<<

. 20
( 32 .)



>>

which means the social values that guide decisions made by company
staff.
The people in charge within oil companies (i.e., the company
directors, asset managers, etc.) usually have a managerial and/or
engineering background. They are highly capable of dealing with
technical and managerial challenges, which is reflected in their
approaches to CSR. As Michael Blowfield argued: ˜The technologies
used in CSR reflect a preference for measurement, quantitative data-
processing and particular means of communication ¦ segmenting
information into quantifiable components to aid the process of man-
agement™ (Blowfield 2005, 522). This preference can help to explain
both the success of many environmental initiatives and the failure of
many social initiatives. When the corporate will is present and the
CSR challenge can be reduced to distinct quantifiable technical and
managerial tasks, oil companies can perform CSR tasks to a high
standard. As discussed in Chapter 4, BP™s mission to reduce carbon
dioxide emissions, led by the company™s CEO, John Browne, was very
successful. A technical/managerial challenge such as carbon dioxide
emissions can be reduced to ˜metrics™, ˜indicators™ or ˜guidelines™ and
job performance can be quantified. Therefore, technical/managerial
approaches can successfully address environmental challenges, but
they are often insufficient in addressing complex social problems
where soft skills, patience and interpersonal skills are much more
important.
The limitations of technical/managerial approaches can be seen in
the manner in which local communities are consulted. A consultation
The development challenge 129
*




exercise is inherently qualitative and inherently discursive requiring
in-depth discussions and the building of a good rapport with people.
Treating consultation from a technical/managerial perspective leads
managers to speed up discussions with local communities and to try to
achieve an immediate goal (such as a written list of local demands)
rather than trying to build bridges with the local people and spending
lengthy periods discussing the causes of problems. In the words of
one development professional in Nigeria: ˜Shell learned fast new
approaches and paid lip service but corrupted the practice, for example,
PRAs [participatory rural appraisals] done in two days like an engineer-
ing exercise.™ This mindset helps to explain the companies™ failure to
involve the beneficiaries of CSR.

No integration into a larger development plan
Given the importance of the business case and the practical problems
of executing CSR schemes, it is perhaps not surprising that corporate
social initiatives rarely form part of larger regional development
plans. In conducting the Nuffield Foundation study, the author did
not encounter a single example of a broad-based collaboration
between oil companies on issues such as health, education or enter-
prise development. This finding is supported by a previous study on
multinational oil companies in Azerbaijan and Kazakhstan, which
pointed to the limited potential of collective action on development
initiatives. The study concluded:

Quite clearly, getting the companies to work together on projects of
which the benefits may not be proportional to their costs is hard,
particularly in projects with a combination of problem solving, social
well being, company PR and goodwill issues at stake. So even if joining
forces would produce stronger and more comprehensive programmes,
the unlikely hope of individual benefits puts an effective brake on such
efforts. (Gulbrandsen and Moe 2005, 9)

By not integrating CSR or ˜social investment™ into larger develop-
ment plans, the development potential of corporate initiatives is
130 Beyond Corporate Social Responsibility
*




greatly limited and resources may not be channelled for the most
effective development use. Since projects are often planned to suit
short-term expediencies, ˜decisions are taken at too low a level as to
which projects to execute™, as one development professional put it. So
there may be little co-ordination in deciding which areas should
benefit and how projects can contribute to a greater whole.
Without a larger development plan, a new hospital may not
necessarily be built where it is most needed or the value of entre-
preneurship training may be severely hampered if it is not accom-
panied by improved education, improved access to credit, improved
communications or access to markets. For instance, one company
built a fish-processing plant in Nigeria, which was situated a long
distance from trade markets, lacked electricity for cold storage and
lacked suitably qualified personnel. As another extreme example, an
oil company in Nigeria built a road which ran parallel to another
road built by the Niger Delta Development Commission. These are
severe examples of co-ordination failures, but they underline the
importance of wider planning and co-ordination for the success of
development projects.
Worse still, by not integrating CSR into macro-level development
plans, oil companies run the risk of causing local conflicts and
creating negative development consequences. One example from
Nigeria is the concept of a ˜host community™, namely that oil
companies have a social responsibility towards the local community
located closest to their oil facilities. Preference for one community
may breed jealousy in other communities and inter-communal con-
flicts. In one extreme case narrated to the author, members of one
community burned down houses in a relatively successful ˜host
community™ (which was located closer to oil company premises
than their own community) in order to benefit from host community
status themselves. This is perhaps the most extreme and terrifying
example of how adopting a micro lens rather than a macro lens
within CSR can have perilous effects.
The development challenge 131
*




Conclusion

This chapter has demonstrated that corporate initiatives have rela-
tively little potential for tackling the development challenge. While
the professionalisation of community development initiatives is
undoubtedly increasing, this chapter questioned recent claims about
the positive contribution of CSR to international development. The
inescapable conclusion of the chapter is that CSR or ˜social invest-
ment™ in its current form has limited potential for fostering genuine
local community development in practice.
At this point, it may be useful to clarify what this chapter does not
argue. This chapter does not argue that CSR or ˜social investment™ is
discredited because some corporate initiatives have failed.
Development agencies and NGOs also have their share of failed
development projects, despite having superior development exper-
tise. Development agencies and NGOs can also cause long-term
problems for recipient countries: like petrodollars, the influx of public
aid is said to create negative ˜resource curse™ effects (Younger 1992)
(see Chapter 6), while aid delivery has come to rely on NGOs, private
contractors and others, which can erode governance structures
(OECD 2000). Therefore, the issue is not that multinational firms
simply make mistakes or create negative externalities. Rather, there
are fundamental problems about the capacity of private firms to
actively implement development projects and the aspiration of
achieving broader development goals through CSR may be flawed.
The Nuffield Foundation study conducted by the author reveals
that a key constraint to CSR™s role in development is the business
case, that is, the subservience of any CSR schemes to corporate
objectives. This chapter does not question the companies™ right
to make profit, but it suggests that profit-maximising motives are
often incompatible with good development practice. Given that
oil companies are not development agencies, they do not tend
to prioritise overall development goals, and there are inherent
132 Beyond Corporate Social Responsibility
*




