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number of state-owned companies, such as Algeria™s Sonatrach,
have reduced their social investment spending over the last two
decades because their respective governments feel that other govern-
ment departments are now in a better position to fulfil various
˜national missions™ such as developing infrastructure and building
hospitals (Marcel and Mitchell 2005, chapter 6).
While there are differences between commercial oil companies and
state-owned oil companies, all large oil companies engage in social
investments in some form. In effect, oil companies have become
quasi-development agencies with a combined total annual budget of
billions of dollars, which raises the question of how effectively the
money is actually spent.
The author of this book has analysed recent social and environ-
mental reports by twenty companies to ascertain to what extent oil
companies fund community development schemes and what specific
focus areas they target. The analysis covered reports of the same
twenty companies considered in Chapter 4. As we can see from
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Table 5.1, every single company supports some sort of ˜community
development™ or ˜social investment™.
All twenty companies support education initiatives and eighteen
out of twenty companies support health initiatives aimed at local
communities (in addition to education or health initiatives for their
workers). However, there is a wide variation in the scope of initiatives
and the level of integration. The initiatives range from occasional
financial donations to schools or hospitals to the construction of new
schools and other facilities. Some initiatives appear to have little
integration with the company™s activities and exhibit few signs of a
˜social strategy™ (e.g., a single donation to a medical facility), other
initiatives exhibit a high level of integration with the company™s
operations (e.g., skills training that may help local people to find
employment in the oil and gas industry). Among emerging market
companies, South Africa™s Sasol and Brazil™s Petrobras appear to have
much more sophisticated and integrated development programmes
than, for instance, China™s Sinopec or Hungary™s MOL.
Some companies go beyond supporting particular health or educa-
tion projects by attempting to foster the long-term social and eco-
nomic development of their local communities. This is particularly
evident in initiatives to support income-generating projects. On the
one hand, companies provide skills training and advice to local
entrepreneurs and small and medium enterprises (SMEs), which in
turn can generate local income and jobs. Indeed, all ten companies
from developed economies support such initiatives, and half of the
companies from emerging economies do so. On the other hand, some
companies actively pursue ˜local sourcing™, which means increasing
the purchase of local products for their operations (from foodstuffs to
oil equipment). Seven out of ten companies from developed econo-
mies and two emerging market companies had a policy on increasing
local inputs, although some of these policies were the result of legal
requirements enforced by host governments. Examples include
Sasol™s partnership with an NGO to train bird guides for the
110 Beyond Corporate Social Responsibility
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developing ecotourism industry, Shell™s assistance for Indian farmers
to gain organic certification, business support centres to help smaller
companies to obtain business contracts from oil companies and train-
ing programmes in entrepreneurial and marketing skills. A number of
companies go beyond social and local economic issues and also see a
role for improving the quality of governance in the countries where
they operate (see Chapter 6).
However, while there is a wealth of community initiatives, the
current reporting on these activities is very weak. The social and
environmental reports contain only input and no output measures for
their social investment. In other words, companies provide informa-
tion on how much they have spent on education or philanthropic
activities or how many local stakeholders participated in a project, but
they provide no measures of how effectively the money was spent. Not
even the level of spending is comparable between companies, because
it is not clear what is included and what is not (e.g., Exxon™s figure
includes PR-related donations to arts institutions and spending on
public policy research). Not a single company systematically measures
the effectiveness of its development interventions, either in terms of
scientific measures (e.g., changes in health indicators related to health
spending) or in terms of a value-for-money analysis. Oil companies
seem to be simply satisfied that they spend money on ˜development™.
We do not know, therefore, to what extent the community investment
has actually yielded tangible benefits for stakeholders.
The development impact is obviously inherently difficult to meas-
ure, but it is not impossible to introduce indicators. Most notably,
Shell introduced the measure of ˜estimated spend on goods and
services from locally owned companies™ in lower-income countries.
However, this example is almost unique in current reporting, and the
other companies do not even specify any developmental indicators.
Neither does Shell™s or any other indicator allow us to assess the
actual impact of development interventions or to compare perform-
ance between different initiatives and different companies.
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A number of companies, including Total, Repsol and Petrobras,
have announced that they are producing suitable development indi-
cators. Indeed, companies already use some development indicators
at the operational level. Shell uses various development indicators
such as ˜the repayment rate of loans™ in micro-credit schemes for rural
communities in Nigeria. Chevron calculates the ˜average income of
farmers™ and the ˜number of hectares that were formerly unproduc-
tive and are now in use™ as measures of success for an agricultural
business programme that the company funded in the Philippines.
Therefore, we will probably see improvements in social reporting
in future.
For the time being, company reports reveal a marked imbalance
between environmental and social reporting. On the one hand,
environmental reports include a variety of scientific measures of
success (carbon dioxide emissions, quantity of oil spills, etc.), as we
have seen in Chapter 4. On the other hand, social reports narrate
selective examples (or ˜stories™) of community investment pro-
grammes without reference to any measure of success. The reader
can either trust these stories or not trust them, but the reader cannot
verify or compare the achievements of companies.
Needless to say, community investments can be highly beneficial
for stakeholders in the absence of externally verified measures of
success, and one could point to various examples of success, including
Shell™s micro-credit schemes in Nigeria and Chevron™s agricultural
initiative in the Philippines. One must also remember that the
beneficiaries of oil-company-funded projects often have no alterna-
tive sources of support, particularly in developing economies where
the government has failed in its development role.
Initiatives funded by oil companies gain further credibility because
they can draw on international development expertise in many of
their funded projects. Indeed, various companies participate in part-
nerships with established development agencies such as USAID and
UNDP, while using NGOs to implement development projects on
112 Beyond Corporate Social Responsibility
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FUNDING USAID UNDP Exxon




