Beyond Corporate Social Responsibility: Oil Multinationals and Social Challenges - Example

BEYOND CORPORATE SOCIAL RESPONSIBILITY: OIL MULTINATIONALS AND SOCIAL CHALLENGES By Beyond Corporate SocialResponsibility: Oil Multinationals and Social Challenges Introduction Corporate social responsibility (CSR) is a form of self-regulation principle that defines a business model. CSR came into the light in the early 1960s. The term was adopted following the development of the term stakeholders. In this context, stakeholders refer to people or parties affected by an organization’s operations. In the book Strategic Management: a Stakeholder Approach, Freeman use the term to describe cooperate owners besides the shareholders. Thus, CSR can be viewed as policies aimed at deploying the proceeds of a company beyond its shareholders. CSR policies acts or functions as an inherent mechanism that ensures compliance with business laws, ethics and international regulation. The issue of cooperate social responsibility has significant interest while addressing multinational companies such as the oilgiants. Multinational oil companies such as BP and Shell have been accused of neglecting their CSR leading to massive exploitations. Activities conducted by these companies have been blamed for increased environmental degradations and poverty among local communities. In the dawn of the twenty-first century, issues of cooperate social responsibility are even more critical. An illustration of this would be the issue of ethics concerning the existing laws that relate to accounting structures. This paper explores Oil Multinationals and Social Challenges in Nigeria in relations to CSR principles. Rules control the dealings of people because they originate from penalties with the domestic or federal administration. Individuals tend to be wary of elevated authorities more than of the penalties of committing some mistakes. Corporate Social Responsibility (CSR) essentially advocates for business establishments to show responsibility towards environmental as well as social factors, and to be held accountable to its community for all its productive operations. Businesses are usually a large part of their communities. Their functions have an important effect on the wider society and its potential economy. Businesses have a responsibility for observing the social responsibility idea without the local government having to compel them to do so (Beatty and Samuelson 2006). Corporate concerns seek to address questions of the morality of domestic activities such as strategies, practices, and managerial structure. Corporate concerns are grounded in corporate customs. If a corporation prizes capital gains over human capital, it will retrench members of staff to save capital. Alternatively, a business that treasures its workers is more likely find other expenses to cut and retain its members of staff. The notion of ethical standards rises from the subject of personal issues. Individual matters are concerns that are based on employees within a business, along with their actions and choices. Moral standards are principles that are set by the people no other governing organisations. Hence, each person has a right to defend what he or she believes in. Decisions in an industry influence all tiers of the directorial composition, which in turn shapes the existences of all stakeholders of the corporation. Therefore, the issue of moral standards has emerged due to the existing corruption in most multinationals. Consequently, the worldwide impact of great corporations, society’s eye is chiefly directed towards outsized companies. However, ethical matters also crop up in underdeveloped industries. There is a gap in the public’s sensitivity to the ethical dealings in large and mid-level corporations. Additionally, the principles of excellence impinge on both organisations in different ways when executed (Du, Bhattacharya and Sen 2010). When an employer determines that unprincipled behaviour will not be abided in his organisation, the outcome is the strengthening of the business culture and the avoidance behaviours. However, in underdeveloped companies the price of a zero tolerance policy can be overwhelming. The expenses associated with substituting an employee in a large firm are easily extended across the whole entity as a fixed charge of conducting business; this is not a reality in underdeveloped industries. The employer-worker connection in the underdeveloped companies is more informal, by nature, and personal. This flexibility allows a more casual agreement to be made between the administration and employees. Discovering a “win-win” resolution can result in the avoidance, by employees, of moral hazards. In a large and publically traded corporation, this agreement cannot be made. This is because not all of those who are residual plaintiffs (proprietors) can be spoken for. In the large, publically owned businesses, the zero tolerance strategy should be implemented. However, in a privately owned corporation, a modified zero tolerance procedure can be functional. Citizens tend to favour underdeveloped industries when moral situations and predicaments are present. This is because they sense that underdeveloped companies and underprivileged individuals lack the assets to urge the decision-making mill to function in their interests. Society tends to feel that the financially challenged individuals are vulnerably at the mercy of the unpredictable forces of globalisation and corruption (Frynas 2009). Large municipalities in