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Interview data suggests that interactions with Western partners
were behind the drive to adopt Western-style approaches. Leadership
from the top can provide part of the explanation; for instance, one
interviewee said with reference to Kuwait Petroleum™s ethical policy
that ˜the sheikh thought this was important™. However, interna-
tional exposure appears to have been crucial either in persuading
the Kuwaiti decision-makers or Luis Justi “ the former managing
director of PDVSA “ that the companies should have a Western-
style social and environmental strategy. Interviewees suggested
that the adoption of Western CSR tools could be explained on
the basis of ˜international credibility™, ˜interacting with Western
oil executives™, ˜joint ventures™ or simply ˜part of the trend and
expectations™.
Kuwait Petroleum and PDVSA have pursued international expan-
sion for a long time, and “ unlike many other national oil companies “
they have extensive foreign oil and gas investments and marketing
The logic of CSR strategies 33
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operations in developed countries. Kuwait Petroleum™s drive to
become a global company started as early as in 1981 with a US$2.56
billion agreement to purchase the US company Santa Fe
International (T©treault 1995, 32“41), while PDVSA started a series
of international ventures from the mid-1980s, notably the acquisition
of the US company Citco (Baena 1999). International joint ventures
appear to have been important mechanisms for transmitting interna-
tional practices, acting as isomorphic pressures. Kuwait Petroleum
partnered up with Shell and BP to explore investment opportunities
in Asia, while PDVSA engaged in partnerships with multinational
companies such as Shell before 2002. The international expansion
plans of Petrobras and Indian Oil were less ambitious. Petrobras
considers itself more a regional company in Latin America rather
than a global company, having become the second-largest energy
company in Bolivia and Argentina. Indian Oil has opened offices in
Kuwait, Dubai and Malaysia, and its international expansion has a
regional focus on Asia and developing economies, including Trinidad
and Tobago. None the less, both companies have collaborated with
various international firms and have been exposed to international
markets and, by extension, to some of the same institutional pressures
as other international companies.
Institutional pressures can help to explain why diverse companies
such as Kuwait Petroleum, PDVSA (pre-2002) and Indian Oil have
begun to pay more attention to environmental issues, which were
previously neglected. For example, PDVSA started a development
agreement with Shell and Mitsubishi in around 2000, which in turn
created a ˜sustainable development™ team to study the potential social
and environmental impacts of a planned project; the team was able to
introduce new ideas about sustainability into PDVSA. Similarly,
institutional pressures can explain why both Petrobras and Indian
Oil decided to join the United Nations Global Compact (see
Table 2.4). A Petrobras interviewee commented: ˜This [Global
Compact membership] shows that we are now global.™ Indeed,
34 Beyond Corporate Social Responsibility
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Petrobras won an international CSR award in 2006 for a farming
project which explicitly adopted the United Nations Millennium
Development Goals.
None the less, oil companies from emerging economies did not,
by and large, conceive of social and environmental strategies as
business opportunities, unlike Shell or BP. For instance, Petrobras™s
thermoelectric projects were driven by Brazilian Government pres-
sures, while Kuwait Petroleum™s environmental improvements across
its refineries were driven by European environmental regulations,
which imposed quality standards for petroleum products in the
European Union. These reluctant investments were a passive
reaction to changes in the external business environment, not
entrepreneurial initiatives.
Indeed, in contrast to the American and British multinational
oil companies, there is little evidence of long-term planning in
terms of social and environmental issues, and CSR appears to be
generally less of a strategic tool. The most notable exception
was Kuwait Petroleum™s introduction of unleaded petrol in the
European market in 1984, following a policy announcement of a
plan to provide tax breaks for unleaded petrol within the European
Community. In the same year, Kuwait Petroleum International
launched ˜unleaded petrol™ accompanied by a large publicity cam-
paign in order to obtain a first mover advantage ahead of compa-
nies such as Shell. Ralph Brown, the company™s marketing director,
reportedly said: ˜since we were going to have to do it anyway in the
near future, we might as well do it on our own timing™ (T©treault
1995, 63). This was an early example of an entrepreneurial green
initiative by a national oil company. However, the initiative did
not form part of a longer-term strategic plan, and Kuwait
Petroleum managers™ entrepreneurial initiatives within the com-
pany were stifled in later years by state policy and bureaucracy,
which ultimately limits entrepreneurial potential in all state-owned
national oil companies.
The logic of CSR strategies 35
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Conclusions on CSR strategies

The above analysis of oil companies suggests that all three perspec-
tives “ stakeholder theory, institutional theory and Austrian econom-
ics “ have a part to play in explaining the social and environmental
strategies of multinational companies. However, it appears that the
explanatory strength of a particular perspective varies between com-
panies and over time.
Stakeholder government pressures have played a key role in influ-
encing the social and environmental strategies of state-owned com-
panies. Pressures from non-governmental organisations also appear to
have initially played an important part in shaping corporate strategies
for Shell and BP. None the less, institutional pressures and isomor-
phism appear to have become more dominant over time. To put it
differently, stakeholders can trigger a radical change in company
strategy initially; once CSR tools and practices become more sophis-
ticated and developed, they spread across an industry via professional
meetings, memberships of the same associations and joint ventures,
and then become accepted norms.
This pattern seems to support previous research on social and
environmental strategies, which suggested that the local context
gives way to convergence pressures over time (Levy and Kolk 2002)
and supports the previous insight that social and environmental
movements can give rise to widely accepted institutional structures
within an industry (Lounsbury et al. 2003). Therefore, stakeholder
pressures become less important over time. Stakeholder pressures are
still important for state-owned companies where the government-
owner continues to play a central role, but convergence pressures can
also be seen within state-owned companies. The CSR policies of
Kuwait Petroleum, Petrobras or pre-2002 PDVSA have clearly been
influenced by interactions with other firms in international markets.
While stakeholder and institutional pressures continue to be
important, this research strongly suggests that CSR strategy is not
36 Beyond Corporate Social Responsibility
*




