Oil and CSR means Business
CSR as a Business Strategy among Oil Companies in South Sudan
2005-2011
Sindre Sørhus
Master thesis Human Geography
SGO 4090
Autumn 2012
Department of Sociology and Human Geography
Faculty of Social Sciences
University of Oslo
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Acknowledgements
This master-thesis, though sometimes felt as a solitary endeavour, is a result of
collaboration and massive support. I have relied heavily on assistance and support
from countless persons and institutions to who I am forever grateful. First of all I
would like to express my gratitude and sympathy towards the people of South Sudan
who opened their country, doors and hearts to a bewildered and bearded Norwegian.
From the offices at the Ministry of Energy and Mining to the open-air churches,
meeting diplomats, former child soldiers or the street-kids at Konyo-Konyo, my
encounters with the South Sudanese people were always positive.
I would also like to thank the informants at the Ministry of Energy and Mining,
ECOS, PACT Sudan, PETRONAS, WNPOC, Total, and “Peter” from the local
community who agreed to be interviewed. Without your participation I would have
been stranded.
Jamus at Norwegian People`s Aid became an important discussion partner in
developing my thesis questions. In Juba he and the rest of the hardworking staff at
Norwegian People`s Aid assisted me with accommodation, transportation, contacts,
excursions and valuable discussions. The reputation and high standing NPA in South
Sudan reflected positively on me and I am proud to have been associated with you.
My cousin Kari at the Norwegian embassy made sure I saw more of South Sudan than
offices and laptops and introduced me to a world of fun and interesting expats as well
as Juba’s number one boda-boda driver: Alex. Thank you all for showing me Juba and
South Sudan.
At the University of Oslo, my supervisor, Hege M. Knutsen, has been immensely
helpful. It has no doubt been frustrating going through my unfinished manuscripts that
made little sense, but her comments have been important to guide me towards the
final result. She has undoubtedly supervised more than supervisors are supposed to
and saved me from the gravest errors. As for the remaining errors, they are my own.
Finally I want to thank my beautiful wife, Christina, for supporting me and for letting
me skip work to study in South Sudan. Not every wife would visit in Juba, and very
few would be happy spending her holiday volunteering when her husband is
organising interviews all day. I will now return from the computer and give you the
attention you deserve (almost a full week before September 7th whey you are
scheduled to give birth to our child).
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Table of Contents
List of abbreviations........................................................................................................................... 5
1. Introduction ..................................................................................................................................... 6
1.1 Defining Corporate Social Responsibility .................................................................................. 7
1.2 Objectives and research questions ............................................................................................... 9
1.3 Choice of case ...................................................................................................................................... 10
1.4 Structure of the thesis ...................................................................................................................... 10
2. Theoretical framework................................................................................................................ 12
2.1 Economic theories ............................................................................................................................. 12
2.1.1 Neoliberal theories ......................................................................................................................... 12
2.1.2 Radical political economic theories ....................................................................................... 13
2.1.3 An account of the CSR-debate ................................................................................................... 15
2.2 The concept of Corporate Social Responsibility.................................................................... 17
2.2.1 Carroll`s CSR-pyramid................................................................................................................... 17
2.2.2 Affirmative and negative injunction duties........................................................................ 21
2.3 Why do companies engage in CSR? ............................................................................................ 23
2.3.1 Institutional theory......................................................................................................................... 23
2.3.2 Stakeholder theory ......................................................................................................................... 25
2.4 The resource curse ............................................................................................................................ 27
3. Background .................................................................................................................................... 31
3.1 Historical and geographical context........................................................................................... 31
3.2 Socio-economic conditions in South Sudan ............................................................................ 32
3.3 History of oil in Sudan ...................................................................................................................... 32
3.3.1 Controversies regarding the oil industry ............................................................................ 33
3.4 Oil-contracts ......................................................................................................................................... 34
3.5 Oil companies in South Sudan ...................................................................................................... 35
3.6 Legal regulation of the oil industry ............................................................................................ 37
3.6.1 Regulation of the oil industry in the CPA ............................................................................ 38
4. Methods .......................................................................................................................................... 40
4.1 Philosophy of science ....................................................................................................................... 40
4.2 Choice of method................................................................................................................................ 42
4.3 Preparations for fieldwork............................................................................................................. 43
4.4 Selecting and getting access to informants ............................................................................. 44
4.4.1 Choice of informants ...................................................................................................................... 44
4.4.2 Securing access to informants .................................................................................................. 46
4.5 Research methods ............................................................................................................................. 49
4.5.1 Qualitative interviews ................................................................................................................... 49
4.5.2 Interview guides............................................................................................................................... 50
4.5.3 Choice of location............................................................................................................................. 51
4.5.4 Documentation of the interviews ............................................................................................ 52
4.6 Informal data gathering................................................................................................................... 53
4.7 Desktop research ............................................................................................................................... 54
4.8 Analysing data ..................................................................................................................................... 55
4.8.1 Handling of data ............................................................................................................................... 57
4.8.2 Evaluation of data ............................................................................................................................ 57
4.9 Challenges during my fieldwork .................................................................................................. 58
4.9.1 Ethical considerations ................................................................................................................... 60
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5. CSR-policy and practice in South Sudan .................................................................................. 62
5.1 The CSR-policy of oil companies operating in South Sudan ............................................. 62
5.1.1 International oil companies ....................................................................................................... 63
5.1.2 Joint Operating Companies (JOCs) .......................................................................................... 65
5.1.3 Petrodar Operating Company ................................................................................................... 66
5.1.4 Greater Nile Operating Company (GNPOC)........................................................................ 68
5.1.5 White Nile Operating Company (WNPOC) ......................................................................... 70
5.2 From policy to practice .................................................................................................................... 72
5.2.1 Profitability ......................................................................................................................................... 73
5.2.2 Employment ....................................................................................................................................... 74
5.2.3 Securing oil supply .......................................................................................................................... 75
5.2.4 Environmental protection........................................................................................................... 76
5.2.5 Compensation .................................................................................................................................... 80
5.2.6 Community development ............................................................................................................ 81
5.2.7 Summary .............................................................................................................................................. 85
5.3 Assessment of CSR-practices......................................................................................................... 85
5.3.1 Oil companies .................................................................................................................................... 86
5.3.2 Government of South Sudan (GoSS)....................................................................................... 89
5.3.4 The international civil society................................................................................................... 91
5.3.5 Local communities in the oil producing areas .................................................................. 92
5.4 Reasons for resentment .................................................................................................................. 95
5.4.1 The importance of the economic responsibilities .......................................................... 95
5.4.2 The importance of legal responsibilities ............................................................................. 97
5.4.3 The importance of ethical responsibilities ......................................................................... 98
5.4.4 The importance of philanthropic responsibilities .......................................................... 99
6. Explaining social performance ............................................................................................... 102
6.1 A lacking culture of CSR in the Sudanese oil industry ..................................................... 102
6.1.1 The legacy of the civil war........................................................................................................ 102
6.1.2 Weak legal framework and no will to enforce it........................................................... 104
6.1.3 The influence of the Government of Sudan in the oil industry ............................. 107
6.1.4 The prevalence of national companies with a limited culture of CSR ............... 108
6.1.5 The organisation of the oil industry in JOCs ................................................................... 110
6.2 CSR in a world of powerless stakeholders............................................................................ 113
6.2.1 Civil society as demanding, dependent and dangerous stakeholders............... 113
6.2.2 Government of South Sudan as discretionary stakeholder .................................... 118
6.2.3 Government in Khartoum as dominant and definitive stakeholder .................. 121
6.2.4 Owners as dominant and definitive stakeholder ......................................................... 122
7. Conclusion ................................................................................................................................... 124
7.1 Consequences for policy............................................................................................................... 128
7.2 Consequences for theory and suggestions for further research ................................. 130
References ....................................................................................................................................... 132
List of Exhibits
Exhibit 1. Figure 1 Carroll’s Pyramid of Corporate Social Responsibility ................ 19
Exhibit 2. Table 1 Composition of the different JOCs in South Sudan ...................... 36
Exhibit 3. Figure 2 Map of Oil Blocks in Sudan ......................................................... 37
Exhibit 4. Table 2 Informants, sources of data and methods used .............................. 46
Exhibit 5. Table 3 Categorisation of stakeholders based on attributes ...................... 123
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List of Abbreviations
CNPC
China National Petroleum Company
CPA
Comprehensive Peace Agreement
CSR
Corporate Social Responsibility
ECOS
European Coalition on Oil in Sudan
EPSA
Exploration and Production Sharing Agreement
GOSS
Government of South Sudan
GNPOC
Greater Nile Petroleum Operating Company
JOC
Joint Operating Company
NGO
Non-Governmental Organisation
ONGC
Oil and Natural Gas Company
SPLM/A
Sudan People`s Liberation Movement/Army
WNPOC
White Nile Petroleum Operating Company
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1. Introduction.
This study is conducted to shed light on the conditions that affected the corporate
social performance of international oil companies operating in what is today South
Sudan during the period from 2005 to 2011. The impacts of the oil industry can be
devastating and it is of vital importance that companies behave responsibly, especially
in poor countries where marginalized communities are more vulnerable to
exploitation.
The oil producing areas in South Sudan contain large oil-reserves, but are still among
the least developed areas on the planet. Following the discovery of oil, a war broke
out in 1983 between the central government of Sudan and a southern rebel group
called Sudan People`s Liberation Army (SPLA). During the civil war that lasted more
than 20 years, approximately two million people were killed and twice as many were
displaced. Because of their proximity to the oil fields, the local communities in the
oil-regions suffered more than others and were subject to forced displacement and
violent attacks by government troops and local militia. Villages were destroyed,
civilians killed, raped or taken as slaves. Oil companies have been criticized for
complicity in these war crimes and their actions during the war created resentment in
South Sudan. The Comprehensive Peace Agreement (CPA) that was signed in 2005
brought peace and promises that the local communities in the areas of oil production
shall benefit from oil extraction. This study will look at whether and how the
companies contribute to this through their Corporate Social Responsibility (CSR) and
why the companies have acted as they have. Conducted using the qualitative methods
of semi-structured interviews, informal data gathering and desktop research this study
will examine both the policies and actions of the oil companies and the conditions
present in South Sudan during the time of the CPA in order to explain their policy and
practice.
The term Corporate Social Responsibility (CSR) has become the most common term
used to express the responsibility business has towards greater society. CSR has been
embraced by companies and nations across the globe and promoted by global
institutions through initiatives such as the UN Global Compact. The concept of CSR
is not new, but gained renewed attention in the 1990s when scandals on child labour,
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human right abuses and pollution uncovered the negative effects of globalisation. As a
response to its own scandals, the oil industry have been among the leading industries
in promoting CSR and oil companies have been at the forefront when it comes to
CSR-reporting and development of CSR-policies (Frynas, 2010; Shankleman, 2006).
Literature on CSR has differed based on the economic theories the writers base their
research in (Broomhill, 2007). While literature based in neoliberal economic theories
generally portrays CSR as a win-win solution that benefits both business and society,
literature based in more radical economic theories has focused on the failures of both
companies and CSR-itself (ibid). According to Frynas “…too many books on CSR fail
to appreciate the importance of context in the evolution of CSR” (Frynas, 2010, p. 2).
Frynas further argues that context is important both to understand the emergence of
CSR and to determine what companies can and should do in a given setting (ibid). In
this study I have described both the nature of the oil industry in general and the
particular economic and political conditions in South Sudan during the CPA-period
from 2005-2011.
The oil industry is chosen as the object of study, because I noticed that oil companies
behave differently in different parts of the world and became curious about how this is
compatible with centrally developed CSR-policies. This study uses the CSR-policies
as a starting point to analyse the practices of companies. It further goes on to discuss
what responsibility civil society and government expected the companies to assume
and discusses the achievements of CSR in South Sudan in the given period. Finally it
discusses the conditions present in South Sudan and how they have affected the policy
and practice of the companies.
1.1 Defining Corporate Social Responsibility (CSR)
Before I move on to my research questions I find it necessary to clarify the meaning
of Corporate Social Responsibility (CSR). The term is widely used, but there are a
number of different definitions and conceptions about what CSR is. After looking at
37 different definitions of CSR, Dahlsrud identifies five common dimensions: an
environmental dimension, a social dimension, a stakeholder dimension, an economic
dimension and a voluntary dimension (Dahlsrud, 2008). These five dimensions
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indicate that CSR is seen as something that goes beyond the law (voluntary) to
manage their responsibility towards the nature (environmental), wider society (social)
and various groups affected by the business (stakeholder) while being profitable
(economic). None of the definitions actually address what social responsible practices
entail, but rather describe CSR as a phenomenon (ibid). Definitions of CSR therefore
provide little guidance for business on how to manage their social responsibilities.
In this study I will use a definition of CSR similar to the one applied by Blowfield and
Frynas (2005). They propose that given the plethora of definitions it may be more
useful “…to think of CSR as an umbrella term for a variety of theories and practices
all of which recognize the following: (a) that companies have a responsibility for their
impact on society and the natural environment, sometimes beyond legal compliance
and the liability of individuals; (b) that companies have a responsibility for the
behavior of others with whom they do business (e.g. within supply chains); and (c)
that business needs to manage its relationship with wider society, whether for reasons
of commercial viability or to add value to society” (Blowfield & Frynas, 2005, p.
503)
I see social and environmental impacts as the core of CSR. Hence, in this study CSR
is viewed as an umbrella term covering various ideas and practices that recognise
that business has impacts on society and the natural environment and that
business has a responsibility to limit their negative and maximise their positive
impact. CSR-activities are thus activities on part of the company to limit the negative
or enhance the positive impact of the company. This way of viewing CSR is
intentionally wide, and includes ideas and practices that don’t necessarily contain a
voluntary or stakeholder dimension. This allows me to look at any part of the
operation of the oil companies that has social or environmental impacts.
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1.2 Objectives and research questions
Developing countries with large oil resources are found to perform worse than their
neighbours with fewer natural resources (Auty, 1993). At the same time international
oil companies operating in developing countries have been criticised for unethical
behaviour. This has made me curious about how the oil industry can contribute
positively to the economic and social development of a country.
My study consists of two research objectives. The first research objective addresses
the CSR-practice of the international oil companies in South Sudan in the CPAperiod, how this corresponded with their CSR-policy and how local government and
civil society experienced their actions. I will shed light on this with the following
three research questions.
- What is the CSR-policy of the oil companies in South Sudan?
- How does the CSR-practice of the oil companies correspond with their CSRpolicies?
- How do civil society and the Government of South Sudan (GoSS) consider the
practice of the oil companies?
My second research objective is to explain the CSR-practice of the companies by
looking at conditions that impact how they practice CSR. Using institutional theory
and stakeholder theory as starting points I will analyze how the organization of the oil
industry and the ability of various stakeholders1 to hold the companies accountable
can explain the social performance of the companies. This is done with the help of the
following two research questions.
- What conditions in South Sudan have influenced the culture of CSR in the oil
industry?
- What stakeholders did the oil companies listen to, and what was the relationship
between the companies and their main stakeholders?
A stakeholder is defined as ”any group or individual who can affect or is affected by
the achievement of the organisation’s objectives” (Freeman, 1984 p. 46).
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1.3 Choice of case
The case was chosen for several reasons. The oil industry is of interest because of its
negative externalities 2 combined with large profits. For the oil industry, the most
obvious negative externalities are connected to environmental damage. Pollution and
oil spills affect negatively on third parties without the companies bearing the total cost
of it (Humphreys, Sachs, & Stieglitz, 2007). The large profits provide the companies
with the means to invest in managing the impact of their activities, while the negative
effects of oil production provides them with a reason.
South Sudan provides an interesting case because of its dire needs and high
dependency on oil revenue. It is also interesting because the regulation of the oil
industry in South Sudan was weak which means that there was a large scope for
voluntary action from the oil companies. During the war the companies were severely
restricted by security concerns, so the period of 2005-2011 was chosen because this
was a period with consistent regulation. The Government of South Sudan was
extremely weak in this period and there were disputes over the regulation of the oil
industry. The scope for agency on part of the oil companies was therefore anticipated
to be particularly large. After independence things changed and it is too early to judge
how this will affect the companies.
My aim is that this study will provide new information on CSR in international oil
companies in developing countries. Research on CSR among oil companies operating
in Africa is mainly focused on companies from Europe and North America who are
most active in West Africa. The oil industry in South Sudan, on the other hand, is
dominated by Asian companies on which the literature is more limited.
1.4 Structure of the thesis
In Chapter 2, I will present the theoretical framework of my study. I start by
accounting for economic theories that form the basis for much of the discussion on
CSR. First I will look at how different economic theories view CSR. I will then
2
Externalities are costs or benefits that are inflicted upon third parties.
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present Carroll`s hierarchical CSR-pyramid as well as some of its critics. A
presentation of the views of Simon et al (1972) on affirmative and negative injunction
duties follows, before I present institutional theory and stakeholder theory. Finally I
will present the theory of the resource curse as put forward by Richard Auty (1993).
Chapter 3 presents background information for my study. I will briefly present the
historic, geographic and social context in which the companies operated. After
presenting the context, I turn to the oil industry. The account of the oil industry in
South Sudan contains the companies involved; their operating areas, as well as how it
has been regulated.
In Chapter 4, I account for my choice of method and challenges I faced during the
fieldwork. Before presenting my choice of method I will state what theory of science
this research is conducted in relation to. Following the reasons for my choice of
method, I will present my preparations for the fieldwork and the choice of informants.
Thereafter I will go through the different methods used and their strengths and
weaknesses. The chapter will end with an account on the practical and ethical
challenges encountered during the fieldwork.
Chapter 5 and 6 forms my analysis. In chapter 5 I look at the CSR-policy of the
different companies, before I turn to how they have actually performed. Following
this, I look at how different groups view the actions of the oil companies. I further
discuss why there is a discrepancy between how oil companies present themselves
and how others experience their actions, using the views of stakeholders and different
theories. In chapter 6 I analyse the oil industry based on institutional theory and
stakeholder theory and discuss whether this can help explain the performance of oil
companies in South Sudan.
Chapter 7 is the conclusion. I will present a summary of my findings and its
implication for policy and theory, as well as give some recommendations for future
research.
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2. Theoretical framework
In this chapter I will give a summary of the theoretical framework for this study. I will
start by providing some economic theories that form the basis for much of the debate
on CSR, before I turn to the discussion on CSR itself. The next part of the chapter will
focus on theories on CSR and different approaches to the phenomenon. I will start
with Carroll’s CSR-pyramid that provides a model to identify different dimensions of
CSR before I look at Simon et al’s (1972) theory on the importance of different
responsibilities. I will further account for two different theories on why companies
engage in CSR: institutional theory and stakeholder theory. Finally I will present the
theory of the resource-curse to highlight the specific challenges of CSR in the oil
industry.
2.1 Economic theories
Different views on CSR are based in different economic theories. I will therefore give
a summary of the different economic theories that have shaped the CSR-debate to
understand the different approaches to CSR and their arguments. Obviously attitudes
towards CSR vary among adherent to the different economic theories. This is not an
attempt to give a thorough account of all the different views on CSR, but to outline
how different views of CSR are based in different economic theories.
2.1.1 Neoliberal theories
Neoliberal theories are economic theories that focus on the laws of supply and
demand and stress the importance of open markets and free trade. Neoliberalism
further supports deregulation of markets and believe that competition among the
private sector will yield the best result for society. Full employment is reached
through non-intervention, as market forces will make sure capital and manpower is
allocated to sectors where they are most needed.
The neoliberal view of a company’s social responsibility has generally corresponded
with the famous statement of Milton Friedman in 1970:
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“… there is one and only social responsibility of business –to use its resources and
engage in activities designed to increase its profits so long as it stays within the rules
of the game, which is to say, engages in open and free competition without deception
or fraud” (Friedman, 1970).
Among neoliberal approaches an extreme attitude to CSR has been to view CSR as an
intrusion on business and a distraction from their real objective. According to this
view, CSR is principally wrong because companies, by pursuing social and
environmental targets, may hurt shareholders by lowering their profit (Levitt, 1958;
Henderson, 2001). This has lead critics of neoliberal theories to argue that CSR is not
compatible with neoliberal theory and that these theories must be discarded once one
admits that CSR is desirable (Dubbink, 2004). However, most neo-liberal adherents
see engagement in CSR as a profitable choice for business in the long run and
therefore rational (Broomhill, 2007). Neoliberal definitions of CSR tend to see it as
“…the adaptation of a set of voluntary principles and guidelines, initiated and driven
by the corporation” (ibid p. 6), with the ultimate goal of increasing profit. CSR is
seen to minimize risks and therefore cutting costs and is promoted as a win-win
situation between business and society (Grossmann, 2005). This argument has been
named the “business case” for CSR. It is the central message of most books on CSR
and is widely adopted by companies and business students (Vogel, 2005).
The neoliberal approach to CSR has been criticised for ignoring the negative impacts
of business as well as neglecting instances where ethical behaviour runs contrary to
profit. Critics also claim that neo-liberal theories pay too little attention to market
failures and market manipulation. The fiercest criticism has come from various radical
political economic theories.
2.1.2 Radical political economic theories
Opposed to neoliberal economic theory are a number of political economic theories
inspired by Marxism and socialism. In development studies these theories are labelled
dependency theories, but other economic theories also fall under the category of
radical political economy. These theories trace their roots to Karl Marx and Andre
Gunder Frank’s theories on development and underdevelopment.
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Radical political economic theories are sceptical to free markets and promote an
active state to regulate the private sector. The neoliberal idea that the interest of
business and society are always in harmony is seen as unrealistic and is therefore
rejected by radical political economy. Radical political approaches instead see large
corporations as powerful entities with self-interests that sometimes collide with the
rest of society (Broomhill, 2007). Pollution, child labour, corporate fraud and tax
evasion are seen as examples of the mismatch between the interest of society and
corporations. Just as adherents to radical theories are critical to free markets and the
role of multinational corporations, they are also critical to CSR. The abuse of
corporate power has lead these radical approaches to view many of the current CSR
initiatives as naïve, ineffective and inadequate. CSR-policies are seen to avert
attention from proper regulation of business because of the self-regulatory and
voluntary nature of many CSR-initiatives (ibid). The role of the state and civil society
in controlling the potentially negative impact of private companies is therefore a
major concern.
