CSR AND MULTINATIONAL OIL CORPORATIONS

A PROJECT REPORT ON

“CORPORATE SOCIAL RESPONSIBILITY

AND MULTINATIONAL OIL
CORPORATIONS”

BY:

KRISHNA CHAITANYA ACHANTA

ROLL NO: 09117

Page 1
 CSR AND MULTINATIONAL OIL CORPORATIONS

A Project Report on

“CORPORATE SOCIAL RESPONSIBILITY AND MULTINATIONAL OIL

CORPORATIONS”

By

A.KRISHNA CHAITANYA

PGDM 2009-2011

BATCH XVII

ROLL No. 09117

Vignana Jyothi Institute of Management, Hyderabad

(2009-2011)

A report submitted in partial fulfilment of requirements of PGDM program

Page 2
 CSR AND MULTINATIONAL OIL CORPORATIONS

ACKNOWLEDGEMENT:
I owe my profound acknowledgement to all the respected people who made this report
successful.

I am grateful on the first hand to Vignana Jyothi institute of management for giving an
opportunity to work on my study at their institute. i would like to thank director Dr. Kamal ghosh
ray for providing this opportunity.

I am also thankful to col.Saeed Ahmad for providing necessary guidelines for successful
completion of my report and study.

Page 3
 CSR AND MULTINATIONAL OIL CORPORATIONS

Contents
ACKNOWLEDGEMENT: ............................................................................................................................ 3

CONTENTS ............................................................................................................................................... 4

OBJECTIVE OF STUDY: .............................................................................................................................. 5

RESEARCH METHODOLOGY: .................................................................................................................... 5

SCOPE OF STUDY: .................................................................................................................................... 5

EXECUTIVE SUMMARY: ............................................................................................................................ 6

WHAT IS CSR ........................................................................................................................................... 7

WHY DO COMPANIES DECIDE TO GET INVOLVED IN CSR, AND HOW DO THEY BENEFIT ........................... 9

THE PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY ........................................................................... 9

CSR IN DEVELOPING COUNTRIES: .......................................................................................................... 13

INTRODUCTION ..................................................................................................................................... 15

CORPORATE RESPONSE STRATEGIES ...................................................................................................... 17

DIFFERENCES IN ‘MACRO CSR’ STRATEGIES ........................................................................................... 19

ACKNOWLEDGEMENT OF THE PROBLEM ............................................................................................... 19

ORGANISATIONAL RESPONSE ................................................................................................................ 21

DEGREE OF COMMITMENT .................................................................................................................... 23

ANALYSIS OF MACRO CSR STRATEGIES .................................................................................................. 25

CONCLUSION:........................................................................................................................................ 28

LIMITATIONS OF THE STUDY: ................................................................................................................. 31

BIBLIOGRAPHY: ..................................................................................................................................... 32

Page 4
 CSR AND MULTINATIONAL OIL CORPORATIONS

OBJECTIVE OF STUDY:
Globalisation is a leading concept which becomes the main factor in business. This phenomenon
affects the business economy life style and environment in different ways, and almost all
corporations have been affected in many ways. My purpose of study is to know how
multinational oil corporations are working for the benefit of the stakeholders all around the world
and being responsible in their way of functioning.

RESEARCH METHODOLOGY:
The study uses secondary sources, including assessments of company literature and the web-sites
of the four companies. A substantial literature search, including newspapers and journals, was
also carried out.

SCOPE OF STUDY:
The study is about corporate social responsibility and the CSR activities of multinational oil
corporations. The study is restricted to only four companies in multinational oil corporations.
The main reason behind this is time constraint as it is a major field of study.

Page 5
 CSR AND MULTINATIONAL OIL CORPORATIONS

EXECUTIVE SUMMARY:
Several studies show that large revenues from extractive industries may undermine economic,
political and social development in developing countries; a problem coined as the `paradox of
plenty‘. This study explores whether four major oil companies accept this claim and how they
have responded to this challenge. In brief, empirical evidence suggests that the companies
recognise broader social concerns to varying degrees, but none of them fully accept the `paradox
of plenty‘ problem. There are also important differences in organisational response, pertaining
most notably to transparency of investments and how social concerns are integrated in corporate
management systems. There is, however, no widely accepted corporate solution to the `paradox
of plenty‘. The problem calls for innovative rather than proactive corporate responses.

Page 6
 CSR AND MULTINATIONAL OIL CORPORATIONS

WHAT IS CSR
Corporate social responsibility (CSR), also known as corporate responsibility, corporate
citizenship, responsible business, sustainable responsible business (SRB), or corporate social
performance, is a form of corporate self-regulation integrated into a business model. Ideally,
CSR policy would function as a built-in, self-regulating mechanism whereby business would
monitor and ensure its support to law, ethical standards, and international norms. Consequently,
business would embrace responsibility for the impact of its activities on the environment,
consumers, employees, communities, stakeholders and all other members of the public sphere.
Furthermore, CSR-focused businesses would proactively promote the public interest by
encouraging community growth and development, and voluntarily eliminating practices that
harm the public sphere, regardless of legality. Essentially, CSR is the deliberate inclusion
of public interest into corporate decision-making, and the honouring of a triple bottom line:
people, planet, profit.

The practice of CSR is much debated and criticized. Proponents argue that there is a strong
business case for CSR, in that corporations benefit in multiple ways by operating with a
perspective broader and longer than their own immediate, short-term profits. Critics argue that
CSR distracts from the fundamental economic role of businesses; others argue that it is nothing
more than superficial window-dressing; others yet argue that it is an attempt to pre-empt the role
of governments as a watchdog over powerful multinational corporations. Corporate Social
Responsibility has been redefined throughout the years. However, it essentially is titled to aid to
an organization's mission as well as a guide to what the company stands for and will uphold to its
consumers.

