Glossary
Accountability. Corporate accountability refers to having to answer for the consequences of a company's behaviour. Measures of accountability can range from social audits of a company and CSR reporting, to the legal liability for a company's actions. While there is no consensus on what corporate accountability should encompass, the term 'accountability' is usually understood to result in stricter obligations by companies in comparison with 'social responsibility'. Civil society. Civil society...
Importance of government
This book has repeatedly shown that a country's government is not merely an important element of the national context, within which companies operate. The actions or inaction of the government largely define the rights and responsibilities of companies. Indeed, the distinction between 'regulatory compliance' companies complying with the law and 'voluntary action beyond compliance' CSR depends crucially on the government. The need for CSR is greatest in societies where the government has not...
Undermining governance through corporate activity
Most oil company executives tend to reject the notion that they could play a constructive role in helping to address governance issues, and they have a legitimate concern over corporate involvement in the political process. However, such a stance denies the reality that 1 multinational companies already intervene in the political process to attain corporate objectives e.g., lobbying for new legislation Frynas et al. 2006 Shaffer and Hillman 2000 2 corporate activities such as tax avoidance and...
CSR among oil multinationals
The oil and gas sector has been among the leading industries in championing CSR. This is at least partly due to the highly visible negative effects of oil operations such as oil spills and the resulting protests by civil society groups and indigenous people. Prominent examples of publicised industry 'debacles' include oil tanker accidents such as the Exxon Valdez, indigenous unrest such as anti-Shell protests in Nigeria and the involvement of oil companies in human rights abuses such as BP in...
The product
The nature of products and services necessarily determines CSR concerns, so we start by explaining the nature of crude oil. Crude oil or petroleum is a hydrocarbon material of ancient animal and vegetable origin. The word hydrocarbon refers to mixtures of chemical substances, which primarily consist of carbon and hydrogen atoms. But names can be confusing to the layman. As liquid and gaseous hydrocarbons are closely related, the word 'petroleum' is sometimes used to refer to both petroleum and...
The government
Work by institutional theorists reminds us that, despite globalisation, nation-states remain the primary units of political competition and mobilisation, national legal systems continue to standardise the nature of property rights in an economy and national regulations continue to table 3.1 Key stakeholder groups in the oil and gas sector and their interest in CSR Gain aid from donors Avoid the need for government intervention Lack of capacity to support social and environmental Protect own...
The development challenge
This chapter evaluates the potential of the current CSR agenda for addressing international development challenges, by focusing on the experience of the oil and gas sector. Both development agencies and companies have in recent years made claims about the positive role that CSR could play in contributing to international development goals such as poverty alleviation and health improvements. As the UK Government's Department for International Development DfID argued, 'By following socially...
Importance of context
This book focuses on the oil and gas sector and some of the lessons are specific to that sector. Above all, Chapter 6 shows that resource extraction creates particular economic, political and social problems. Many other economic sectors do not create such negative effects. Therefore, issues such as wider societal governance and revenue transparency may be less relevant to companies from other sectors. The nature of an industry determines CSR concerns, and any CSR guidelines, standards and...
Social Responsibility Of Business Introduction
Companies are increasingly expected to assist in addressing many of the world's pressing problems including climate change, poverty and HIV Aids. According to a 2007 survey by the consultancy firm McKinsey carried out among the chief executive officers CEOs of companies, 95 per cent of those questioned believe that society has greater expectations than it did five years ago that companies will assume public responsibilities. More than half of the CEOs believe that these expectations will...
Royal Dutch Shell
Acona. 2004. Buying Your Way into Trouble The Challenge of Responsible Supply Chain Management. London Insight Investment Management. Adams, Ronald. 2005. Fast food, obesity, and tort reform an examination of industry responsibility for public health. Business and Society Review 110 3 297 320. Aguilera, Ruth V., Deborah E. Rupp, Cynthia A. Williams, and Jyoti Ganapathi. 2007. Putting the S back in corporate social responsibility a multilevel theory of social change in organizations. Academy of...