Many political analysts and activist groups based in radical political theories reject
voluntary CSR completely and prefer to talk about Corporate Social Accountability.
Instead of focusing on how business should behave responsibly, they rather focus on
how to hold them accountable when they don’t. This position has been particularly
common among activist groups and NGOs, but has also gained a foothold within
larger international organisations such as the UN (Utting, 2002). Still, radical theories
have been criticized for not acknowledging the positive impact of business and the
positive effort conducted by individual firms.
As shown, neoliberal and radical political economic theories provide very different
justifications for engagement in CSR. While neoliberal theory claim companies
should engage in CSR when, and if it is beneficial for the company, radical political
economy claim companies have an obligation to act responsibly. CSR should
therefore be enforced on companies to limit their negative impact on society. There
are a number of economic theories that occupy the middle ground between these
theories. However, the main disagreement are found between neoliberal and radical
political theories, with alternative views positioned somewhere on the spectre.
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2.1.3 An account of the CSR-debate between different economic theories
In the on-going debate between adherents of the different economic theories the
debate has focused on different aspects of CSR. A heavily debated subject has been
the business-case for CSR; the idea that its good for business to engage in CSR.
Critics claim that evidence shows that companies often make choices indicating that
sound ethics is bad for business. They pollute, violate human rights, use child labour
or treat workers poorly. This has led some to argue that CSR needs to be regulated. As
we have seen, neoliberal approaches have generally heralded CSR as a win-win
solution for business and society. By incorporating ethics in their business strategy,
companies will not only contribute positively to the society, they will also experience
new opportunities, better PR, saved expenses, limited risks and new markets. As
Grossman concludes, there is therefore no need for regulations: “The link between
social engagement and financial performance ultimately suggests that companies will
be motivated to self regulate and implement socially responsible strategies regardless
of legislative reform” (Grossmann, 2005, p. 594). This is what Vogel calls “The
market for virtue” (Vogel, 2005), where companies gain a competitive advantage by
being virtuous, i.e. act responsibly.
A related point of disagreement concerns the focus on voluntarism in CSR. Neoliberal
approaches tend to see voluntarism as an essential part of CSR. If CSR is to give the
corporations a strategic advantage it should come from the corporations, not be a legal
requirement. Only by going beyond what the company is forced to do by law can a
company be said to be responsible. While voluntary solutions puts more pressure on
companies to develop strategies themselves, and allows consumers to reward
companies that go the extra mile, at the same time it opens a window for companies
that choose not to act responsibly. Some based in radical economic theories interpret
the surge of CSR in the 90s as a strategic choice by the companies to avoid regulation
(Jenkins, 2005). Being sceptical to deregulation, they therefore question the focus on
voluntarism in CSR.
Critics of voluntary initiatives claim that focus on voluntarism leads to companies
only acting responsibly when it serves their own economic interests (Corporate
15
Watch, 2006), which will not protect society from the abuse of corporations. The
focus of companies is assumed to be on profit and additional responsibility will only
be taken if it serves the financial interest of the company. Corporate Watch claims this
happens because companies are governed by, often anonymous, shareholders. To a
large extent profitability determines the stock-value, meaning that CSR-initiatives that
lowers profitability are not welcomed by the owners (ibid). Neoliberal approaches
don’t deny that profit is the motivation for engaging in CSR, but claim that profitseeking companies will benefit all of society.
Vogel believes that this critic of CSR is based on two misunderstandings: That it
never can be in a company’s financial interest to behave responsibly and that
companies only care about profit (Vogel, 2005, p. 13). On the contrary, he argues,
many business owners are concerned that their company have a positive impact on
society. He claims there is a market for virtue, though it has limits.
A third argument concerns CSR´s implications for accountability. Within radical
political economic theory it is claimed that the focus on voluntary action makes it
harder to hold companies accountable. Voluntary initiatives like UNs Global Compact
have been criticised for containing mechanisms that prevents accountability
(Dueholm, Nissen Lund, & Bomholdt, 2008); particularly in third world countries
where local communities are often marginalized and has limited capabilities to fight
against large multinational corporations. These are also the ones suffering the most
from the negative impact of large corporations (Newell, 2005, s. 543). As a
consequence it is argued that ethical and social standards should be incorporated in
national and international laws instead of being left to the goodwill of companies.
Instead of focusing on encouraging companies to behave responsibly, one should
focus on building mechanisms to hold them accountable (Bendell, 2004).
A proposed solution to the accountability-problem has been to encourage civil
regulation through multistakeholder-initiatives where different stakeholders meet,
cooperate and hold each other accountable. Newell finds civil regulation partly
problematic and links this to the power-relation between companies and local
communities. Big multinational corporations tend to wield much more power than
poorer local communities, especially in third world countries (Newell, 2005). To
16
enable communities to hold companies accountable, Newell argues that they must be
able to hold local and national government accountable. As the regulator, the
government has much more leverage towards large companies. Through access to
justice and a functioning legal system and by applying pressure to government, the
local communities may be able to influence companies. For this to work, though, the
government needs to be able to sanction the companies. If not, the communities are
dependent on the will of the companies to listen to the population (ibid p. 551). Vogel
agrees that civil regulation is problematic and sees it as an attempt to bridge the gap
between law and market. However, while many prefer that corporations be strictly
and efficiently regulated through national and international law, this is not always
possible. When it is not, civil regulation may be the second best option (Vogel, 2005,
s. 9).
2.2 The concept of Corporate Social Responsibility
According to Frynas “There is no accepted theoretical perspective or research
methodology for making sense of CSR activities” (Frynas, 2010, p. 12). This poses a
challenge for a study attempting to shed lights on the phenomenon, and requires the
researcher to chose both the appropriate method and theoretical perspective for his
study. In the following section I will provide an overview of the different approaches
to CSR I have found most relevant for this study.
2.2.1 Carroll’s CSR pyramid
Archie B. Carroll’s CSR pyramid has been the most durable and widely cited model
of CSR in the literature (Crane & Matten, 2007) and serves as a good starting point.
Though it has limitations, it provides a useful model for defining and exploring CSR.
Carroll claims there are different components of CSR and that companies have
responsibilities that are arranged in a hierarchy (Carroll, 1991). The most fundamental
responsibility for a company is economic. This responsibility is directed both to its
shareholders, its employees and the larger society. Without profit a company will not
be able to survive, people will loose their jobs, government will loose tax income and
the company will no longer contribute to growth in a country. Carroll acknowledge
17
that companies pursue profit out of self-interest, but still claims that “...economic
viability is something business does for society as well, although we seldom look at it
this way” (Carroll, 1999, p. 284).
The second step on the pyramid is legal responsibilities. A company has a
responsibility to follow rules and regulations. For those who define CSR as voluntary
action by the company, this is not regarded as CSR, as it is taken for granted. It is
however, possible to argue that a company that does not follow rules and regulations
is irresponsible and cause social harm. Hence it is closely related to the company’s
social responsibilities.
The third step is labelled ethical responsibilities. This is the companies’ obligation to
do what is right, just and fair. It also includes the obligation to not cause harm. Ethical
responsibility is connected to the core activities of the company and exceeds the legal
requirements. Thus it falls within voluntary action by the company. This is not to say
that the companies always do this by their own conviction. Carroll acknowledge that
stakeholders influence companies and may push them to behave more ethically.
The fourth step is called discretionary or philanthropic responsibility. Hereunder lies
gifts, sponsorships and social projects; efforts that contributes to a better society and
shows good citizenship on part of the company, but are not related to its core
operations. Carroll claims that philanthropic responsibility ”...is highly desired and
prized but actually less important than the other three categories of social
responsibility” (Carroll, 1991, p. 42). According to Carroll, companies that engage in
philanthropic endeavours, but forget the more fundamental ethical responsibility, are
less responsible.
18
Figure 1
Source: (Carroll, 1991, p. 42)
Figure 1 shows Carroll’s pyramid with explanations of the different responsibilities.
The most fundamental responsibility is at the bottom, while the least important forms
the top of the pyramid. Carroll sees his pyramid as a metaphor and admits that it is not
perfect. His pyramid is intended to “…portray that the total CSR of business
comprises distinct components that, taken together, constitute the whole. Though the
components have been treated as separate concepts for discussion purposes, they are
not mutually exclusive and are not intended to juxtapose a firm's economic
responsibilities with its other responsibilities” (ibid). However, Carroll does not give
any reasons for the hierarchical order, something that has led others to speculate
whether the pyramid should be seen as a descriptive or normative model (Visser,
2006, p. 46).
According to Visser (2006), Carroll’s CSR-pyramid may not be the best model for
understanding CSR, especially not in Africa. He further claims that in an African
context the same four elements are present, but the hierarchy is different from western
19
societies. The African CSR-pyramid would have economic responsibility as the most
fundamental, followed by philanthropic, legal and ethical responsibility, showing that
CSR is understood differently in the West and in Africa. While there certainly are
differences between Africa and Europe or the U.S, differences also exist within
Africa. Therefore, to talk of an African context does not cover the wide diversity of
the African continent. However, Visser shows that what people understand as the
social responsibility of business is dependent on culture (Visser, 2006). A similar
conclusion is reached by Crane and Matten who has examined how Carroll`s CSRpyramid fit a European context (Crane & Matten, 2007, p. 51). Hence, the CSRpyramid should be seen as a dynamic model dependent on context.
Lantos (2002) uses neoliberal economy to challenge the morality of the different
components of Carroll’s pyramid. He separates between ethical, altruistic and
strategic CSR. Ethical CSR corresponds to the economic, legal and ethical
responsibilities of a Carroll’s pyramid, while altruistic CSR corresponds to
philanthropic responsibility. Finally strategic CSR is the philanthropic responsibilities
“…which will benefit the firm through positive publicity and goodwill” (Lantos, 2002,
p. 2). Lantos claim that “…ethical CSR is morally mandatory and goes beyond
fulfilling a firm’s economic and legal obligations, to its responsibilities to avoid
harms or social injuries, even if the business might not benefit from this” (Lantos,
2001, p. 16). This goes beyond the business case for CSR by claiming that the
responsibility to avoid harm trumps the economic responsibility of a company.
However, Lantos agrees with Milton Friedman that philanthropy is not the role of
business and argues that altruistic CSR is immoral because it violates shareholder
property rights and steals their wealth. On the other hand, Lantos argues that strategic
CSR is good for both companies and society. His argument is that companies should
only engage in philanthropy if they can expect to profit from it (Lantos, 2001), thus
making it part of the economic responsibilities of firms. The implication of this would
be to remove philanthropic responsibilities from the CSR-pyramid altogether.
Carroll’s CSR-pyramid offers a valuable model to analyse CSR-policies and practices
because it identifies different components of CSR. Their relative importance is
disputed and they are not mutually exclusive. However they are valuable for
discussion purposes and to identify nuances in CSR policies and practices.
20
2.2.2 Affirmative and negative injunction duties
A critique of Carroll’s model is that it does not say anything about instances where
different responsibilities collide (Crane & Matten, 2007, p. 51). I will now look at
theories that address this issue.
Simon et al (1972) introduced the distinction between affirmative and negative
injunction duties in the CSR-debate. Affirmative duties are the responsibility to do
good, while negative injunction duties are the responsibility to not cause harm. Simon
et al (1972) argue that the duty to not cause harm is the most important and calls this
responsibility a “moral minimum” of which all men and companies are obliged:
”Although reasons may exist why certain persons or institutions cannot or should not
be required to pursue moral or social good in all situations, there are many fewer
reasons why one should be excused from the injunction against injuring others”
(Simon, Powers, & Gunnemann, 1972, p. 62).
Negative injunction duties as well as affirmative duties connected to the core
activities of a company falls under what Carroll calls ethical responsibility, while
affirmative duties unrelated to the core activities correspond well to what Carroll calls
philanthropic responsibility. Simon et al (1972) claim that when different
responsibilities collide, companies’ primary responsibility is to avoid causing harm.
Thus they agree with Carroll’s view that ethical responsibility is more important than
philanthropic responsibility.
The relevance of this view on the oil industry has been examined. Through analysing
the Nigerian oil industry, Uwafiokun Idemudia noticed that community development
projects were popular among the oil-companies (Idemudia, 2007). He further found
that projects that were “bottom-up” oriented with communities having a stronger
influence were more likely to have a positive impact on the communities than projects
that were “top-down”. However, neither of these types of community projects
changed the day-to-day activities of the companies with its negative impacts, which
was the main concern of the communities. Instead of focusing on the negative
injunction duties of their ethical responsibility, the companies focused on the
21
affirmative duties corresponding to their philanthropic responsibility. The neglect of
their negative injunction duties thus undermined the contribution to the host
communities.
Idemudia shows that the size of the CSR-budget or the participation in different
initiatives does not necessarily tell anything about the contribution to the society.
Though context determines what action will provide the best result in any given
setting, Idemudia points out that the most fundamental part of CSR is to accept
responsibility for the negative consequences of the operations of a company.
According to Simon et al (1972) the negative injunction duty may also install a moral
responsibility on persons and companies to avoid harm even though they are not the
ones inflicting the harm. This responsibility increases based on need, proximity,
capability and last resort. Increased need increases responsibility to aid. Increased
proximity and capability likewise increases the responsibility. Finally one becomes
more responsible for providing assistance the less likely it is that someone else will be
able to aid (Simon, Powers, & Gunnemann, 1972, p. 74).
Using a utilitarian perspective on CSR in the Angolan oil industry, Wiig and Ramalho
come to a similar conclusion. They argue that oil companies have a moral obligation
to take responsibility that normally would be taken by the government: ”If other
institutions/agents do not take responsibility while corporations are able to (have the
capability) take this responsibility, then the companies should take additional
responsibility” (Wiig & Ramalho, 2005, p. 2). However, these views are contested.
For the oil industry operating in developing countries this view would mean that they
share a responsibility to help the needy in their operating area. This responsibility
increases with the proximity and capability of the companies, as well as the need of
the people and the likelihood that others will correct the social injury. With oil
companies often operating in areas where the needs are great and the capability of
other actors to fulfil the needs are lacking, this way of thinking assign a lot of
responsibility to the companies.
The view of Simon et al (1972) and Idemudia (2007) has implications for the oil
industry where environmental or social concerns are often weighed against
22
profitability. While the oil industry has been among the leading industries in the
adoption and development of CSR (Shankleman, 2006), this can in part be explained
by the potentially harmful nature of the industry. Oil extraction potentially has a
number of negative consequences for both host countries and local communities.
Pollution, oil spills, corruption and violent conflict has followed oil-extraction and led
to bad publicity and pressure from civil society and governments to change the
business in a more ethical direction. According to Simon et al (1972) and Idemudia
(2007) the primary moral concern of oil companies should be to limit the harm caused
by the industry.
2.3 Why do companies engage in CSR?
According to Frynas, “What is particularly lacking is a general explanation as to why
and how firms engage in CSR” (Frynas, 2010, p. 13). To understand why companies
act as they do, it is important to understand why they accept social responsibility. By
uncovering why companies engage in CSR it is also possible to uncover how they
engage in CSR, as different reasons for engaging gives different strategies. Carroll’s
pyramid is not an explanatory model to why business has adopted CSR. To answer
this question we need to look at other theories. Frynas lists several different
perspectives on CSR activities (ibid), but claims that two of these perspectives have
become dominant: institutional theory and stakeholder theory.
2.3.1 Institutional theory
Institutional theory focuses on the institutionalisation of behaviour. According to
these theories companies adapt to institutions within a given context. Such institutions
can be national norms or recognised ways of doing things within an industry.
Companies are believed to adapt to social norms because they cannot survive without
a certain level of acknowledgment from its surroundings. In other words “companies
imitates what others do in order to remain socially acceptable” (Frynas, 2010, p. 16).
The process where companies behave similarly within a defined business environment
is called isomorphism. Isomorphism can be both competitive and institutional
(DiMaggio & Powell, 1983). Competitive isomorphism is when competitive pressure
23
excludes companies, whose organisation is unsuited to the environment, leaving the
remaining companies with similar organisations (Hannan & Freeman, 1977).
Institutional theory focuses on the second form of isomorphism, institutional
isomorphism. DiMaggio and Powell (1983) identify three mechanisms that explain
why companies become similar:
-
Coercive isomorphism results from “…both formal and informal pressures
exerted upon organizations by other organizations upon which they are
dependent and by cultural expectation in the society within which
organizations function” (ibid p.150). An important part of this pressure is the
legal framework. Another way of applying pressure is by withholding
financial funds or social approval.
-
Mimetic isomorphism is the imitation of other companies to reduce
uncertainty. “Organizations tend to model themselves after similar
organizations in their field that they perceive to be more legitimate or
successful” (DiMaggio & Powell, 1983, p. 152).
-
Normative isomorphism is the result of professionalization and is a normative
source for change. Professionalization rest on formal education and
universities and other training institutions that are centres for development of
norms and normative rules. Workers who are trained in these institutions
develop common norms. After their training they spread to different
companies and create professional networks.
According to institutional theory oil companies will develop similar CSR-policies and
practices due to the mentioned mechanisms. It explains why companies within the
same industry often have the same approach to CSR, or why companies operating in
the same country have similar CSR-policies. According to Kolk and Van Tulder
“MNCs appear only willing to state active commitment if others in their sector do as
well” (Kolk & van Tulder, 2006, p. 798).
24
2.3.2 Stakeholder theory
Stakeholder theory has been the dominant perspective within the CSR-debate,
following Freemans influential book “Strategic management - a stakeholder
approach” (1984). The theory evolved as a response to pressure on company
managers from government regulators, media, and competitors. According to
Freeman, managers find”…an increase in external demands” (Freeman, 1984, p. V)
and management of these demands is at the core of stakeholder theory. A stakeholder
is defined as ”any group or individual who can affect or is affected by the
achievement of the organisation’s objectives’” (ibid p. 46). Freeman believes that “if
business organizations are to be successful in the current and future environment then
executives must take multiple stakeholder groups into account“ (ibid p. 52). The
ability of companies to manage their stakeholders will thus determine their success.
To manage their stakeholders successfully, companies need to be able to identify their
stakeholders and their stakes in the company’s operations, have procedures to take the
stakeholders and their concerns into account and balance the different interests to
achieve the objective of company (ibid p. 53). CSR has been interpreted as a reply to
demands and concerns and therefore a way of managing the stakeholders.
The importance of various stakeholders has been discussed in stakeholder-theory.
While Freeman acknowledges the dilemmas in conflicting interest, he is mainly
concerned with the identification of stakeholders, not a further classification of
stakeholders. The very process of identifying stakeholders assigns legitimacy because
the firm acknowledges that the stakeholder is affected by, or can affect its business
(ibid p. 45). Once the firm has recognised the legitimacy of the stakeholders,
conflicting interests are to be resolved by the firm based on the expected actions of
the stakeholders (ibid p. 132). Mitchell et al (1997) suggest that “… the degree to
which managers give priority to competing stakeholder claims… goes beyond the
question of stakeholder identification” (Mitchell, Agle, & Wood, 1997, p. 854).
According to Mitchell et al the importance of a stakeholder is based on three factors:
“power”, “legitimacy” and “urgency”. Power refers to the ability of a stakeholder to
bring about the outcomes they desire (ibid p. 865). Legitimacy is determined by
whether the claims (e.g., moral, legal and property based) of the stakeholder are
25
considered legitimate by the company (ibid p. 882). Finally urgency refers to “…the
degree to which stakeholder claims calls for immediate attention” (ibid p. 867). The
possession of any of these attributes makes an individual or group a stakeholder.
Mitchell et al (1997) further categorizes the different type of stakeholders based on
their combination of attributes. Stakeholders who only possess one of the attributes
are called latent stakeholders and receive the least attention from companies. There
are three types of latent stakeholders:
-
The dormant stakeholder possesses power, but lacks legitimacy and urgency
in its claim. Its power is therefore not used.
-
The discretionary stakeholder has legitimacy, but no power and no urgency in
its claim. This is the group most likely to be recipients of what Carroll calls
philanthropic responsibility. Lacking power and urgency, “there is absolutely
no pressure on managers to engage in an active relationship with such a
stakeholder” (Mitchell, Agle, & Wood, 1997, p. 875) and the discretionary
stakeholder is dependent on the goodwill of the company.
-
The demanding stakeholder has urgency, but lacks legitimacy and power.
While he can be bothersome to companies he is not considered a threat.
According to Mitchell et al (1997) companies pay more attention to stakeholders who
possess two attributes. These are called expectant stakeholders and are also divided
into three types:
-
Dominant stakeholders have power and legitimacy but lack urgency. Because
they have power to enforce their claims, they receive much attention from
company management. Examples of dominant stakeholders are owners and
government.
-
Dependent stakeholders lack power, but have urgent and legitimate claims.
They are called dependent because they depend on others for the power to
carry out their will. These stakeholders are dependent on the voluntary action
of the company or on advocacy by more powerful stakeholders.
-
Dangerous stakeholders have power and urgency, but lack legitimacy on their
claims. This type of stakeholders can be violent and use unlawful tactics to
advance their claims.
26
Finally we have the definitive stakeholders, the ones who possess all three attributes
of power, legitimacy and urgency. For company management, this is the group whose
claims are considered most important. It is important to notice that any expectant
stakeholder can become a definitive stakeholder by getting the last attribute (ibid).
Stakeholders are not static and may change categories over time by gaining or loosing
attributes. Another important point is that the stakeholder-categories are based on how
the stakeholder is viewed by the company. The stakeholders themselves may have
different perceptions about the urgency and legitimacy of their claims.
According to stakeholder theory, a company will engage in CSR as a result of
pressure from various stakeholders. The typology of Mitchell et al (1997) provides a
framework to identify and evaluate the importance of different stakeholders. The
CSR-policy and practices of companies are expected to be a response to claims from
stakeholders with different attributes. Stakeholder theory can therefore provide
valuable explanations for the CSR-policy and performance of oil companies in South
Sudan.
Both stakeholder-theory and institutional theory are reactive perspectives; they both
emphasise the role of external actors in influencing the companies. Furthermore, they
are not mutually exclusive. Mechanisms described in institutional theory may exist
together with mechanisms described in stakeholder theory. The same group or
individual may also be classified both as an institution and a stakeholder. In the oil
industry, the government is an important institution because it creates social norms as
a lawmaker. At the same time it is an important stakeholder for the oil companies.
