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countries, since there is little impact of oil operations in the Akassa
area, where oil operations are located offshore. Statoil started funding
the project even before it moved in (and Statoil has not yet started oil
production), and the area has enjoyed a long period of peace and
stability. As a consequence, ProNatura is said to have faced fewer
constraints such as the influence of the dependency mentality.
However, one should welcome a success story which could be used
as a role model elsewhere.
Sources: interviews in Nigeria and Knight et al. 2000.



included: ˜CSR is a waste of time™, ˜CSR is about managing
perceptions and making people inside and outside the company
feel good about themselves™ and ˜CSR is a red herring in terms of
development projects™. Of course, oil companies have many CSR
advocates, who would undoubtedly like to dismiss such claims.
But criticism by industry insiders must be taken seriously and
calls for an assessment of CSR practice. Accordingly, the rest of
the chapter will present the findings of the author™s Nuffield
Foundation study.


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 for local communities
were severely constrained by the companies™ own motives for com-
munity development work, on the one hand, and by various imple-
mentation problems, on the other.
116 Beyond Corporate Social Responsibility
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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
*

keeping employees happy.
*



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 help to understand why social initiatives have only limited
development potential. We shall briefly outline those four drivers and
suggest why the companies™ motives for embarking on community
development projects limit their development benefits.

Obtaining competitive advantages
Companies are sometimes motivated by the desire to obtain a com-
petitive advantage vis-à-vis rival companies with less social engage-
ment. Indeed, in a number of oil-producing countries, socially
responsive oil companies appear to have been favoured by the gov-
ernment in the award of oil and gas concessions “ although technical,
commercial and political motives probably still played the most
important role in selecting companies.
For instance, oil companies in Angola have been actively encour-
aged by the government to contribute towards ˜social development™
initiatives for a long time, including the Social Bonus Fund of the
Angolan state oil corporation, Sonangol, and the Angolan president™s
Eduardo dos Santos Foundation. One academic writer commented that
corporate contributions to the president™s foundation “ and, by impli-
cation, other social initiatives “ offered a double advantage to foreign
The development challenge 117
*




firms of ˜being close to the source of power while also making a display
of charity™ (Messiant 2001). Interviews suggest that, notably, Chevron
in Angola has strategically used its social investments in its attempt to
renew its stake in Block 0, Angola™s most prized oil asset, with an
output of 400,000 barrels per day. Even some Chevron staff admitted
in private that the announcement of a US$50 million partnership
between Chevron, USAID and UNDP in November 2002 was timed
to coincide with the Block 0 negotiations. In early 2004, Chevron™s
concession was finally extended from 2010 to 2030, and the company
pledged a further US$80 million to a social fund. In other words, social
engagement helped the company to obtain a competitive advantage.
While Chevron™s partnership with USAID and UNDP has had
discernible development benefits in Angola, there has been controversy
with regard to oil companies™ payments to the Social Bonus Fund and
the president™s social foundation. Indeed, it has been suggested that the
corporate ˜social investment™ often served as simply another means of
channelling money to Angolan government officials with few develop-
ment benefits (Frynas and Wood 2001). Beyond the award of conces-
sions, oil companies have occasionally initiated specific social projects
to curry favour with a specific government official, for instance through
building an orphanage in the official™s village or region of origin.
From the perspective of oil companies, the benefit of social initia-
tives may be to bring managers closer to political decision-makers,
while appearing to be socially responsible. From the perspective of
broader society, a crucial pitfall of using social initiatives as a com-
petitive weapon is that the development priorities pursued by oil
companies may be those of specific government officials and not
necessarily those of the supposed beneficiaries of such initiatives.

Maintaining a ˜licence to operate™
Firms embark on social investments in order to maintain a ˜licence to
operate™, which means community development projects are initiated as
a way of maintaining a stable working environment. In extreme cases
118 Beyond Corporate Social Responsibility
*




such as Nigeria and Colombia, violent conflicts have occasionally halted
oil operations, hence oil companies were unable to carry out normal oil
production activities without engaging in community development
initiatives and essentially buying the local communities™ support.
For instance, oil companies in Nigeria have pursued community
development initiatives in order to ensure the smooth construction
of pipelines, an approach described by one oil sector consultant as the
˜rapid construction “ zero interruption™ approach. Indeed, Shell™s main
Nigerian affiliate, Shell Petroleum Development Company (SPDC),
provided its major contracts managers with a development budget;
when a new pipeline was built, the manager was able to initiate a
new development project within a community in order for pipeline
construction to continue unhindered. When the SPDC team finished
the construction of a particular section of the pipeline, the community
development budget for the area was simply closed, which followed the
firm™s logic for embarking on the project in the first instance.
Furthermore, one problem of such an approach is that the major
contracts managers are not development specialists, and projects are
driven by short-term expediencies rather than the long-term develop-
ment needs of a community. In one extreme case narrated by a Shell
manager, SPDC built three town halls in one Nigerian community in
the process of building a pipeline, because three community leaders
wanted to benefit personally from construction contracts.
If social projects are initiated in order to temporarily buy peace,
the companies are unlikely to properly consult the entire affected
community. In line with predictions of stakeholder theory (see
Chapter 2), firms will listen primarily to those stakeholders who
pose the greatest threat to their operations, not those best placed to
contribute towards development aims.