developing nations have constructed a casual shadow economy because the existing “bureaucratic channels” leave them no possibilities of survival (Beck and Woolfson 2005). This is because their governmental administrations have too many requirements, approvals, and stipulations, which work mainly as discouragements that prompt openings of corruption to be created so that businesses can survive. A bribe given to a government member of staff by a citizen is usually viewed in a different light than the same act with an expatriate conducting the bribing. On the brighter side, inside SMEs, moral responsibilities are part of business as usual, they are not a subject that as an after-the-fact verification on business. Public responsibility is not an issue that involves the contribution of some profits that were generated where some reputational significance can be attained. Instead, for many SMEs public responsibility occurs in the course of generating significance for all concerned. This is to be a more protracted means of observing about communal responsibility. However, it will only thrive as a practice, if the general support for it can be garnered. It is in this area that much more has to be attained. Most large business establishments view the CSR concept as a progressive theory that should be implemented. The implementation of a CSR program calls for companies to realise some type of environmental or social actions. Both average sized as well as large businesses need to implement CSR programs. Though mid-sized businesses face low regulatory restrictions, they also have to deal with the market pressure to endorse CSR practices. Business is a necessity for the development of the global economy. This is the main factor that drives and sustains the society. In general, free market economies are the best ways for managing economic activity. Business organisations in market economies improve the lifestyles of the majority of people all over the world. Moreover, business can also contribute to problems that negatively affect the quality of life. Business organisations are often subject to alarming scandals such as negligence, fraud, and negligence. For instance, pollution can be said to be a result of the ineffectiveness of the processes in production (Gyves and OHiggins 2008). This wastefulness generates negative externalities that in the past, businesses have dislodged onto their environments. While businesses are mostly formed to create profits, the importance of how the business organisation conducts itself cannot be ignored. Businesses have to obey the regulations of their nations, but should also act morally in cases where there are no evident regulations, and deal decisively with any damages brought about by their actions in an environmental as well as social context (Arena 2004). This triple objective of realising social, environmental as well as economic goals is the basis of what is generally identified corporate social responsibility. Benefits of corporate social responsibility The term ‘Corporate Social Responsibility’ was first used in 1953; with the writing of Bowens Social Responsibility of Businessmen” (Corporate watch report 2009). The development of CSR came as people began to consider how to address the negative effects of business organisations on their communities. CSR quickly developed beyond being something that people in academic circles discussed to being a program that was implemented in companies as well as SEOs. Corporate social responsibility brings diverse benefits both externally as well as internally to the businesses that are involved in diverse ventures (Beck and Woolfson 2005). Externally, CSR generates a positive image among the members of its society, and brings a lot of esteem from other businesses (Hawkins 2006). In addition, seeking to fulfil the objectives that society views as being important can result in increased sales. The local consumers can be a vital source of revenue for the company. If a business invests towards improving its reputation in its community, it will find workers more easily and be able to hold on to them (Blomback and Wigren 2009). Business establishments also have a large impact on their environments. Its community will better receive a company that chooses to clean up after itself and not deposit harmful materials in its environment. Companies that recycle used products also benefit from the support of their societies. Ideally, corporate social responsibility promotes trust and loyalty among the workers. It also enhances the functional effectiveness of the business, which, is accompanied by improved productiveness and quality. More significantly, it serves as a calming diversion from the everyday workplace operations, and brings a feeling of meaning and contentment to their lives. The workers will be more inspired and, therefore, be more creative. Lastly, CSR helps businesses to make sure that they observe the regulatory requirements in their nations (Jennings 2006). CSR importance and its relevance today In the present world, consumers can easily access information regarding any particular company on the internet. Under the current economic constraints, companies observe CSR rules as a show of compliance to mainstream business thinking. Peter Duker confirms that, “The 21st century will be the era of the social sector company. The more money, economy, and knowledge grow global, the more that the community will be of prime importance” (Lydenberg, 2005, p.213). Drucker (2006) confirms that despite the competitiveness