2.4 The resource curse
It has long been acknowledged that abundance of natural resources has had a negative
impact on many countries. Resource abundance has been linked to increased
corruption, eroding of institutions, inequality, poverty, the Dutch disease, rent-seeking
behaviour and armed conflict. This phenomenon has been termed the “paradox of
plenty” or “the resource curse” (Auty, 1993). Since the social responsibilities of
companies are connected to their impact on society, it is important to understand the
impact of the oil industry when one analyses the CSR of oil companies.
27
According to Humphreys et al (2007) there are at least three different processes that
come into play when a country starts extracting a valuable resource:
1. Currency appreciation
When the revenue of a country increases substantially because of income from a
valuable natural resource, the currency will appreciate. This in turn has negative
effects on other industry that becomes less competitive. Because of this effect,
revenue from natural resources may lead to a deindustrialisation of the nation. This
has been named the “Dutch disease” after the effect on the Dutch manufacturing
industry when the country discovered natural gas in the North Sea in the 1970s
(Humphreys, Sachs, & Stieglitz, 2007, p. 5).
2. Fluctuation in commodity prices
Commodity prices are highly volatile. For oil prices the history has shown that they
are strongly affected by both disruptions in supply and demand and speculation. This
makes long-term planning very difficult. An increase in the oil price may give the
country unexpected revenue. This has led countries to increase spending and
borrowing. When the price drops, it can leave a country unable to repay the loans and
force it to cut spending.
The non-renewable nature of oil and gas resources has led some to argue that “…any
consumption of revenues from sales should be viewed as a consumption of capital
rather than consumption of income” (ibid p. 8). This view puts emphasis on how the
revenue is spent. If it is not invested wisely in future income, the country’s total
capital declines.
This form of over-consumption is often coupled with
underinvestment in important sectors like education and health. Countries depending
on non-renewable natural resources tend to forget that they need to invest in building
a diversified and skilled workforce for the future when the natural resource runs out
(ibid p. 10).
3. Negative effect on political conditions
When a country receives a large share of their revenue from resource extraction they
have less incentive to tax their population. The state becomes less reliant on its
citizens. The consequence is that the linkages between state and citizen may weaken.
Relying on external income sources further limits the need for the state to develop
28
institutions to raise revenue and may inhibit the flow of information from the state to
the citizens. Controlling the revenue from the resource becomes more important than
making sure people earn money to pay taxes.
Taken together these processes have also caused corruption and armed conflict to
secure control of the resource. The evidence has been particularly strong in countries
abundant in minerals or petroleum resources. The mining and petroleum-industry is
capital-intensive and has historically been dominated by national companies and large
multinational oil companies. The production is mechanised and requires special
knowledge and skills, which means the oil multinationals tend to bring specialists
from abroad instead of investing in the local workforce. Often the production takes
place in remote areas where production-chains are unlikely to appear, thus further
limiting the transfer of technology and knowledge (Potter, Binns, Elliott, & Smith,
2004).
The oil companies have limited control over the processes of the resource curse. Still,
the resource curse poses challenges for the oil industry because the negative impacts
are related to their core operations. The cure for the curse has been heavily debated
and while some focus on the actions of government (Barma, Kaiser, Le, & Viñuela,
2012) others also see an important role for oil companies (Humphreys, Sachs, &
Stieglitz, 2007, p. 15; Frynas, 2010). There is currently consensus that transparency
and accountability are important ways to overcome the resource curse (Humphreys,
Sachs, & Stieglitz, 2007, p. XIV). The contribution of oil companies is therefore to be
transparent (ibid, Barma, Kaiser, Le, & Viñuela, 2012, p. 225) and to promote
accountability. Guldbrandsen & Moe (2005) has named this responsibility “Macro
CSR” saying: “Macro CSR refers to the responsibility for the indirect consequences
of relatively sudden, steep rises in revenue from extractive industries on a country’s
economic, political and social development” (Guldbrandsen & Moe, 2005, p. 55).
While there is little acceptance of Macro CSR among oil companies, it is included in
this study to see if conceptions of Macro CSR explain the CSR-practices of the oil
companies in South Sudan. A final way companies can help countries overcome the
resource curse is to stay away from countries where government uses the oil revenue
in a way that harms its people.
29
Oil is a particularly important commodity, whose importance for both the economy
and security of states has been acknowledged for the last century (Mohr, 1925;
Noreng, 2006). Dependency theory suggests that the powerful nations will strive to
control such a valuable resource through national and transnational corporations.
Governments in resource rich developing nations are therefore permitted to continue a
corrupt and damaging regime as long as they are loyal to the dominant nations and
allow “the natural resource wealth within their borders to be looted by firms from
wealthy countries” (Rosser, 2006, p. 17).
As opposed to dependency theory, which focuses on the role of the state in limiting
the harmful effects of globalisation, neoliberal theory puts more emphasis on the role
of the state in facilitating free trade. Ross (1999) proposes two different explanations
as to why resource dependent nations perform worse: “that much of the resource
curse is caused by the state’s ownership of resource industries”, which is seen as less
efficient (Ross, 1999, p. 319), and “the failure of states to enforce property rights”
(ibid p. 320), thus discouraging investment in manufacturing and causing resource
extraction to be the dominant industry. Other critics of the resource-curse theory
claims it is too deterministic and points to the fact that there are huge differences
among resource-rich countries as well as differences within the same country. They
point to other factors, like good institutions that are just as important as the resource
base (Mehlum, Moene, & Torvik, 2002). Validating or discarding the theory of the
resource curse is beyond the scope of this study. However, because of its impact on
the conception of the oil industry in developing countries, it can help explain both the
CSR-policy and actions of the oil companies in South Sudan, as well as the attitude of
other stakeholders.
To sum up, there is no commonly accepted theoretical perspective for making sense
of CSR activities. Instead a large number of theoretical perspectives exist that are
based in different economic theories. This study incorporates theories that
differentiate between different aspects of CSR as well as theories that explain why
companies engage in CSR in order to examine how and why the oil companies have
acted on their social responsibility in South Sudan.
30
3. Background
“South Sudan is one of very few places worthy of the description “Dark Africa””
NGO-worker in Juba
To understand the actions of companies and expectations of stakeholders, one needs
to understand the context. The context has implications for both the bargaining power
and the responsibilities of the companies. The situation in South Sudan is complex
and this thesis does not allow for an in depth description of the context. Instead I have
focused on giving a brief account of elements that influenced the situation during the
CPA-period, as well as describing the oil industry in South Sudan.
3.1 Historical and geographical context
Sudan declared independence from its Anglo-Egyptian rulers 1st of January 1956, but
was soon cast into a civil war between a mainly Arab and Muslim North and a
predominantly Christian South. In 1972 a peace agreement was signed, South Sudan
was given semi-autonomy and peace ensued until oil was discovered in the border
areas in 1979. Conflict ensued over the control over the resources and eventually a
civil war between North and South broke out that left 2 million dead and 4 million
displaced (Collins, 2008).
On the 9th of January 2005, after years of negotiating, the Comprehensive Peace
Agreement (CPA) was signed. The Government of National Unity was formed in
Khartoum where southerners participated, though in a minority. At the same time the
Government of South Sudan (GOSS) with limited autonomy was formed. Among the
provisions in the CPA was the right of South Sudan to hold a referendum on
independence in January 2011 as well as regulations for the distribution of oil revenue
(CPA, 2005). Despite problems a referendum was held and about 99% of the voters
voted in favour of secession. Finally, on the 9th of July 2011, South Sudan celebrated
its independence. This study examines the period between the signing of the CPA and
independence. During this time the oil companies had to manage a tense political
situation with an unknown outcome. There is little doubt that this shaped their CSRpolicy and practices.
31
South Sudan is a landlocked country with great geographical and ethnic diversity.
Seasonal rainfall and geographical features such as the river Nile with its tributaries
and the Sudd swamp creates flooding that damages what little exist of infrastructure
in the country. The major oil fields are all located close to major rivers, thus being in
environmentally fragile areas highly volatile to water pollution.
3.2 Socio-economic conditions in South Sudan
In their first calculation of GDP per capita after independence, the government of
South Sudan estimated the GDP per capita of South Sudan to be US$ 1546 in 2010.
This is by far the highest in East Africa, amounting to twice that of Kenya. These high
numbers are almost solely created by the oil industry, with oil exports amounting to
71 % of GDP in 2010 (South Sudan National Bureau of Statistics, 2011). The
importance of the oil industry is also clearly visible in government budgets. In 2010
an estimated 97,8 % of GOSS revenue came from oil (SSCCSE, 2011). This makes
South Sudan the most oil dependent nation in the world (Shankleman, 2011).
Despite the oil wealth, South Sudan is a poor country with 51% of the population
living below the poverty line (SSCCSE, 2011). Tropical diseases are common and
there is little access to proper health facilities. The literacy rate in the country is
among the worst in the world. According to a 2009 survey, only 27 % of the
population over 15 years are literate (ibid). The problem of literacy is enforced by the
fact that many in rural communities use their tribal language and has little knowledge
of English or Arabic. This is also a challenge for companies who want to employ local
skilled labour. South Sudan is clearly a country with massive need for development.
One would therefore expect this to shape the CSR-policy and actions of the oil
companies operating in the country.
3.3 History of oil in Sudan
Oil was first discovered in the late 1970s by Chevron. However, in 1984, the southern
rebel army, Sudan People’s Liberation Army (SPLA) attacked Chevron’s oil facilities
and forced the company to leave the country. Production started a decade later in
1993 when smaller companies invested in the country despite the on-going civil war
32
(Shankleman, 2011). In 1996, Sudan became the first African country to receive
large-scale investment in its oil industry by China. China National Petroleum
Corporation (CNPC) was followed by Malaysian owned PETRONAS and the Indian
national company, Oil and Natural Gas Corporation Limited (ONGC). These
companies developed the oil fields further and constructed pipelines to bring the oil to
the Red Sea coast near Port Sudan.
Since November 1997 Sudan has been under US sanctions for supporting terrorism,
destabilisation of neighbouring governments and human right violations (U.S.
Department of Treasury, 2008). Combined with divestment campaigns against
western companies this has lead to a domination of the industry by Asian companies.
In 2009 the total oil production of Sudan was 490 000 barrels per day (BP Statistical
Review, 2010). When South Sudan separated, they kept the majority of the oil
production. The first numbers after independence showed that South Sudan alone
produced around 300.000 barrels per day3. Although a substantial production, most of
the oil fields in South Sudan are considered mature. If no new discoveries are made
production will most likely plateau and decline after 2012 (Government of the
Republic of South Sudan, 2011).
3.3.1 Controversies regarding the oil industry
The oil industry was heavily criticised during the civil war for its strong alliance with
the regime in Khartoum. Over more than 500 pages Human Right Watch (2003)
account for the involvement of the oil industry in the atrocities committed during the
civil war. They conclude that the oil companies has been complicit in human right
abuses and that the oil companies’ treatment of southerners were considerably worse
than the one received by northerners in the same area (Human Rights Watch, 2003, p.
521).
In 2001 the Presbyterian church of Sudan sued the Canadian oil company Talisman
for assistance to genocide. The US federal district court in New York dismissed the
3
http://af.reuters.com/article/investingNews/idAFJOE78L00920110922 04.06.12
33
lawsuit in 2006, but the pressure from human right advocates had already pressured
the company to withdraw from the country in 2002. After reading a 2010 report4 on
the Swedish company Lundin’s operations in South Sudan, the Swedish prosecutors
decided to open an investigation of which the result is still unclear. The controversies
over human right abuses also led to a divestment campaign and the US imposed
sanctions barring American companies from operating in Sudan.
Another controversy concerns the way contracts have been awarded. After the signing
of the CPA the government of South Sudan (GOSS) was free to negotiate contracts.
During the CPA-period this resulted in disagreement between companies and GOSS
because contracts where awarded to blocks that were already taken. The new
companies consisted of small, inexperienced companies, which have led some to
speculate “why the government of Sudan has continually issued concessions to new,
untested, unknown or inexperienced explorations firms” (Coalition for International
Justice, 2006, p. 37), thereby questioning the process of assigning contracts.
3.4 Contracts
The contracts used in Sudan were, and still are Exploration and Production Sharing
Agreements (EPSAs) signed with International oil companies in partnership with the
Sudanese oil company, Sudapet. These companies have then normally joined together
to form Joint Operating Companies (JOCs) who operate the oil field. Under an EPSA
the operating company deducts some of the oil produced to cover costs (cost oil),
while the rest (profit oil) is shared according to a certain percentage (Radon, 2007).
The government share is calculated after the companies have deducted their expenses.
The EPSAs were negotiated during the civil war and were not changed with the
signing of the CPA. The EPSAs state, among much else, how the profit oil is to be
divided, what obligations the oil company has, what constitutes cost oil, custom
exemptions, responsibilities for damages, health and security instructions and
4
(ECOS, 2010) ”Unpaid Debt” published by ECOS in June 2010
34
community development obligations
5
. The EPSAs have been, and still are
confidential, which means it is hard to uncover their true content.
3.5 Oil companies in South Sudan.
The oil industry in South Sudan has been organized in joint operating companies
(JOC) consisting of several international oil companies and the national Sudanese oil
company, Sudapet. Lately, South Sudan has also set up a national oil company named
Nilepet. During the CPA-period the composition of the JOCs changed, but the major
companies have remained mostly the same.
The oil industry in South Sudan is confusing. First, the Joint Operating Companies are
organized differently. While the shareholders of the EPSAs own Petrodar and
GNPOC, WNPOC is owned 50% by PETRONAS and 50% by Sudapet. 6 Second, the
legal standing of the contracts has been uncertain, with the government in South
Sudan awarding contracts during the CPA-period that were not recognized by other
oil companies. This has been particularly evident in Block 5B and B. Finally, reliable
information is hard to come by. Company webpages are rarely updated and the
information on the webpages of the Joint Operating Companies (JOCs) is often
wrong. Sometimes this is evident, but other times information is given that is hard to
verify. For example, Star Petroleum claim on their webpage 7 that they “have been
appointed to be awarded” a 20 % share in Block B even though Total denies this and
no contract appear to have been signed.
Table 1 shows the composition of the different JOCs operating in South Sudan, while
the following map shows the distribution of the oil blocks in former Sudan.
5
Found in EPSA I was given access to.
http://www.wnpoc.com.sd/ 03.03.12
7
http://www.starpetroleum.org/south-sudan-block-b.php 05.15.12
6
35
Table 1
Composition of the different JOCs in South Sudan
Block Activity
Shareholders 20118
Operating company
CNPC 40%
Greater Nile Petroleum
1,2,4 Production
PETRONAS 30%
Operating Company
ONGC 25%
(GNPOC)
Sudapet 5%
Production
CNPC 41%
Petrodar Operating
3,7
PETRONAS 40%
Company
Sudapet 8%
Sinopec 6%
Tri-Ocean 5%
Production
PETRONAS 68,875%
White Nile Petroleum
5A
ONGC 26,125%
Operating Company
Sudapet 5%
(WNPOC)
No activity,
PETRONAS 39%
White Nile (5B)
5B
previously
Sudapet 13 %
Petroleum Operating
exploration
Ascom ?
Company (WNPOC)
Small scale
Total 32,5%
Total
B
exploration
Kufpec 27,5 %
Free 20%
Sudapet 10%
Nilepet 10%
No activity
Star Petroleum 75%
Star Petroleum
Ea
Hemla Energy 5%
Sudapet 20%
Changes during the CPA-period
Block 3 & 7: Al Kharafi held 3% of shares until 2008 when Tri Ocean bought Al
Kharafi’s share and 2 % from Sudapet.
Block 5B: Lundin held 24,5 % until 2009 when they left Sudan due to disappointing
exploration. ONGC held 23,5 % until 2009 when they left the block due to
disagreement over the validity of the contract of Ascom from Moldova.
Block B: In 2009 White Nile Oil Company of Guernsey UK was awarded shares in
the block. This was refuted by Total who won the complaint (Total 2010).
Block Ea: Contract was signed in 2010, so far no activity registered.
Sources:
ECOS, 2007; ECOS, 2010
http://www.sudantribune.com/Sudan-oil-body-endorses-Ascom,32245 14.06.12
Personal communication with representatives from oil companies
8
The list of shareholders may not be comprehensive as I encountered no official data
on this. The information is gathered from various sources and may therefore contain
minor errors.
36
Figure 2
Source: ECOS, 2007
3.6 Legal regulation of the oil industry
The oil industry before independence was subject to The Petroleum Resources Act of
1998 and the Petroleum Regulations of 1973. There are also a number of laws that
37
cover environmental and land-issues in the Sudanese legal framework. However, the
oil companies were primarily bound by their contracts, which were said to “…embody
the entire rights and obligations of the Government and the Oil Company” (Samasu
International Company Ltd., 2004, p. 15). A lawyer at one of the international oil
companies confirmed this and claimed they never had to look at the laws, as
everything was in the contract (personal communication).
Although it is hard to assess the contracts when they are confidential, there are signs
that the oil companies were pleased with them. They fought hard to keep them
unchanged and confidential after independence. The C.O of Star Petroleum has said
that “…the contractual obligations are impossible to improve” and that it is
“impossible to get conditions this favourable in other parts of the world”9. On their
webpage Star Petroleum also claim that Block E has “favourable contractual & fiscal
terms.”10
Some have argued that production-sharing agreements can limit regulation by the host
government because “… the PSA has given the oil companies a voice, if not a
modified veto over regulatory enforcement by the inclusion of regulations as
contractual provisions” (Radon, 2007, s. 101). Instead of regulation being debated in
parliament, it is negotiated with the oil companies. Whether it was due to the nature of
the contracts or not, it seems evident that the regulatory framework regarding the oil
industry was weak.
3.6.1 Regulation of the oil industry in the CPA
The legal regulation of the oil industry did not change much with the signing of the
CPA, but the CPA also contains some guiding principles for management and
development of the oil-industry. Articles 3.2-3.4 state that a National Petroleum
Commission shall be established with members from both North and South Sudan,
including the two presidents. Its responsibility shall be the management of the oil
industry (CPA, 2005, p. 52).
9
http://www.expansion.com/2010/08/15/empresas/energia/1281898326.html My
translation 05.15.12
10
http://www.starpetroleum.org/south-sudan-block-e.php 01.06.12
38
The CPA also sets some binding guidelines for how the oil industry should act.
Article 1.10 in chapter 3 on wealth sharing states: “That the best known practices in
the sustainable utilization and control of natural resources shall be followed” (ibid p.
66). However, the CPA does not say anything about what the best known practices
are, leaving this to the judgement of the companies.
The CPA further states that revenue from the oil fields in the South shall be shared
50-50 between the South and the North (ibid article 5.3 p. 54). It also contains
provisions for compensation: “Persons whose rights have been violated by oil
contracts are entitled to compensation. On the establishment of these violations
through due legal process the Parties of the oil contracts shall be liable to
compensate the affected persons to the extent of the damage caused ” (ibid article 4.5
p. 53).
Concerning legal regulation of CSR it states that contracts are not subject to
renegotiation (ibid article 4.2 p.53) but that “if contracts are deemed to have
fundamental social and environmental problems the Government of Sudan will
implement necessary remedial measures” (ibid article 4.3 p. 53). According to the
CPA both a National Petroleum Commission and a technical committee was supposed
to be formed to administer the oil industry. However, the technical committee never
became functional.11
Though weak, it is still clear that there were rules and laws that the companies were
bound by, both in the field of environment, employment, compensation and
engagement with local communities.
11
Personal communication with informant at the ministry in Juba who was supposed
to be in the technical committee.
39
4. Methods
“I think this (CSR) would be very dangerous to talk about.”
Vice president of Petrodar in Juba
In this chapter I will explain my choice of methods during the research process.
Before I start I will state what philosophy of science this study is grounded in. I will
then move on to state the reasons for my choice of methods, present my choice of
informants and give insight into evaluations I made during the fieldwork regarding
my research method. A central part of this chapter will be my reflections on the
challenges I met during my research and the implications of doing research in a
difficult environment.
4.1 Philosophy of Science
In this study I use different methods to uncover structures that can explain the nature
of the CSR-practices in the South Sudanese oil industry between 2005 and 2011. As
such, this study is based on the thoughts of critical realism. An important part of
critical realism is the notion that all research should have generalizing claims
(Danermark, Ekström, Jakobsen, & Karlsson, 2002). That is to say that the claims
should also be valid outside of the researched case. Another important statement is
that the fundamental goal of social research should be to uncover the causal
mechanisms that produce social phenomena (ibid).
Critical realists argue that there exists a true world independent of our consciousness;
but that all knowledge of this world is dependent on context and that neutral
observations of facts on reality do not exist. Hence, conceptualisation becomes the
most central activity for social scientists. This is done through conceptual abstraction,
a process where one identifies which aspects of a phenomena or object are vital and
necessary for the phenomena or object to be what it is, and which aspects are
contingent. This process is a thought-process (ibid).
Conceptual abstraction will help in order to perform the two other parts of a study
based on critical realism: structural analysis and causal analysis. Objects in the social
40
sciences are relational, and to understand them one need to map the relation between
different social objects. The structural analysis is an exchange between a concrete
study and an abstract analysis. It starts by looking at the concrete phenomena. From a
description of a concrete phenomenon, it moves to the abstract for an analysis before
it returns to the concrete through a planned study (ibid).
Critical realism is based on the understanding of natural conditions. Objects have
power based on their structures, and mechanisms exist and are determined by the
structures. There is an internal and necessary relation between the nature of an object
and its causal powers and tendencies. The goal of a causal analysis is to uncover the
causal power of objects and phenomena. Critical realism believes that the world is too
complex to predict the future. However, critical realism still believe that one can
produce generalizing claims because they deal with the structures and causal powers
of a phenomenon, not how this manifests itself in a given setting. Hence, people’s
actions are never determined by the structures. The structures simply facilitate certain
behaviour.
In critical realism the choice of methods should be governed by theory and several
research methods should be used in the same study. The separation between
quantitative and qualitative research should be abolished and be replaced with
extensive and intensive research based on the objective of the research (Sayer, 1992).
