Licence to operate: CSR as a strategic tool
of multinational oil companies
Arne Wiig, Dr. Oecon. CMI
Ivar Kolstad, Dr. Oecon.
Angola seminar CMI June 2008
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Action is needed. Also by firms?
• “Without improving their democratic institutions
and administrative capacity, it is unlikely that
African oil exporters will be able to use
petrodollars to fuel poverty reduction; instead oil
monies are more likely to make matters worse for
the poor”
–
Catholic Relief Services (2003):Bottom of the Barrel. Africa’s Oil Boom and the
Poor
2
Should oil companies address governance?
”..oil companies tend to be reluctant to contribute towards better
governance, despite the fact that this would have greater
developmental potential in the longer term than isolated charitable
giving.”
Frynas (2005).
”..[BP] risks having all corporate efforts to promote social and
economic development undermined by the host country’s
macroeconomic policies and lack of commitment to developing
democratic and accountable political institutions”
Gulbrandsen and Moe (2007).
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Agenda
•
What are the obligations of corporations?
– The assigned responsibility approach
•
The Angolan context:
– Resource curse
– Institutions as the key to the curse
•
CSR activities of multinational oil companies in Angola
– Governance?
– Motivations and priorities
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What are the obligations of corporations?
•
Ethical theory:
– Reasoned answers to right and wrong
– Specify claims that people have:
• Consequentialism: Happiness, utility, welfare
• Duty ethics: Rights, not being treated as a means (Kant)
• Liberalism: Freedom
•
Claims to imply claims against:
– Obligations/responsibilities/duties
– Against whom, and what kind?
– Assigned responsibility approach
•
Three types of obligations:
– Negative: Not directly violate claims people have
– Positive:
• Implementation: Secure claims people have
• Compliance: Not undermine the obligations of others
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Implications for corporations
•
Negative and positive compliance obligations are universal:
– Also apply to companies
•
Positive implementation obligations:
– Division of moral labour
– State has primary obligation for securing claims
– If state defaults, others have secondary obligation to step in
– Ultimately, obligation falls on corporations
•
What companies should do depends on reason for government
default:
– Government is incapable: Direct implementation
– Government is unwilling: Influence goverment
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The Angolan context
•
Resource curse:
– Countries with oil on average have less growth, lower human
development scores, worse income distributions
•
Four explanations:
– Dutch disease
– Rent seeking
– Patronage
– Destruction of institutions
•
Empirical evidence suggest rent-seeking and patronage main
problems
•
Key to resource curse: Improve institutions/governance
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Weak and non-improving governance
Governance Score (-2.5 to +2.5)
2.5
2
1.5
1
Voice and Accountability
0.5
Political Stability
Government Effectiveness
0
-0.5
Regulatory Quality
1996
1998
2000
2002
2003
2004
2005
2006
Rule of Law
Control of Corruption
-1
-1.5
-2
-2.5
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CSR activities by oil companies
•
PSA social spending
• Dependent on production
• Mainly managed by Sonangol
• 50-100 million USD per year (Amundsen and Wiig, 2008)
• Non transparent, no accountability
•
Social bonuses
• Managed by Sonangol, but new partnership initiatives
• Huge amounts 200 mill. USD in each of the blocks 17 and 18
• More transparent than previously
•
Voluntary contributions
• Direct management
• NGOs
• Company Foundations
– Ex: Chevron CDPA
• 1-5 mill. USD per year pr company
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Lack of focus on governance
•
•
•
•
•
Oil companies have played a minor role in challenging the
government on transparency issues
Lack of coordination among oil companies on governance issues
Sector support but not support to governance issues
– Health (Esso, Chevron, Total)
– Education (Esso)
– Local communitiy support (Chevron)
– Water supply (StatiolHydro)
Local content and training are key ingredients of CSR; but strictly
needed for the companies
Support to civil society for providing services – not for voice
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Why are not the oil companies addressing
governance issues (1)
•
Might perceive that they do not
have a responsibility to intervene
•
But, survey among oil companies
about motivation for being social
responsible:
Pressure or expectations from the
government and companies’
internal rules are the primary
motivations
Part of our code of conduct
Angolan authorities require it
Pressure from shareholders
Pressure from the home country
To persuade decision-makers
Pressure from NGOs
Pressure from local communities
Fear of losing contract because someone else is
responsible
CSR does not play any role
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7
5
4
4
3
3
2
1
Risk reduction and dancing to the
tune of Angolan government
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Why are not oil companies addressing governance
issues (2)
•
•
•
•
Two out of three companies claimed that they had experienced
situations in which CSR had played a role when contracts were
awarded.
Our assumption: Motivations for CSR policies influence the types
of CSR activity companies would pursue.
We therefore asked both government and company respondents to
evaluate how different dimensions of CSR affect the likelihood of
getting licences/contracts in Angola.
Found a strong correlation between these factors and firms’ actual
activities. See Table 2
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Conclusion
•
•
•
•
•
Angola faces resource curse problems unless governance issues
are addressed
The government does not address governance issues and it does
not prioritize social sectors
From an assigned responsibility perspective, firms have a
responsibility to address governance
The firms are not – rather target their CSR to specific social
sectors.
One important reason is that CSR is used strategically for gaining
contracts.
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