merely a reaction to external pressures. Rather, companies use CSR in
order to gain competitive advantages in terms of obtaining preferen-
tial treatment by governments or in terms of entering new markets.
Active entrepreneurship plays a role in formulating social and envi-
ronmental strategies. Shell™s and BP™s investment in renewable energy
cannot be explained through either external pressures or a theory of
the firm/the resource-based perspective. A company does not invest a
billion dollars in order to react to external pressures or current
demand alone. Likewise, the market did not communicate to Shell
and BP an urgent need to invest in renewable energy, nor did these
firms have unique capabilities to pursue a renewable energy strategy.
Yet this type of investment can be readily explained from the
Austrian perspective, which assumes that the key characteristic of a
successful entrepreneur is the ability to make successful judgments
about the future (Mises 1969; Rothbard 1962). Following the Austrian
idea of ˜entrepreneurial foresight™, companies have made different
assumptions about the future with regard to the future importance
of ethical concerns, the finite nature of oil and gas reserves or the
commercial viability of renewable energies in ten years. These
assumptions necessarily shape future social and environmental strat-
egies because companies need to reconcile any ˜ethical™ considera-
tions with commercial considerations.
There is little evidence that companies from emerging economies
have pursued entrepreneurial opportunities with regard to CSR. Even
when companies such as PDVSA and Kuwait Petroleum faced global
competitive pressures and were exposed to international markets, ˜green™
entrepreneurial activity was limited. In contrast, Western multinational
companies face strong competitive pressures, are driven purely by com-
mercial concerns and their access to many of the world™s oil reserves is
limited, so they need to use any available means to gain a competitive
advantage over their rivals. CSR may just be one of those means.
In conclusion, we require a multilevel theoretical perspective to
explain the social and environmental strategies of companies. This
The logic of CSR strategies 37
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research merely provides a starting point, and our conclusions have to
be tentative at this stage, but it points to the importance of institu-
tional pressures and entrepreneurship in shaping corporate strategy. It
is clear that the stakeholder perspective “ which has been most
frequently used to explain CSR “ is insufficient. The evolution of
CSR is a complex process.
three


The context of CSR




Discussions on CSR often revolve around attempts to find ˜universal™
solutions that can be uniformly applied across the world. Ethical
codes and principles such as the United Nations Global Compact,
certification schemes such as the ISO 14001 or standards for reporting
such as the Global Reporting Initiative attempt to universalise social
and environmental standards. There are good arguments for applying
the same universal standards: certain standards are becoming a legal
requirement, unambiguous criteria simplify the work of managers and
auditors and universal standards increase transparency in information
flows about corporate conduct around the world (Paine et al. 2005;
Smeltzer and Jennings 2006).
However, there are major problems with applying the same rules
and practices everywhere. Indeed, the crucial challenge is to explore
the potential and limitations of CSR in specific settings, because the
success of CSR initiatives is highly dependent on the context. The
same initiative may be appropriate in one country but not elsewhere;
it may work in one sector but not in other sectors; it may be successful
in one situation but not on other occasions. The universal assump-
tions about the social and political conditions for the success of CSR
initiatives are also unrealistic, as we explore further in Chapter 6.

38
The context of CSR 39
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Previous research has clearly demonstrated the limits of universal
standards. First, universal CSR standards fail to address specific
national contexts. Examples include corporate initiatives on black
empowerment and HIV/Aids to tackle the legacy of the apartheid in
South Africa (Hamann et al. 2005), initiatives to deal with the effects
of the economic crisis in Argentina (Newell and Muro 2006), or
specific women™s labour issues in Islamic countries such as ˜menstru-
ation leave™ in Indonesia (Frynas 2003b). Second, universal CSR
standards are capable of addressing some issues better than others.
For instance, universal codes of conduct can improve basic working
conditions in some instances, but they are less able to tackle patterns
of discrimination and harassment in the workplace (Jenkins et al.
2002).
Finally, the nature of an industry determines CSR concerns, and
social concerns are highly diverse between different industries. For
instance, the clothing industry raises issues of employment conditions
and the responsibility of firms within complex global supply chains
(Frynas 2003b), fast food restaurants raise the issue of obesity (Adams
2005), while the main issue in the tobacco industry is the long-term
health effects of smoking (Palazzo and Richter 2005). These concerns
may vary between countries, but the key concerns related to an
industry™s operations are typically shared in most countries. Nigeria
is very different from Azerbaijan, but some of the key concerns related
to the oil and gas sector are very similar in both countries “ the
environmental impact (such as oil spills), the social impact of oil
operations on local communities and macro-economic difficulties
created by the inflow of oil revenues. That is why it is always crucial
to understand the industry context within which CSR operates. This
chapter is devoted to investigating the industry context.
The following sections aim to explain the oil and gas industry and
its wider impact in simple terms. By the end of this chapter, the reader
should have a much better idea of how the oil business works and
what social, environmental and economic issues oil operations raise.
40 Beyond Corporate Social Responsibility
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The product

The nature of products and services necessarily determines CSR
concerns, so we start by explaining the nature of crude oil. Crude
oil (or petroleum) is a hydrocarbon material of ancient animal and
vegetable origin. The word hydrocarbon refers to mixtures of chem-
ical substances, which primarily consist of carbon and hydrogen
atoms. But names can be confusing to the layman. As liquid and
gaseous hydrocarbons are closely related, the word ˜petroleum™ is
sometimes used to refer to both petroleum and natural gas. Coal is
also a hydrocarbon, but petroleum-related books usually refer to oil

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