Intensive research is concerned with uncovering causal powers and how they play out
in a case, while extensive research is concerned with finding patterns and common
properties. In this regard, this study belongs to intensive research.
In this study I have used abduction, the method where one sees an empirical
phenomenon in the light of a theory to get a new interpretation of the phenomenon.
This means seeing the phenomena through a new analytical frame. In this study the
empirical phenomenon is the CSR-practices of oil companies in South Sudan. The
theories used to get a new interpretation of the phenomenon are institutional theory
and stakeholder theory.
41
4.2 Choice of method
Charles C. Ragin claims that identifying “…order and regularity in the complexity of
social life” (Ragin, 1994, p. 31) is the most fundamental goal of social research. To
reach this goal, this research was conducted as a case study using qualitative research
methods. Qualitative research differs from quantitative research in that it explores a
greater number of variables than quantitative research (ibid), thus making it suitable
for case-study research. According to Merriam a case study “…is an in-depth
description and analysis of a bounded system” (Merriam, 2009, p. 40); meaning that
it is possible to delimit the object of study. In this study the case chosen is the oil
industry in South Sudan during the period from 2005 to 2011. Ragin argues that
qualitative methods are well suited for in-depth examination of a case because they
make it easier to identify the important aspects of a case (Ragin, 1994, p. 79). He
further argues that it is easier to see how different aspects fit together when much is
known about a case (ibid p. 84). By keeping my options open and not limit myself to
a set number of variables, I aimed to get a deeper understanding of how CSR was
practiced and the reasons behind it. This meant exploring a number of variables, many
of which were not clear at the beginning of my fieldwork. Also, I have not limited my
study to oil companies, but also studied others that influence or are influenced by the
oil industry.
In total I conducted 7 qualitative interviews, all of them lasting about an hour. Three
with representatives from different oil companies, one with a representative from the
Ministry of Energy and Mining (M.E.M.)12, two with different NGOs working on oil
in South Sudan and one with a respected representative from the communities
affected by the oil industry.
In addition I used informal data gathering. I did not expect to use this method, but
during my fieldwork it became obvious that this was a very valuable way to attain
data. During my fieldwork I stayed three days at the Ministry of Energy and Mining
in Juba and attended an oil conference in Upper Nile State focusing on how the oil
wealth could benefit the people of South Sudan. Both these occasions allowed me to
12
The name of the Ministry has changed to the Ministry of Petroleum and Mining, but
I use the name of the CPA-period.
42
talk to a number of people with knowledge about the different aspects of the oil
industry. I also had shorter talks and discussions with people from Petrodar and
ONGC Videsh, representatives from the Norwegian Oil for Development-program,
civil society leaders and several NGOs.
Finally I also relied on desktop research. A lot of information already exists on the oil
industry in South Sudan. I therefore searched for secondary data collected and
presented in company CSR reports, reports by different NGOs, webpages, public
databases and newspapers.
While I didn’t expect to use informal data gathering as much as I did, the use of
different research methods was a conscious choice. This was done in order to achieve
method-triangulation. Method-triangulation involves using different research methods
in the same study, which will help decide whether the data are valid, thereby
strengthening the validity of the conclusions. By using interviews, secondary data and
informal data gathering my objective was to get a more nuanced picture of the South
Sudanese oil industry. Though all my methods are qualitative, the ability to use
different data from the same groups of informants (oil companies/local
community/NGOs etc.) was important, especially since the number of informants was
limited.
4.3 Preparations
Before I started my fieldwork I read up on South Sudan, the oil industry in South
Sudan and CSR in general. I studied different approaches to CSR to guide my
research. I also looked at the web pages for the oil companies and read their countryand CSR-reports, as well as reports on the oil industry written by various NGOs. This
was important in preparing my interview-guides, although these guides changed
substantially during my fieldwork.
In addition I contacted Norwegian People`s Aid in South Sudan to discuss my
research questions. The objective of the research was further worked out in discussion
with Norwegian Peoples Aid in South Sudan and my supervisor. After this we had
sporadic contact and it was only because Norwegian People`s Aid in South
43
coincidently had an available room that I ended up staying with them in Juba. This
research is not conducted on behalf of Norwegian People`s Aid, but their help has
been invaluable. Upon arrival they provided me with a desk at their office for the first
weeks and while I did not report to Norwegian People`s Aid, I discussed frequently
with them. Others therefore most likely perceived me as affiliated with Norwegian
People`s Aid although I operated independently.
My cousin worked at the Norwegian embassy in Juba at the time and provided me
with insight into the conditions in South Sudan, but when I left for Juba I still was not
sure what to expect. I therefore decided to keep my options open regarding which
qualitative methods I would use. By being open to different research methods I hoped
to be able to use the methods best suited to answer my research questions. However,
the limitations of the fieldwork in time and the difficulty of moving outside of Juba
meant that some research methods were never considered. I knew qualitative
interviews would be an important part of my research, but I was unsure whether it
would be possible to get access to some groups of informants and how much
information they would provide.
When I arrived in Juba I primarily wanted to interview representatives from the
international oil companies, the government and civil society. Arranging interviews
from Norway proved difficult, as communicating with South Sudan is hard at best, so
prior to my arrival I had no contact with any informants apart from Norwegian
People`s Aid.
4.4. Choosing and getting access to informants
Picking the right informants and securing access to them is an important part of
conducting research. In the following section I will state why I chose the informants I
did and how I secured access to them.
4.4.1 Choice of informants
Qualitative studies are based on a strategic choice of informants. In order to
understand the conditions for CSR in South Sudan under the CPA, I wanted to talk to
44
people from at least three groups; International oil companies and their Joint
Operating Companies (JOCs), the Government of South Sudan (GOSS) and
representatives from the civil society in the oil producing regions. There are only 3
JOCs producing oil in South Sudan and during my visit only 4 international oil
companies, including one currently not producing oil, were present in Juba. Since the
JOCs have their own CSR-programs I wanted to interview them as well as the
international oil companies. My informants needed to have knowledge on the oil
industry during the CPA-era, but their views should also as far as possible represent
the views of their group. In order to secure this I wanted to talk to as many as possible
from the different groups.
Among civil society I wanted to talk to people who were knowledgeable on how the
companies had behaved in the country. I was not primarily interested in individual
projects or detail knowledge on specific action. The focus of this study is how and
why companies approach CSR, not to evaluate the success of the individual projects.
This meant I needed to talk to someone with knowledge going beyond the local level.
Since the international community is an important group in South Sudan I wanted to
interview both NGOs that work on questions related to the oil industry and
representatives from the local communities affected by the oil extraction
In government I wanted to interview someone who had worked with the oil industry
during the CPA-era and one sufficiently senior to be able to express the view of the
Government of South Sudan (GOSS) on the actions of companies. Since the oil
industry is highly political I feared that some might try to use me to express their
political views. Therefore I preferred to talk to a member of the bureaucracy, whom I
assumed to be more neutral, as opposed to politicians.
However, wanting access and getting access is not the same. The number of potential
informants from both the international oil companies and GOSS are limited and
getting access to all of them proved about as difficult as anticipated.
45
4.4.2 Access to informants
I feared that access to informants would be a challenge, as the situation in South
Sudan just after independence was expected to be somewhat chaotic. Oil companies
were in the process of setting up offices and while some were up and running, others
only had one person working from a hotel room. Table 2 shows my informants and
sources of data, as well as the methods used.
Table 2
Informants, sources of data and methods used
Oil
companies
Interviews
 PETRONAS
 Total
 WNPOC
Informal data gathering
 Petrodar
 ONGC Videsh
 Hemla Energy
NGOs


ECOS
PACT Sudan


Representative
of the Ministry
of Energy and
Mining in Juba

Government



Civil Society
Other groups

Local
Community
leader “Peter”





Norwegian People`s
Aid (NPA)
Justice Africa
Upper Nile oil
commission
Various people
working at the Ministry
of Energy and Mining
Local government of
Upper Nile State
NPA oil task force
Unity State
Representatives of local
communities in Unity
and Upper Nile State
Oil for development
Integrity research
Norwegian union of
petroleum workers
Desktop research
 GNPOC
 WNPOC
 Petrodar
 CNPC
 PETRONAS
 ONGC Videsh
 Total
 Lundin
 Talisman
 Star Petroleum
 Tri-Ocean Energy
 Human Rights First
 Global Witness
 Fatal transactions
 IKV Pax Christi
 ECOS
 Sign of Hope
 Newspaper articles
 Press releases



Letter of complaint
from communities
of Unity State
Newspapers
Academic research


Academic research
Newspaper articles
46
In order to talk to me, the oil companies demanded that I get an authorization from the
Ministry of Energy and Mining. Through Norwegian People`s Aid I was introduced to
advisors from the Norwegian Oil for Development-program, who in turn advised me
on whom to contact at the ministry. To get the letter of authorization I had to spend
three days waiting at the ministry. The people at the Ministry of Energy and Mining
were very welcoming and I was treated as a guest. However, they were also in a
process of transition. In one office eight people shared three desks. People were
overloaded with work and had limited resources. Still they took their time to talk to
me and the days waiting at the ministry gave me the opportunity to talk to a number
of interesting people, both employees and external visitors. During these days I
encountered the person who was to become my main informant within the Ministry of
Energy and Mining. In addition to his interview I also talked to several others at the
ministry. To make sure their views and opinions were not marginal, I also read
newspapers and press releases that expressed the view of the Government of South
Sudan on the behaviour of the oil industry.
Even after producing the letter of authorization some of the international oil
companies and their JOCs were reluctant to talk with me. Being in a transition period
some of the companies only had technical staff present, while others needed
permission from Khartoum to talk to researchers. The oil industry in South Sudan has
received a lot of criticism; especially form western organisations and media. Not
surprisingly they were fairly defensive on certain topics. The result was that 2 of the
JOCs and 1 of the international oil companies refused to be interviewed or only
allowed me to talk to persons with little or no knowledge of the company’s CSRpolicies and practices. Though this could make my findings less valid, I have tried to
correct this by also using other methods, like desktop research and informal data
gathering.
Access to informants from civil society was gained through my contacts in the
international community. Since many of the local community leaders live and work in
the oil producing states, few were available for interviews. Although I ended up with
only one interview with a local community leader, I also rely on interviews with
NGOs who work with oil-questions to get the view of the local population in the oil
producing states.
47
I quickly found that not everyone in South Sudan worked on a schedule. Some
interviews were continuously postponed, which left me with two important interviews
on my final day: one with Total and one with a local community leader. Unfortunately
I was never able to interview ONGC Videsh and Leben Moro, a professor at Juba
University. Even though I had appointments they were postponed and later cancelled
due to their prolonged absence.
The method of informal data gathering was particularly important during three
settings. First, during an oil conference in Malakal in Upper Nile State set up by
Norwegian People`s Aid. The topic of the conference was how South Sudan could
benefit from its oil wealth. Only one oil company, Petrodar, was present, but a
number of civil society members and representatives from local authorities attended.
A number of NGOs and members of the international community also contributed.
Particularly interesting for my study was a presentation by Integrity Research on the
situation of CSR in South Sudan. This led to a discussion where several local
community leaders from both oil-producing states (Unity State and Upper Nile State),
voiced their concerns on the oil industry and CSR.
Second, during my three days spent waiting at the Ministry of Energy and Mining.
These three days was probably when I learned the most during the fieldwork. People
walked in and out more or less unconstrained. Sharing lunch and chatting with the
representatives of the ministry gave me a unique insight in the relationship between
the Government of South Sudan (GOSS) and the oil companies and the challenges the
oil administration faces. I got to see how the ministry worked and were allowed to
talk to advisors, oil companies, local Sudanese searching for employment and
officials working under difficult conditions.
Third, during my interaction with members from the international community. This
took place over lunch or dinner, at parties, at meetings or during random encounters.
This form of networking was absolutely crucial in getting access to informants and
my contacts in the international community also gave me a unique insight into the oil
industry. I had only just arrived in Juba when Norwegian People`s Aid asked me to
comment on a report on CSR in the South Sudanese oil industry. Later I attended
meetings between NGOs concerned with oil-related questions and was asked to
48
comment on the draft of the petroleum bill before a group of NGOs would present
their view on it to the parliament. Although the new petroleum bill is not part of this
study, I learned a lot about previous mistakes from the discussions on the subject. I
was able to discuss legal terms with Norwegian lawyers working on the petroleum bill
and discuss my preliminary findings with experts in the field.
To sum up getting access to the informants I wanted was challenging, but on the other
hand I also got access to data and informants that I did not expect to get access to.
While there are people and organisations I regret not having talked to, the informants
I got access to provided me with a volume of data that together with desktop research
was more than sufficient to answer my research questions.
4.5 Research methods
In this study I have primarily relied on three research methods: qualitative interviews,
informal data gathering and desktop research. I will now give my reasons for
choosing these methods and discuss their strengths and weaknesses in relation to this
study.
4.5.1 Qualitative interviews
Qualitative interviews are well suited if you want to uncover the meanings or feelings
of the informants. I considered it an important method to answer my researchquestions. Partly because written material from independent sources on CSR in South
Sudan is limited, but also because qualitative interviews have several advantages as a
research method. Interviews enable the researcher to cover many topics and gather
large amounts of data in short time. Another advantage to interviews is that it allows
the researcher to “uncover” misunderstandings and probe into new topics that arise
during the interview (Valentine, 2002).
However, using interviews to gather data is not unproblematic. An interview is an
interaction between researcher and informant. The quality of the interview depends to
a large extent on the researcher interpersonal- and listening-skills (ibid). Also, while
interviews may give information on the informant’s views and opinions, it is
49
dependent on the informants will to divulge their true views. In all interaction, the
information one gives away mirrors how one wants to appear, which may or may not
be sincere. Despite these shortcomings qualitative interviews give important data.
Used together with other sources it can also provide valuable information on both
distinct phenomena and historical events.
4.5.2 Interview-guides
Interviews are defined by their level of structure. In a structured interview the topics
and questions are formulated beforehand and the order of the question is set. This
makes it easy to compare the answers from different interviews. While mainly used in
quantitative studies, it can also be uses as a method in qualitative research. As
opposed to a structured interview an interview with a loose structure resembles a
conversation where both informant and researcher are free to ask questions or bring
up new topics. This approach has the advantage that the informant can provide
information that the researcher does not know exist and it allows the researcher to
pursue interesting topics that appear in the course of the interview.
In this study I have relied on semi-structured interviews which lie somewhere in
between the two extremes already described. Using interview-guides is a way to
structure a semi-structured interview. An interview-guide consists of topics that a
researcher wants to cover during an interview. It might also contain formulated
questions, but these are supposed to be used as a guide and not a form to be followed
strictly. An interview-guide should be flexible and allow the researcher the possibility
to ask follow-up questions and prod deeper into certain areas while covering all the
planned topics (Arthur & Nazroo, 2003).
The interviews all took place in Juba and were conducted in September and October
2011. I sometimes had to do interviews without much preparation because the
informant insisted on doing it right away, as he did not know when he would be
available later. On one occasion I had to do the interview without having my
interview-guide present. My interview-guides started out rudimentary, but grew in
complexity as more interesting topics appeared during desktop-research and in
conversations and interviews. The result was that the guides used in the first
50
interviews were quite different than the one used in my last. Although this means that
topics, which were found to be less interesting for my study, or topics that appeared
during the course of the research are not covered by all informants, the majority of the
topics and questions were kept in the interview-guides for all interviews. If new
questions appeared later that were thought particularly important, these were asked
informally when the informant was available. Comparison between informants from
the different groups of stakeholders is therefore still possible.
4.5.3 Choice of location
The location of an interview can influence the result of it. If the informant is nervous,
uncomfortable or has feelings connected to the setting he might give less or other
information than if he is in known surroundings. The roles of researcher and
informant are created based on the setting and the interaction happening there and
then. These roles further influence the result of the interview (Elwood & Martin,
2000).
Planning the setting of the interview was hard, as appointments changed frequently
and I sometimes had to do interviews on short notice. The interviews with
representatives of oil companies and government were conducted in their offices. This
meant that the informants were in a safe and known environment and one might
expect that this would make them more open. At the same time this might make the
informants less critical to their own working-place than if they were being
interviewed in a neutral space. Although I welcomed personal opinions on the
operations of the oil companies, I was primarily interested in the view of the
companies or government, so this was not considered a major issue. The interview
with Total was conducted with two representatives present. This was by their own
choosing and while this may have prevented them from saying things they did not
want the company to know about, it provided me with two informants that could give
their separate views on my topics. Apart from this, interviews with government and
oil companies were conducted one to one.
My interview with “Peter” from the local communities in the oil producing area was
conducted in an office of an NGO with 4 other local men present. This was the choice
51
of “Peter” and probably distracted me more than him. The reason for their presence
was not explained, but my informant wanted them to attend. The representative from
PACT Sudan was interviewed inside their compound while the representative from
ECOS was interviewed in a quiet corner of a restaurant.
In total I was rarely able to control the choice of location for the interviews. On the
other hand, leaving this choice to my informants gave them some power. Although I
mainly interviewed persons who were considered elites, the researcher also has power
because he controls how the information given in interviews is presented. Oil
companies have received a lot of criticism and some are vary when meeting
researchers. Letting them choose the location perhaps made them less defensive and
more open. The government is also used to dealing with foreign advisors and my
impression was that I was greeted with respect because my student-status meant I was
perceived as a foreign specialist.
4.5.4 Documentation of the interviews
I used a recorder on some of the interviews. A recorder helps document everything
that is said so that the researcher avoids loosing important information. It further
allows the researcher to be more attentive as he does not have to make as many notes
during the interview. The drawbacks are that the recordings have to be transcribed,
which can be a time-consuming process. The presence of a recorder may also make
the informants nervous and less willing to give up information.
The use of a recorder was completely voluntary and many of my informants preferred
not to use it. Only two interviews were taped, those at WNPOC and the Ministry of
Energy and Mining. During one interview I sensed that the informant seemed tense,
possibly due to the presence of the recorder. I asked if I should turn the recorder off,
but he said it was not a problem. Still, I felt he was more stressed with a recorder, and
spoke a bit more freely once the interview was finished and the recorder was turned
off. The recordings were transcribed when I came home to Norway and later deleted.
The other interviews were documented by taking notes on a laptop during the
interview. This made it harder to ask questions at the same time, but I also had to be a
52
more attentive listener because I was afraid I’d miss some important information.
After every interview I went back to my room to work on my notes while the
interview was still fresh in my mind. This was even done with the interviews where I
had recordings, as I wanted to make notes on the things I found most interesting that
could further guide my research.
4.6 Informal data gathering
The use of informal data gathering consists of both informal conversations and the use
of statements intended for a larger audience/third parties. The method raises several
questions, both ethical and practical.
An ethical implication of informal data gathering is that the information is given
outside the researcher-informant context. Hence, the informants are not informed that
their statements will be used in a study, or that they are free to withstand from
partaking in the study. While I seldom asked for permission to use informally
gathered data, I always made it clear what I was doing in South Sudan and the subject
of my thesis.
Practically, informal data gathering is hard to plan. However, although one doesn’t
make interview appointments, it is possible to plan informal data gathering by seeking
out places where one is likely to encounter potential informants. For me this meant
attending the oil conference in Malakal, spending time at the ministry, eating lunch at
Central Pub and being as social as possible. An advantage to informal interviews and
data gathering is that people speak more freely when they are not in a formal setting.
People from one of the oil companies that refused a formal interview were
comfortable talking informally, although this were much shorter conversations.
To sum up, informal data gathering is problematic, but can be very productive,
especially combined with other methods.
53
4.7 Desktop research
In order to understand the context of the oil industry in South Sudan I read up on the
history of South Sudan and the political situation in the country. This helped me
identify areas of interest for my further research. I also read reports and articles
covering the oil industry in Sudan and CSR in general. Before, during and after the
fieldwork I also gathered data through desktop research.
All the major oil companies operating in South Sudan have webpages containing
information on their CSR-policy. Some also publish CSR-reports and other reports on
their operations in South Sudan. Comparing these with the response I got in
interviews and other reports helped me get a clearer picture on the nature of the oilindustry.
Desktop research was particularly important in answering my first research objective:
“How was the CSR-practice of the international oil companies in South Sudan in the
CPA-period, how did this correspond with their CSR-policy and how have local
government and civil society experienced their actions?” I relied heavily on desktop
research to account for the CSR-policies of the oil companies. I have also relied on
reports from researchers, companies and NGOs to form a picture on the actions of the
international oil companies and how different groups have interpreted their actions.
Since the oil industry is highly political one must be careful not to accept data at face
value. CSR is often considered as part of a company’s PR-strategy, and one would
expect the informants to strive to portray their view, more than facts, in interviews,
reports and documents. In a country where there has been little independent research
done on the actions of the international oil companies it is difficult to determine what
has really happened. Using different methods and seeking information from different
groups of informants was a way for me to triangulate the data I collected. I constantly
had to be critical and interpret my responses based on whom I was interviewing.
Other researchers in South Sudan complained that some companies fed them
exaggerations and others outright lies. For me, uncovering misrepresentations,
exaggerations and understatements was an interesting finding in itself, as it gave
insights into the way the different groups would like to present themselves. Instead of
54
being concerned with if the information I was given was true, I focused on whose
truth I was presented.
Whether the reports and web pages should be viewed as primary or secondary data
depends on what one is looking for. If one looks at a CSR-report to learn what
projects the company has conducted and their success, it is secondary data. However,
if one uses the same report to see how the company presents itself through its reports,
it is primary data. In this study the same sources have been used both as secondary
and primary data.
Using secondary data saves time and allows a researcher to add more data in the same
study. The danger of using secondary data is that its validity depends on the source.
To account for the companies’ CSR-policy I have used their own reports and web
pages. When accounting for the actions of the companies I have used various sources.
Some of the information obtained from these sources is contradictory. In these
instances I have solved this by stating both views. Evaluating the individual projects
and particular actions of the different oil companies is beyond the scope of this thesis.
Rather this study is interested in what areas the companies have focused on in their
CSR-activities. On this the sources are pretty consistent.
