Corporate Social Responsibility (CSR) in the oil and gas sector

© Prof. Jedrzej George Frynas

www.frynas.com

Copyright: Prof. J. G. Frynas (2015)

Evolution of CSR in oil and gas, 1995-2015

1995 1997 1999 20032001 2005 20092007 20132011

1996 1998 2000 20042002 2006 20102008 20142012

Brent Spar & Nigeria

Buncefield explosion

Macondo blowout

Extractive Industries

Transp.Initiative

Security & Human Rights

Principles

IPIECA Guidance 2nd edition

Selected key events

Selected key initiatives

2015

Copyright: Prof. J. G. Frynas (2015)

Blowfield/Frynas definition of CSR

CSR means something different to a Greenpeace activist and to an oil manager. CSR also means something different to a BP manager and to an ARAMCO manager.

So it is useful to think of CSR as an umbrella term for a variety of views and practices all of which recognize : 1. that companies have a responsibility for their impact on

society and the natural environment, sometimes beyond legal compliance and liability of individuals;

2. that companies have a responsibility for the behaviour of others with whom they do business (e.g. first and second tier oil and gas contractors).

Source: Blowfield, M., Frynas, J.G. (2005). “Editorial: Setting New Agendas - Critical Perspectives on Corporate Social Responsibility in the Developing World”, International Affairs 81(3): 499-513.

Responsibility for the behaviour of others

Copyright: Prof. J. G. Frynas (2015)

Example of differences in oil and gas

UK• key source of pressure:

public opinion & NGOs• role of government: effective

regulation and social welfare• little spending on CSR

activities in UK• key issues: climate change,

charitable donations and cultural sponsorship

Nigeria• key source of pressure: local

communities & government• role of government:

ineffective regulation and social welfare

• hundreds of millions on social investments

• key issues: local communities, oil spills, gas flaring

Copyright: Prof. J. G. Frynas (2015)

Main CSR issues in oil and gas

Environmental factors

Indirect impact

local supply chaininfrastructure dev.

Local impacts

oil spillswater dischargeswaste

Social factors

Economic factors

Climate / energy

GHG emissionsenergy usegas flaringalternative energy

Direct impact

taxation employmenttechnology

Local community

community relat.social investment

Human rights

Corruption

Political factors

Health and safety

employee healthinjury and illnessproduct safety

Copyright: Prof. J. G. Frynas (2015)

Nature of oil sector operations

• Oil companies can cause harm by the very nature of their operations: climate change, contact with rural communities and impact on national economies and governance.

• Capital-intensive sector: very few jobs created.

• Key impact of oil operations: tax (e.g. Shell in 2012: US$21 billion in corporate taxes and US$85 billion in excise duties and sales taxes, US$149 million on social investments).

• With the exception of reductions in CO2 emissions, companies tend to focus on micro-level social and environmental effects and little attention is given to the nature of operations and investments.

Copyright: Prof. J. G. Frynas (2015)

CSR in the oil and gas sector too often focuses too much on the top of the pyramid

Social investment

Investment as usual

Government taxes

Example: Shell in 2012

US$ 149 million in social investments

US$ 30 billion in net capital investment

US$ 85.1 billion in excise duties and sales taxes, US$ 21 billion in corporate taxes, and US$ 3.6 billion in royalties

Copyright: Prof. J. G. Frynas (2015)

BP Tangguh project in Indonesia

HAZOP analysis

Anglo-American SEAT Toolbox

Learning lessons from best practices

Copyright: Prof. J. G. Frynas (2015)

Innovation and CSR – oil and gas examples

• Petrobras development of low-emission and renewable fuels

• BP reduction of greenhouse gas emissions by 10% in a year

• Shell partnership - Daimler Chrysler, Norsk Hydro, Iceland government to develop hydrogen technology

• Statoil commercial development of carbon capture and storage

• Eco-Centre waste management facility of Baker Hughes

• Oil & Gas Innovation Centre

Copyright: Prof. J. G. Frynas (2015)

• Frynas, Jedrzej George. Beyond Corporate Social Responsibility – Oil Multinationals and Social Challenges. Cambridge University Press, 2009.

• Frynas, Jedrzej George. “Corporate Social Responsibility or Government Regulation? Evidence on Oil Spill Prevention”, Ecology and Society 17(4): 1-13, 2012.

• Frynas, Jedrzej George. “Corporate Social Responsibility in the Oil and Gas Sector”, Journal of World Energy Law & Business 2(3): 178-195, 2009.

Further reading

Copyright: Prof. J. G. Frynas (2015)