Development business ethics is one of the forms of applied ethics that examines ethical
principles and moral or ethical problems that can arise in a business environment.

In the increasingly conscience-focused marketplaces of the 21st century, the demand for
more ethical business processes and actions is increasing. Simultaneously, pressure is applied on
industry to improve business ethics through new public initiatives and laws.

Page 7
 CSR AND MULTINATIONAL OIL CORPORATIONS

Business ethics can be both a normative and a descriptive discipline. As a corporate practice and
a career specialization, the field is primarily normative. In academia, descriptive approaches are
also taken. The range and quantity of business ethical issues reflects the degree to which business
is perceived to be at odds with non-economic social values. Historically, interest in business
ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and
within academia. For example, today most major corporate websites lay emphasis on
commitment to promoting non-economic social values under a variety of headings (e.g. ethics
codes, social responsibility charters). In some cases, corporations have re-branded their core
values in the light of business ethical considerations

The term "CSR" came in to common use in the early 1970s, after many multinational
corporations formed, although it was seldom abbreviated.

ISO 26000 is the recognized international standard for CSR adheres to the triple bottom
line (TBL). It is widely accepted that CSR adheres to similar principles but with no formal act of
legislation. The UN has developed the Principles for Responsible Investment as guidelines for
investing entities.

Within the world of business, the main ―responsibility‖ for corporations has historically been to
make money and increase shareholder value. In other words, corporate financial responsibility
has been the sole bottom line driving force. However, in the last decade, a movement defining
broader corporate responsibilities– for the environment, for local communities, for working
conditions, and for ethical practices–has gathered momentum and taken hold. This new driving
force is known as corporate social responsibility (CSR). CSR is oftentimes also described as the
corporate ―triple bottom line‖–the totality of the corporation‘s financial, social, and
environmental performance in conducting its business. As the commercial sector increases its
investments in corporate social responsibility in its three usual venues

Page 8
 CSR AND MULTINATIONAL OIL CORPORATIONS

WHY DO COMPANIES DECIDE TO GET INVOLVED IN CSR, AND

HOW DO THEY BENEFIT

Today, more and more companies are realizing that in order to stay productive,
competitive, and relevant in a rapidly changing business world, they have to become socially
responsible. In the last decade, globalization has blurred national borders, and technology has
accelerated time and masked distance. Given this sea change in the corporate environment,
companies want to increase their ability to manage their profits and risks, and to protect the
reputation of their brands. Because of globalization, there is also fierce competition for skilled
employees, investors, and consumer loyalty. How a company relates with its workers, its host
communities, and the marketplace can greatly contribute to the sustainability of its business
success.

THE PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY

For CSR to be accepted by a conscientious business person, it should be framed in such a way
that the entire range of business responsibilities is embraced. It is suggested here that four kinds
of social responsibilities constitute total CSR: economic, legal, ethical. And philanthropic.
Furthermore. These four categories or components of CSR might be depicted as a pyramid. To
be sure. Ail of these kinds of responsibilities have always existed to some extent. But it has only
been in recent years that ethical and philanthropic functions have taken a significant place. Each
of these four categories deserves closer consideration.

Page 9
 CSR AND MULTINATIONAL OIL CORPORATIONS

Figure 1: pryamid of corporate social responsibility

Economic Responsibilities
Historically business organizations were created as economic entities designed to provide goods
and services to societal members. The profit motive was established as the primary incentive for
entrepreneurship. Before it was anything else, business organization was the basic economic unit
in our society. As such, its principal role was to produce goods and services that consumers
needed and wanted and to make an acceptable profit in the process. At some point the idea of the
profit motive got transformed into a notion of maximum profits, and this has been an enduring
value ever since. All other business responsibilities are predicated upon the economic
responsibility of the firm, because without it the others become moot considerations.

Legal Responsibilities
Society has not only sanctioned business to operate according to the profit motive; at the same
time business is expected to comply with the laws and regulations promulgated by state, and
local governments as the ground rules under which business must operate. As a partial fulfilment
of the "social contract" between business and society firms are expected to pursue their economic
missions within the framework of the law. Legal responsibilities reflect a view of "codified
ethics" in the sense that they embody basic notions of fair operations as established by our
lawmakers. They are depicted as the next layer on the pyramid to portray their historical

Page
10
 CSR AND MULTINATIONAL OIL CORPORATIONS

development, but they are appropriately seen as coexisting with economic responsibilities as
fundamental precepts of the free enterprise system.

Table 1: differences between economic and legal responsibilities

Ethical Responsibilities
Although economic and legal responsibilities embody ethical norms about fairness and justice,
ethical responsibilities embrace those activities and practices that are expected or prohibited by
societal members even though they are not codified into law. Ethical responsibilities embody
those standards, norms, or expectations that reflect a concern for what consumers, employees,
shareholders, and the community regard as fair, just, or in keeping with the respect or protection
of stakeholders' moral rights. In one sense, changing values precede the establishment of law
because they become the driving force behind the very creation of laws or regulations. For
example, the environmental, civil rights, and consumer movements reflected basic alterations in
societal values and thus may be seen as ethical bellwethers foreshadowing and resulting in the
later legislation. In another sense, ethical responsibilities may be seen as embracing newly

Page
11
 CSR AND MULTINATIONAL OIL CORPORATIONS

emerging values and norms society expects business to meet, even though such values and norms
may reflect a higher standard of performance than that currently required by law. Ethical
responsibilities in this sense are often ill-defined or continually under public debate as to their
legitimacy, and thus are frequently difficult for business to deal with. Superimposed on these
ethical expectations emanating from societal groups are the implied levels of ethical performance
suggested by a consideration of the great ethical principles of moral philosophy. This would
include such principles as justice, rights, and utilitarianism.