4.8 Analysing data
During intensive research, data gathering and analysis is a parallel process. Already
when one chooses an area of study one will have thoughts on the phenomenon to be
studied. The analysis can be seen as an interaction between the choices of method, the
evaluation of data and the use of theory. This interaction may change the choice of
method, the use of theory and the evaluation of data. I will now account for the stages
in my analysis before I explain how I handled the data during the process.
The different stages of my analysis correspond with the stages of an explanatory
research based on critical realism (Danermark, Ekström, Jakobsen, & Karlsson,
2002). The analysis started at the same time I chose the case and my thesis questions.
I read literature and reports on the subject to form a picture of my case. I also read
55
different theories on CSR searching for some that fitted both my thesis questions and
my case.
My first goal was to describe the phenomenon in my case. This consisted of
describing the CSR-policies of the various companies as well as their actions and how
it was received. When I had a clear picture of the situation in the oil industry during
the CPA-era, I started looking at different aspects of greater interest. When I had
found what part of the phenomenon I wanted to investigate further I searched for
theories that could answer my new research questions. This meant I had to adjust the
research questions used to shed light on my second research objective.
The different aspects were then interpreted through different theories and conceptual
frameworks. This process corresponds with what critical realism calls abduction and
critical re-description. Several different theories and explanations were presented and
compared to provide a satisfactory explanation of the actions of the oil companies.
This guided my further research and caused me to return to some of my former
informants with new questions. Relations between oil companies and between oil
companies and other stakeholders were of special interest.
Finally the analysis turned to comparing the different theories to see which theories
could best explain my case. Though in some cases one theory is sufficient to explain a
phenomenon, other times “…the theories are rather complimentary, as they focus on
different, but nevertheless necessary conditions” (Danermark, Ekström, Jakobsen, &
Karlsson, 2002, p. 110). I was left with institutional theory and stakeholder theory as
the most fitting theories to explain why companies acted as they did. These
approaches stood out as promising explanations early in the research, but other
theories were also considered. 13 Once I had concluded that stakeholder theory and
institutional theory were best suited to explain the behaviour of the companies, I went
through my data once more to get a fuller picture of how the causal mechanisms
described in institutional and stakeholder theory had manifested in South Sudan.
13
Alternative explanations that were considered are: Austrian economics, Game
theory and Theory of the firm.
56
4.8.1 Handling of data
After every interview I did a quick analysis to see if the interview could guide me in
my future research. Throughout the research I also made notes of information found
through informal data gathering or desktop research that helped answer my research
questions and organized this according to what research question they answered.
The data was continuously compared with relevant theories and organized according
to which theory they fitted. This helped me rule out certain theories that did not fit my
data material. After the fieldwork was finished the analysis continued in Norway
where I tried to make sense of all my data. I started organizing quotes and reports
depending on what research-question I felt they were most closely related to. After
this I tried to give a preliminary answer to the different research questions based on
my data.
In this study data is expressed explicitly through quotes, as well as implicitly by
guiding the research and as additional confirmation of my statements and conclusions.
The amount of data is large, especially the data resulting from desktop research.
Therefore not all relevant data is included explicitly in the analysis. Quotes are used
when appropriate. A problematic issue with using quotes is that it takes a statement
out of its original context (Coffey & Atkinson, 1996, p. 30). To limit this problem I
have stated in what context the quotes were made or what questions they were
answering.
Transcripts of the taped interviews are kept, while the recordings are deleted when the
thesis is submitted. Notes from my fieldwork are also kept, as well as a file of
documents and reports used in this study in case future researchers want to benefit
from my collection of documents.
4.8.2 Evaluation of data
According to Tove Thagaard (1998) data in qualitative studies should be judged by
their credibility, confirmability and transferability. Credibility in a qualitative study
depends to a large extent on the sources and informants. The credibility of my data
57
has been strengthened by my use of different qualitative methods and by using
informants from different groups. When they all concurred, the information was
highly credible. When there were discrepancies it was interesting in itself as it
allowed me to examine further why there were discrepancies. Some of the data I
gathered was discarded because it did not fit the rest of my data-material and was
found to be of low credibility.
Confirmability refers to the critical self-examination by the researcher on his own
interpretations and whether other research would be able to confirm the result
(Thagaard, 1998). Due to the difficult situation in the oil producing areas it is hard to
confirm the data about the action of the oil companies. However, researchers with
access to the oil producing areas would be able to assess the actions of the oil
companies and thereby confirm the first part of my study. It is harder to confirm the
explanation as to why the companies have acted as they have, as countless alternative
explanations potentially exist. Still, the relationships between companies and their
stakeholders can be confirmed as well as the organisation of the oil industry. By
comparing this with the actions of the oil companies one can also confirm my
conclusion. Thus, this study is confirmable. I have also focused on separating between
the data and my interpretations, although I acknowledge that data are never objective,
but always to some extent interpreted.
Transferability refers to whether one might expect to find the same in similar
situations. According to critical realism reality is too complex to make predictions
about the future or other contexts. However, the mechanisms or causal potential that
are uncovered in this study are likely to be present in other situations as well.
4.9 Challenges during my fieldwork
South Sudan officially gained its independence on the 9th of July 2011. I arrived one
month later to find a country in rapid transformation. Up until independence, most of
the oil companies had offices in Khartoum and little presence in Juba. However, the
new Government of South Sudan (GOSS) demanded that they also open offices in
Juba. Most companies were in the process of doing this, or had just recently opened
their offices when I arrived.
58
Upon my arrival in Juba my first task was to search for informants. As I considered
the oil companies my most important informants, my first challenge was to find the
offices of the different companies. Juba has no street-names and some of the
companies had not had time to establish proper offices, so it took me weeks just to
map out the whereabouts of the different companies. As my fieldwork coincided with
Ramadan several of the companies were also short of staff or had temporarily closed
their offices. In one bizarre incident I was shown around an empty office by a local
man who mistook me for a representative of the oil company. Apart from a clean
desk, there was no sign of human activity and nobody knew when the oil-company
would move in.
Another challenge was related to the restrictions on mobility in South Sudan. During
my flight to Malakal I got to see the oil fields from the air and got some perspective of
the geography and topography of the area. I had hoped to visit the oil producing areas
in person, but due to a rapid change of plans I did not get to stay in Unity to visit the
oil fields. Instead I had to return to Juba. Seeing the oil fields first hand and talking to
the local communities in their environment would have been helpful to get a fuller
picture of the situation in the oil-producing areas. Unfortunately, getting to the
oilfields independently is very hard due to bad roads, no public transport and security
issues, so going at it alone was not an option.
I also had to deal with the politics of the oil industry in South Sudan. A number of my
discussions and one of my interviews were conducted in public places that were not
soundproof. Even though I tried to isolate us as much as possible, it is not impossible
that some information was altered or withheld because of the potential of other people
overhearing us. There are certain things I was told were not to be spoken openly about
in South Sudan and the oil politics is a particularly sensitive subject. I was explicitly
told to hide certain documents I was given access to and sometimes people lowered
their voices when discussing sensitive issues. While I didn’t feel uncomfortable with
this at the time, it may have affected the data I was given access to.
During my fieldwork I learned that research can be hard to plan and unexpected
events may ruin the best laid plans. I had to rely on the help of my contacts in order to
59
find informants and get the data I needed, but luckily South Sudan is full of helpful
people.
4.9.1 Ethical considerations
Interviews are morally binding even when the topic is not sensitive. The use of quotes
and the analysis itself can have implications for the informants -both positive and
negative. Although the interviews were confidential, I can not guarantee that I have
been able to secure full confidentiality. I have maintained anonymity of my
informants when it comes to their names, but included whom they spoke on behalf of
when this was relevant. However, Juba is a small place and it is possible for someone
with knowledge of the oil industry there to work out who I have talked to. While
some of my informants would like to be identified, others expressed indifference to
this. The only name mentioned in this study belongs to “Peter”, my informant from
the local community in the oil producing areas. Although he made no reservation
against being identified, I have chosen to use a false name to maintain his anonymity.
I am also aware that a conflict of solidarity may have arisen between my relation to
informants and the place of South Sudan that can affect my interpretation and the way
I present the thesis. The people of South Sudan have suffered much hardships and it is
hard to not be moved by their needs. Awareness of this dilemma has been important
to keep the analysis as objective as possible.
For most of my informants I was considered an outsider. As a white Norwegian I was
sometimes mistaken for an aid worker, a foreign consultant or an oil worker. For both
the local communities and the government in South Sudan I was an outsider because I
was a foreigner. For the oil companies I was a person from outside the industry. The
only groups of informants that might possibly consider me an insider were the NGOs
and the international community. This might have affected the information I got from
my informants. At the Ministry some mistook me for an advisor from the Oil for
Development program and although I tried my best to correct these mistakes, I cannot
rule out that I was given information I was not supposed to get because of my
nationality and association with other Norwegians. In this report I have tried to avoid
using such information explicitly and taken care to anonymise my informants.
60
I acknowledge that this study may have implications for my informants and others. I
have tried to avoid personal implications by maintaining anonymity and only use
statements that were perceived as potentially damaging after securing the consent of
my informants. This means I have avoided using some data that was gathered through
informal data gathering that I considered to be harmful to my informants.
To conclude, South Sudan is a challenging environment to do research in, but also
very rewarding. During my fieldwork I adopted new methods of data collection and
altered my research questions to adapt to the situation in the field. Flexibility was
important to deal with the challenges, but in the end I was totally reliant on the help of
others to conduct this study.
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5. CSR-policy and practice in South Sudan
In the following chapters I will present my empirical data and analyse them with the
help of relevant theories. The aim of the analysis is twofold: First to uncover how the
companies acted in the CPA-period, how this corresponded with their CSR-policy and
how local government and civil society experienced their actions. Second, to explain
why the CSR-practices have caused resentment among stakeholders in South Sudan.
5.1 The CSR-policy of oil companies operating in South Sudan
Most of the companies operating in South Sudan from 2005-2011 had an official
CSR-policy. This can be found on their webpages and in company-reports. Obviously,
the CSR-policies are not static and some have changed substantially during this
period. Likewise CSR-policy may differ within a company and its subsidiaries.
However, what the companies state as their official CSR-policy is interesting in itself,
as it shows what impression the companies want to project and provides a standard on
which to measure their actual performance.
When analysing the CSR-policies of the different companies I have used the areas of
Carroll’s CSR-pyramid. I have also included a fifth area, which I have called political
responsibilities. This refers to the responsibility of companies to secure oil supply.
Political responsibility to secure oil supply differs from the economic responsibility
because the focus is on production, not profit. Since oil is a strategic resource that
countries are dependent on, national companies are often given the political
responsibility to secure the supply of this resource. Commercial companies also
frequently stress the importance of their production for the global economy and
thereby society at large. As with economic responsibility, it can be argued that this is
something companies do for themselves to keep operating. However, looking at the
rhetoric used, companies claim that this is something they also do for society. I have
included this as I think it helps explain both the policies and the actions of the
companies.
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5.1.1 International Oil Companies
The CSR-policies of the international oil companies operating in South Sudan has not
been the same, nor has it been consistent for the CPA-period. Some oil companies
have left South Sudan, while others have arrived. For some of the companies, their
CSR-policy was formed during these years. Naturally the policies of 2011 will be
quite different from the policies of 2005. To analyse the CSR-policy of the
international oil companies in South Sudan I have looked at reports and statements
published by the companies as well as interviews with some of the companies.
The international oil companies in South Sudan focus on many common areas in their
CSR-policy. All the major international oil companies operating in South Sudan refer
to environmental protection, health and safety, securing energy supply and
community development as part of their CSR-policies (PETRONAS, 2007; Sinopec,
2009; Total, 2009; CNPC, 2010) 14 . However, there are differences among the
companies.
All the major companies mentions securing energy supply, i.e. their political
responsibility, as their primary social responsibility (CNPC, 2010; PETRONAS,
2007; Sinopec, 2009; Total, 2009). CNPC states this explicitly as the most important
part of their CSR: “Securing national energy resources is PetroChina’s long-term
and foremost social responsibility” (CNPC, 2007, p. 10), while ONGC has as their
company vision to: “To be a world-class exploration and production company
providing security oil to the country”15. PETRONAS (2009) highlights the connection
between energy and economic growth: “We recognize that our responsibility to
society begins with ensuring a sustainable and reliable supply of energy to drive
economic progress” (PETRONAS, 2009, p. 6). Finally, Total includes the element of
sustainability in their political responsibility: “Our principal responsibility is to meet
the demand for energy on a sustainable basis” (Total, 2007, p. 1). This includes
investment in green technology, but refers primarily to investment to enhance oil and
gas production (ibid). CNPC, Sinopec and ONGC are national companies from big oil
14
For the CSR-policy of ONGC Videsh see their Global Compact reports (2009) and
their webpage: http://www.ongcvidesh.com/Company.aspx?tab=4 06.19.12
15
http://www.ongcvidesh.com/Company.aspx?tab=0 06.19.12
63
importers and focus on their political responsibility to secure the oil supply of their
home countries. PETRONAS and Total also see it as their most fundamental
responsibility to secure energy supply, but as a commercial company and a national
company from an oil exporting country, they refer to the global energy supply.
When operating in foreign countries all the international oil companies acknowledge a
responsibility towards their host nations. Total claims this responsibility is met
primarily through being profitable and creating employment: “Contributing to the
social and economic development of our host countries and communities is one of the
principles set out in the Total Code of Conduct. First and foremost, we fulfil our
responsibility as an economic player.”16 The economic responsibility to be profitable
and contribute to the economy through tax-payments and job-creation is also
prominent at CNPC, Sinopec and ONGC (CNPC, 2010; Sinopec, 2009; ONGC
Videsh, 2009, p. 48). They all believe firmly in the neoliberal argument of mutual
benefits and mutual economic growth. This was also the position of PETRONAS in
2007 when their sustainability report state that: “Strong business growth and
performance record has enabled PETRONAS to make significant contributions to the
economic and social well-being of Malaysia, as well as that of our host countries and
their people” (PETRONAS, 2007, p. 9). However, in later reports there are no
references to their economic responsibility (PETRONAS, 2009; PETRONAS, 2011),
showing that they focus less on this in their CSR-policy today.
In the areas of environmental protection and health and safety, the companies use
different rhetoric concerning their responsibilities. CNPC (2010), ONGC (2009, p.
48) and Sinopec (2009) focus more on their legal responsibility to be in compliance
with laws and regulation, as opposed to PETRONAS and Total who during the period
have shifted their focus towards a higher focus on developing company standards.
Thus they focus more on the ethical responsibility to behave responsibly towards the
environment and their stakeholders.
Finally all the international oil companies acknowledge a philanthropic responsibility
to assist local communities and give donations. For PETRONAS this is the only
16
http://www.total.com/en/our-challenges/driving-shared-development-/ourapproach/our-business-principles-201045.html 06.18.12
64
dimension of CSR mentioned in their CSR-reports. It is also a major focus of CNPC,
Sinopec and ONGC (CNPC, 2010; Sinopec, 2009; Sinopec, 2010; ONGC Videsh,
2009, p. 48). Total claim to have learned that “philanthropy doesn’t lead to
sustainability”17 , indicating that the philanthropic responsibilities are not a central
part of their CSR-policy. However, they still engage in it saying: “Some communities
in our host countries are very poor or are contending with specific problems. We can
provide material assistance to help improve their situation.”18
To conclude, the international oil companies operating in South Sudan during the
CPA-era all have sophisticated CSR-policies covering all of the dimensions of
Carroll’s CSR-pyramid. Although there are differences, this points to a common
understanding of CSR. The main difference in CSR-policies concerns the ethical and
legal responsibilities of companies. CNPC, Sinopec and ONGC generally have a
higher focus on legal compliance regarding environmental protection and
transparency. Total and PETRONAS on the other hand have shifted their focus
towards ethical responsibility by focusing on company standards instead of legal
compliance with laws and regulation.
5.1.2 Joint Operating Companies (JOCs)
In Total’s block B a Joint Operating Company (JOC) has not been formed and Total
is the operating company. They have therefore developed their own CSR-strategy and
Ethics Charter (Total, 2009). Total’s CSR-policy for Sudan harmonizes with their
central CSR-policy, though with a higher focus on security and human rights. In the
other blocks the production is handled by JOCs who have their own CSR-policies.
CNPC is the dominating shareholder of two JOCs: Petrodar Operating Company and
Greater Nile Petroleum Operating Company (GNPOC). The second largest
shareholder of both consortia is PETRONAS. As the biggest shareholders, one would
expect CNPC and PETRONAS to have the largest influence on the CSR-policy of the
two JOCs. The analysis shows that while the CSR-policy of the JOCs are evidently
17
http://www.thejakartapost.com/news/2010/02/22/total-eampp%E2%80%98philanthropy-doesn%E2%80%99t-leadsustainability%E2%80%99.html 04.10.12
18
http://www.total.com/en/our-challenges/driving-shared-development-/ourresources/corporate-philanthropy-initiatives-201056.html 04.10.12
65
influenced by the international oil companies, their policies are far less sophisticated
and focus on fewer dimensions of CSR.
None of the JOCs in South Sudan publishes CSR-reports of any kind and only
WNPOC were willing to be interviewed. While I also got to talk to representatives
from Petrodar more informally, I have not talked to anyone from GNPOC. A lot of
the data on the CSR-policies of the JOCs is therefore collected through desktop
research and informal data gathering.
5.1.3 Petrodar Operating Company
“No Data Found”
“Corporate values”-page on Petrodar’s webpage19
Petrodar Operating Company operates block 3 and 7 in Upper Nile state and is owned
by CNPC 41%, PETRONAS 40%, Sudapet 8%, Sinopec 6% and Tri-Ocean 5%.
Petrodar does not publish CSR-reports, but contain information on their CSR-policy
on their webpage.
Petrodar stress the economic responsibilities of the companies. Petrodar mentions
several strategies that correspond to what Carroll calls economic responsibilities and
express their belief in mutual benefits between companies and society. Among those
strategies are: “Achieve nation building through adding value to the economy and
society” and “Recognize valuable link between business and society”20. The focus on
nation building and the link between business and society shows that Petrodar sees
their profit as beneficial for the society. Their claim that this is sign of their moral
commitment clearly shows that Petrodar feel they have a social responsibility to be
profitable.
There is no clear reference to the political responsibilities of Petrodar, although the
reference to “nation building” can be interpreted this way. This is still consistent with
19
20
http://www.petrodar.com/content.php?GL=1&PL=3 06.16.12
http://www.petrodar.com/content.php?GL=4&PL=17 06.16.12
66
CNPC’s CSR-policy, as it focused on the political responsibility towards China, not
host states.
Petrodar seem to accept a philanthropic responsibility towards the local
communities: ”As part of our corporate social responsibility, we continued to provide
local communities with the necessary services and basic needs such as clean water,
health care and education in addition to the establishment of social facilities.” 21
However, legal regulation is also central in the area of community development.
Community development-programs are covered by the oil contracts, and the rhetoric
used by Petrodar implies that they see community development as a legal
responsibility. The major objectives of the community development programs are
firstly to: “Improve the socio-economic level of the communities surrounding
PDOC22’s operation areas and recognize their rights and interests by complying with
the applicable laws and regulations” (my emphasis). 23 Though they say they will
recognize the rights of the communities, something that would imply an ethical
responsibility, they will do this by complying with laws and regulations, thus reducing
it to a legal responsibility. Even though Petrodar claim to have gone beyond the
provisions of the contract in their community development program, there is no
reference to this being an additional philanthropic responsibility that Petrodar
assumes.
Like CNPC, Petrodar focuses on following regulation in their environmental policy:
”Environmental protection is an integral part of PDOC corporate social
responsibility and PDOC is committed to an environmental-friendly operations.
PDOC makes every effort to comply with all applicable Environmental [regulation?]
in both national and international standards and legislation and has been certified to
both the ISO 14001 and OHSAS 18001 standards. A routine environmental
monitoring programme and reporting procedures are in place to ensure that all
activities are within the environmental regulations (my emphasis).”24
21
http://www.petrodar.com/content.php?GL=1&PL=1 03.20.12
PDOC = Petrodar Operating Company
23
http://www.petrodar.com/content.php?GL=4&PL=17 03.20.12
24 http://www.petrodar.com/content.php?GL=4&PL=16 03.13.12
22
67
This understanding of environmental protection indicates that Petrodar sees this as
part of their legal and not ethical responsibilities. In total the ethical responsibilities of
Petrodar are almost entirely reduced to a legal responsibility of compliance with laws
and regulations. This differs from PETRONAS who focuses more on companystandards and sees environmental protection as an ethical responsibility.
The rhetoric applied by Petrodar points to an understanding of CSR highly focused on
economic and legal responsibilities. The focus on legality in the environmental policy
indicates that the largest shareholders, in this case CNPC, have a bigger influence
over the CSR-policy in the JOCs. Hence the CSR-policy of Petrodar lies closer to the
ones of CNPC and Sinopec, though not as comprehensive, than the one of
PETRONAS.
5.1.4 Greater Nile Petroleum Operating Company (GNPOC)
“So, what is this Corporate Social Responsibility?”
Office Manager GNPOC, Juba
Greater Nile Petroleum Operating Company (GNPOC) operates block 1, 2 and 4 in
Unity State and stretching into the Republic of Sudan. It is owned by CNPC 40%,
PETRONAS 30%, ONGC 25% and Sudapet 5% and is the JOC with the least
reference to any CSR-policy. There are some references to health, safety and
environmental concerns in their mission statement, but there is no page dedicated to
this, nor any reports published. It is unclear whether this is because GNPOC has the
oldest website of the JOCs25 or because they don´t see any use in publishing their
CSR-policy. GNPOC refused to be interviewed and has not replied to any of my
requests to their offices in Juba and Khartoum.
Part of GNPOC’s mission is to: “Maximize shareholders’ return on investment,
Contribute towards achieving Sudan’s national aspirations as a net oil exporter and
GNPOC’s webpage is copyrighted in 2007, while WNPOC is copyrighted in 2009
and Petrodar in 2010-2011.
