts for about one million deaths each year, mostly children and infants.  Our efforts include providing life-saving bed nets, anti-malarial drugs and treatment programs, as well as education about the disease.  We are also bringing our business approaches to ensure we get results that change lives.

In many developing countries, poverty prevents people and communities from reaching their full potential.  Research shows that investing in women is often a catalyst for economic and social change.  To this end, we created the Women’s Economic Opportunity Initiative in 2005 to give women in developing countries the access to opportunities, skills and tools they need to participate in the economic life of their communities.

Here in the United States, community needs are different.  One of the daunting challenges we face is ensuring that America’s students are prepared for the jobs of the 21^st century.  I think everyone in this room knows that our nation’s competitive future depends on excellence in math, science, and engineering. 

In 2007, we made a founding commitment of $125 million to the National Math and Science Initiative. The group’s mission is to find the most successful, proven math and science programs for both students and teachers, scale them up, and deploy them to the national level. 

This initiative is already delivering results. 

In the first full academic year, schools that adopted and implemented NMSI’s programs saw more than a 50 percent increase in the number of passing scores for Advanced Placement math, science, and English exams.  That increase is nine times the national average, and there was a 70 percent increase among minority students.

Environmental Protection
The third part of our broad definition of success and good citizenship relates to our broad-based approaches to minimize environmental impacts from energy use. Our quest is to provide alternative ways to consume oil and natural gas that reduce the environmental impact from our consumption.  We are meeting this objective by investing in the technologies that help both ourselves and our customers use energy more efficiently and reduce emissions.

For instance, ExxonMobil is a world leader in cogeneration. Cogeneration is the efficient, simultaneous production of electricity and useful heat or steam used for industrial processes.  We currently have an interest in 4,900 megawatts of cogeneration capacity at more than 30 sites around the world – producing enough electricity to supply more than 2 million U.S. homes.  In addition, we have new facilities under construction in Singapore that will increase our cogeneration capacity to more than 5,000 megawatts by next year. 

The emissions saved through this cogeneration capacity equate to taking over 1 million cars off of the roads.

We are also developing technologies to help consumers save energy.  We have worked with major tire manufacturers to develop a new tire-lining technology that uses up to 80 percent less material in the manufacturing process – making tires lighter and keeping them properly inflated.  A car with under-inflated tires burns up to an extra tank of gasoline every year.

And most recently we invested in a potentially revolutionary technology to develop next-generation biofuels from photosynthetic algae.  We know certain species of algae can produce oils through photosynthesis that could one day be blended through our existing refining and supply network, and converted to diesel, gasoline, and other products.  

Now there is much research ahead of us, and at this point we do not know if we will be successful or not.  But if our R&D effort is successful, and we can bring solutions to the scale necessary to be meaningful, it could lead to billions of dollars in investment in which algae could play a role in expanding our transportation fuel supplies. And, because algae live by absorbing carbon dioxide, this technology may also be used for reducing greenhouse gas emissions.

Conclusion
Maintaining good corporate citizenship while delivering energy the world’s societies require is a complex task, and one which cannot be undertaken in isolation from the communities and societies in which we operate.

From his many years in both government and in the private sector, Jesse Jones understood that the challenges we face require us to invest in the future and to work together.  These challenges require that business and government engage in an ongoing dialogue to build good public policies – policies that allow companies and citizens to find new and innovative ways to succeed in the free market and achieve our shared goals of building a better future for all.

In the energy business, we know the value of investing for the long term.  We know our competitive edge depends on investments in people as well as new technologies.  But success in developing people and technology depend on a sustained, disciplined and consistent approach. 

In the decades ahead, it will be more important than ever for governments to encourage free trade, uphold the rule of law and build the stable legal and regulatory frameworks that allow for long-term investment and long-term corporate citizenship efforts to make a difference.  

Often the policy changes that are most damaging to entrepreneurs and innovation flow from a fundamental mistrust in the private sector.  Leaders in the private and public sector both have a responsibility to challenge the basis and perceptions for this mistrust. 

The Jesse H. Jones and Mary Gibbs Jones Award for International Citizen of the Year is one of the ways that helps bridge the current divide.  It is both a much-appreciated recognition for my company, and a visible reminder of our obligation to maintain a commitment to excellence in citizenship in all of our activities in the years ahead.  Again, on behalf of the men and women of ExxonMobil the world over, I am honored to receive this award.

I thank you for your kind attention.