The business ethics movement of the past decade has firmly established an ethical responsibility
as a legitimate CSR component. Though it is depicted as the next layer of the CSR pyramid, it
must be constantly recognized that it is in dynamic interplay with the legal responsibility
category. That is, it is constantly pushing the legal responsibility category to broaden or expand
while at the same time placing ever higher expectations on businesspersons to operate at levels
above that required by law.

Philanthropic Responsibilities
Philanthropy encompasses those corporate actions that are in response to society‘s expectation
that businesses be good corporate citizens. This includes actively engaging in acts or programs to
promote human welfare or goodwill. Examples of philanthropy include business contributions to
financial resources or executive time, such as contributions to the arts, education, or the
community. A loaned-executive program that provides leadership for a community‘s United
Way campaign is one illustration of philanthropy.

Page
12
 CSR AND MULTINATIONAL OIL CORPORATIONS

Table 2: differences between ethical and philanthropic components

CSR IN DEVELOPING COUNTRIES:

The challenge for corporate social responsibility (CSR) in developing countries is framed by a
vision that was distilled in 2000 into the Millennium Development Goals—‗a world with less
poverty, hunger and disease, greater survival prospects for mothers and their infants, better
educated children, equal opportunities for women, and a healthier environment‘. Unfortunately,
these global aspirations remain far from being met in many developing countries today. The
question therefore, is: What is the role of business in tackling the critical issues of human
development and environmental sustainability in developing countries

To begin with, There is an extensive historical and generally highly critical debate in the
development literature about the classification of countries as developed and less developed or
developing. Without reviving that debate here, suffice to say that I use developing countries

Page
13
 CSR AND MULTINATIONAL OIL CORPORATIONS

because it is still a popular term used to collectively describe nations that have relatively lower
per capita incomes and are relatively less industrialized.

This is consistent with the United Nations Developments Program‘s categorization in its
summary statistics on human development and is best represented by the World Bank‘s
classification of lower and middle income countries. It should be noted, however, that the
UNDP‘s classification of high, medium and low development countries produces a slightly
different picture than the World Bank‘s list of which countries are developed and developing.

CSR is an equally contested concept. CSR in developing countries to represent ‗the formal and
informal ways in which business makes a contribution to improving the governance, social,
ethical, labour and environmental conditions of the developing countries in which they operate,
while remaining sensitive to prevailing religious, historical and cultural contexts‘.

The rationale for focusing on CSR in developing countries as distinct from CSR in the developed
world is fourfold:
1. Developing countries represent the most rapidly expanding economies, and hence the most
lucrative growth markets for business
2. Developing countries are where the social and environmental crises are usually most acutely
felt in the world
3. Developing countries are where globalization, economic growth, investment, and business
activity are likely to have the most dramatic social and environmental impacts
4. Developing countries present a distinctive set of CSR agenda challenges which are
collectively quite different to those faced in the developed world.

Now we will see different ways to categorize the literature on CSR in developing countries. It
then reviews the research which has been conducted at a global and regional level, before
considering the main CSR drivers in developing countries. Finally, a model of CSR in
developing countries is proposed, before concluding with a summary and recommendations for
future research.

Page
14
 CSR AND MULTINATIONAL OIL CORPORATIONS

Figure 2: classification of CSR in developing nations

INTRODUCTION
Over the last fifty years, the oil industry has been criticised for being monopolistic, taking
'obscene profits' during oil crises and causing accidents with devastating consequences for local
environments and human health. Since the late 1980s, the scope of responsibilities attributed to
the oil industry has expanded to include a broader social agenda, in particular environmental
sustainability and human rights. Even though social and environmental issues have been on the
oil companies‘ agenda since the 1970s, the issues highlighted are in many ways new, reaching
public attention particularly through the Ken Saro-Wiwa case in Nigeria in 1995. Since the mid-
1990s, a growing number of studies have questioned whether the presence of and investments by
extractive industries in general, and the oil industry in particular, in fact represent forces for good
in developing countries. The set of challenges raised by these questions deepened the legitimacy
crisis the oil industry was already facing in the 1990s.

Statistical indicators, for instance in terms of GDP performance, show that resource-abundant
developing countries tend to perform markedly worse than those with a poorer resource base. In
brief, developing countries with considerable mineral and oil resources have for various reasons
not converted this resource wealth into real improvements in the lives of the majority of their

Page
15
 CSR AND MULTINATIONAL OIL CORPORATIONS

citizens. There appears also to be a correlation between rapid inflows of oil revenues and high
levels of corruption, military spending, violent conflicts and civil wars. Hence, rather than a
blessing, there are strong indications that oil and mineral dependence can be a curse leading to
poor performance on key social and poverty-related indicators. This is often referred to as
―The paradox of plenty‖.