25
68
Develop a competent Sudanese workforce” 26 Another place, GNOPC states “…we
also up heave a social responsibility which primarily focuses on employment apart
from other issues.”27 Thus, the main focus is on nation-building and economic profit;
targets fitting the economic and political responsibilities of a company. As opposed
to Petrodar, the rhetoric of GNPOC’s CSR-policy also admits a political responsibility
towards Sudan. However, taken together the focus on the economic and political
responsibilities reveals the same attitude to CSR as both CNPC and Petrodar: the
belief in the business case for CSR.
The corporate values of GNPOC similarly reveal a focus on profitability and
efficiency.10 While there are also values that refer to the implementation of rules,
practices and ethics, there is no reference to environmental policies, community
development programs or ways to avoid the negative impact of oil operation.
Therefore it is hard to evaluate what the company thinks about their legal, ethical and
philanthropic responsibilities. This is not to say that GNPOC have no policy to
manage their impact on these areas. Rather, that they don’t see the use in publishing
it. While GNPOC’s webpage appears to be little used to convey messages of the
company, there is little other public information coming from GNPOC regarding their
CSR-policy and the company representative in Juba did not know what CSR was.
Thus it seems that CSR is not a priority for the company.
That GNPOC portrays such a small interest in CSR might seem strange, as GNPOC
was the JOC where Talisman held a 25% share from 1998 to 2002 when it was
pressured by activists to withdraw from Sudan28. During this process Talisman tried
to address the critic by publishing CSR-reports and developing a GNPOC code of
conduct 29 . Unfortunately, this outspoken commitment to CSR seems to have left
GNPOC with Talisman.
26
http://gnpoc.com/mission.asp?glink=GL001&plink=PL001 03.13.12
http://gnpoc.com/career/ 03.17.12
28
The Presbyterian church of Sudan filed a lawsuit in 2001 against Talisman for
aiding the Sudanese army in atrocities committed during the war. The church’s
lawsuit was dismissed in 2009, but the company’s reputation was tarnished.
29
http://www.corporatesecretary.com/articles/corporate-socialresponsibility/11972/canada-leads-global-interest-csr/ 03.01.12
27
69
Today, what is left of GNPOC’s public CSR-policy seems to be a strong focus on
economic and political responsibilities. Legal and ethical responsibilities are briefly
mentioned and philanthropic responsibilities only indirectly. However, GNPOC at
least used to have a code of conduct and in 2009 the Health, Safety and Environmentskills of GNPOC employees were assessed (CNPC, 2010, p. 14). Although the result
of the assessment is unknown this shows that they have some environmental policy.
Most likely the difference in the CSR-policy of Petrodar and GNPOC is caused by a
lack of publication of GNPOC’s CSR-policy. A possible explanation for this is the
influence of other shareholders like ONGC, who holds shares in GNPOC but not in
Petrodar and who have published far less on its own CSR-policy than the other
international oil companies. Furthermore, it seems like CNPC also speak on behalf of
their JOCs in their report on their operations in Sudan (CNPC in Sudan, 2010). There
is little in this report that provide additional information on the CSR-policy of
GNPOC, but the fact that GNPOC-activities are included suggests that CNPC controls
much of GNPOC.
It seems that GNPOC has a limited focus on CSR, which makes it hard to compare
their CSR-policy to that of its shareholders. They believe firmly in the business case
for CSR, that their profitability is good for society and has programs for both
environmental and philanthropic donations. It is however hard to judge whether they
see this as a legal, ethical or discretionary responsibility.
5.1.5 White Nile Petroleum Operating Company (WNPOC)
“Yes, we have some… at least a draft [CSR-] policy that is not even confirmed.”
WNPOC-representative
WNPOC is a JOC owned 50% by PETRONAS and 50% by Sudapet. They are the
operating company of block 5A and 5B, which also have other shareholders.
Although shareholders like ONGC are believed to have some influence over the CSRpolicy of WNPOC, this is expected to be far less than that of PETRONAS and
Sudapet. WNPOC does not publish CSR-report, so the sources used to analyse their
CSR-policy are their webpage and other publications as well as an interview with a
WNPOC-representative.
70
By the end of 2009 WNPOC had worked out a guideline on corporate donations that
covers their CSR-policy (WNPOC, 2009). In these guidelines, corporate social
responsibility is defined as:
“Responsibility of an organization for development of the society and environment,
through transparent and ethical behaviour that:
a) Contributes to sustainable development, including health and the welfare of
society.
b) Takes into account the expectations of stakeholders.
c) Is in compliance with applicable law and consistent with international norms of
behaviour.
d) Is integrated throughout the organization and practiced in its relationships.”
(WNPOC, 2009, p. 3)
This definition recognises both a legal and an ethical responsibility. Furthermore, the
fact that WNPOC have developed guidelines on corporate donations means that
WNPOC sees donations as part of their CSR. Since their donations are not always
connected to the core activities of the company it is clear that WNPOC also
acknowledge, and focus on their philanthropic responsibility.
Environmental concern is one of WNPOC’s basic responsibilities 30 . In their
environmental policy WNPOC focuses on following both national law and company
standards. The targeted areas are air quality, clean water, waste management and oil
spill response15. The fact that WNPOC has “…developed a broad array of
operational requirements engineering standards and performance guidelines to direct
its commitment”15, shows that the company finds the legal requirements insufficient.
This is a similar approach to the environmental policy of PETRONAS, who have also
moved from a focus on legal compliance to company standards.
WNPOC speaks little of their economic and political responsibility, and acknowledge
that compliance with laws and regulation is not sufficient. The CSR-policy of
WNPOC resembles that of PETRONAS by focusing strongly on the ethical and
philanthropic responsibilities of companies, and less on their economic, political and
30
http://www.wnpoc.com.sd/?page=topics&id=83 03.15.12
71
legal responsibilities.
In general, the CSR-policies of the JOCs seem mostly influenced by the major
international oil company in the consortia. Even though the JOCs are composed of
many of the same companies, there is little consistency on what dimensions of CSR
they focus on. Petrodar and GNPOC have adopted CNPC`s focus on the economic
and political responsibilities, while WNPOC has copied PETRONAS` focus on the
ethical and philanthropic responsibilities. This indicates that minor shareholders have
little influence over the CSR-policy, and are not able to strengthen the CSR-policies
of the JOCs. In all JOCs the CSR-policies are far less sophisticated than among their
international shareholders. No CSR-reports are published and there is little
transparency on what standards the JOCs apply.
5.2 From policy to practice
The International Oil Companies and the Joint Operating Companies (JOCs) have
separate CSR-programs. However, the separation between the JOCs and the
international oil companies is not always obvious, as some international oil companies
report on activities that are actually performed by the JOCs. Apart from Total, which
is also the operating company, the CSR-activities conducted by the international oil
companies independent of the JOCs have generally been limited to philanthropic
donations away from the oil fields. In the following section I have included the
activities by both JOCs and international oil companies, but focus on the performance
of the JOCs.
I will first look at the CSR-activities of the oil companies relating to different areas
that are considered central in the CSR-debate in South Sudan. This is not a
comprehensive evaluation of the actions of the companies, but rather a broad
summary of how the companies have performed in various areas in order to identify
what have been the prioritised areas for the companies. I have analysed the
performance according to the different dimensions in Carroll’s CSR-pyramid to work
out what dimensions of social responsibility the companies have fulfilled and
neglected in the different areas.
72
5.2.1 Profitability
The issue of profitability corresponds to the economic responsibility of the oil
industry. The oil-industry in South Sudan was generally profitable during the CPAperiod. According to the Government of National Unity, in 2005 alone, 31 million
barrels of oil went to the oil companies31. For ONGC, Sudan accounted for 30-50% of
their overseas oil production between 2006 and 2011 (ONGC Videsh, 2011).
PETRONAS also claimed that Sudan was an important country because it contributed
to the profit of the company (interview) and it seems unlikely that the situation has
been different for the other oil producing companies.
The economic responsibility of the companies towards the governments of Sudan was
to a large extent fulfilled when it comes to financial contribution. According to the
CPA revenue from the oil industry was to be divided evenly between North and South
Sudan. From 2005 to 2011 more than 10 billion USD was transferred from Khartoum
to Juba.32 This revenue has been of crucial importance to the southern government
and accounted for 97,8 % of the South’s total revenue in 2010 (SSCCSE, 2011).
Although some argue that South Sudan are not spending the money wisely by
spending 26% on security and only 7% on education and 4 % on health (ibid), there is
no doubt oil revenue has been crucial to the functioning of the southern government.
It is however hard to say accurately how profitable the industry has been, as some
have doubted the official production data and claimed that Khartoum understated the
production to avoid paying the South its appropriate share (Global Witness, 2009).
This suspicion is in large caused by the lack of transparency in the Sudanese oil
industry. WNPOC claimed that information was available for the Government of
South Sudan during the CPA, but that they never asked for it (interview), but this was
refuted by PETRONAS who said that it was not possible for them to reveal their
production figures (interview). So, while the companies have fulfilled their economic
responsibility, their ethical responsibility to be fair and transparent towards the
Government of South Sudan has not received the same attention.
31
http://www.sudantribune.com/Sudanese-presidency-updated-on-oil,14359 03.24.12
http://www.globalwitness.org/campaigns/corruption/oil-gas-and-mining/sudan-andsouth-sudan 03.24.12
32
73
5.2.2 Employment
Another part of the economic responsibility refers to creation of employment as a
consequence of a company’s profitability. Here the picture is more mixed. While
CNPC alone claim to “…have created more than 80,000 local jobs” (CNPC in
Sudan, 2010, p. 3) through their localization efforts, the majority of these jobs have
been created in the North. Criticism has been raised against the employment policy of
the oil companies, claiming that Southerners were prevented from getting jobs.
Concerning the employment situation, ECOS comments: “The companies employ no
educated Southerners and routinely dishonor working contracts. GNPOC and
Petrodar recruit Southerners for the lowliest jobs only” (ECOS, 2008). A
representative from the Ministry of Energy and Mining in Juba supported this view,
saying: “… a lot of Southerners were kept out of the participation in the oil industry.
As such, they did not find a chance to work in the oil companies. The few of them who
work is like a drop of ink in an ocean” (interview M.E.M.). Leben Moro shows how
the treatment of Southerners applying for jobs was sometimes cruel, relating the story
of a man encountered at the hospital in Melut county33 long after the CPA was signed:
“Oil company security men were responsible for his suffering. The security men
arrested him, tied him up, and set fire to him. His crime was insisting on a job!”34
Employment of Sudanese is regulated by the contracts that contain minimum
proportions for Sudanese nationals working in the companies. The companies hence
have a legal responsibility to employ Sudanese nationals as well as being part of their
economic responsibility to create jobs. However, the contracts don’t specify whether
they should employ North or South Sudanese. This is left to the discretion of the
companies, which would make it an ethical responsibility to distribute employment
fairly. While skilled workers are in short supply among the local communities in the
oil producing areas, this could have been different if the companies had invested in
educating and training locals. It seems that the companies have prioritized their
economic and legal responsibility towards Khartoum and downplayed their ethical
responsibility towards the local communities in South Sudan.
33
34
Petrodar operating area.
http://www.pambazuka.org/en/category/features/42865 05.18.12
74
5.2.3 Securing oil-supply
Along with their economic responsibility, the national oil companies also have a
political responsibility to their home government to secure the supply of a strategic
resource. This is particularly important for countries that are big oil-importers like
China and India. While the leading shareholder in WNPOC, PETRONAS, does not
have the same political responsibility to secure supply towards Malaysia, it’s partner
in block 5A, ONGC is highly concerned about this. The importance of this
responsibility was expressed by the Indian oil minister who in 2002 was asked by a
Canadian newspaper how concerned India would be about the effects of the oil fields
on Sudan's civil war: "I know in the U.S.A. or Canada these feelings are there. But we
in India don't have such feelings on this issue. We feel the investments there are safe
and, since it's a producing field, we are keen to have it… My greatest interest is to
have equity oil as soon as possible."35 This position indicates that securing oil supply
is the main concern of ONGC’s owner; the Indian state. The same attitude can be
found at both CNPC and Sinopec.
In this regard, CNPC and ONGC have been successful. By maintaining production,
and increasing it through both war and peace they have secured the supply of this
strategic resource. During the war they were able to operate and produce oil in an area
where others shied away. Throughout the CPA-period they have managed to keep
their contracts and have kept the oil flowing without major disruptions.
Furthermore, the experiences from Sudan have undoubtedly been valuable for the
companies and their home countries when trying to gain contracts in other parts of
Africa. Increased trade between Sudan and, especially, India and China has also been
a positive result from the oil production (Large & Patey, 2010). A part of this trade
has been the arm-trade between China and Sudan. This trade has been criticized
because it has enabled Sudan to commit atrocities in Darfur (Human Rights First,
2008) and helped North Sudan during the civil war. In this regard the political
responsibility towards the home nations has been more important than the ethical
35
National Post, Canada, 24 June, 2002 Quote retrieved from
http://www.article13.com/A13_ContentList.asp?strAction=GetPublication&PNID=18
0 01.05.12
75
responsibility to protect, or at least not endanger, the local population in Sudan.
GNPOC, WNPOC and Petrodar have also fulfilled their political responsibility
towards the Sudanese state by supplying it with oil. After the CPA was signed,
production increased though the lack of any big new discoveries means that the
production will most likely go into decline in few years if nothing changes
(Government of the Republic of South Sudan, 2011).
Total, on the other hand has not been able to fulfil this political responsibility. Instead
they have focused on upholding their ethical responsibility by withstanding from
exploration and production because of the security in the area (Total, 2009). In
interview Total also expressed that another reason for abstaining from operations was
that they felt the government in Khartoum was not fully legitimate (interview). In this
sense they accept what Guldbrandsen & Moe (2005) calls Macro CSR by not
providing funds for the government in Khartoum. This way they have avoided being
part of the conflict and causing additional harm for the population in the area thus
honouring their negative injunction duties. However, Total admits that security
reasons are also behind the decision to halt operations (interview). Hence, the reason
why Total is not operating is not only because they want to avoid causing harm, but
also because they want to avoid being harmed themselves.
5.2.4 Environmental protection
Action to protect the environment can be seen as meeting economic, legal, ethical or
philanthropic responsibilities, depending on its justification. Whether it should be
labelled ethical or philanthropic responsibility, depends on whether measures are
connected to the core activity of the company or not. Normally there are several
reasons why companies engage in activities and they strive for measures that are in
compliance with laws and regulation and protect the environment while at the same
time improving the profit of the company. Their priorities only appear when it is not
possible to combine legal compliance, ethical behaviour and profit.
In Unity state in WNPOC’s block 5A the German NGO Sign of Hope has found
76
evidence of widespread pollution and water contamination.36 WNPOC refute that they
are the source, but has not been able to explain the high presence of cyanides, lead,
nickel, cadmium and arsenic in the drinking water. WNPOC replied to the allegations
by saying that they are in compliance with “all the environmental regulations and
procedures and international best practices carrying out its operations”. 37 Their
reference to legal regulation indicates a view of environmental protection as a legal
responsibility. However, they also emphasise that they are committed to ethical
behaviour and environmental protection without referring to laws and regulation.
Since compliance with laws are not prominent in their reply, it would seem that
WNPOC sees legal responsibility as a minimum, but still something they accept and
strive to go beyond.
The allegations of pollution by WNPOC causing disease and death are also
documented in Fallet’s study of the same area (Fallet, 2010, pp. 60-63). Faced with
such grave accusations WNPOC have so far not published any evidence to prove their
operations are clean. Despite their outspoken commitment to their ethical
responsibilities, their blatant dismissal of the allegations shows that WNPOC doesn’t
always uphold their negative injunction duties.
Among the few larger projects in South Sudan that would fall under ethical
responsibility is the construction of bioremediation plants to clean the wastewater
from the drilling process. This is done by all the JOCs. Though a sign of taking ethical
responsibility to avoid harm, WNPOC also stress the legal responsibility when
presenting it: “This 13 Million USD worth project serves to treat Central Processing
Facility (CPF) Produced Water which has been proven to comply with Sudan
Environmental Regulations
& Food and Agriculture Organization
(FAO)
standards.” 38 GNPOC has a similar project, although on the northern side of the
border. Though no independent monitoring of the water quality takes place it is
claimed by the service company that the produced water is well within both
36
37
http://ngonewsafrica.org/archives/569 03.19.12
http://www.wnpoc.com.sd/?page=newsViewer&id=7 03.19.12
38
http://www.wnpoc.com.sd/Portal/news.php?row_id=50&scKey=c0c7c76d30bd3dcaef
c96f40275bdc0a 03.20.12
77
international and Sudanese threshold values.39 The focus on legal limits for pollution
indicates that these projects are at least partly motivated by legal restraints.
The legal compliance of companies is hard to evaluate because of the combination of
weak legislation, confidential contracts, isolated oilfields and no independent
monitoring. Either way, complaints have been made that the ethical responsibility has
not been met regarding the discharge of wastewater. ECOS reports that “…the
GNPOC consortium in Western Upper Nile is known to discharge large quantities of
contaminated water onto the surface, much to the chagrin of the agro-pastoralists in
the area. It is not potable for humans, unfit for animals and too filthy for irrigation”
(ECOS, 2008, p. 33). Similar complaints have been expressed towards Petrodar and
caused the commissioner of Melut County to travel to China to present the
complaints.40
PETRONAS was aware that some people “portray oil companies as not beneficial to
environment”, but said that “…this is countered by the company who presents their
business case and that they adhere to international law” (interview). They further
said: “We don’t think we destroy the environment” and indicated that “the protests
may be political” (interview). By “business case” PETRONAS refers to their position
as an apolitical entity indicating that they don’t want to get involved in the politics of
environmental policy, but rather stick to compliance with international law. This
reduce their environmental policy to a legal responsibility albeit a bigger legal
responsibility than if they only complied with national law. As shown in chapter
5.1.1, the CSR-policy of PETRONAS shifted from a focus on compliance with laws
to a focus on following their own standards during the CPA-period. Still, when I
asked the representative from PETRONAS on the matter, he said that they followed
national laws and did not necessarily go beyond them. This seems odd, as the laws of
Sudan were very weak. So the shift from legal responsibility to ethical responsibility
may so far not have materialised in South Sudan.
Regarding their environmental track record, CNPC say that: “By 2009, CNPC’s
39
http://www.oceans-esu.com/case/casew01.htm 03.20.12
http://www.mirayafm.org/index.php/southsudan/771-malut-citizens-complain-ofoil-pollution- 03.20.12
40
78
operations in Sudan had no serious pollution accidents. Discharges of waste gas,
water and solids all meet Sudanese and international standards” (CNPC in Sudan,
2010, p. 16). This statement only confirms that CNPC feel they have fulfilled their
legal responsibility. However, there are those who argue that oil companies have
continuously been breaking the environmental laws. Professor Asim El-Moghraby
said during an oil conference in December 2010 that: “Sudan’s oil industry is
systematically violating a number of Sudanese laws concerning Forestry, Range and
Pasture, Fisheries, Irrigation, Roads and Bridges, Wildlife and Health” (ECOS,
2011). When asked, none of the NGOs I talked to could name the laws broken,
because the confidential contracts were said to replace any legal regulations and the
contracts they had witnessed contained minimal regulation concerning environmental
damage. Leben Moro also points at environmental damage in GNPOC’s area and
refers to an investigation by the committees in the National Assembly and Southern
Sudan Legislative Assembly (SSLA) that links pollution and corruption: “These
committees found significant environmental problems caused by unsafe dumping of
water, mud and other wastes in the open. According to an ecologist, who conducted
an environmental assessment in Heglig, „produced water requires careful
management because it contains harmful chemicals. Unfortunately, safety standards
are not complied with because of the rampant corruption”” (Moro, 2009, p. 19).
It seems evident that environmental damage has happened due to the oil operations.
However, there are no references to this in the reports of CNPC that cover the
operations of the CNPC-led consortia GNPOC and Petrodar (CNPC in Sudan, 2010).
In the report they say they are committed to reducing the environmental impact of
their operations, but does not mention any numbers on pollution or spills. This
negligence of problematic issues is prevalent in reports from both CNPC and
PETRONAS (PETRONAS, 2007; PETRONAS, 2011; PETRONAS, 2009).
The lack of reporting on problematic issues relates to the ethical responsibility of the
companies to be honest and transparent. So, even though the companies may have
fulfilled their legal responsibilities to some degree when it comes to environmental
activities, the prevalence of pollution and the lack of transparency and proper
reporting indicate that the companies have not fulfilled their ethical responsibilities.
79
5.2.5 Compensation
According to the CPA the companies have a legal, as well as an ethical obligation to
compensate those that were negatively affected by the oil operations before the CPA.
Even though this study focuses on the period after the civil war, the responsibilities of
the oil companies are closely linked to their actions before the CPA was signed. Much
of the claims for compensation are due to displacement during the war. While Leben
Moro shows that some displacement also took place in Petrodar’s area after the
signing of the CPA (Moro, 2009, p. 17), the extent of this has been far less than
during the war.
Compensation has occurred to some extent, but there is still a long way to go. The
alleged compliance in human right violations by oil companies during the war has led
to legal processes41 and grievances among the population. Concerning the operations
of Petrodar in Manyo in March 2006, Moro writes: “The oil workers reportedly
recorded the damaged trees, destroyed homes and other losses and promised to pay
compensation. However, the promise was not fulfilled. The local people were left
reeling with bitterness against the oil company” (ibid p. 17). This became evident
during the oil conference in Malakal where the issue of compensation engaged the
attendants more than any other topic. Reports indicate that the anger is justified. The
UN mission in Sudan has monitored the implementation of the CPA and concludes in
their may 2011 report that “no action has been taken to compensate victims of such
contracts provided for in the wealth-sharing agreement” (UNMIS, 2011, p. 22). This
has aggrieved the local communities and caused resentment towards the companies.
Although WNPOC has also received complaints about missing compensation for
displacement and death caused by the oil operations42, this was not the impression
given by WNPOC who jokingly said about the government in Khartoum: “They give
a lot of compensation. I think most of the oil business is more or less compensation”
(interview). This again corresponds poorly with the statement made by WNPOCs
largest shareholder PETRONAS, who commented on the discussion on compensation
that “JOCs will come to the shareholders with complaints. They update all activities,
41
42
Lundin and Talisman
http://www.sudantribune.com/South-Sudan-villagers-environment,26231 05.10.12
80
but there has been very minimal reports on issues like this” (interview). A partial
explanation to this discrepancy might be that WNPOC see parts of their community
development programs as a form of compensation (interview) and therefore feel they
meet their obligations.
