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lysed forty-two leading oil companies (both multinationals and
domestic state-owned companies) in twenty-one countries of oper-
ation with regard to revenue transparency. The report suggested that
the exclusive focus on the reporting of payments to governments is
not sufficient to generating a climate of transparency. It stated:
Revenue transparency by oil and gas companies is comprised of
more than just reporting on payments to home governments on a
country-by-country basis. It also requires disclosure of operations data
and anti-corruption programmes both of which support such trans-
parency and enable its sustainability by the company. (Transparency
International 2008, 24)

The key finding of the Transparency International report was that the
majority of the forty-two companies analysed ˜do not make sufficient
efforts to report on their payments to host governments on a country-
by-country basis or to disclose the accompanying information on
their operations and anti-corruption programmes™ (Transparency
International 2008, 24).
Therefore, while companies publicly support transparency, they
appear only to select a few areas for openness, and they continue to be
secretive about other areas. Indeed, CSR reporting and ˜transparency
initiatives™ play a key role in influencing the media and public
162 Beyond Corporate Social Responsibility
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opinion because they help to portray firms as responsible citizens that
care about people and the environment as much as about profits. As
one study pointed out a long time ago, the influence of interest groups
may indeed be greatest when ˜disguised as altruistic, nonpartisan or
patriotic interest™ (Ray 1972), which can in turn help towards (to
borrow from the vocabulary of Jürgen Habermas) ˜procurement of
legitimation™. Reporting on CSR lends itself perfectly to positively
influencing external perceptions because it helps to disguise the real
self-interest of firms. Henriques (2007, 150) commented that it is
ironic that CSR or sustainability reports ˜were originally conceived
as mechanisms for companies to demonstrate that they were being
influenced by their stakeholders, rather than vehicles for the
opposite™.
In summary, companies use political influence to attain corporate
goals related to profit maximisation, but they rarely use that influence
to encourage improvements in governance. While CSR initiatives
largely fail to encourage better governance, corporate activities may
actually undermine governance.


Conclusion

Governance remains the main challenge for extractive industries. Yet
this chapter has demonstrated that the current CSR agenda barely
addresses governance issues. One exception is transparency, which
has been supported by a number of multinational companies. Indeed,
this chapter pointed to abundant evidence that transparency can
yield many positive effects “ ranging from increased foreign invest-
ment to decreased corruption in health services. However, the effec-
tiveness of the current transparency initiatives “ principally the
EITI “ is severely constrained. On the one hand, most oil-producing
countries lack the conditions for the success of transparency initia-
tives. On the other hand, the EITI is constrained by its focus on
revenue transparency “ as opposed to transparency of government
The governance challenge 163
*




spending. Indeed, there is no scientific basis to support the premise of
the EITI that revenue transparency leads to better social or economic
outcomes.
In the face of the limitations of the EITI, the World Bank and the
IMF may offer alternative mechanisms for improving governance in
resource-rich countries. Indeed, in April 2008, the World Bank
president, Robert Zoellick, announced a new initiative to help devel-
oping countries manage their natural resource revenues. The initia-
tive, labelled ˜The Extractive Industries Transparency Initiative Plus
Plus™ (EITI++), goes beyond the EITI by offering resource-rich coun-
tries World Bank assistance in designing contracts, monitoring oper-
ations, collecting taxes and, above all, spending the revenues
effectively. The first two countries to implement the initiative are
scheduled to be Guinea and Mauritania, two countries that have not
yet experienced a natural resources boom. While details on the new
initiative are still scarce at the time of writing, the World Bank
initiative has certainly more merits than the current corporate and
policy agenda on governance.
None the less, both the EITI and the new World Bank initiative
fail to address the question of how multinational companies can be
usefully integrated into improving governance. The author of this
book believes that companies have a role to play in better governance
in the countries where they operate. As this chapter has demonstra-
ted, multinational companies are political actors already, and they use
their influence to pursue corporate objectives. In many countries,
ranging from Equatorial Guinea to Azerbaijan, Exxon or BP has more
influence than the World Bank or other external actors. At the very
least, multinational companies could use this influence to persuade
governments to sign up to the EITI++ initiative, to publish Reports
on the Observance of Standards and Codes (ROSCs) or to spend a
greater portion of oil revenues on health and education. At the
moment, companies continue to neglect the macro-level problems
in their industry and the related governance issues.
164 Beyond Corporate Social Responsibility
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Most multinational companies do not even accept that they have a
responsibility for macro-level issues “ issues concerning the society-wide
impact of the oil and gas industry. Indeed, a Norwegian study of four
multinational oil companies “ Exxon, Shell, BP and Total “ demonstra-
ted that company executives do not fully acknowledge the resource-curse
phenomenon. All companies continue to claim that they mainly benefit
the countries in which they operate, despite the overwhelming evidence
of the resource curse. In the words of the Norwegian researchers, ˜this
means that they [oil companies] do not fully consider the company™s
impact on the public in host countries™ (Skj¦rseth et al. 2004).
The contention is not that a single company should accept the
responsibility for the adverse impact of the entire oil and gas sector on
the host country. Rather, the unwillingness of both companies and
governments to face up to the reality of the resource curse constrains
the CSR agenda. In simple terms: if one does not acknowledge the
source of a problem, it may be difficult to consider the most appro-
priate solutions for it.
In conclusion, CSR debates appear to have marginalised debates
on governance and macro-level solutions to complex society-wide
problems. There is a real danger that a narrow focus on CSR, local
community projects or the EITI may divert attention from broader
political, economic and social solutions for such problems.
seven


Conclusions and recommendations




This book set out to understand Corporate Social Responsibility
(CSR) and particularly its potential and limitations for addressing
key ˜challenges™ in the business“society relationship: the environ-
ment, development and governance. The oil and gas industry served
as a window to a better understanding of what CSR can or cannot
accomplish. This chapter briefly summarises the book™s findings and
provides recommendations for companies and policy makers.


