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The good oil on ethical behaviour

Published 16-SEP-2019 12:32 P.M.


3 minute read

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ExxonMobil (NYSE:XOM), once the poster child for environmental hazard, has been trying to clean up its image of late.

That’s a hard task the ExxonValdez oil spill left a stain on the oil industry and history. Pictures of oil slicked Alaskan wildlife will be forever ingrained in people’s memories: 250,000 seabirds, almost 3,000 sea otters, 300 harbor seals, 250 bald eagles, 22 killer whales, and billions of salmon eggs all perished.

Whether Exxon has fixed its image or not is a thesis in itself, however the $304.5 billion capped company is working hard in the clean energy/electric vehicle space.

Much like the $116 billion capped Phillip Morris (NYSE:PM) is getting ethical and encouraging people not to smoke, ExxonMobil wants people to drive clean and is developing product suites that complement electric vehicles.

According to ExxonMobil’s Outlook for Energy report, in combination, plug-in hybrids, battery electric and fuel cell vehicles are predicted to exceed 20 per cent of the world’s light-duty fleet by 2040, so profit is still a main driver.

“Mobility is changing and electric vehicles are becoming a greater part of the mix,” said Russ Green, ExxonMobil’s vice president of finished lubricants. “Customers and OEMs are looking to optimise the range and safety performance of their electric vehicles, and ExxonMobil is uniquely positioned to deliver these benefits. This is just the start of the product and service solutions we’ll be developing to support the evolving needs of our customers.”

The launch of its new suite of products follows the recent extension of the company’s partnership with Porsche to include collaboration on its Formula E series car for the 2019 / 2020 season – ExxonMobil’s first entry into electric motorsports.

ExxonMobil will provide Mobil-branded high-performance electric powertrain fluids to Porsche, developed specifically to meet the specialised demands of electric vehicles – including conductivity, cooling capabilities and material compatibility.

There is a reason for big companies taking more ethical stances. For one, it is modern society’s will. It is also just good business practice.

The $43 billion capped electronics innovation company Koninklijke Philips (AMS:PHIA) has a CEO who seems woke to this paradigm.

“When companies work ethically, they will naturally outpace competition. Why? Simply because customers, as we’ve discovered, will see them as a trusted partner, not only for what they do, but how it is delivered. Commitment from management is a key factor to effectively deal with these situations,” said Roy Jakobs President and Chief Executive Officer, Middle East and Turkey for Philips.

Exxon’s cap over the last five years has been on decline, it’s lost over $30 billion over the last five years.

On 31 August Bloomberg reported “Exxon Mobil Corp. is poised to drop out of the S&P 500 Index’s 10 biggest companies for the first time since the index’s inception some 90 years ago, the consummation of a long-term trend of tech titans replacing industrial giants in the top ranks of U.S. stock market.

Visa Inc. replaced Exxon as the 10th biggest member of the index by weighting on 1 August and two weeks later Procter & Gamble Co. also overtook the oil giant.

Exxon’s marketing team may need to work harder on its clean energy message. It’s a large capped company and there’s no reason why it won’t remain so, however it’s dip must be disturbing shareholders. Perhaps they need to push the ethical message harder.

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S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

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