Still, it seems like the companies have failed to fulfil their ethical responsibility to
provide compensation for harm caused. In this regard they have also failed their legal
responsibility as stated in the CPA.
5.2.6 Community Development
According to their contracts companies are obliged to pay a certain sum for
community development. This makes it possible to view this as a legal responsibility
for the oil companies. In addition to this, oil companies have been involved in projects
related to infrastructure, education, health and sports that go beyond their legal
requirements and could therefore be viewed as meeting their philanthropic
responsibility. Finally, it is possible to see these projects as something the companies
are morally obliged to do as compensation for harm caused thus making it an ethical
responsibility.
CNPC claim that “…by 2009, the Company, through its subsidiaries and joint
operating companies in Sudan, had donated nearly USD 50 million to local charity
groups and neighbouring communities around oil blocks. This cooperation witnessed
an eventual increase in social welfare, including constructing hospitals and schools,
digging water wells, and paving roads, benefiting over two million local people”
(CNPC in Sudan, 2010, p. 25). As the major shareholder in Petrodar this corresponds
well with Petrodar’s claim that they have spent 96 million USD more on community
development than they have been contractual obliged to in the period from 20022010.43 This money has been spent on constructing “hospitals, clinics, dispensaries,
schools, roads, bridges, water wells & tanks, power supply, and donated school and
medicine supplies.”53 When listing the community development projects conducted
from 2002-2010 they also include one airport, although it is not clear whether this is
43
http://www.petrodar.com/content.php?GL=4&PL=17 03.20.12
81
also funded with the 96 million USD mentioned.
GNPOC has conducted community development projects covering both their
philanthropic and ethical responsibility. Those programs falling under philanthropic
responsibility are: Distribution of medicines and medical equipment, building of
water tanks, sponsorship of sport events, distribution of school furniture and school
uniforms, setting up a radio station, supplying “watching clubs” with TVs, providing
medical courses and involvement in vocational training and agricultural projects.
Projects aimed at their ethical responsibility are limited to fencing and rehabilitation
of water ponds (GNPOC, 2009). Judging from their community development-report,
it seems that philanthropic activities are far more common than projects related to the
core activities of the company.
WNPOC has a decent community development-program that focuses on a number of
areas. Projects mentioned on their webpage cover water supply, education, capacity
building, agricultural development, humanitarian assistance and emergency response,
social sponsorship and support, road and other construction, health services and
livestock development. Larger products are left to the shareholders because of
limitations in the budget (interview). According to WNPOC the budget for
community development projects was limited: “As I tell you the budget is still limited,
it’s not that much. For example, maybe the oil company will be ready to pay only 2
million US. This 2 million US you will put up a new project and also sustain the
existing one on that” (interview).
This financial limitation causes WNPOC to focus on smaller projects, like building
schools which only cost 2-4000 US$ (interview) and leave larger infrastructure
projects, like building of roads to the shareholders. WNPOC further expressed that the
company also has a moral obligation to help the communities when the government
does not: “…because as I tell you the government is handicapped. It is not able. It is
unfair that you are working in that area and you are seeing people, -children are not
going to school. People are not taking good water. Or people are sick all the time”
(interview). This shows that WNPOC accept an ethical responsibility that corresponds
with Simon et al’s (1972) view of CSR and shows that WNPOC is willing to accept
additional responsibility when others are not assuming theirs.
82
One sees that the community development projects of the three oil producing JOCs
cover roughly the same areas. They all focus on water supply, education, health,
infrastructure, and social donations. While these areas are important for the country,
the projects have been criticised for not working properly. My informant “Peter”
complained that projects only benefited Northerners: “They have built school and
hospitals on government areas. In Bentiu only people from the north have access”
(interview). Roads constructed by the oil companies have been accused of causing
floods (ECOS, 2008), hospitals constructed by oil companies are left without staff or
patients and a mosque has been erected in an area without Muslims (Moro, 2009).
It may be unfair to judge companies solely on the success of their projects. Even
experienced aid agencies struggle to make their development projects work properly
and projects often have unintended negative consequences. However, unlike aid
agencies oil companies also have a stronger self-interest in many of the projects.
Roads, bridges, power supply and especially an airport are used extensively
(sometimes almost exclusively) by the oil companies themselves. Thus, a large part of
the community-development projects are aimed at the needs of the companies, not the
local communities. While the yearly 300.000 USD contribution mentioned in the
Petrodar’s contract is non-recoverable, this is not the case for any additional sums
spent. Since the production-sharing contract in question assigns the government 6480% of profit oil44, the company also loose the same percentage of any barrel that is
deducted as cost oil. The additional sums paid by companies on community
development are deducted as cost oil, which means the company only spends 20-36%
of the money. The government pays the rest through less profit oil for market.
Although WNPOC claims that other contracts only allow for 50% of such projects to
be deducted as cost oil (interview), it still shows that companies don’t carry the whole
financial burden of these projects.
Total’s CSR-projects were mainly done in Jonglei state and covered water access and
guinea-worm eradication as well as projects focused on education. To make this work
Total worked with both NGOs and local communities. Total’s focus on education and
safe water access has resulted in the construction of three primary schools, the
44
For explanation on profit oil and cost oil see chapter 3.4
83
rebuilding of a high school, refurbishment of a teacher’s training institute, opening of
two education and business centres for women and support for the Commercial
Integrated Farming Institute where about 3000 women have enrolled. In 2009 Total
began financing drilling and repairing of water-wells. By the end of 2010, 50 new
wells were drilled and another 51 repaired. In addition a mobile lab has been financed
to aid water quality testing. Apart from these target areas, Total has also been
involved in infrastructure programs and a project aimed at reducing the need for
firewood among rural families45.
In the interview, Total expressed concern that they had no control over the money
they were contractually obliged to pay to the Government for community
development programs and that they preferred to do projects where it was clear to the
communities that they were behind them (interview). While the projects were done to
aid the communities, they were also strategic to ensure that Total kept their contract
as well as securing a safe and good working environment for the company. This
motivation was also expressed by WNPOC who said that community development
programs helped build relationship with the communities thus improving security and
the working operations of the oil companies (interview). The same justification is
found at Petrodar who claim community development programs ”… will lead to
create a good neighbourhood with the local communities and will also allow for
smooth operation”
46
. The fact that the person responsible for community
development-programs at GNPOC is also responsible for security47 indicates that they
also see these programs in relation to the wider relationship with communities.
The companies have fulfilled and gone beyond the legal responsibilities of their
contracts when it comes to the community development programs. They have also
conducted projects that meet their philanthropic responsibilities, although with varied
success. The most successful community development projects were conducted by
Total and WNPOC, who focus less on the legal requirements of the projects. Apart
from WNPOC there is little evidence that the companies see this as an ethical
45
http://sudan.total.com/a-long-term-commitment/our-support-for-local-development600093.html 03.29.12
46
http://www.petrodar.com/content.php?GL=4&PL=17 05.10.12
47
http://gnpoc.com/President.asp?glink=GL001&plink=PL006 05.10.12
84
responsibility, but rather as a combination of the economic responsibility to ensure
operations and profit and the philanthropic responsibility to donate to society.
5.2.7 Summary
While the CSR-policies of the JOCs differed, the social performance has been
relatively similar among the oil companies who produce oil in South Sudan. That is to
say, the social and environmental impact of the producing oil companies has been
similar. They have all contributed to the Sudanese state through tax payments and
secured oil supply to their home countries. They have created some employment
opportunities though benefitting Northerners more than Southerners. Furthermore
they have taken some action to limit environmental damage, but not sufficient to
avoid allegations of widespread pollution and neglect. Nor have they been able to
supply compensation to all who are entitled to it. Finally they have engaged in a
number of community development projects with varied degrees of success.
Though the CSR-practices of the oil companies have focused on similar areas, there
are some differences that reflect the rhetoric of their CSR-policy. Total, with its
strong focus on ethical responsibilities has upheld them, at the expense of their
political and economic responsibilities by refraining from oil activities. WNPOC has,
in accordance with its CSR-policy made a greater effort to meet its philanthropic
responsibilities than the other JOCs. Petrodar, who focuses on economic, legal and
discretionary responsibilities, has taken measures on all these areas, but done little to
uphold its ethical responsibilities. Likewise, GNPOC who focus on the economic and
political responsibilities has also to a large extent fulfilled these responsibilities. Thus
it seems that the social performance of the oil companies is not coincidental.
Companies put effort into areas they consider central in their CSR-policies.
5.3 Assessment of CSR-practices
I shall now look at how various actors perceive the CSR-practices of the oil
companies in South Sudan during the CPA-period. These actors are the oil companies
themselves, the Government of South Sudan (GOSS), the international civil society
and the local communities in the oil producing areas.
85
5.3.1 Oil companies
“Petrodar is proud of its effort in improving the living conditions of the people
residing within the vicinity of its operations.”48
If one is to believe their public statements, the oil companies seem to be pleased with
how they have managed their impact. As shown in the previous chapter companies
claim to have followed all rules and regulations and contributed to the economy of
Sudan. The companies also indicate that they are pleased with their general CSRpractices. They are aware of the criticism of the oil industry, but attribute this to
misunderstandings. PETRONAS expressed this when answering why the oil industry
was criticised: “Maybe because Government of North is not favoured by western
countries. So they think that everyone who works with the government are also bad“
(interview). Other companies have also put off criticism by referring to their ethical
behaviour. When faced with allegation that Petrodar had understated the production
reports, they responded by saying: “We have always operated in a professional and
ethical manner in line with international standards and will continue to do so in the
future (my emphasis).”49
When asked what government and civil society should do to make CSR-efforts work
better, the representative from PETRONAS said that they had to understand the
objective of the oil companies, claiming: “We do it [produce oil] for nation building.
We are doing good things for them and we do not expect them to make things
difficult for us” (interview, my emphasis). The PETRONAS representative also
underlined that the oil companies were “…playing part in facilitating cooperation
between North and South” (interview).
CNPC quotes the President of Sudan Omar al-Bashir from a 2007-speech where he
supposedly praised: “…CNPC for “not only bringing us oil but also bringing us
peace” (CNPC in Sudan, 2010, p. 4). This line of argument is known from other
companies. Both Lundin and Talisman sought during the civil war to promote peace
by partaking in negotiations or supporting peace initiatives, although with little
48
49
http://www.petrodar.com/content.php?GL=1&PL=1 05.08.12
http://www.petrodar.com/news_details.php?id=6&GL=6&PL=23 04.10.12
86
evidence of effect (Shankleman, 2006, pp. 138-139). The very same companies have
later been charged with human rights violations in their home countries. This has not
stopped the companies from going as far as claiming some credit for the peace
agreement of 2005. When faced with the investigation, Lundin countered that:
“Through our process of stakeholder engagement and community development
projects, we believe that the Company played a positive role in the peace and
development of that country.”50 Even though the allegations against Lundin are based
on events happening before the peace-agreement was signed, it shows that the
company consider their CSR-practices to be have been both effective and appropriate.
This does not correspond with the impression of other groups.
The most striking feature of the information coming from the international oil
companies is not what it contains, but what it emits. References to problematic issues,
critic or errors on behalf of the companies are almost non-existent. In a 45 pages long
report on CNPC’s activities in Sudan from 2010 there is no reference to the conflict
between the North and South, the CPA or any complaints whatsoever (CNPC in
Sudan, 2010). There is a short mention of nine Chinese workers being kidnapped in
2008, of which five were killed. However, there is no explanation as to the motive
behind this attack or any disagreements with the local communities. Rather, the
message is one of companies only contributing positively to the development of South
Sudan.
The avoidance of problematic issues and exaggerations of the positive impact of the
companies is not specific to Sudan, but can be found in central CSR-reports as well.
When talking about their global operations, Sinopec says: “Giving back to the
community and motivating more people to do the same, Sinopec is moving forward
like a gigantic ship, carrying responsibility and philanthropy and spreading the spirit
of selflessness and dedication and sense of social responsibility as far and wide as it
can” (Sinopec, 2009, p. 84). It is difficult to accept this as little more than slogans and
PR-material. Total has a more sober approach to problematic issues and admits that
there are controversies. Still, the CSR-reports should be interpreted as sources of
Statement regarding Lundin Petroleum’s role in Sudan 06.23.2010
http://www.lundin-petroleum.com/Documents/ot_corp_23-06-10_info_e.html
04.10.12
50
87
information on how the companies would like to present themselves, rather than data
on the actual practices of the companies.
Still, there are voices from inside the companies that acknowledge that errors have
been made. During an oil-conference in Malakal in August 2011 a representative from
Petrodar admitted that environmental mistakes and “bad things” had happened in the
past and talked about a “mess left by the North”. However, this example of selfcriticism is rare. By and large the oil companies attributed any complaints to overexpectations by the local communities. When asked about the challenges to CSR in
Sudan, WNPOC answered: “Most of the challenges on managing this corporate
social responsibility is the expectation of the people. Over-expectation. Yeah, you see
the area is coming up from war and the government is not capable of doing anything.
So it is still depending on the oil companies” (interview).
When asked the same question, PETRONAS and Total’s answers were almost
identical:
“They welcome the program, but locally they want to ask for more. Dealing with the
expectations is a challenge. They have too high expectations” (interview
PETRONAS).
“There will be challenges. Population has been used to receive a lot. Expectations are
very high. Higher than what we will be able to provide” (interview Total). Because
the expectations were perceived as unrealistically high, the companies felt no moral
obligation to meet them.
In total, the companies seem pleased with their corporate social performance. They
publicly claim their actions have promoted peace and development in the country.
While aware of criticism, they generally attribute this to over-expectations and
mistrust due to the political situation between North and South.
88
5.3.2 Government of South Sudan (GOSS)
“All oil companies are crooks!”
Man at the Ministry of Energy and Mining in Juba.
The Government of South Sudan (GOSS) has not been as impressed by the CSRpractices as the companies themselves. Rather, the impression presented to me was
one of disappointment and failure. According to the CPA, North and South Sudan
should cooperate in the regulation of the oil industry. However, this part of the CPA
was not implemented properly, leaving GOSS with limited influence over the oil
industry. According to my informant at the Ministry of Energy and Mining (M.E.M.)
the magnitude of the CSR was ”very little”. He further complained that the local
aspect of the operating companies was ”very negligible” (interview). This was
explained by the strained relationship between the North and the South and the
control over the oil industry by the North.
He admitted that companies were having CSR-programs, but felt they were
inadequate: “But of course you know what they are giving here is health clinic, water
yard, you know... schools. In all the three consortia this is what they are doing as far
as the corporate social responsibility is concerned […] Some of them, you know, can
take one, two or three persons from the area, send them to the Universities, pay for
them, you know... This is the level of the CSR they are doing. It is not that much”
(interview). Another complaint was that the oil companies employed few South
Sudanese. As a result the transfer of technology was very limited (interview).
WNPOC was aware of the attitude of the GOSS regarding their CSR-practices and
said in interview: “So, all the time, South Sudan are accusing those of the North
Sudan: You are not sharing with us the information. In everything. Including the CSR.
And also saying more than this, that you are not doing the CSR.” However, he
attributed this to the bad relation between the North and the South
In 2007 Rich Machar, the vice-president of South Sudan visited the operations of
89
PETRONAS51 and commented afterwards: “I was not happy with what I saw. […]
The way they handled the water associated with the oil, the use of chemicals used in
exploration and the roads constructed blocking the flow of streams without bridges or
culverts is a concern. […] We also have concerns about community development. We
want it driven by state authorities, not what we saw, which were just incidents of
charity.” After his visit Machar told PETRONAS they ”...would have to employ more
Southerners, fund an independent study on the environmental impact of its work,
change the way it handled community development and abandon the practice of using
central government troops for security.”52
This negative view of the oil industry has spread to areas of South Sudan where oil is
yet to be discovered. The Governor of Jonglei state, Brigadier General Philip Thon
Leek Deng, says in a statement on oil policy in Jonglei in 2007 that:
“…we want to avoid what had happened in Unity and Upper Nile States where oil
industry displaced hundreds of thousands of people, millions of trees were cut down,
all sorts of pits---flare pits, drilling pits, garbage pits, etc are left behind without
treatment or care; thousands of kilometres of roads are raised without bridges hence
distorting flow of water and cattle and wildlife movement routes and subsequently
resulting in the degradation of the local environment and impoverishment of the local
communities. Not only that, but whatever development, trainings and employments,
only benefited people from northern Sudan. Even what little social development
projects done so far in those oilfields, have been randomly, half heartedly and
shortsightedly done.”53
Many of the bad things the governor comments on happened during the war, but it is
clear that two years into the CPA things have not changed sufficiently to impress him.
To sum up the South Sudanese Government feel that the companies have failed their
economic responsibilities by not employing Southerners. They have also failed their
ethical responsibilities by polluting and using central forces for security, thereby
51
Probably referring to the operations of WNPOC
http://www.sudantribune.com/South-Sudan-sets-terms-for,21178 06.06.12
53
http://www.sudantribune.com/Oil-policy-in-Sudan-s-Jonglei,21212 06.06.12
52
90
increasing the tension in the areas. Finally they have failed their philanthropic
responsibility by doing too little and conducting their projects in a random, halfhearted manner.
5.3.3 The international civil society
“Sudan’s oil industry is possibly the least socially responsible on earth.”
(ECOS, 2008, p. 36)
The international civil society, headed by various NGOs, has been even more critical
to the oil industry in Sudan. During my time in Juba the most common response when
international workers heard about the topic for my thesis was: “CSR? I didn’t think
that existed here.” The industry was thought to consist of irresponsible companies
that don’t care for the environment or the local population.
In 2008 the NGO ECOS published a report where it says: “Sudan’s oil industry is
possibly the least socially responsible on earth” (ECOS, 2008, p. 13). It goes on to
say that “Unfortunately, few if any of the country’s major players show any
awareness of their responsibilities, make no serious effort to build a social support
basis, and seem to bank on cozy relations with the ruling elite only” (ibid p. 36). This
report was written by IKV Pax Christi on behalf of the European Coalition on Oil in
Sudan (ECOS), an organisation established in 2001 that unites over 50 European
NGOs54. Their statement therefore represents the view of a large number of NGOs.
While the comprehensive 2008 report of ECOS covers a range of topics like
displacement, compensation, employment, environmental impact and transparency,
other NGO-reports have focused on specific topics like transparency (Global Witness,
2011), compensation for atrocities committed during the war (ECOS, 2010) or the
role of oil companies in the conflict in Darfur (Human Rights First, 2008). Common
for all of them is that they are highly critical to the actions of the oil companies.
When Petrochina, an arm of CNPC applied for entry to UN´s CSR-initiative, Global
54
http://www.ecosonline.org/about/ 06.07.12
91
Compact, in 2007, several NGO´s complained55. Petrochina were finally admitted in
2009 despite a complaint supported by over 80 civil society organizations from 25
different countries. They argued that Petrochina, through its relations with CNPC was
complicit in human rights abuses in Sudan and that they didn’t use their influence in
Khartoum to stop the atrocities in Darfur.56
The view of the oil companies was shaped during the war, when oil companies were
linked to the atrocities committed by the regime in Khartoum. Still, even after the
signing of the CPA the situation was difficult for people in the oil producing areas.
Conflict erupted, pollution continued, oil security forces were sometimes violent,
compensation was not paid, the lack of transparency continued and community
development projects did not meet the needs of the local communities. The
international civil society therefore considers the companies to have failed their social
responsibility towards the people of South Sudan.
5.3.4 Local communities
“The land is occupied with companies that have no mercy nor value human dignity”
(Community of Maluth County, 2009)57
Local communities are not a homogenous group, but rather a collection of different
social and ethnic groups with different views. Their view on the oil industry differs
and the view presented here may not correspond with the view of all the communities
or their members. Fallet found in her study of the communities in WNPOC’s block
5A that knowledge of the oil industry was limited: “…very few knew anything about
oil-production, transportation of oil, and the use, value or the appearance of oil. Only
a handful knew the name of the company” (Fallet, 2010, p. 52). Most of her
respondents further insinuated that they did not give the oil industry much thought
(ibid). At the same time they expressed concern about the effects of the oil industry:
55
http://www.unglobalcompact.org/newsandevents/news_archives/2009_01_12b.html
06.07.12
56
http://globalcompactcritics.blogspot.com/2009/09/global-compact-boardcommends-cnpc-for.html 06.07.12
57
Letter can be supplied on request
92
“Most of the respondents suspected a link between the illnesses that occurred in the
area […] and the oil-production” (ibid p. 53).
This concern was also expressed to me. My informant “Peter” told me about the
situation in the oil producing area. He claimed nothing much changed with the CPA.
“People continue to die because of waste. Cattle drink water and get sick while
chemical waste is thrown anywhere” (interview). Environmental spills were allegedly
often not reported by the oil companies because there were no government
representatives in the area who could hold them accountable. When spills were
reported this was done when they were almost cleaned up. Although the companies
would sometimes compensate if a child or cattle dies, this was not seen as sufficient.
This shows that the companies fail in acting on their negative injunction duties.
“Peter” was also not impressed by the affirmative duties of the companies saying:
“now the contribution is not felt. They are coming like thieves and take value and run
away” (interview). This bad impression of the oil companies has spread to areas
without oil production. A member of the Jonglei Oil task force set up by Norwegian
People’s Aid said: ”Fortunately oil companies have not started working in Jonglei
State” (speach during oil conference in Malakal). This indicates that the critical view
of the activities of the companies is not exclusive to the affected areas.
Three years after the CPA was implemented affected communities in Melut58 county
(Block 3 belonging to Petrodar) wrote a letter to GOSS president Salva Kiir
complaining about the practices of Petrodar containing a range of moral judgements.
