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Strategy& - www.strategyand.pwc.com

NEW STUDY REVEALS MANAGEMENT AND PREVENTION OF HIV, TB & MALARIA REMAINS INADEQUATE WITHIN THE UPSTREAM OIL INDUSTRY SUPPLY CHAIN; GREATER COLLABORATION BETWEEN INDUSTRY PLAYERS IS NEEDED

Report by Global Business Coalition
and Booz & Company
calls for improvement in contractor interaction and policies related to epidemics

New York, NY - August 18, 2010 - A new study reveals that the oil and gas industry supply chain - which includes oil companies, contractors and sub-contractors - does not perceive the full extent of the risks that HIV/AIDS, tuberculosis (TB) and malaria pose to its workforce, productivity and profitability. The study - conducted by management consulting firm Booz & Company in partnership the Global Business Coalition on HIV/AIDS, Tuberculosis and Malaria (GBC) - outlines why the oil and gas industry should improve its understanding of the hazards posed by these three epidemics and makes ten recommendations for how to make health a priority.

Many major oil and gas companies work in less developed regions of the world - such as West Africa and Asia - where HIV, TB and malaria are highly problematic health issues that can pose a strong risk to worker productivity. Oil and gas activity is likely to increase in many of these regions over the next decade. The industry employs tens of thousands of young, male migrant laborers who work on a temporary contract basis at remote project sites with lack of adequate housing, healthcare and transport - conditions that contribute to the transmission of these diseases.

Seventy-five percent of those infected with HIV/AIDS are located in Sub-Saharan Africa, a key area of industry operation, and the virus is a growing problem in other major countries of industry operation such as Russia and China. The HIV epidemic has helped contribute to the resurgence of TB, which is the leading cause of death in HIV-positive individuals in sub-Saharan Africa. In addition, malaria outbreaks have been known to derail progress on large scale projects.

"HIV/AIDS, TB and malaria pose a clear and present risk to the energy industry supply chain, yet many companies do not fully appreciate the nature or extent of this looming challenge," said Shuma Panse, GBC senior manager for membership and advisory services, and an author of the study. "The good news is there are easy and affordable ways to protect workers and company productivity. The first step is understanding the risk, and engaging with the majors. They can even make an effective worker HIV/AIDS policy a contractual requirement of doing business."

Report Reveals Perception of HIV, TB, Malaria Risk Not in Line with Reality

Among the report's key findings, health issues lagged behind safety as the top priority for oil companies and their contractors. Oil and gas companies base their engagement on health, safety and the environment on their perception of risk. While safety issues are perceived to have the greatest risk, the perception of HIV, TB and malaria risk for companies with significant operations in disease-endemic regions is not often in line with actual prevalence and incidence rates.

According to the Booz/GBC study, risk perception was rated as the most important driver behind health priorities by both the oil companies (50%) and their contractors (71%). However, HIV, TB and malaria were not present in any of the interviewees' top five most pressing health issues at the global level. Instead, issues such as stress, obesity and heart disease were a greater priority.

Major Oil Companies Taking Steps to Promote Health, but Action is Lacking in Supply Chain

According to the study, while several major oil companies are taking some proactive steps to protect their workforces from these diseases, the same cannot be said for their supply chains - compromising the work that the majors are doing.

For example, the Booz/GBC study revealed that where health programs are established and well-structured, oil companies are very generous about extending these programs to their contractors. However, nearly 25% of oil contractors surveyed said they had never had any explicit interaction with their clients (oil majors) on HIV, TB or malaria - signaling room for improvement. Oil contractors cited client contractual and managerial requirements as major drivers behind their activities and programs.

"Oil companies are ahead of the curve in developing HIV and malaria programs, but the contractor community has not been as active," said Jake Leslie Melville, Booz & Company Partner and an author of the study. "Further, our survey found that the subcontractor community is the most poorly served in terms of disease prevention and management programs, yet it is this community that is at the greatest risk."

Additional key findings:

  • There is more interaction between oil companies and oil service contractors than between contractors and their subcontractors. For example, all oil companies surveyed stated they either always or sometimes monitored their contractors on HIV, TB and malaria management but only 35% of contractors said they never monitored their subcontractors on these issues.
  • Contractor action on health issues is largely dependent on guidance from oil companies and in some cases financial institutions if they are providing funding. Contractual clauses on these diseases are becoming more prevalent and are generally considered effective, but still could be adopted more broadly.
  • Study Outlines 10 Recommendations for Greater Prevention and Management of Health Epidemics

    As a result of the findings, the Booz/GBC study concluded that the oil and gas industry has the capacity to make an enormous impact on HIV, TB and malaria and proposes 10 key recommendations for greater prevention and management of these epidemics.

    The study recommends that all players in the oil industry supply chain develop an adequate understanding of disease-risk profiles and develop programs accordingly; document the impact of HIV, TB and malaria on worker productivity, and increase company/contractor/sub-contractor interaction in developing programs and sharing best practices.

    The Booz/GBC report also points out the need for oil companies and oil service contractors to increase the use of company-driven contractual clauses and incentivize contractors and sub-contractors to prioritize HIV, TB and malaria management. Further, the study calls on oil companies and industry bodies to develop contractual clauses from a collective industry perspective, with standardized language or a universal clause that would help contractors translate a mandate into action and develop a standard mechanism for auditing contractual compliance. 

    It also recommends that industry bodies focus their research on the sub-contractor community in order to better understand pressures they face as well as extend research to financing institutions. And, for financing institutions, the study recommends increasing the prevalence of financing institution-driven contractual clauses.

    Study Methodology

    Booz & Company and GBC invited 34 oil companies and services contractors to complete a survey regarding HIV/AIDS, TB and malaria activity and also to participate in a one-to-two hour structured interview. Companies were selected based on their inclusion either in the Global or Fortune 500 lists and were prioritized with a geographic focus on Africa, Russia or China. A GBC member company also distributed surveys to its global suppliers. Interviews were conducted by Booz and GBC staff members with both industry and disease-specific expertise.

    The report "HIV, TB, and Malaria Management & Prevention in the Oil & Gas Supply Chain" is available online for download.

    ###

    The Global Business Coalition on HIV/AIDS, Tuberculosis and Malaria

    The Global Business Coalition on HIV/AIDS, Tuberculosis and Malaria (GBC) is an alliance of over 200 international companies leading the business fight against HIV/AIDS, TB and malaria. GBC works to leverage the private sector's unique skills and expertise in the global response - including developing comprehensive workplace policies; supporting community programs; utilizing core competencies; facilitating leadership and advocacy by business leaders and brokering public private partnerships. The official focal point of the private sector delegation to the Global Fund to Fight AIDS, Tuberculosis and Malaria, GBC maintains offices in New York, Paris, Johannesburg, Beijing, Nairobi and Moscow. Visit www.gbcimpact.org to learn more about GBC.

    About Strategy&

    Strategy& is a global team of practical strategists committed to helping you seize essential advantage. We do that by working alongside you to solve your toughest problems and helping you capture your greatest opportunities. We bring 100 years of strategy consulting experience and the unrivaled industry and functional capabilities of the PwC network to the task. We are a member of the PwC network of firms in 157 countries with more than 195,000 people committed to delivering quality in assurance, tax, and advisory services. Visit www.strategyand.pwc.com to learn more about Strategy&


    "Reproduced with permission - Global Business Coalition on HIV/AIDS, Tuberculosis and Malaria (GBC)"

    Global Business Coalition on HIV/AIDS, Tuberculosis and Malaria (GBC)
    www.gbcimpact.org/


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