Citizens
FACILITATION
International




PLANNING NNF IITA




EXECUTION NGO 1 NGO 2 NGO 3


Figure 5.1: Layers of an Exxon-funded agricultural development project in
Nigeria


the ground. Figure 5.1 provides the example of an agricultural local
community development project, which was partly funded by Exxon
in Nigeria. The project was facilitated and planned by a specialist US-
based consulting firm called Citizens International, the Africa-based
International Institute of Tropical Agriculture (IITA) and the not-
for-profit New Nigeria Foundation (NNF), and it was entirely imple-
mented by small indigenous non-governmental organisations. In
many instances, multinational companies such as Exxon and Shell
use the expertise of development agencies and specialist international
development consulting firms such as Citizens International and
Chemonics to design suitable development projects, while they use
international development specialists, existing medical and educa-
tional bodies and NGOs to implement company-funded projects on
the ground. Private contractors may even carry out many vital tasks
during the preparation of a project, such as carrying out social impact
assessment studies, drawing up lists of stakeholders to be consulted or
setting the agenda for project funding; a successful example was BP™s
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Tangguh liquefied natural gas project in Indonesia, which benefited
from the specialist expertise of the consulting firm Chemonics.
Therefore, the design and implementation of company-funded proj-
ects has become more professional over the years.
The professionalisation of community investment is reflected in
the restructuring of community relations within oil companies. As
one example known to the author, Shell in Nigeria reorganised its
community development unit into the Sustainable Community
Development (SCD) unit in 2004, with a new emphasis on sustain-
ability and the long-term perspective for all its community develop-
ment projects. The company has moved away from its focus on
infrastructure projects, such as hospitals, towards more promising
smaller projects such as micro-credit schemes. The SCD unit hired
consultants and development specialists (including a former senior
UNDP official and former NGO staff), while entering into partner-
ships with external development agencies and various NGOs. The
unit has also introduced a number of guidelines for implementing
development-related projects and some measurement techniques to
ensure some consistency. To sum up, the delivery of ˜community
development™ by companies is evolving and becoming increasingly
sophisticated. The Akassa community development project in
Nigeria is an example of the best development practice that has
benefited from a more professional approach by oil companies to
development issues (see Box 5.2).
However, a previous study by the author funded by the Nuffield
Foundation suggests that, for all the money that oil companies
have spent on development initiatives, there are surprisingly few
tangible benefits for local stakeholders. Indeed, it is significant that
some of the most scathing criticisms of CSR “ or rather the
community development interventions “ were expressed in con-
versations with the author by former and current oil company staff
and company consultants with first-hand experience of CSR prac-
tice in the oil and gas sector. Comments by industry insiders
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Box 5.2: The Akassa project in Nigeria
Statoil™s funding for the Akassa project in south-eastern Nigeria has
come to symbolise the potential positive benefits of oil company devel-
opment interventions and has recently served as a role model for other
oil companies and external donors in the Niger Delta.
The Akassa project in Nigeria™s Bayelsa State was funded by Statoil
(and initially also BP, now Chevron) but was implemented by a develop-
ment NGO called ProNatura, which had exceptional development
expertise and was able to execute the project without interference from
oil company managers.
In contrast to most other oil-company-funded projects, the Akassa
project was entirely grassroots-based. Rather than outsiders deciding on
which specific initiatives should be implemented, the Akassa project
was largely driven by the local people. In contrast to the often super-
ficial consultation exercises with local people carried out by oil com-
panies, ProNatura conducted an in-depth appraisal of the needs of the
community over a longer period of time in which ProNatura staff went
to live in the villages and had extensive discussions with the local
people about their problems and the causes of these problems, before
even starting to plan any initiatives. The project was fully community-
led, involving not just the chiefs (as oil companies had previously
done) but the whole community in the planning process, including
women and youths. Also, crucially, ProNatura helped to build up the
capacity of the local people to help themselves by, among other things,
helping to set up new institutions such as a development foundation
and community development councils, while providing training and
advice to the local people.
In contrast to other oil company projects, the Akassa project was part
of a large development plan for the entire Akassa clan (encompassing
some 30,000 people in many different villages) rather than focusing on
one or several host communities.
The Akassa project has now come to be seen as a benchmark for
best practice in the Niger Delta and ProNatura is currently trying to
emulate this approach in the process of executing development pro-
jects on behalf of France™s Total and the tiny oil firm Nexen. But oil
company staff in other companies such as Shell and some development
professionals have doubts as to whether the Akassa project could be
replicated elsewhere in Nigeria or in oil-producing areas in other
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