Now we examine to what extent four major oil companies accept the `paradox of plenty‘
problem and what they do to deal with it. We have chosen to focus on the four oil ‗majors‘
ExxonMobil, Shell, BP, and TotalFinaElf. But this is not a comprehensive evaluation of
individual companies. On the basis of relatively scarce empirical evidence, we seek to identify
company strategy changes and inter-company variation, with a view to understanding the
direction the oil industry is heading Although there is growing public awareness of the problems
related to strong oil-dependence and oil revenues in developing countries, there are, largely
because of the relatively short time span, not that many cases where the underlying problems
have ‗exploded‘ to the same extent as in the Saro-Wiwa case, and the oil companies have not had
much time to develop appropriate response strategies. Moreover, oil industry involvement in
‗nation building‘ in host countries raises difficult normative issues. Nevertheless, corporate
responsibility for broader social and economic developments in new oil producing regions is an
emerging challenge that many oil industry actors believe will become increasingly important in
the years to come. Most major oil companies refer to such challenges in their business principles
and codes of conduct. Their reasons are mainly twofold. First, the scale of oil exploration and
production in difficult areas is widening continuously. Secondly, the revolution in
communications makes it easier for potential critics to monitor activities in far-away places.

First, we shall develop categories and indicators for comparing corporate response
strategies. Second, we shall compare the four companies according to these indicators. Third, the
empirical observations are then analysed according to validity, i.e. how well do the categories
capture corporate strategies in this field. Finally, we discuss the findings in light of further
research needs: how can we explain similarities and differences in corporate CSR strategies

Page
16
 CSR AND MULTINATIONAL OIL CORPORATIONS

CORPORATE RESPONSE STRATEGIES

In the following, we refer to the new set of challenges as ‗macro CSRs‘. This term refers to
indirect consequences of sudden and steep rises in revenues from extractive industries for the
host country and society, such as the effect of oil revenues on After years of unrest, Shell closed
its operations in Ogoni in the Niger Delta in Nigeria in January, 1993. In May 1994 four Ogoni
leaders were murdered. Saro Wiwa and several other Ogonis were arrested for the murders. Saro
Wiwa and eight other Ogonis were sentenced to death in a trial that blatantly violated
international standards of due process‘. International humanitarian organisations called upon
Shell to intervene. Shell refused, considering the incident an internal Nigerian affair. Widespread
consumer boycotts of Shell in Europe took place. In November 1995, Shell President Herkströter
pleaded for mercy on humanitarian grounds, to no avail. Saro Wiwa and the eight other Ogoni
leaders were hanged. Corruption, human rights controversies and lack of democratic progress in
developing countries.

In contrast, ‗micro CSRs‘ encompasses the immediate effects on local communities of the
activities of a company, employment, labour conditions, local education and health care. The
distinction between `macro‘ and `micro‘ CSR is, however, not clear cut since local corporate
responses, such as employment of local people or building of new schools, can produce
significant results with possible ramifications to the ‗macro‘ level. Nevertheless, there is a
fundamental difference in the risk involved. Micro CSR projects benefit both companies‘
reputation and community development. In contrast, corporate CSR responses directed at the
macro level, such as disclosure of investments in host countries, may expose companies to risk
for sanctions from host countries

The main categories for analysing corporate response strategies are ‗level of commitment‘ and
`‗degree of commitment‘. Level of commitment refers to the extent to which corporations
recognise and respond to demand for responsibility for developments on the macro level in host
countries. Degree of commitment refers to the link between rhetoric and realities, i.e. corporate
action. Level of commitment can be conceived of as a socialisation process in which
corporations recognise their social role. Preston and Post identify three stages of socialisation:

Page
17
 CSR AND MULTINATIONAL OIL CORPORATIONS

recognition of social concerns; consideration of the company`s impact on society and positive
reaction by incorporation of social goals into overall business strategies. These stages are in turn
related to three managerial responses: corporate philanthropy, stylistic and process responses,
and citizenship and coalitions.

It is perfectly possible that a company incorporates social goals and respond managerially, but
fails to live up its standards and aspirations. In this case we would say that the degree of
commitment is low. Implementation failure may be caused by lack of willingness or ability to
follow through. To some extent implementation failure may simply reflect a certain type of
rhetoric that hinges on longer-term ambitions and aspirations, whose conversion into tangible
action is constrained by ‗real-world‘ complexities. Nevertheless, and owing to the reputation
risks facing companies that fail to live up to their aspirations and standards, we would in general
expect some degree of consistency between words and actions. Strong language and mission
statements will not only create expectations among the public at large, but also among
employees, shareholders and investors. For instance, the use of value based statements calling
upon companies to increase transparency and fight corruption could make the company
vulnerable to public criticism if the words are not followed by actions.

Measuring differences and similarities in current ‗macro CSR‘ strategies is by no means a simple
task. We base our comparison pragmatically on a limited set of concrete issues and actions that
have been considered by the oil companies With regard to level of commitment, we first analyse
acknowledgement of the problem in light of the various socialisation stages relating to fight
against corruption, human rights, transparent reporting and the ‗paradox of plenty‘ problem.
Second, organisational responses are operationalised as integration of social concerns into
management systems and cooperation with Non Governmental Organisations (NGOs) and
International Organisations (IOs). Degree of commitment is measured in terms of specific
actions such as disclosure of financial data and withdrawal from controversial projects.

Page
18
 CSR AND MULTINATIONAL OIL CORPORATIONS

DIFFERENCES IN ‘MACRO CSR’ STRATEGIES

I have examined the strategies of ExxonMobil, Shell, BP and TotalFinaElf. The selection of
these companies is based on several considerations. First, we expect that the strategies chosen by
these companies vary significantly. Secondly, these four ‗majors‘ represent some of the world‘s
largest enterprises. Hence, in terms of size, outreach and providers of energy to fuel the
economy, these four companies are likely to be key players in the regions and countries in which
they operate. Third, the selected companies can also be seen as industry leaders. Hence, our
findings could plausibly indicate where the industry as a whole is heading.

