1. Carl Wirdak Occidental Petroleum Corporation GEMI Survey EHS / SR Governance – A Snapshot October 2003

2. EHS Governance Benchmarking – October 2003 2 Outline Survey Recap Framework for EHS / SR governance Factors that influence EHS and SR Role of the Board of Directors Accountability systems Performance assessment and feedback processes Next steps for the GEMI Governance work group

3. EHS Governance Benchmarking – October 2003 3 Survey Overview Scope of EHS / SR Governance covered by survey was broadly defined Survey response rate was just above 50% –Not all companies completed all questions But there was good coverage across the sectors represented in GEMI Thank you to all participants!

4. EHS Governance Benchmarking – October 2003 4 EHS / SR Governance – What is covered? Almost all companies include the following: –Conventional EHS performance –EHS costs (ongoing and liabilities) –EHS risk management –Legal compliance –Employee behavior / ethics –Internal and public EHS communication

5. EHS Governance Benchmarking – October 2003 5 Governance – What is on the fence? A sizable fraction of companies do not consider or only partially include the following topics: A.EHS value-added B.Social Responsibility performance C.Supply and distribution chain relationships D.Stakeholder engagement E.New product development F.Product de-selection

6. EHS Governance Benchmarking – October 2003 6 What frames company actions? Documents that frame EHS governance for companies include: –EHS policy –Code of Conduct –Compliance with law policy –Ethics policy –Company values & principles

7. EHS Governance Benchmarking – October 2003 7 Code of Conduct Every company maintains a code of conduct The code applies to all employees, not just top management The code always covers environment and health & safety Does the code of conduct address social responsibility?

8. EHS Governance Benchmarking – October 2003 8 What shapes EHS and SR expectations?

9. EHS Governance Benchmarking – October 2003 9 Trends in EHS and SR expectations

10. EHS Governance Benchmarking – October 2003 10 What goals are being pursued? Current goals (identified by more than 50% of respondents) Minimize waste, discharge & emissions Reduce natural resources and raw materials usage Manage EHS risk Manage emerging EHS issues Reach out to communities Engage stakeholders Participate in voluntary initiatives

11. EHS Governance Benchmarking – October 2003 11 What goals may be pursued? 2008 goals (identified by more than 50% of respondents) All those on prior slide, plus: Manage indirect or extended impacts Maximize use of renewable energy Maximize use of renewable raw materials Conserve land Protect biodiversity Build EHS value into products and processes Focus on the bottom of the economic pyramid Enhance social structure in developing regions

12. EHS Governance Benchmarking – October 2003 12 Who considers EHS and SR matters?

13. EHS Governance Benchmarking – October 2003 13 EHS / SR consideration by the Board Most companies have just one committee that deals with EHS & SR matters Typical size is 3 or 4 members Most members are outside directors Committees meet 2 to 4 times per year Year that BOD began addressing EHS / SR

14. EHS Governance Benchmarking – October 2003 14 BOD involvement in setting expectations No company has its Board involved in drafting language for goals

15. EHS Governance Benchmarking – October 2003 15 Information sources for the BOD How are BODs informed about emerging issues and/or the company’s activities, including its EHS or SR profile, its performance, etc.? Number of responses

16. EHS Governance Benchmarking – October 2003 16 What is on the BOD agenda?

17. EHS Governance Benchmarking – October 2003 17 Reporting EHS and SR to the BOD Chief EHS / SR officer reports to the BOD Others include: –CEO –General Counsel Typically, the format is a presentation that covers –company performance –positions on issues Frequency of reporting to BOD

18. EHS Governance Benchmarking – October 2003 18 Organizational background In 70% of companies, EHS and SR does not report to one person In ~50% of companies, EHS or SR functional area reports to an Executive V.P. or a Senior V.P. Others include: –CEO –COO / President –General Counsel Number of responses Organizational Model

19. EHS Governance Benchmarking – October 2003 19 EHS / SR performance targets 21 companies in sample EHSSR Companies having targets20189 Average percent of targets that are quantitative 69%87%32% Percent of companies where all targets are quantitative 45%61%0%

20. EHS Governance Benchmarking – October 2003 20 Who is accountable for performance? Accountability rests with line management and staff EHS SR

21. EHS Governance Benchmarking – October 2003 21 Is compensation linked to EHS / SR? EHS SR Line management and EHS / SR staff have strong links

22. EHS Governance Benchmarking – October 2003 22 EHS / SR Assurance & Sarbanes-Oxley For EHS (blue dots), compliance assurance mechanisms are mature, but… the link to Sarbanes-Oxley process certification is not complete For SR (red dots), there are no assurance mechanisms in place NoYes Assurance Mechanism No Yes No. of companies = 21 Sarbanes Oxley link

23. EHS Governance Benchmarking – October 2003 23 Where do companies audit? 21 companies in sample EHSSR Company operations100%95%24% Suppliers62%33%5% Customers10%5%0%

24. EHS Governance Benchmarking – October 2003 24 What do companies audit? 21 companies in sample Laws & Regs Company Policy Company Values Industry Stds External Codes Company operations 100% 76%57%48% Suppliers 48%38%14%29%14% Customers 10%5%0%

25. EHS Governance Benchmarking – October 2003 25 EHS / SR Governance “Wish List” Consistent definition of what is in SR An organized management system for SR Increased attention at the BOD level More routine reports to BOD Greater dialog with the BOD during presentations External verification of audit process and results Formal process to obtain stakeholder input

26. EHS Governance Benchmarking – October 2003 26 Closing Comments Questions / comments / discussion For further information contact GEMI Governance work group co-chairs: –Robert Accarino (Abbott) –David Lowy (Altria)