that characterizes the current business environment, business leaders uphold CSR rules. Increasing prosperity: Consumers in the upper classes can pay for premium brands. Moreover, the consumers from the lower classes might be reluctant to more so much for a mere brand. They might instead choose to invest in businesses that are involved in the improvement of their basic functions. Shifting social expectations: It is quite normal for consumers to expect a lot from businesses whose commodities they purchase. However, with recent scandals in formerly respected and esteemed financial enterprises, a considerable number of consumers have lost their trust in the regulatory bodies that manage companies. Globalisation and Information Flow: With the easy access to all types of data, companies are increasingly being responsible for their activities. In the present age, bad or dissatisfied comments from an aggrieved consumer can actually compel the other consumers to boycott the commodities produced by the accused company (Bornstein 2004). Some of the ways through which companies can ensure that their Corporate Social Responsibility policies are successfully carried out include: 1) By improving the communication between business organisations and their top management 2) Selecting the correct people or employees to oversee the CSR positions 3) Ensuring that there is a good association between suppliers, customers, and stakeholders 4) Conducting yearly CSR audits 5) Initiating a feedback process so that a company can determine how far it has gone in implementing CSR programs and realising how much more it has to do. The organisational activities of Petrol as well as Oil industries, especially, can have serious effects on the environment (Ofori and Hinson 2007). Oil companies should not merely prioritise operations as well as functions that create profits, but also those that improve society. There are three main laws of CSR. These include accountability, sustainability, and transparency. Sustainability concerns how the actions that have been effected in the present are likely to affect the future in terms of opportunities that will exist then, as well as the options that will be available then. For instance, if a corporation participates in removing a large amount of natural resources, it has to take into account how the loss of those resources will affect the future (Smith 2007). Accountability concerns business organisations taking responsibility for the factors that shape of affect the external environment. If an organisation’s procedures negatively affect the environment, it should be ready to compensate the communities where it is located and actively seek for a less destructive alternative to realising its objectives. Transparency is about a company being allowing people or even its own workers to be able to freely report on the activities that take place within it and not deceiving the public about its shortcomings or disasters (Drucker 2006). According to (Marin, Ruiz and Rubio 2009), the first thing that corporations should do is actively seek for ways in which its operations can be streamlined in such a way that they ensure that there is a reduction of wastage. There has also been a increasing pressure for corporations all over the world to assume a leading role in discovering ways of dealing with the worlds socio-economic concerns, particularly where the ruling government is unable to conclusively deal with these problems. Unfortunately, oil companies have not had outstanding performances of fairness in the manner in which they handle communities that live next to their factories or businesses. A good example is the Shell Company in Nigeria (Carlisle and Faulkner 2004). Factors ignored by Oil Companies in the Implementation of CSR In the African continent, the largest producer of oil is Nigeria. Nigeria is also a member of the Organization of Petroleum Exporting Countries (OPEC). The presence of oil in Nigeria has affected serious political changes over the years and provides more than 80% of the country’s foreign exchange earnings. However, the oil reserves have not successfully turned Nigeria into one of the richest nations in the world; a quality that characterizes many oil producing nations. The oil in Nigeria only enriches a select few who are part of the ruling class. With a per capita GDP of merely U.S. $260 annually, Nigeria is still one of the earth’s poorest nations many decades after the discovery of oil. In the past, the oil boom has been the main reason why successive politicians have sought to govern Nigeria. The Niger Delta, a principal source of oil reserves, has the largest wetlands in Africa. It covers more than 20,000 square kilometers. Of this extended area, mangrove forests cover 6,000 square kilometers. There are also extensively wooded areas with many exceptional species of flora and fauna. In spite of the Royal Shell Oil Company having extracted oil from the area for decades, there is still hardly any first rate independent scientific information on the lasting effects of hydrocarbon effluence on the Delta. Extraction of oil in the region has had enormous impact on the environment as well as the sources of civil conflicts that characterize the region. Like Shell, oil companies operating in different areas all over the world are usually quick to stress that they are involved in numerous programs that improve adjacent communities. Still, Nigerian environmental regulations, which are in many ways comparable to those in-developed nations, are poorly enforced