Stakeholders
Multinational oil companies such as Shell could not operate successfully without the involvement of other stakeholders, who provide the legal guarantees, funding, equipment, technical expertise for oil operations and legitimacy. The web of relationships of an oil company is very complex. As an example, Figure 3.4 provides a typology of the stakeholder groups of Shell International - the Shell company's London-based hub. Behind each of the headings, there may be numerous organisations with...
The context of CSR
Discussions on CSR often revolve around attempts to find 'universal' solutions that can be uniformly applied across the world. Ethical codes and principles such as the United Nations Global Compact, certification schemes such as the ISO 14001 or standards for reporting such as the Global Reporting Initiative attempt to universalise social and environmental standards. There are good arguments for applying the same universal standards certain standards are becoming a legal requirement,...
The basis of environmental success
The success of CSR in addressing various environmental issues can be explained by the convergence of environmental and business interests. Both companies and the environment can benefit from energy efficiency and a reduction in gas flaring, as the sale of previously flared natural gas or energy savings can lead to better financial performance. Indeed, the general evidence for a business case or win-win outcomes of CSR is strongest with regard to environmental issues, as opposed to 'social'...
The limitations of community development initiatives
The author has conducted an extensive twelve-month research project on oil-company-funded community development projects in the Gulf of Guinea region, generously funded by the Nuffield Foundation. Eighty-nine interviews were conducted for this research with oil company staff, consultants, NGO staff, local communities, government officials and others in the United Kingdom, the United States, Nigeria, Cameroon and Equatorial Guinea. The study found that the positive effects of company initiatives...
Potential and limitations of CSR
The evidence in this book suggests that CSR has the greatest potential for addressing environmental challenges. Corporate reporting on the environment is steadily improving, new environmentally friendly technologies are being developed and tangible improvements are being made by some companies. Environmental challenges benefit from the specific expertise that companies possess, as technical and managerial skills greatly assist environmental improvements. Most crucially, environmental...
Conclusions on CSR strategies
The above analysis of oil companies suggests that all three perspectives - stakeholder theory, institutional theory and Austrian economics - have a part to play in explaining the social and environmental strategies of multinational companies. However, it appears that the explanatory strength of a particular perspective varies between companies and over time. Stakeholder government pressures have played a key role in influencing the social and environmental strategies of state-owned companies....
Austrian economics as an alternative perspective
Recent attempts to construct a multilevel theory for explaining CSR strategies focused mainly on stakeholder theory and institutional theory and were guided by the idea that social and environmental strategies are externally driven, with the role of managers confined largely to adapting to external demands Aguilera et al. 2007 Campbell 2007 . However, this exclusive emphasis on adaptation to external pressures fails to allow for active managerial choices about the direction of the social and...
Conclusion
An analysis of the industry context demonstrates that the attribution of social responsibility to a specific actor can often be complex, especially if the government and contractors have significant influence over day-to-day business operations. Even if a company like Shell controls all activities along the supply chain and can be held directly responsible for an oil spill or adverse social effects, questions may be asked about the partial responsibility of financial institutions or the...
Conditions of success and limitations of transparency
As revealed by previous research, the success of transparency initiatives in the oil and gas sector depends on the following conditions Media. Evidence suggests that independent media is an important tool for increasing accountability and the beneficial effects of transparency Besley and Prat 2006 . Better flows of information about revenues and spending allow the public and interest groups to observe the causes and effects of fiscal policy and thereby improve political accountability. There is...
Motives for community engagement and their constraints
The Nuffield Foundation study identified four important drivers for firms to embark on community development projects obtaining competitive advantages maintaining a 'licence to operate' managing external perceptions The above list of four motives drivers is by no means exhaustive and other drivers may be added. Furthermore, social initiatives may also serve to address several of these motives simultaneously or may be partly motivated by a genuine desire 'to do the right thing'. But the list can...
The logic of CSR strategies
Hundreds of academic papers have been published on CSR, but there is no consensus on how to explain the rise and direction of CSR, and there is no agreement on how CSR should be studied. The emergence of CSR has been explained as a consequence of the actions or inaction of governments and changing global governance Jenkins 2005 Moon 2004 the spread of global communications and greater scrutiny of corporate activities by non-governmental organisations Fabig and Boele 1999 Spar 1998 and...