limitations to how corporate social initiatives can address the con-
cerns of the local communities.
Furthermore, this chapter has identified a number of practical
constraints to the implementation of successful community develop-
ment schemes including country- and context-specific issues; the
failure to involve the beneficiaries of CSR; the lack of human resour-
ces; technical/managerial approaches of oil company staff; and the
lack of CSR™s integration into larger development plans.
Despite all of these constraints, some of the money spent on ˜social
investment™ does reach the intended beneficiaries, and there are
notable examples of best practice, such as the Akassa project dis-
cussed earlier. In the case of Statoil™s Akassa project in Nigeria and
BP™s Tangguh liquefied natural gas project in Indonesia, interviews
with company insiders point to three factors that can explain the
success of those two initiatives: (1) the company™s level of commit-
ment to the local communities went far beyond the business case; (2)
the quality of consultations with the local stakeholders; and (3) the
high quality of staff working for the company. However, the Nuffield
Foundation study found that the Akassa project was exceptional in a
number of respects (see Box 5.2). Similarly, interviews suggest that
the Tangguh project was exceptional, not least because BP™s CEO
John Browne took a personal interest in Indonesia and some of BP™s
best staff were sent to work on the project. In contrast, the vast
majority of company-funded projects are considered to be much less
successful in terms of development benefits.
Even if companies were able to maximise the development benefits
from their community initiatives, the development benefits from
such efforts will always be limited compared with other economic
contributions that companies make. As companies themselves real-
ise, their main contribution to development is through paying taxes
to governments and supplying energy, as well as providing jobs and
investment. The local community spending is very small compared
with the taxes that companies pay. For instance, Shell reportedly paid
The development challenge 133
*




US$17 billion in corporate taxes and collected US$71 billion in excise
duties and sales taxes on behalf of governments in 2006, compared
with US$140 million spent on ˜social investment™. In other words, the
host governments received US$88 billion from Shell in 2006 alone,
which they could in turn spend on social investment. By implication,
much more attention needs to be paid to the quality of spending of
petroleum revenues. In the words of a senior World Bank official:
˜CSR is missing the boat, the real issues are the fiscal issues ¦ oil
companies have a role to play in the improved management of
revenues.™ In other words, the crucial challenge for the oil and gas
sector is related to governance, which we discuss in the next chapter.
six


The governance challenge




This chapter evaluates the potential of the current CSR agenda for
addressing issues of governance. While extractive industries such as
oil and gas generate relatively few jobs and local economic linkages
compared with manufacturing or services industries, they have been
blamed for distorting national economies and undermining good
governance. Many oil-producing countries have suffered from the
phenomenon known as the ˜resource curse™. Despite being well
endowed with natural resources, oil-producing countries have expe-
rienced economic underdevelopment, political mismanagement and
military conflict, a finding supported by many quantitative and qual-
itative studies and accepted by World Bank and IMF economists
(Gelb 1988; Ross 1999; Sachs and Warner 1999, 2001).
There are three principal negative societal effects of natural
resource exports, which have been called the ˜resource curse™:

Impact on the economy. Large foreign exchange inflows generated
*

by extractive industries exports lead to the appreciation of a coun-
try™s currency exchange rates, which makes it more difficult to
export agricultural and manufacturing goods “ a phenomenon
known as Dutch disease. Extractive industries also draw capital,

134
The governance challenge 135
*




labour and entrepreneurial activity away from non-resource sectors
such as manufacturing and agriculture, thereby stifling the devel-
opment of those sectors. Not surprisingly, it has been shown that
resource-rich countries have had lower economic growth rates than
countries without these resources over the long term (Corden 1984;
Sachs and Warner 1999, 2001).
Impact on governance. Extractive industries exports may under-
*

mine good governance and political accountability to society.
Given their dependence on extractive industries revenue, govern-
ments in resource-rich countries may neglect non-resource taxa-
tion and may have fewer incentives to nurture other economic
sectors and improve the quality of institutions. It has been shown
that resource-rich countries have higher levels of corruption and
lower levels of education than non-resource rich countries
(Gylfason 2001; Leite and Weidmann 1999).
Impact on conflict. The extraction of natural resources requires
*

little human co-operation and tends to be less affected by violent
conflicts than manufacturing or service industries. Because multina-
tional companies can build the necessary infrastructure, including
access roads, they are able to provide their own security and “ being
enclave economies “ they rely little on local business linkages. Thus,
governments in resource-rich countries have less incentive to ensure
economic and political stability. In addition, the prospect of gaining
control over natural resource revenues may encourage the formation
of rebel groups and separatist movements. It has been shown that a
country™s dependence on natural resources dramatically increases
the threat of armed conflict (Collier and Hoeffler 1998, 2000;

<<

. 20
( 32 .)



>>