Managing external perceptions
Companies also initiate social investments in order to manage exter-
nal perceptions. Many social initiatives have been started following
The development challenge 119
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bad publicity and can be seen as an attempt to improve a company™s
reputation. For instance, in the village of Okoroba in Bayelsa State,
Nigeria, visited by the author years ago, a Shell contractor destroyed a
hospital building. Shell promised to build a new hospital but the
construction stalled for many years. The hospital was eventually
rebuilt by Shell following bad publicity, generated notably by a
director of Environmental Rights Action/Friends of the Earth
Nigeria, who originated from the village.
Of all the companies studied by the author, the Hungarian com-
pany MOL was the most honest in defining the aims of the company™s
˜social investments™:
Sponsoring activities, in line with our business strategy, send out
positive messages and support the achievement of marketing objec-
tives. They also strengthen MOL Group™s business position and value
and increase its social recognition and as a result earn the respect of
society. (MOL Group 2007, 89)

In many other cases, corporate social initiatives have been used for
public relations (PR) purposes, notwithstanding their success in
fostering the long-term development of a local community. In
extreme cases, oil companies have publicised projects which did not
exist on the ground or were only partially functional, a practice made
easier in developing countries, where it may be difficult to verify such
claims. For instance, Shell in Nigeria claimed in an advertising
brochure in August 1996 that the Kolo Creek flowstation was provid-
ing associated gas for a rural electrification scheme; during the
author™s visit to the site in early 1997, associated gas was still being
flared there.
Kolo Creek is an extreme example of a marketing distortion, but it
underlines the importance of PR for CSR practice. If PR priorities
precede development priorities, this is likely to affect the planning
and the implementation of CSR initiatives. PR needs may, for
instance, prioritise media-friendly projects such as donating medical
equipment or helping to construct a new hospital, rather than patient
120 Beyond Corporate Social Responsibility
*




local capacity-building or the training of village nurses, which was
exactly the lesson of past projects in Nigeria™s oil-producing areas. In
the words of one oil and gas sector insider: ˜amateurism the way that
things are done is beyond belief, for example, the way the projects are
chosen, until I understood that this was tokenism, it was about
managing perceptions [sic].™ There is a real danger that PR priorities
may constrain development efforts.

Keeping employees happy
While there are important corporate motives for ensuring that
external actors have a positive view of the company (governments,
local communities, NGOs and the public), companies have com-
pelling internal motives for CSR. Field research for the Nuffield
Foundation study suggests that CSR is often driven by the firms™
desire to demonstrate to their own employees that the company is a
positive force for development. The public criticism of oil and gas
companies has had a demoralising effect on oil company staff, with
publicised stories of environmental damage, the role of oil in con-
flicts or arguments that the oil revenues harm local economic
development. In particular, expatriate staff in developing countries
may feel demoralised when they see how oil riches fail to benefit
larger society while enriching the country™s elite. In extreme cases,
the recruitment of new graduates and the retention of existing staff
have been affected. In the words of one oil and gas sector insider:
˜You can™t stop CSR, because you would demotivate your own
employees.™
However, using community development initiatives as a motiva-
tional tool is in itself a limiting factor, since the very existence of such
initiatives (rather than the long-term development benefit) is a goal
in itself for companies. Charitable donations to an orphanage or a
school, for instance, may already make staff feel better about them-
selves, without the need for the firm to ensure the actual development
benefits of such work. This may explain the earlier observation that
The development challenge 121
*




corporate reports do not provide any indicators of how effectively the
community development funds are spent.
As social initiatives are, to some extent, driven by what makes staff
feel better about themselves, the development priorities may reflect
those of the people inside the firm rather than the local community.
In one case narrated to the author by a consultant, an American
manager from a cattle-farming community in Nebraska initiated a
cattle-raising scheme for a local community. It is not that a commun-
ity could not benefit from a cattle-raising scheme, but rather that such
projects are driven by the priorities of individual employees rather
than those of local communities.

Pitfalls of the business case
The four subsections above demonstrate that the ˜business case for
CSR™ (that is, the use of social initiatives for attaining corporate
objectives) sets limits on what such initiatives can achieve for broader
society. Since the ˜business case™ drives CSR, it is not surprising that
many corporate social initiatives do not go beyond narrowly philan-
thropic gestures like donating objects to local communities such as
schoolbooks, mosquito nets or life jackets, without any attempt to
consult the community or development specialists. Even such simple
gestures sometimes end up as failures. In Equatorial Guinea, Exxon

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