Do oil companies’ CSR efforts get even close to tackling the challenges associated with the industry? A new book takes a pessimistic view, says Brenda Won
‘Beyond Corporate Social Responsibility: Oil Multinationals and Social Challenges’ by Jedrzej George Frynas (2009). Cambridge University Press., 207 pages £55 ($US99).
Oil spills, civil wars, corruption, gas flaring – these are some of the negative impacts often associated in the public imagination with the oil industry, contributing to its image (fair or not) as one of the worst sectors when it comes to social impacts. However, for these same reasons, the oil industry has also made some of the strongest efforts to address its impacts through corporate social responsibility, or CSR (broadly defined as ‘voluntary action beyond compliance’).
In Beyond Corporate Social Responsibility, Jedrzej George Frynas, a professor at the UK’s Middlesex University Business School, asks whether CSR successfully addresses the key business-society challenges facing the oil industry, and answers with a strong ‘no’. Drawing on both the positive and negative practices of oil multinationals (citing the experiences of BP, Exxon, Chevron, and Petrobas among others), Frynas offers a usefully frank critique of the failures and successes of CSR in tackling major social challenges – albeit his negative conclusions should be taken as a call to strengthen CSR rather than to dispense with it entirely.
Frynas begins the book with helpful basic background on CSR as well as the oil industry context, describing production basics and principal actors. The main body of the book comprises a critical analysis of the degree to which the current CSR agenda meets what he identifies as the three main societal challenges in the oil and gas sector, namely environmental issues, development and governance. Although Frynas argues CSR has allowed oil multinationals to make headway in some areas, such as revenue transparency and environmental management, his general finding is that current voluntary initiatives are often not sufficient to meet such daunting social challenges.
Frynas identifies two main underlying reasons why, in his view, CSR has failed to meet such challenges. The first is that the business case for CSR is not always adequate – that is, that maximising profits sometimes may simply be incompatible with achieving long-term social goals. For example, companies may view social investments in a community as a means of ‘buying peace’ to prevent future disruptions to operations. Consequently, development projects may only benefit ’strongmen’ in the community and be less concerned with genuine community involvement or consultation. This ultimately undermines the development benefits that can be derived from a company’s social investment, Frynas argues.
Frynas’ second claim is that oil multinationals often do not, or choose not to, fully recognize the breadth of their impact on wider society, and are thus unwilling to take responsibility for them. Frynas argues that the current CSR approach leaves out important wider economic and political issues that are at the heart of many of the negative social impacts of the oil industry. In particular, he criticizes what he sees as the lack of willingness of companies to take responsibility for their part in the ‘resource curse.’ This denial contributes to a general reluctance of companies to use their influence to improve governance in host countries.
CSR is down, but not out
If the current CSR approach is not enough, what does Frynas suggest in its place? He does not outline alternative arrangements in detail, but broadly proposes a system of ‘shared’ governance in which there is an “optimal balance of voluntary and mandatory, national and international, prescriptive and enabling regulation.”
It may be that a book that sets out to explore whether CSR can address a set of huge challenges – many of which are challenges for all of society not just for the oil and gas industry – is destined to find CSR efforts inadequate to the task at hand. Also, some of the legitimate criticisms levelled at CSR might be better interpreted as an attack on CSR as it is sometimes currently practiced, rather than on the concept itself.
For example, the failure of some firms to effectively involve local communities in development projects does not necessarily highlight an inherent problem with CSR. In fact, by failing to involve communities in this way, companies may be storing up problems for the future. Breeding dependency among communities is not only bad for development, but bad for business and often leads to local people making impossible-to-satisfy social demands upon the company which can in turn lead to protests and unrest. Making sustainable contributions to development enhances outcomes for both communities and companies, and Frynas offers examples of best practice where such outcomes have been achieved - such as the Statoil’s support of the Akassa project in Nigeria.
The book is full of such implicit lessons for companies, which might usefully have been made even more explicit. Frynas’ system of shared governance or binding regulation does not appear to be forthcoming any time soon on many key issues. So improving upon CSR as it stands still presents perhaps the most practical means of enhancing the positive impacts of oil multinationals on society. CSR is an ever-evolving concept, and as Frynas rightly points out there are still many shortcomings to current approaches, but there are also many success stories. It is true that ensuring wider application of CSR best practices will not solve all the world’s social challenges. But it might just bring us closer in the meantime.
Reproduced with kind permission from Critical Resource: http://www.c-resource.com/view_article.php?aid=135&ref=bulletin.
Brenda Won is an associate at Critical Resource, which specialises in sustainability and stakeholder issues in the natural resources sector. www.c-resource.com