Beyond corporate social Responsibility
BEYOND CORPORATE SOCIAL RESPONSIBILITY Corporate Social Responsibility CSR has emerged as an important approach for addressing the social and environmental impact of company activities. Yet companies are increasingly expected to go beyond this. They are now often expected to assist in addressing many of the world's most pressing problems, including climate change, poverty and HIV Aids. With increasing expectations placed on business, this book asks if CSR is capable of delivering on these...
Oil companies from emerging economies
The CSR strategies of oil companies from emerging economies are far less well-documented than those by Shell or Exxon, so it is more difficult to trace their evolution. The strategies of these companies are also likely to be different because they are fully or partially government-owned. Kuwait Petroleum and Venezuela's PDVSA are 100 per cent government-owned. The Indian government holds just over 80 per cent of Indian Oil shares, while the Brazilian Government controls 57 per cent of the...
Limitations of environmental reporting
There is a recognition that CSR reports are better at covering environmental issues than social ones and environmental reporting has been practised by companies for longer than social reporting Blowfield 2007 KPMG 2005 . Yet criticism of corporate reporting comes both from academics and mainstream organisations such as the Association of Chartered Certified Accountants ACCA . Despite the standardisation of environmental reporting mentioned earlier, there is evidence that corporate reporting has...
Consumption of oil and gas
While some oil companies were successful in achieving environmental improvements, their absolute impact on the industry's environmental footprint remains questionable. A 2005 report by Henderson Global Investors - Carbon 100 - analysed the carbon emissions of the 100 largest companies listed on the UK stock exchange the FTSE 100 . The report found that the oil and gas sector was responsible for 41 per cent of direct carbon emissions among the FTSE 100 companies, followed by electricity 21 per...
Limitations of the EITI
Notwithstanding the existing conditions for success, the design and remit of the EITI also have inherent limitations. Above all, the EITI focuses on revenues, not spending. Effective EITI implementation helps to reveal how much a government has earned from oil and gas, but this does not necessarily help to increase the accountability of government spending. For instance, while the Economist Intelligence Unit praised the accountability of SOFAZ the revenue savings fund in Azerbaijan , it pointed...
Stakeholders vs institutions
Following Freeman's 1984 influential book, stakeholder theory has become the key theoretical perspective utilised within CSR debates. A stakeholder is typically defined as 'any group or individual who can affect or is affected by the achievement of the organisation's objectives' Freeman 1984, 46 . To put it differently, stakeholders are those groups that can either help or damage the firm, including employees, customers, suppliers, shareholders, banks, governments and non-governmental...
CSR strategies in the oil and gas sector
The above discussion of theoretical perspectives can help to guide us in studying to what extent CSR is driven by stakeholder demands, institutions or entrepreneurial activity. The purpose of this inquiry is not to determine which perspective is correct - each perspective can add interesting insights rather, the purpose is to determine under what circumstances companies have acted in particular ways. This chapter looks at CSR strategies within two different groups of companies multinational oil...
Importance of government regulation
Critics of voluntary CSR initiatives from the NGO community often have an ideological preference for government regulation and legal liability as the desirable alternatives for improving corporate standards of behaviour Christian Aid 2004 International Council on Human Rights Policy 2002 . In contrast to this position, the author of this book believes that we need a clear cost-benefit analysis of regulation or 'hybrid' voluntary-regulatory solutions. Indeed, many developing nations may not have...
Multinational oil companies
Shell and BP have been seen as pioneers of CSR within the oil and gas sector, and the role of stakeholders can to a large extent help to explain the birth of CSR in this sector. A series of crises led to strategic shifts in the two companies. table 2.3 Key data on analysed oil companies table 2.3 Key data on analysed oil companies PDVSA figures from Latin Business Chronicle 25 February 2008 . Source Fortune Global 500 23 July 2007 . PDVSA figures from Latin Business Chronicle 25 February 2008 ....
Conclusion 1
This chapter has demonstrated that some companies have made progress on the environmental aspects of their operations. Environmental reporting is improving, new technologies are developed and tangible improvements are made. BP s achievement in reducing greenhouse gas emissions encapsulates the creativity and capacity of oil companies to deal with environmental issues. Judging by the evidence in this chapter, CSR has potential for addressing environmental challenges. However, we have also...