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goals such as poverty alleviation and health improvements. As the
UK Government™s Department for International Development
(DfID) argued, ˜By following socially responsible practices, the
growth generated by the private sector will be more inclusive, equi-
table and poverty reducing™ (Department for International
Development 2001, 2, quoted in Jenkins 2005, 525). The contribution
of firms to development goals is particularly relevant in developing
economies, where the state has often failed to provide basic infra-
structure, education and health facilities.
The linking of CSR to international development goals is a hugely
significant development, in that firms are not simply expected to act
appropriately in terms of responsible environmental practices or
health and safety, but also to play an important role in public inter-
ventions such as the United Nations Millennium Development
Goals (MDGs). If firms are seriously expected to play such a role,

102
The development challenge 103
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CSR cannot be simply seen from the business perspective, as the
expectations of what CSR could potentially accomplish seem to have
become much broader. From society™s perspective, it is important to
assess the contribution that private companies can make to interna-
tional development goals.
What constitutes ˜international development™ can, of course, be
differently interpreted. In addition to basic human needs, it could
encompass broad goals such as income distribution or value creation.
The United Nations MDGs include such goals as halving global
poverty, reducing child mortality and increasing access to safe drink-
ing water.1 However, poverty appears to be the key global concern
today. Indeed, the UK DfID defines ˜international development™ in
terms of ˜efforts to bring people out of poverty™.2 When we discuss
international development goals with reference to private sector
initiatives in this chapter, we focus on poverty.


Tackling the development challenge

Since the late 1990s, international organisations such as the World
Bank and the United Nations, as well as national development
agencies such as the US Agency for International Development
(USAID) and the DfID in the UK, have embraced CSR and dis-
cussed the role that the private sector can play in achieving develop-
ment goals including poverty alleviation, education and health
improvements (Jenkins 2005). In December 2005, the UN special
envoy for HIV/Aids in Africa even proposed that multinational firms
should contribute 0.7 per cent of their annual pre-tax earnings to
combating HIV/Aids; this figure corresponds to the UN target for
developed nations™ contribution to development aid as a proportion


The United Nations MDG website at www.un.org/millenniumgoals/ (accessed
1

12 January 2006).
The DfID website at www.dfid.gov.uk/ (accessed 12 January 2006).
2
104 Beyond Corporate Social Responsibility
*