ACKNOWLEDGEMENT OF THE PROBLEM

All companies apparently recognise broader social concerns. The company literature of
ExxonMobil, Shell, BP and TotalFinaElf, however, reveals substantial differences in their
strategies. Variations are identified with respect to the language used by the companies in
addressing macro CSR challenges, and the amount of attention paid to particular social
responsibility issues in external communications.

In general, the company literature of TotalFinaElf and ExxonMobil pays less attention to CSR
than does that of BP and Shell. The two latter companies also appear to frame their sphere of
responsibility in broader terms than TotalFinaElf and ExxonMobil do. For example, all
companies declare their support of the Universal Declaration on Human Rights, but only BP and
Shell support the Sullivan Principles (voluntary business codes). BP puts strong emphasis on
communicating to the public what it perceives as the key social issues of relevance for the
business agenda. Shell‘s communications also commit the company to the extent that they focus
on specific goals and countries, for example Nigeria. In 2002, ExxonMobil responded to the
widening CSR agenda by publishing the report ‗Corporate citizenship in a changing world‘ The
relevant sections on governments and societies are, however, amazingly sparse in clear
commitments on the macro level, compared to BP and Shell. Despite the increased emphasis on
social issues, TotalFinaElf‘s 2001 Annual Report and the company‘s Code of Conduct do not

Page
19
 CSR AND MULTINATIONAL OIL CORPORATIONS

offer any concrete commitments on social issues beyond those already mentioned by the
individual pre-merger companies.

All companies claim that their operations benefit the countries in which they operate. This
implies that none of them acknowledge that they are part of ‗paradox of plenty‘ problem.
However, there are differences, most notably between ExxonMobil and TotalFinaElf on the one
hand, and Shell and BP on the other. While ExxonMobil and TotalFinaElf see their responsibility
primarily in terms of providing affordable and environmentally clean fuel and investments in the
countries and regions in which they operate, BP aims to be ‗a force for good‘, and Shell ‗will
strive to build a better world‘ Both BP and Shell aim to become industrial leaders in terms of
integrating concerns for the society into their business strategies; Exxon‘s literature indicates no
ambitions in this regard.

We find the same pattern when it comes to goals related to transparent reporting of data – and
calls for transparent governance in the host countries. BP and Shell both identify non-transparent
financial flows in host countries as a problem. They aim to become leaders in the development of
standards and methodologies for transparent reporting of the social impacts of their activities,
and have also published far more data than ExxonMobil and TotalFinaElf. Both Shell and BP
emphasise the need for transparent governance in countries where they operate in their company
publications. ExxonMobil and TotalFinaElf barely mention the issue of transparency in their
publications.

BP, Shell and ExxonMobil all claim to be actively fighting corruption. There are, however,
differences between the three. While ExxonMobil emphasises that the company will stick to the
rules and regulations in the country it operates, Shell and BP‘s publications touch upon cases that
are not so clear-cut. The publications from Shell, and particularly BP, indicate a broader concern,
extending to alleged misuse of public revenues to which they contribute. Such misuse may not be
illegal, but it definitely represents a grey area that appears to unease the two companies. For
instance, BP undeniably set a new standard of fiscal transparency by publishing details of
signature bonus payments made in developing Angola‘s huge reserves of oil. And the company

Page
20
 CSR AND MULTINATIONAL OIL CORPORATIONS

has banned not only straight bribery but also all facilitation payments ExxonMobil apparently
oppose new standards of fiscal transparency. According to BP ‗Facilitation payments are small
payments made to low-level officials to obtain routine levels of service‘. The routine character of
such payments is illustrated by this acknowledgment of the difficulty of ceasing such practices:
―Action plans were implemented to eliminate these payments before the end of the year. By
taking a firm stance with officials, we found that payments could be stopped without significant
impact on our business. Our ethics certification exercise at the end of the year confirmed that
most facilitation payments involving BP staff had been eliminated, except for a few minor items.
There is little mentioning of corruption and facilitation payments in the company
communications of TotalFinaElf, other than denials of accusations lodged against the forerunner
company, Elf, in the various investigations and trials related to the so-called ―Affaire Elf‖.

ORGANISATIONAL RESPONSE

With regard to management systems and reporting, the pattern described above is repeated: Shell
and BP differ from ExxonMobil and TotalFinaElf. Both Shell and BP have taken steps to some
extent, or claim they have taken steps - to integrate social concerns into their management
systems.

In terms of developing a corporate compliance program and management system on social

issues, BP seeks to balance an approach based on rules and compliance with a value-based
approach that is consistent with its ‗overall management ethos‘. The management system takes
the form of an ‗implementation model‘, based upon performance targets and management
commitments assigned to each of the 140 Business Units, principles for communication and
training, performance monitoring and reporting. Starting in 2001, BP‘s approach has become
more regionally focused, as highlighted by the appointment of a regional ethics committee. This
is done with the understanding that issues such as facilitation payments pose different challenges
in different regions. As regards new tools and management techniques, BP claims to take new
steps and seeking ‗innovative‘ solutions by way of establishing self-imposed constraints and

Page
21
 CSR AND MULTINATIONAL OIL CORPORATIONS

guidelines on ethical behaviour, which apply to relationships with employees and governments
alike. As a step towards translating new business principles into procedures and rules in the
company, Shell formed a twelve member Social Accountability Committee. The remit of the
Committee has been to review the policies and conduct of Shell companies with respect to the
principles, a process that led to the publication of a human rights guide for Shell managers,
entitled Business and Human Rights – A Management Primer. The guide does not describe how
to tackle human right issues in terms of procedures in the day-to-day operations of the company,
but it provides a balanced introduction to the human rights issues affecting its businesses. Also a
new annual ‗Business Principle Letter‘ was introduced, which the Country Chairman were
required to sign in order to ‗confirm that the necessary procedures have been put in place to
ensure that the spirit is understood and the principles are being implemented‘. After the inclusion
of human rights in the business principles of the company, the letter should also cover these
issues.

