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The context of CSR 61

campaign against Shell™s Brent Spar platform in 1995 (Rice and Owen
1999; Zyglidopoulos 2002), and the contribution of NGOs to the
development of policy initiatives such as the Extractive Industry™s
Transparency Initiative (EITI) and the Voluntary Principles on
Security and Human Rights (Freeman 2001; Publish What You Pay
and Revenue Watch Institute 2006).
Beyond NGO campaigns against oil firms, the last decade has also
seen a rise in partnerships between companies and NGOs (Bendell
2000; Svendsen and Laberge 2005). These partnerships have taken
many forms. Sometimes firms may engage with an NGO for a specific
project, for instance for marketing an environmentally friendly pro-
duct. At other times, many firms form a formal coalition with various
NGOs on general issues of joint interest. In the oil and gas sector,
companies have often forged partnerships comprising NGOs and
local communities, aimed at local community development in devel-
oping economies (see Chapter 5). These partnerships can sometimes
blur the difference between an NGO and a paid contractor in cases
where the NGO engages in a specific project that is directly funded by
the company. Working in partnerships towards the establishment of
CSR standards and principles, oil companies and NGOs have also
collaborated in initiatives such as the United Nations Global
Compact and the above-mentioned EITI. Companies have various
reasons for entering such partnerships, including the desire to use
NGOs to gain credibility and to solve operational problems.
While some NGOs have been highly critical of CSR initiatives or
have even rejected the notion of voluntary CSR and self-regulation
(Christian Aid 2004; International Council on Human Rights Policy
2002), NGOs have an interest in engaging with CSR, not least
since CSR can represent shared goals with the business community,
engagement with CSR can help NGOs to secure funding and NGOs
are able to influence the emerging CSR standards, codes and ˜social
norms™. The key limitation of NGOs is their lack of accountability
compared with government or democratic trade unions, their lack of
62 Beyond Corporate Social Responsibility

grassroots support and their ineffectiveness at providing services
(Blowfield and Murray 2008, 258). In sum, NGOs seek to and are
able to influence various CSR initiatives, but their legitimacy and
capacity are often limited.


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 influ-
ence 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 government for the company™s operations. An
analysis of the context of CSR implies that a narrow focus on
˜corporate™ responsibility can be misguided, and an investigation of
corporate responsibilities must be accompanied by an investigation of
the responsibilities of government and the responsibilities of financial
The analysis of the context in this industry also implies that the
nature of oil and gas operations involves many potential negative
social and environmental effects, ranging from the negative effects of
seismic studies to oil spills during transportation and processing of oil.
On the one hand, oil operations can cause environmental damage
at different stages of the supply chain. Accordingly, Chapter 4 will
discuss environmental issues in greater depth. On the other hand, oil
operations involve many interactions between multinational compa-
nies and local people in often remote rural areas. Accordingly,
Chapter 5 will address local community issues.
At this point, we must stress that the industry context does not by
itself shape the conduct of companies. As the previous chapter
demonstrated, the CSR strategies of firms are also shaped by the
The context of CSR 63

national context, specific stakeholder groups and the attitudes of
the corporate decision-makers. Human action can play a role, and a
personal decision by a company™s director or an asset manager can also
influence the direction of a company.
Therefore, the industry context cannot explain why the oil and gas
industry has applied different operating standards around the world,
why Shell has been more active in CSR than other oil companies or
why a specific corporate decision was taken on a given occasion. But
the industry context can help to explain why the oil and gas industry
has been more heavily criticised by NGOs for its operations than
other industries and, as a result of such criticism, why multinational
oil companies have become active CSR advocates. It can help to
explain why local community development has been a key issue for
oil companies, whereas it rarely features as a prominent issue for many
other types of companies. It can also help to explain some of the
difficulties that oil companies have had in executing CSR initiatives
in the face of constraints posed by government policy or in the
absence of government intervention. As we stated at the outset of
this chapter, the success of CSR initiatives is highly dependent on the

The environmental challenge

By looking at CSR™s prospects and limitations in the oil and gas
sector this chapter investigates the extent to which CSR can
address environmental challenges. As indicated in Chapter 3, the
environmental challenge of the oil and gas industry lies in the fact
that the nature of oil operations involves many potential negative
environmental effects. Public awareness of the environmental
impact of oil operations was heightened by major environmental
disasters in the past, including oil tanker accidents such as the
Exxon Valdez spill off Alaska in 1989 and ˜well blow-outs™, for
example, when Mexico™s Ixtoc 1 oil well blew out and released
an estimated 3 million barrels of oil into the Gulf of Mexico in
As mentioned in Chapter 3, oil and gas operations pose a threat
to the environment at each stage of the process “ construction,
exploration, production, transportation and refining. During the
construction of oil infrastructure and oil company facilities, lorries
and construction teams may cause dust and waste may be created.
During the exploration for oil and gas, environmental threats
include, among others, clearance of land (which can lead to a
long-lasting or permanent loss of vegetation) and drilling activities