of GDP (White and Jack 2005). This is perhaps a somewhat radical
opinion, but the expectations placed on the private sector have
undoubtedly grown, particularly in countries with Anglo-Saxon busi-
ness traditions. Most notably, USAID has engaged in multiple part-
nerships with private firms such as Chevron, Microsoft and IKEA to
support and partly fund initiatives ranging from building new homes
in Armenia to renewable energy schemes in the Philippines (US
Agency for International Development 2003).
A number of Western governments have consciously passed the
responsibility for development efforts from the public to the private
sector. A striking example was the Consortium for Development and
Relief in Angola (CDRA), which comprised NGOs such as Catholic
Relief Services, Care and Save the Children. Until 2002, CDRA
received funding from government bodies such as USAID to help in
the post-war rebuilding efforts in Angola. In 2002, the US Govern-
ment informed CDRA that the development projects would now be
financed by Chevron, not US Government funds, giving the NGOs
two weeks to accept the proposed change in funding. One organisa-
tion “ Catholic Relief Services “ refused to accept Chevron money
and subsequently faced a US$700,000 funding shortfall as a result,
which put its development efforts at risk. But the US Government
succeeded in shifting the responsibility for the development efforts
from the public to the private sector.
The calls for greater involvement of private firms in human devel-
opment reflect the growing importance of Foreign Direct Investment
(FDI) relative to Official Development Assistance (ODA) to devel-
oping countries, with FDI now reportedly outpacing ODA by a factor
of three to one (Jenkins 2005, 529). A senior USAID official admitted
in an interview with the author that USAID seeks financial contri-
butions from firms because there are ˜fewer resource flows to devel-
oping countries through ODA™. As a consequence of world-wide
liberalisation and deregulation, therefore, firms are now being called
upon to go beyond their traditional role of generating economic
The development challenge 105
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growth (and thus indirectly helping goals such as poverty alleviation)
towards playing a more direct role in alleviating poverty and other
development goals.
In a small number of industries, including the oil and gas industry,
firms are now making significant contributions towards community
development projects such as hospitals, schools and micro-credit
schemes. Global spending by oil, gas and mining companies on com-
munity development programmes was estimated at over US$500 mil-
lion per year in 2001 (Wells et al. 2001), but the figure is much higher
today. The four oil majors “ Shell, Exxon, BP and Chevron “ spent
almost US$500 million between them in 2006 alone.
The biggest spender was Venezuela™s PDVSA, which reportedly
spent US$13.3 billion on ˜social development™ in 2006 (this is up from
US$6.9 billion in 2005). Other state-owned companies such as Saudi
Aramco and Russia™s Gazprom have also spent billions of dollars on
social investments (see Box 5.1), although exact figures are frequently
not available for many of these companies. Among the commercially
operating multinational oil companies, the biggest spender was prob-
ably the Brazilian oil company Petrobras, which reportedly spent 545
million Brazilian reais (about US$255 million) on ˜social investments™
in 2006, compared with US$156 million by France™s Total, US$140
million by Shell and US$138 million by Exxon (see Table 5.1). Most of
the funding was targeted at developing economies, where most oil
production takes place and where the development needs are great-
est. But a number of Western companies have also made considerable
investments in their home country, Exxon notably spending US$79
million on local communities in the United States in 2006 (57 per
cent of the company™s social investment budget for that year).
Large social investments by companies such as PDVSA, Saudi
Aramco and Gazprom reflect the fact that state-owned or partly
state-owned companies pursue the social objectives of the govern-
ment. PDVSA in Venezuela has greatly expanded its social invest-
ments since 2002 because President Chavez has directed the company
106 Beyond Corporate Social Responsibility
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Box 5.1: Social investments by state-owned oil and gas companies
PDVSA is the biggest spender on social investments in the oil and gas
sector, disbursing US$13.3 billion in 2006. PDVSA directly supports
projects in line with ˜national missions™ set by the government of
Venezuela, which relate to education, access to health services, access
to basic food items, agricultural development, skills training for the
unemployed, promotion of indigenous communities and, somewhat
unusually, provision of identification documents to previously unregis-
tered citizens.
Saudi Aramco has particularly focused on education. The company has
built almost 135 schools in Saudi Arabia. Saudi Aramco reportedly plans
to spend over US$10 billion on building a new Western-style private
university, ˜King Abdullah University of Science and Technology™, in
Saudi Arabia over the coming years. In comparison, Saudi Arabia™s total
annual education budget is about $15 billion.
Russia™s Gazprom™s largest recent social investment was a ˜gasification™
scheme to extend gas provision to 13 million Russians, which required
the construction of more than 13,000 kilometres of new distribution gas
pipelines over 2005 7. In 2006, Gazprom reportedly spent over 17 billion
roubles (over US$650 million) on this scheme alone, which was more
than the combined total social spending by Total, Shell, Exxon, BP and
Chevron in the same year.
However, a number of state-owned companies spend considerably less
on social investment programmes than Saudi Aramco and Gazprom.
For instance, Mexico™s Pemex reportedly spent over US$100 million on
˜cash and non-cash contributions™ in 2005. Ninety-five per cent of these
financial donations and other contributions (e.g., donations of asphalt)
went directly to state and municipal government authorities in Mexico;
in effect, the active engagement of Pemex in social investments was
much smaller than that by commercial companies such as Exxon, Shell
and BP.
Sources: various newspapers, magazines and company websites; social
investment spending figures converted from local currency into US
dollars, using currency exchange rates from The Economist for
31 December of a given year.
The development challenge 107
*




table 5.1: Community investments by selected oil companies in 2006

Community investment by focus area
2006 spending Community Community Entrepreneurs Local
Company Country (US$ million) health education / SMEs sourcing

BP UK + + + +
107

Shell UK + + + +
140

Chevron USA + + + +
91

Exxon USA + + + +
138

Statoil Norway + + + +
10

Norsk Norway + +
45
Hydro*

Total* France + + + +
156

ENI* Italy + + + +
98

Repsol* Spain + + +
34

OMV Austria n/a + + +

CNOOC China n/a + +

Sinopec China n/a + +

Lukoil Russia + +
62

Gazprom Russia n/a + +

MOL Hungary n/a + +

Petrobras* Brazil + + + +
255

Petronas Malaysia n/a + + +

PKN Poland n/a + +
Orlen

PTT Thailand n/a + + +

Sasol South n/a + + + +
Africa

Note: * 2006 spending figure converted from local currency into US dollars, using
currency exchange rates from The Economist for 31 December 2006.
108 Beyond Corporate Social Responsibility
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to embark on ambitious development programmes. Similarly, the
king of Saudi Arabia has single-handedly directed Saudi Aramco to
spend billions of dollars on specific social projects. In Russia,
Gazprom™s ˜gasification™ scheme was promoted as a ˜social project of
national significance™ by the Russian Government.
For a number of reasons, the government may assume that the
state-owned oil company is better equipped to deliver social develop-
ment than other government agencies. The government may seek
specific technical skills from the company: for instance, Russia™s
Gazprom is better equipped to deliver gas supplies to households
than other government agencies. The government may also assume
that the oil company is capable of operating more independently and
professionally than other government agencies: for instance, the king
of Saudi Arabia chose Saudi Aramco to build a modern Western-style
university because of the company™s traditional independence from
religious institutions in the kingdom (see Box 5.1). Conversely, a

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