A recent trend in the Shell literature is the publication of more information on the company‘s
performance in the social area which could be seen as a strategy to regain public confidence in
the company after Saro-Wiwa and Brent Spar. For example, the People, Planet & Profit states
that ―An important part of building confidence is the publication of reliable information that
gives a fair picture of our performance‖. The report sets a new standard for reporting by oil
companies by publishing quantitative data on Shell‘s use of security forces, screening against
child labour and anti-bribery measures.

Except for corruption, we find few indications of ExxonMobil integrating social concerns into its
management system. But one element of the Operation Integrity management System (OIMS) on
Third Part Services – requiring contractors to provide same standards as ExxonMobil – indirectly
relates to this issue. To our knowledge, TotalFinaElf has done little to integrate social macro
concerns into its management systems; although its code of conduct states that ‗the Group
expects its suppliers to adhere to a code of conduct equivalent to its own‘ The Company
distributes the corporate purchasing code of conduct to its business units and main suppliers.

Page
22
 CSR AND MULTINATIONAL OIL CORPORATIONS

According to the company, use of the code is reportedly now required for the evaluation and
selection of contractors and service providers, although the explicit way this is done is not clear.

All four companies have worked with Non-Governmental Organisations and International
Organisations on specific projects. Shell and BP have consulted NGOs on a regular basis during
the formulation of company policies. Shell stands out in this regard for having developed long-
term relationships with Amnesty International and in each country Shell operates; one person
acts as the ‗Country Chairman‘, i.e. the executive responsible to the Shell Group.

Several NGOs have publicly acknowledged BP for being among the first oil trans-nationals to
endorse a human rights policy, for its early position on the climate change issue, its exit from the
Global Climate Coalition, and for setting new standards in areas such as transparency. BP
engages regularly in stakeholder consultations, taking forms like direct informal contact,
structured debates as well as more formal exercises mediated by a third party. Such stakeholder
consultations involve key NGOs such as Human Rights Watch, Amnesty International, Oxfam,
Christian Aid, Global Witness, IUCN and WWF. That said, BP has also received criticism from
NGOs regarding its activities and investments in Columbia, Angola and China.

DEGREE OF COMMITMENT
The main focus of the four companies regarding concrete actions is on what we designate the
micro-level: e.g. measures within the workplaces or adjacent communities. All four companies
spend substantial sums on health and school projects in the local communities in the countries
where they operate. Actions related to macro issues are difficult to measure in any systematic
way. However, we have some scattered evidence indicating that the picture varies with level of
commitment. At one extreme is TotalFinaElf, where we have few indications of macro directed
actions. Shell and BP, on the other hand, have taken steps that fall into the macro category. The
best example is probably BP‘s actions in Angola. Responding to its own rhetoric and
recommendations that BP ‗set a benchmark for corporate transparency and accountability in

Page
23
 CSR AND MULTINATIONAL OIL CORPORATIONS

Angola‘, BP in addition to maintaining a dialogue with the Bretton Woods institutions over the
situation in Angola, it would publish key financial data regarding its operations. They would
cover total net production by block; aggregate payments to Sonangol in respect of production
sharing agreements; and total payments in terms of taxes and levies to the Angolan Government.
The disclosure of these financial data and signature bonus payments was characterised by Global
Witness as ‗an excellent move‘, while Human Rights Watch congratulated BP as setting ‗a new
standard of fiscal transparency for oil companies in Angola‘ In the aftermath of the consternation
caused by the execution of Ken Saro- Wiwa in 1995, Shell devoted considerable energy on
improving its reputation with regard to its operations in Nigeria. In 2000 Shell claimed to have
spent 55 million USD on social programmes in Nigeria alone. Steps taken in Nigeria led to the
founding of a donor workshop in 2000, co-hosted with the UN Development Programme. A
development project to be undertaken jointly by Shell, Mobil and the Nigerian state oil company
was also planned but later ran into trouble as the Nigerian partner declined to provide its share of
the investments.

According to Shell representatives, these problems have now been solved and the project is
running as planned. Public pressure has been claimed to be one of the factors behind Shell‘s
decision to withdraw from projects in Columbia and Peru in 1998. The Camisea project in Peru
had been controversial since it was launched in 1996 because the proposed development site is
located in pristine rain forests inhabited by several vulnerable indigenous populations – including
two of the world‘s last isolated nomadic peoples. Shell made laborious efforts preparing rules
and procedures for how to act in the area. A number of NGOs were involved in this work and
detailed plans for how to handle contacts with the local tribes were developed.

Shell claims that when they decided not to develop the project further it was because they were
not able to complete a commercially satisfactory agreement with the Peruvian government. In
retrospect, however, Shell employees claim the project was a great success, in terms of
establishing a framework for other similar projects.

Page
24
 CSR AND MULTINATIONAL OIL CORPORATIONS

The Samor project in Colombia was criticised for its impact on rainforest ecosystems and
indigenous peoples. This project came under intense international scrutiny after the local
indigenous community threatened to commit mass suicide if Shell and its partner Occidental Oil
went ahead with their exploration plans. Because of these reactions in the local community, Shell
found it too difficult to develop the project further.