and hardly investigated. The Shell Corporation’s oil producing past in Nigeria is famous because it has been existent for many years and because Shell has in the past sided with the Nigerian government in endeavoring to destroy any opposition to its operations among ethnic tribes. To protect its investments, the Shell Corporation has not only gone against certain rules that govern the behavior of a corporation operating in foreign soil, but has even acted in league with successive military Nigerian governments to defraud the Nigerian population of its share of oil proceeds. In the nineties, with growing discontentment among the local populations that lived adjacent to Shell’s production facilities, Shell requested the then Nigerian government for more security. The company requested the government to enter into a security partnership. Through this partnership, the Nigerian government was expected to supply the required officers while the company provided finances required to train and equip the special police unit. It soon became apparent that the security operations that Shell wanted to effect were actually terror campaigns to scare the local Ogoni tribesmen into remaining silent about the degradation of their environment. Charges were brought against the leaders of a newly formed group known as ‘The Movement for the Survival of the Ogoni People’. In coordination with Shell, the Nigerian government maligned the leaders of this group, claiming that they were responsible for kidnappings as well as plane hijackings. The leaders were finally executed. Shell’s high ranking officials appointed themselves as the government’s henchmen, going as far as attending tribunals in order to ensure that the most well known leader of the Movement for the Survival of the Ogoni People’ Ken Saro Wiwa, would be executed (Martin 2004). Shell even bribed different people to testify that Ken Saro Wiwa was involved in the murder of Ogoni elders (Smith, 2007). Just thirty-one days after the executions were carried out Shell entered a new agreement with the Nigerian government to spend $4 billion in the establishment of a liquefied natural gas business venture (Smith, 2007). Understandably, Shell has since then tried to rectify its sullied past records by involving the tribes that live in areas where it extracts oil in development initiatives. Today, Shell likes to depict itself as a caring corporation that is struggling to build a clean reputation in Nigeria. In spite of this, there is scarcely any assessment of its CSR schemes privileging data from host communities like members of the Ogoni tribe (Mckinsey & Co 2006). Despite the evident universality of CSR, initiatives among transnational firms that operate in Africa, in most cases, the expectations of CSR among stakeholders in different nations are not identical. Acute poverty being experienced in the Niger Delta exerts strain on oil corporations operating in the region. Indeed, the corporations operate at a greater operation cost compared to similar operations in developed countries. Although the Shell Corporation has initiated different development activities that are meant to improve the living standards of the communities around the oil delta like schools, hospitals, electricity, scholarships, and roads, the communities still perceive this as being insufficient when compared to the immense profits that Shell has reaped in the last five decades of extracting oil from their land. An oil company’s CSR program can never be successful in achieving the main objective of supporting sustainable growth if it is divorced from the nation’s general development concerns (Sheth and Babiak 2010). Apart from being associated with the broader structure of the host nation’s development strategy, a practical CSR policy also has to be perceptive of the special local circumstances in its community, as is evident in the Niger Delta case. Many times in the past, the CSR initiatives of oil companies have been unsuccessful in convincing local communities of their earnestness (Cummings and Worley 2008). These initiatives are usually simple and fail to match with a development plan for the host community as well as the host nation (Slack 2006). A CSR model that enjoys global appeal but is locally incompatible with reality and therefore disliked affects the possibility of the business being successful in that area (Hawkins 2006). This is evident from the past violent protests that have marked Shell’s stormy association with the Ogoni people. The essential issues that oil corporations should ensure that they address in their CSR initiatives in foreign nations should seek to answer the question “What are the most urgent development concerns that are negatively affecting the host communities where the oil production facilities will be situated, and who are the central stakeholders?” Recently, oil reserves have been located in additional nations like Kenya and Uganda on the African continent. This means that there will be more multinational corporations seeking to get permits to extract oil in African nations in the near future. In seeking to answer the important questions about CSR initiatives that are mentioned above, it is particularly important for oil corporations operating in developing nations to comprehend that in Africa, unlike in Western nations where the basic needs have mostly been met, socio-economic concerns are more urgent than tomorrows unquestionably credible but far-flung environmental worries. 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