The environmental challenge 65

(which can lead to the release of drilling fluids). Oil production
activities can have an adverse impact on the environment through
damage from leaking pipelines or atmospheric emissions from the
flaring of gas, a by-product of oil production. During transportation,
tankers release oil into the sea in the course of pumping out bilge-
water or unloading the cargo. The pollution from refineries can
include the release of waste water containing oil residuals, solid
waste disposal and atmospheric emissions. In addition to the eco-
logical hazards in the course of oil operations, end-user consump-
tion of oil products “ together with other fossil fuels “ is an
important contributor to global warming (Clark 1982; Estrada
et al. 1997; White 2002). Table 4.1 provides an overview of the
potential environmental impact of oil companies and the potential
mitigating activities.
The potential environmental impact of oil and gas operations is
greatest during the production phase (see Table 4.2). However, the
impact of oil and gas operations greatly varies between different
locations. In some areas, such as farmland and uncultivated bush
areas, the environmental effects may be relatively insignificant. In
other areas, however, oil and gas operations may leave long-term
damage. For instance, in mangrove swamps, it may take two to
three years for mangrove bushes to recover after their roots have
been cut into, and it may take thirty years or more for mangrove
trees to fully recover from a seismic survey (Frynas 2000, 158).
Environmental risks of oil and gas operations are heightened
because in developing economies natural resources, including oil
and gas deposits, are often located near areas of high biological
diversity and high ecological vulnerability, such as rain forests,
mangrove swamps and protected national parks (Austin and
Sauer 2002).
In this chapter, we shall not discuss environmental risks in detail,
but rather evaluate the extent to which CSR can address the environ-
mental impact of company operations.
table 4.1: Overview of environmental impact of oil companies and mitigating activities

Design and Exploration and Refining and
Process stage construction production Transportation processing End use
Impact Dust Air emissions Air emissions Air emissions Air emissions
Light Greenhouse Greenhouse Greenhouse Greenhouse gases
Noise gases gases gases
Waste Light Noise Light
Noise Waste Noise
Waste Water Waste
Water Water
Mitigating activity Dust, light and Drilling Double-hull tankers Catalyst Inventory and
noise impact discharge Pipeline integrity regeneration supply chain
minimisation management management Clean fuels optimisation
Footprint Energy Cogeneration Underground storage tank integrity
minimisation efficiency Energy efficiency Vapour recovery
Traffic Gas flare minimisation Flare
management Pipeline minimisation
Waste integrity Fuel gas
management management sulphur
Waste/Water reduction
management Furnace NOx
Water/gas mitigation
reinjection Waste/Water
Source: adapted from the Chevron website at www.chevron.com (accessed 13 February 2008).
The environmental challenge 67

table 4.2: Potential environmental impact of oil production activities

Production activity Potential environmental impact
All activities Loss of vegetation/arable land
Hydrological changes
Disturbance of communities/flora/fauna
Well operations Soil, water pollution
Disturbance of communities/flora/fauna
Pipelines Soil, water pollution
Disturbance of communities/flora/fauna
Separation of oil/gas/water Ambient air quality
Acid rain
Soot/heavy metal deposition
Greenhouse effect
Pollution/fire affecting flora
Soil/surface water pollution
Disturbance of communities/flora/fauna
Oil terminals Soil/surface water pollution
Disturbance of communities/flora/fauna
Poor ambient air quality
Ozone depletion (fire-fighting agents)
Soil, water, air pollution
Waste problems
Soil pollution
Source: adapted from van Dessel 1995.

Tackling the environmental challenge

While the use of terms such as ˜CSR™ and ˜Sustainability™ is relatively
new, oil companies were prepared to voluntarily introduce some
pollution-related initiatives from at least the 1960s. Already in 1969,
oil companies established an industry-wide voluntary agreement
called the Tanker Owners™ Voluntary Agreement concerning
Liability for Oil Pollution (referred to as TOVALOP), and in 1974
the Offshore Pollution Liability Agreement (referred to as OPOL)
was set up to meet claims for marine pollution damage and
68 Beyond Corporate Social Responsibility

environmental clean-up costs. Under the terms of these agreements,
oil companies voluntarily accepted strict liability for pollution dam-
age and the cost of remedial measures. However, much of the public
attention to oil companies was focused on marine pollution at the
time. With the general rise in environmental awareness around the
world since the 1970s, the quantity and scope of voluntary environ-
mental initiatives have greatly increased, and the environmental
agenda has widened to include broader issues such as climate change
and biodiversity.
As one of the key signs of environmental engagement, oil com-
panies now provide extensive environmental reports. Indeed, several
comparative international studies have demonstrated that environ-
mental reporting among oil and gas companies is more extensive
compared with other sectors, including utilities and various branches
of manufacturing, although this has partly been a result of the
industry™s greater environmental impact. In addition, a high percent-
age of oil companies use third-party verification of their environ-
mental reports, compared with companies in most other sectors
(Kolk et al. 2001). According to the 2005 survey of CSR reporting
by the consultancy firm KPMG, 16 out of 20 oil and gas companies


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