With regard to ExxonMobil, one project stands out: a 3.5 billion pipeline from Chad to
Cameroon. The project is led by ExxonMobil, but is supported by the World Bank. To ensure
that revenues from the pipeline project are managed properly, Chad has enacted a revenue
management programme where project funds are placed in special accounts subject to review
and World Bank audits. The programme requires funds to be spent on health, education,
infrastructure and rural development programmes. On the one hand this can be regarded as the
most radical case of oil industry, in co-operation with multilateral organisations, infringement on
national sovereignty. And finding ExxonMobil involved in such a project is particularly
surprising given its rhetoric. However, Chad is an extremely weak state, and this model of co-
operation would only be feasible in cases of a similar nature.

ExxonMobil‘s decision to work with the World Bank on the project has to be seen in light of the
high political risks involved. Financial involvement by the World Bank was needed to get the
project off the ground, i.e. loans were given to the respective governments so they could pay for
their share of the pipeline. It should also be noted that questions have nevertheless already been
raised about alleged misuse of the loans for arms purchases by the Chad government.

ANALYSIS OF MACRO CSR STRATEGIES

The first observation to be made is that all four oil majors have in one way or another responded
to the broadening CSR agenda. For example, all companies declare their support to the Universal
Declaration of Human Rights and fight against corruption. This implies that the companies
recognise broader social concerns beyond local community impact and programmes. But none of
them accept any responsibility for the problem coined as the ‗paradox of plenty‘. The companies

Page
25
 CSR AND MULTINATIONAL OIL CORPORATIONS

claim that their operations mainly benefit the countries in which they operate. This means that
they do not fully consider the company`s impact on the public in host countries. There are,
however, significant differences in the substance, scale and intensity of how they consider
impact. It may be argued that BP and Shell indirectly accept `macro-CSR‘ problems by
emphasising transparency of investments. All companies have to some extent included social
concerns as part of their overall goals. BP and Shell have, however, placed more emphasis on
communicating such goals and framed them more broadly than ExxonMobil and TotalFinaElf.

Organizational responses reflect these similarities and differences. First, all companies cooperate
with NGOs and IOs on specific projects, but BP and Shell have consulted with such
organisations on a regular basis during the formulation of corporate strategies. Second, BP and
Shell have taken steps to integrate social concerns into their management systems. Both
companies have established committees for ethics and social concerns. BP`s management system
on social responsibility is assigned to all business units and the company has established regional
ethics committees. These responses come close to experimental or even innovative solutions.

Page
26
 CSR AND MULTINATIONAL OIL CORPORATIONS

Table 3: level of commitment: a summary of the macro CSR strategies of ExxonMobil, shell, BP
and TotalfinaElf
Degree of commitment is more difficult to evaluate since low level of commitment increases the
likelihood of high degree of commitment. ExxonMobil, for example, displays a high level of
consistency between external communication and its actions. By promising little on macro CSR,
there is apparently a high degree of consistency between what ExxonMobil says and what it
does. The same seems to be the case for TotalFinaElf. Shell and BP score higher on level of
commitment. These companies have also behaved in line with a higher level of commitment.
BP‘s disclosure of financial data and signature bonus payments in Angola and Shell‘s
withdrawal from controversial projects in Indonesia stand out in this regard. These observations
are in line with our expectations: Some degree of consistency between words and actions can be
expected owing to the reputation risks facing companies that fail to live up to their commitments.

The stages of corporate socialisation suggested by Preston and Post proved to be useful for
understanding the extent to which oil companies recognise broader social concerns. However,
organisational responses and action on `macro-CSR‘ challenges go beyond their approach.
Garcia and Vredenburg have argued that the stages of socialisation should be extended beyond
positive reaction by including proactive strategy, which is defined as a consistent pattern of
voluntary actions. Proactive strategies appear adequate for categorising corporate strategies with
regard to `micro CSR‘ issues. In climate policy for example, some major oil companies
incorporated voluntary proactive measures such as internal emission trading. Application of the
term ‗proactive‘ in the area of ‗macro CSR‘ is, however, not unproblematic as it tends to connote
something in the direction of the ‗more involvement in host countries the better‘. First, as we
shall see below, there is no widely accepted solution available to the ‗paradox of plenty‘
problem, in contrast to climate change that ‗simply‘ requires reduction in the emissions of
greenhouse gases. Some NGOs argue that companies should abstain from investing in resource-
abundant developing countries with reputations for poor governance, while others claim that
companies should become more actively involved in the political process of sovereign host
countries. We shall return to this ‗paradox of solutions‘ in the concluding section.

Page
27
 CSR AND MULTINATIONAL OIL CORPORATIONS

An alternative way of going beyond the stage of positive reaction can be found in the emerging
business environmental management literature. One stage frequently used in this literature is the
notion of innovative corporate responses to new social challenges. Innovation refers to
something new that is introduced as new ways of combining input factors. Innovation in a wide
sense extends far beyond technological innovation and can be understood as new combinations
of knowledge. As there is no widely accepted solution available to the ‗paradox of plenty‘
problem, innovative corporate strategies are needed. The strategy and behaviour of BP displays
traces of innovative responses in this field.