Potential and limitations of CSR

The evidence in this book suggests that CSR has the greatest potential
for addressing environmental challenges. Corporate reporting on the
environment is steadily improving, new environmentally friendly tech-
nologies are being developed and tangible improvements are being
made by some companies. Environmental challenges benefit from the
specific expertise that companies possess, as technical and managerial
skills greatly assist environmental improvements. Most crucially, envi-
ronmental initiatives appear to lead to win-win outcomes: the environ-
mental impact of companies is reduced, while companies benefit from
lower operating costs, better equipment and innovation.

165
166 Beyond Corporate Social Responsibility
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In contrast, the evidence in this book suggests that CSR has less
potential for addressing problems related to community development
and governance. Companies could greatly benefit from better com-
munity relations and improved governance: fewer operational losses
as a result of community dissatisfaction, less corruption, improved
corporate reputations and so on. The host countries could also greatly
benefit from improvements in human development and governance,
in terms of increased private investment, higher levels of education,
better public services and so on. However, companies appear to be
reluctant to address issues of governance, while their approaches to
community development are often ineffective.
This book suggests that there are two deeper underlying reasons why
multinational companies fail to effectively address development and
governance concerns. First, 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. While the business case
has potential for successfully addressing environmental issues, making a
business case for tackling poverty or governance failures is often much
more difficult. Unlike development agencies, companies do not tend to
prioritise overall development goals such as poverty reduction. Indeed,
profit-maximising motives are often incompatible with good develop-
ment practice; Chapter 5 demonstrates how corporate motives can be at
odds with the development needs of local communities.
Second, multinational companies often fail to acknowledge the
full extent of their interactions with society and politics, and they do
not accept responsibility for macro-level issues “ issues concerning
the society-wide impact of their industry. While companies clearly
exercise political influence, they tend to reject the notion that they
could play a constructive role in helping to address governance fail-
ures. In general, CSR debates appear to have marginalised debates on
governance and macro-level solutions to complex society-wide prob-
lems. Yet CSR initiatives will not be able to tackle some of the key
social and environmental challenges without addressing governance.
Conclusions and recommendations 167
*




Conversely, there are limitations to the extent to which companies
can help towards improvements in governance. At the one extreme, a
single company that has a dominant economic position in a country
can be particularly influential when the government is willing to
tolerate corporate assistance. Most notably, we briefly described in
Chapter 6 how BP was able to influence public policy in Azerbaijan
by providing expert advice to the government. At the other extreme,
a single company can be powerless when faced with government
power. Most notably, the governments of Venezuela and Russia
have in recent years curtailed the commercial operations of the
biggest foreign oil companies, effectively expropriating some of the
assets of Shell, BP and Exxon. The governments of countries such as
Venezuela and Russia appear to be hostile to the very presence of
foreign oil companies (Cresswell 2008; Reed 2007). The remarkable
contrast between Azerbaijan, on the one hand, and Venezuela and
Russia, on the other, once again underlines the importance of context
for the success of CSR initiatives.


Importance of context

This book focuses on the oil and gas sector and some of the lessons are
specific to that sector. Above all, Chapter 6 shows that resource
extraction creates particular economic, political and social problems.
Many other economic sectors do not create such negative effects.
Therefore, issues such as wider societal governance and revenue
transparency may be less relevant to companies from other sectors.
The nature of an industry determines CSR concerns, and any CSR
guidelines, standards and assessments should be made with reference
to the industry context.
By implication, the current focus on the establishment of universal
CSR standards is problematic. Some universal standards such as the
UN Global Compact may be too superficial for effective implemen-
tation. Other universal standards such as the reporting guidelines of
168 Beyond Corporate Social Responsibility
*




the Global Reporting Initiative may be less appropriate than sector-
specific standards such as the 2005 Oil and Gas Industry Guidance on
Voluntary Sustainability Reporting (see Chapter 4).
The wider societal context is also crucial. The discussion of trans-
parency in Chapter 6 demonstrated that civil society, media freedom
and timing are some of the necessary conditions of success for volun-
tary initiatives. The same initiative that was successful in Brazil or
South Africa may not work in China or Azerbaijan because some of
the conditions of success are absent. It has been previously shown, for
instance, that independent monitoring of working conditions in
China may be difficult or even dangerous (Chan 2005), while defec-
tive timing and sequencing was largely responsible for the limited
success of the World Bank-led governance initiative in Chad (Gould
and Winters 2007). Indeed, the uneven spread of the conditions of
success across the world explains the uneven development of CSR in
different parts of the world. Evidence in this book suggests that
Brazil™s Petrobras and South Africa™s Sasol have much more sophis-
ticated CSR policies than oil companies from other emerging markets
such as China and Russia; indeed, CSR is generally more developed
in Brazil and South Africa than in China and Russia.
Therefore, the universal assumptions about the social and political
conditions of success for CSR initiatives are unrealistic. As the author
of this book has previously argued, ˜Current CSR models assume
responsive business interested in CSR, an active civil society willing
to partner with business and a strong state able to provide an enabling

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