CONCLUSION:
In this study, I have explored how different oil companies have responded to the emerging and
widening social agenda. There are both similarities and differences in how Shell, BP,
ExxonMobil and TotalFinaElf have responded. None of the companies accept responsibility for
‗the paradox of plenty‘ problem, but they all support the Universal Declaration of Human Rights,
they work with NGOs and IOs when necessary and they all claim they are fighting corruption
and bribery. On the other hand, there are also some striking differences in their responses. First,
BP and Shell appear to be more ‗accepting‘ and `responsive‘ than TotalFinaElf and ExxonMobil,
across all our indicators. Secondly, much as a consequence of this, there appears to be a
correlation between what companies say and what they are doing. Companies who publicly avow
their commitment to various objectives also seem to take action on those commitments. In this
sense it can actually be claimed that for all the four companies studied, words and deeds are quite
consistent. Instead of pressing our conclusion further, we want to end this article with a
reflection on areas for further research.

The first question that should be given further attention is why the companies do not fully accept
the `paradox of plenty problem‘ and what can they do if they accept a causal relationship
between oil revenues and poor social performance. The answer to the first part of this question
may actually lie in the second part: there are considerable dilemmas confronting the oil industry
when it comes to defining the limits to corporate social responsibility, e.g. interference in
domestic affairs of host countries, and investments/disinvestments in areas with poverty and

Page
28
 CSR AND MULTINATIONAL OIL CORPORATIONS

unrest. For the companies claiming to have a broader social responsibility, e.g. ‗a force for good‘
(BP) and ‗building a better world‘ (Shell), the paradox of plenty directly affects their legitimacy
as corporate citizens.

On the one hand, multinational companies were in the 1970s widely criticised for getting
politically involved in host countries. As a consequence, most oil companies currently state that
they will remain politically ‗neutral‘ and not intervene in ‗party politics‘. On the other hand, oil
companies will in any case have to engage with political actors and bureaucracies when applying
for licences and negotiating contracts. It can thus be claimed therefore that oil companies, when
operating in weak states, do have political influence. Some companies recognise this; others do
not. But even companies that do recognise that their operations may have unwanted effects, and
wish to do something about it, find it hard to define how far they should go in influencing
political actors.

Social responsibility issues are not a decisive factor for whether or not a company will invest in a
country. Companies often argue that ‗if we are not investing someone else will do, and they will
do worse than us with regard to social issues‘. There is some truth in this. Local or smaller oil
companies usually have a less developed community strategy and less concern for social and
environmental dimensions of their operations. In this respect, the major oil companies will
probably perform better. Still, also with regard to investment strategies, attitudes seem to be
changing. For example, Shell has claimed that both economic and social reasons caused it to
decide to refrain from investing in pristine Amazonian areas populated by vulnerable indigenous
tribes. But the difference between not investing and disinvesting for social reasons is very wide.

It seems obvious that one company on its own cannot make a very large difference and that
collective action is required. Collective action clearly can be several things. One of them is to
work with international organisations, such as the Breton Woods institutions. In theory there
could also be a basis for some concerted action in the activities of the various business forums
and associations. One interesting avenue for further research is the link between change in
international institutions and corporate CSR strategies.

Page
29
 CSR AND MULTINATIONAL OIL CORPORATIONS

The second topic for further research is the change and differences observed in corporate CSR
strategies. There are at least three possible reasons why ‗macro CSR‘ strategies of major oil
companies change and vary. First, the sources of corporate strategies may lie in the
characteristics of the companies themselves. Secondly, such strategies may have been influenced
by the political-industrial context of the companies‘ home countries. Thirdly, since the
companies under scrutiny are multinational, changes in strategies over time may be the result of
changes in the international/institutional context in which the companies operate. These three
factors can be linked to three distinct bodies of thought: business (environmental) management
perspectives, theories of domestic politics and theories of international regimes.

The two first perspectives are most relevant for understanding differences in corporate strategy,
whereas changes in the international institutional context is particularly suited for understanding
why the companies have responded, in one way or another, to the widening social responsibility
agenda. First, major oil companies are truly multinational with operations on a global scale that
extend far beyond their home-base countries. Second, CSR issues constitute global challenges
that are increasingly addressed at the global level. Third, there is a global regime under
construction on core issues such as transparency, corruption and bribery. These institutional
developments on CSR parallels in important ways the first phase of the creation of international
environmental regimes. Accordingly, lessons from the foundation, operation and consequences
of international environmental regimes could serve as a starting point for the study of
institutional development and change in corporate CSR strategies.

Page
30
 CSR AND MULTINATIONAL OIL CORPORATIONS

LIMITATIONS OF THE STUDY:

The results and conclusions obtained from this study cannot be generalised for the whole
industry as I have taken only four companies for study. Whole of the study is carried on
secondary data so there is every chance of having a mistake as there are no direct insights
available.

Page
31
 CSR AND MULTINATIONAL OIL CORPORATIONS

BIBLIOGRAPHY:

 BP (2001). BP Business Policies: What we stand for. Retrieved July 29, 2002 from
www.bp.com
 ECON (2000). Nature, Power and Growth. ECON-Report 3, Oslo, Norway: ECON
Centre for Economic Analysis.
 ECON (2002). TotalFinaElf and CSR. ECON-Report 73/2002, Oslo, Norway: ECON
Centre for Economic Analysis.
 Estrada, J., Tangen, K. & Bergesen, H. O. (1997). Manageable or revolutionary?
 Environmental challenges confronting the oil industry. London, UK: Wiley &
Sons.
 ExxonMobil (2002). Corporate citizenship in a changing world. Retrieved October 1,
2003 http://www2.exxonmobil.com/Corporate/Newsroom/Publications/c_cc_02/index.
Html
 Shell (1998). Profits and Principles - does there have to be a choice? Report.
 Shell (1999). People, Planet and Profits. An Act of Commitment. Report. London.
 Shell (2001) People Planet & Profit. Report.

Page
32