Their main complaints were that the company did not consult local communities, that
the oil-wealth did not benefit the communities and that the oil company destroyed the
environment. For the local communities the oil-wealth did not mean improvement of
the economy. Rather the opposite had happened: “…our economy was basically build
on cattle rearing agriculture and fishing, but with the discovery of oil all our pastures
have been destroyed, where we exercise these activity. We have lost our wild animals
which have fled due to the oil exploration destroying the natural environment too”
(Community of Maluth County, 2009). Nor was there much benefits to the local
economy through job creation: “The companies operating in these areas have never
58
Spelling varies. Maluth, Malut and Meluth is also used.
93
thought of giving job opportunities for the people of these areas” (ibid). Though they
admit that some have been able to find jobs with the oil companies, it was mainly on a
day-to-day basis. The communities were further aggrieved when they saw where the
staff came from: “The worst of this is that the classified staffs of these companies are
appointed from Khartoum, the evidence to this is the variation in their salaries,
entitlements”(ibid).
While companies felt that communities had too high expectations, my informant
refuted this. According to “Peter” this understanding was a result of dealing with
individuals instead of communities. High expectations were, in his understanding, the
result of companies dealing with individuals or smaller groups. Instead of consulting
the larger community and provide something that a lot of people would benefit from,
they consulted only parts of the community and provided services that only benefited
a few. The consequence was that the expectations of others were raised because they
also wanted the same services. However, the presence of high expectations among the
local communities was clearly demonstrated at the oil conference in Malakal, which
resulted in a number of resolutions. On CSR the resolution said: “There is a
corporate social responsibility in the area of education, health, roads and water that
the companies have to take into consideration” (concluding remarks oil conference
Malakal 2011). These are clearly areas that would normally be the responsibility of
the government, indicating that the attendants at the conference supported the view of
Wiig and Ramalho (2005) that companies should assume additional responsibility
when government is not capable.
“Peter” also attacked the companies for their lack of transparency: “If you are not
transparent, you are responsible for how the money is spent” (interview). Since the
companies were not being open on their payments to the government they were also
held responsible for any poor spending of it.
Hence, the local communities criticise the social performance of the oil companies in
many areas. They are seen to fail their economic responsibility by not providing
employment and not making sure revenue from the oil production reaches the
communities. They are further seen to fail their ethical responsibility by not being
transparent, by polluting and by not paying compensation. Finally the philanthropic
94
responsibility of the companies to donate to social services is seen as highly
insufficient.
5.4 Reasons for resentment
It is evident that there are some major discrepancies in the understanding of the
success of the CSR-practices. I will now discuss why the CSR-performance of the oil
companies has caused such resentment among the stakeholders in South Sudan. I will
use the different dimensions of Carroll’s CSR-pyramid to frame the discussion.
5.4.1 The importance of the economic responsibilities
Apart from Total, all the companies have fulfilled their economic responsibilities by
contributing oil revenue to the governments in Khartoum and Juba as well as the local
government in the oil producing states. However, paying taxes is only part of their
economic responsibility. Another part is offering employment. In this area the
companies have not been able to meet the expectations of the communities.
Apart from the oil companies, the groups I have analysed in South Sudan do not
consider the political responsibility of oil companies as important. The reason for this
is that the stakeholders I have chosen focus on the impact in South Sudan, not the
impact in the home country of the international oil companies or the Government in
Khartoum. I think it is safe to say that people in South Sudan show little concern for
global oil supply or the supply difficulties of India and China. The lack of refineries in
South Sudan also causes price shocks on fuel despite being a large oil producer.
Political responsibilities are therefore viewed as irrelevant.
Regarding the economic responsibilities the oil industry has fewer positive effects on
a country. Oil companies acquire revenue both for themselves and for the host country
through taxes/production sharing agreements. The revenue that stays in the country
certainly provides the government the means to provide social services to the
population. However, as shown in chapter 2.4 on the resource curse, oil-revenue can
also have devastating effects on the economy and the political situation in a country.
In South Sudan the negative impacts through armed conflict, displacement and
95
pollution have historically outweighed the positive impact of increased revenue,
which is perceived as minimal.
There are also less spillover-effects from the oil industry than other industries. As a
capital-intensive industry, the oil industry creates fewer jobs than more labourintensive industries. This is further exacerbated by the fact that extraction often takes
place in remote areas and specialists are often foreigners (Potter, Binns, Elliott, &
Smith, 2004). As we have seen, this is what happened in the oil producing areas.
Unskilled labour was in short demand and skilled labour was brought in from abroad
or from Khartoum. Nor did the wealth in the oil industry spread to other industries in
the area. While oil companies often question the resource curse, local communities
have experienced it first hand in South Sudan and therefore do not value the economic
responsibility of companies to be profitable.
Finally, oil is a non-renewable resource. Any revenue gained from the extraction of
oil can only be gained once. Some have argued that consumption of oil revenue
should be seen not as consumption of income, but as consumption of capital
(Humphreys, Sachs, & Stieglitz, 2007, p. 8). This has serious implication for policy. If
the revenue is ill spent, the country’s capital stock diminishes and the oil is better left
in the ground. The social responsibility of external actors may even be to shy away
from the oil wealth. Humphreys, Sachs and Stieglitz argue that “If the orientation of a
government is such that there are likely to be few benefits to the people, then domestic
groups and the international community should provide no help for extraction” (ibid
p. 15). In other words, they should accept what Guldbrandsen and Moe (2005) calls
Macro CSR. This is what Talisman did when they left the country, and Total when
they withstood from activity, though they both also had other motives. As a
consequence oppressive regimes will attract the less responsible oil companies, as the
ones who are more concerned about their social impact will shy away. “Peter”
claimed companies should be held responsible for oil revenue if they were not
transparent, thus setting a condition for when companies should accept Macro CSR.
Unsurprisingly, none of the oil companies I talked to agreed.
For the Government of South Sudan, the oil revenue was vital for it to fulfil its
function. At the same time, they got a far smaller share of the oil revenue in the CPA96
period than what they expected to get after independence. The Government in
Khartoum thus had an economic incentive to pump as much oil as possible before
independence, while the government in Juba would get a larger share if the oil was
pumped after independence. Now both Sudan and South Sudan are left with an oil
production that is fast approaching decline and less future oil revenue to promote
development and cover previous damage. For the government of South Sudan the oilrevenue gained during the CPA-period was a mixed blessing, as it left them with less
oil upon independence. For these reasons, the economic responsibilities should be
viewed as less important in the oil industry than in other industries.
As we have seen in chapter 5.2.1, oil revenue has provided the Government of South
Sudan with vital funding. Some have also argued that it helped the peace process by
giving incentives for co-operation 59 . However, oil revenue has also fuelled the
conflict by increased military spending and by allowing North Sudan to continue
military operations in Darfur, further destabilizing the region. For the affected areas
the oil wealth has not materialized and the reactions of the local communities towards
the oil companies implies that they feel they would have been better off without it.
While profit in the oil industry has provided the Governments of both Juba and
Khartoum with the financial means to provide social services, this is not felt by the
local communities. When the industry is also unable to provide employmentopportunities, the economic responsibility of the oil companies becomes irrelevant to
the local communities.
5.4.2 The importance of legal responsibilities
Some highlight the voluntary aspect of CSR and argue that CSR only consist of
measures that go beyond law and regulation. This position demands that there is a will
and a capability to enforce regulation. If no such will or capacity exists, obeying the
law becomes more or less voluntary. As shown in chapter 3.6 and 3.6.1, the legal
regulation of the oil industry in South Sudan during the CPA-period was weak at best.
This was especially true in regard to environmental and social regulation.
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With weak regulation, civil society and the Government of South Sudan has not
considered legal compliance an important part of CSR. In some instances the focus on
legal compliance may even have had negative social consequences because it meant
companies were less transparent and accepted low environmental standards. Among
the international oil companies operating in South Sudan several focus on their legal
responsibilities in their CSR-policy and critique against oil companies are often met
with references to compliance with laws and regulation. However, when the main
regulation documents, the contracts, are confidential, legal illiteracy is prevalent
among local communities and those who understand them perceive laws as weak,
compliance does not impress those affected by the oil industry.
5.4.3. The importance of ethical responsibilities
The major criticism from the local communities relate to the ethical responsibilities of
the oil companies regarding environmental protection, transparency and paying
compensation. The companies are seen as not taking responsibility for the negative
impact of the oil industry by not cleaning up pollution and not paying compensation.
Thus they fail their negative injunction duties, which according to Simon et al (1972),
and Lantos (2001, p. 16) is the most fundamental of a company’s social
responsibilities.
Compensation is a direct financial loss for the oil companies. Likewise, proper
environmental procedures and cleaning up pollution can be costly. Thus, at least in
the short term, these ethical responsibilities are in conflict with the economic
responsibility of the companies to be profitable. In the short term, the business case
for CSR has therefore not fitted reality in South Sudan. Faced with conflicting
interests companies seem to have prioritised their economic responsibility. This has
caused conflict because, while companies focus on laws and profit, their critics are
more concerned about their moral and the ethical part of their business.
The ethical responsibility to be fair and transparent has not been fulfilled by
companies producing oil in South Sudan. Production figures, contracts and
environmental impact assessments have all been confidential. The producing
companies have also largely neglected to publish reports on their CSR-programs or
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the impact of their operations. The lack of transparency has lead to accusations of
corruption and cheating. The Government in Khartoum regulated confidentiality, thus
making it a legal responsibility to not be transparent. However, according to the other
stakeholders this should not trump their ethical responsibility to be transparent.
5.4.4 The importance of philanthropic responsibilities
Lantos (2002) separate between ethical, strategic and altruistic CSR. Ethical CSR
corresponds with the economic, legal and ethical responsibilities of a company.
Strategic CSR refers to philanthropic responsibility that will in some way also benefit
the company, as opposed to altruistic CSR that refers to philanthropic projects that
only benefit others and not the company (Lantos, 2002).
The companies give quite similar reasons for engaging in community developmentprojects. In interview the informant at WNPOC said the goal of the CSR-policy
should be to have “…good relation with local authorities and communities so it can
also do its business in a safely environmental way” (interview). In their donation
policy WNPOC is said to give donations “…in order to discharge part of corporate
social responsibility and to promote goodwill among the host community”
(WNPOC, 2009). This shows that WNPOC are conducting community
development projects to improve relations with communities so that they can
operate their business more effectively. The same attitude is found at Petrodar:
”Petrodar is committed to undertake its social responsibility by developing a healthy,
harmonious and safe working environment in the operation areas that will lead to
create a good neighbourhood with the local communities and will also allow for
smooth operation. At end, this will facilitate achieving the company goals both at
the company and national levels (my emphasis).”24 Believing firmly in the win-win
nature of CSR, Total also state that their CSR-projects are conducted to aid the
business part of their operations, saying, “When we do things, there is a reason”
(interview). The reasons mentioned were increased security and showing the
Government that although they did not produce oil they were doing good, which
would give the government a reason to keep their contract. Judging from these
statements it seems that the oil companies all conduct community development
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projects at least partly out of self-interest. While it is sometimes hard to determine if
something is altruistic or strategic CSR, the admittance by the companies to have
strategic reasons for their community development projects show that the companies
have engaged in strategic CSR and avoided altruistic CSR. This indicates that the oil
companies support the neoliberal argument of Lantos (2002) who claim that altruistic
CSR is immoral because it harms shareholders, and should therefore not be part of a
CSR-policy.
According to ECOS the CSR-failure of the oil companies is because “…the
companies are reacting to a situation. The CSR is not coming from the companies”
(interview). Because the companies have their own interest in mind and not the
interests of the local communities they have not focused on the needs of the local
communities. The result has been community development projects that are not purely
need-based but also based on whether the project would aid operations. Sometimes
this has also lead to benefits for the local population, but as we have seen, critics
argue that the projects are random, too small and half-heartedly done.
Simon et al (1972) argue that companies have a moral responsibility to assist the
communities in which they operate. According to Simon et al (ibid) companies should
also have engaged in altruistic CSR in South Sudan because of the massive needs in
the oil producing areas and the lack of others who are willing and able to assist. This
way of thinking was shared by ECOS who said: “Companies are right to say it is not
their job to create schools and hospitals, but they are making a lot of money and have
a moral obligation to help” (interview). So, while the oil companies see CSR as a
business strategy, critics feel it should be a moral obligation.
On paper Total seem to be willing to also engage in altruistic CSR. Most of Total’s
production is located in emerging economies, which often have significant basic
needs. Total say that their “...commitment is strengthened by the fact that most of our
production is located in emerging economies, which often have significant basic
needs.”3 By saying that their commitment is stronger when the needs are larger they
follow Simon et al (1972) who claim that responsibilities increase based on need.
Total wants to contribute ”Without taking the place of our host countries’
governments”3, but seem to be willing to do more when governments are less capable.
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However, in South Sudan they admit that their CSR-efforts have been strategic. The
unwillingness of companies to engage in altruistic CSR and only focusing on strategic
CSR has caused resentment among stakeholders who feel the companies have a moral
obligation to assist them.
To sum up, the discrepancies between the view of the oil companies and the other
groups can be explained by the companies focusing on areas of CSR that did not
correspond with what the other stakeholders considered the most important part of the
companies’ social responsibility. The companies have focused on their economic,
political, legal and strategic philanthropic responsibilities but have neglected a large
part of their ethical responsibility and refused to engage in what Lantos (2002) calls
altruistic CSR. Whenever there has been a conflict of interest between the interests of
the companies and the interests of the local communities the companies have tended
to protect their own interests. In other words, where ethics and business has collided,
the oil companies have tended to choose business.
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6 Explaining social performance
I will now turn to different theories that help explain the social performance of the oil
companies in South Sudan during the CPA-period. First I will analyse the CSRpractices in the light of institutional theory before I turn to stakeholder theory.
6.1 A lacking culture of CSR in the Sudanese oil industry
Institutional theory predicts that companies within a defined business environment
will develop similar strategies and practices (Frynas, 2010, p. 16) because they face
similar expectations. The fact that most international oil companies have sophisticated
CSR-policies is in itself a strong indicator that there is a culture for CSR in the oil
industry. However, as shown in chapter 5.1.3-5.1.5, there is no common CSR-policy
among the JOCs in South Sudan. Despite this chapter 5.2.1-5.2.6 shows that their
actions are similar. This indicates that common practices have developed in South
Sudan, although unfortunately the common social practices have been unsatisfactory.
Institutional theory states that companies engage in CSR because there exists a culture
of ethics in an industry or a country that companies conform to. In order to understand
why the companies have failed in their CSR-efforts I have analyzed the CSR-culture
in South Sudan in the given time period. Five important factors have been identified
that influence the CSR-culture in South Sudan: 1. The legacy of the civil war. 2.
Weak legal framework and no will to enforce it. 3. The influence of the Government
of Sudan in the oil industry. 4. The prevalence of national oil companies with a
limited culture on CSR. 5. The organization of the oil industry in JOCs.
6.1.1 The legacy of the civil war
During the civil war the oil producing areas were considered enemy territory by the
regime in Khartoum. Reports show that the oil companies treated Southerners and
Northerners differently during the civil war. Not only were almost exclusively
Northerners employed by the companies, they also handled compensation and CSRprojects differently so that they benefited Northerners more than Southerners.
Investigation from Human Right Watch about the situation before the CPA says:
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“Contrast the treatment that southern Sudanese agro-pastoralists living in oil areas
received to the treatment that GNPOC and the government provided for northern
Sudanese living along the pipeline. The latter had the benefit of an environmental
assessment (including the human environment) and compensation in cash, for
instance, when they were moved to a safe (two kilometers) distance from the pipeline.
Whether or not these payments were adequate, they did at least constitute an attempt
to mitigate the possible adverse effects of oil development. Southerners, as described
above and in many other reports on the subject, received no environmental
assessment and no compensation. Instead, they were moved by military force off their
land, their houses and communities were destroyed, their grain and livestock stolen,
and some family members lost, killed, or injured” (Human Rights Watch, 2003, p.
521).
My informant “Peter” complained about the same attitude even after the CPA was
signed, sighing: “…in the North social obligations are met. Why are we treated
differently?” (interview). He further claimed that the poor behaviour of the companies
was influenced by the way they got their contracts. Before the CPA local communities
were never consulted and civilians were chased away. Even after the peace this
attitude continued. Companies operating in South Sudan thus learned that they were
not obliged to care about the local population in oil producing areas. Instead of a
culture of ethics, a culture of negligence and abuse was allowed to continue. The
prevalence of Northerners in the oil industry also meant that the ties between the
companies and northern Sudan grew stronger. Not surprisingly northern Sudan
preferred that companies spent resources on their own population instead of on their
enemy in the south. Many in South Sudan have not forgotten this and complain that
they are still not treated the same way as people in the North.
In addition contracts and the “rules of the game” were negotiated during the civil war.
Ethics were not of the primary concern and have left a regulatory system absent of
proper monitoring and unable to secure ethical behaviour by the companies. Evidently
the legacy of the civil war has influenced the culture of CSR in South Sudan
negatively.
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6.1.2 Weak legal framework and no will to enforce it
According to Dimaggio and Powell (1983) companies can act similarly due to
coercive isomorphism. Coercive isomorphism results from “…pressures exerted upon
organizations by other organizations upon which they are dependent and by cultural
expectation in the society within which organizations function” (ibid p. 150). The
legal framework is an important part of this pressure.
As shown the legal framework regulating the oil industry was weak in Sudan during
the CPA60. Still, the government had sufficient laws in place to hold the companies
accountable if they wanted. Despite this there were few, if any instances of the
companies being held legally accountable for breaching laws or regulations. Some
therefore argue that the problem has not been lack of regulation, but lack of
enforcement. While some of the oil companies said that there was no need to enforce
regulation on the oil companies because they worked “proactively”, other
stakeholders felt that there was both a lack of will and capacity to enforce the
regulation. ECOS explained this, saying: “As long as Khartoum was in charge, the
companies knew that Khartoum wouldn’t force them to adhere to regulations”
(interview). My informant “Peter” claimed that the lack of enforcement exacerbated
the negative actions of the companies: “Companies saw that they had protection.
People talked, but nobody listened, this meant that companies did not have to listen”
(interview).
My informant at M.E.M. also complained that the government in Khartoum had not
enforced laws regulating the industry: “You know, it is the regulator on behalf of the
Government, like for example the minister of petroleum and the exploration petroleum
authority to actually enforce strict measures on these companies. I was meant to
believe that maybe because the operation is in the South and it is not in the North and
that’s why that government decided to give a lot of incentives to the oil companies to
do what they like” (interview). The impression of my informant at the M.E.M. in
Juba was one of companies free to act irresponsibly without being held accountable.
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See chapter 3.6 and 3.6.1
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For Petrodar, a company who focuses strongly on its legal responsibilities in its CSRpolicy, the lack of a legal framework has hampered their social performance. The
representative from Petrodar who admitted to former mistakes at the oil conference in
Malakal claimed it was now the responsibility of the Government of South Sudan to
correct these mistakes. He further complained that there was a lack of environmental
regulation saying: “When rules and regulations are in place we will cooperate on all
issues, also environmental.” The representative claimed that criticism should be
directed towards Juba or Khartoum and not the oil companies, as they could not do
much without a legal framework.
Several oil companies expressed that demands and complaints from the government
was rare. When asked what the government could do to make CSR work better,
PETRONAS answered that they expected the government to not impose “challenging
bureaucracy” on the companies. PETRONAS argued that there was no need for this,
as the “…the government is clear on what they expect. They don’t ask, but we do it
proactively. They are not making demands” (interview, my emphasis). On the
question on what it was like having to relate to both North and South during the CPAperiod, PETRONAS answered that they have tried to spread their CSR-programs
around the country, but that “there is not much interference from the Government”
(interview). Having seen the flaws in the CSR-practices of the companies, these
statements leave a picture of a Government that was uninterested in holding the
companies accountable. However, there were areas where the Government enforced
regulation. This was related to confidentiality, production reports and payments. The
economic and political responsibility of the companies was monitored and companies
were held accountable. At the same time the Government in Khartoum also
discouraged companies from acting in a transparent way. While it is uncertain
whether all the companies wanted more transparency, the Government in Khartoum
prevented this. Production data was kept confidential, as well as contracts and
environmental impact assessments. While the lack of enforcement means that there
was less formal pressure to create standards in the fields of environmental protection,
compensation and dealing with local communities, there was more pressure to
increase production, profit and limit transparency. Through the process of coercive
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isomorphism this has created a culture focused on the economic and political
responsibilities of companies and a culture of limited transparency.
While regulations can be seen as important for the forming of a culture for CSR by
facilitating coercive isomorphism, Michael (2006) argues that a focus on rules and
regulation may be counter to developing ethical behaviour. In the conclusion of an
article on rules and ethics in CSR he writes:
“Ethical recognition is harder because rules, by nature, discourage us from making
choices; moral reasoning is impeded because rules fail to stimulate us to higher, postconventional cognitive levels; moral resoluteness is weakened as external rules
become – and are seen as – a greater motivator of conduct than our intrinsic values;
and acting ethically is rendered more difficult because following rules is often simply
less complex than considering and applying ethical principles” (Michael, 2006, p.
32).
The oil industry in South Sudan lends little support to Michael’s claim that
deregulation has positive effects on CSR. In the case of South Sudan there was plenty
of scope for acting ethically and yet the weak regulatory framework did not spawn
“moral resoluteness”. Lack of rules thus clearly does not cause companies to act
ethically in itself. The situation in South Sudan still confirms Michael’s (2006) point
that following rules is less complex than considering and applying ethical principles.
But weakening of moral resoluteness is not caused by the laws and regulations, but
rather by companies who focus more on their legal than their ethical responsibilities.
Regardless of the legal framework this will lead to a weakening of moral resoluteness.
Proper laws thus seem important to protect society from the negative impact of
business, not to promote “moral reasoning” among companies.
The lack of proper regulation and the lack of will to enforce the laws in place did not
condition the social practice of the companies. Rather the companies were free to act
on their social responsibilities. However, the legal situation still shaped the CSRactivities in South Sudan because it made coercive isomorphism less likely in areas
important to the local communities and the government of South Sudan, while
opening for a culture focused on profit, production and secrecy.
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6.1.3 The influence of the Government of Sudan in the oil industry
As well as being the national government, the regime in Khartoum also controlled
local government in some of the border areas through governors from the ruling party.
During the civil war, the regime proved that it held little concern for the well being of
the people of South Sudan. Even after the signing of the CPA the atmosphere between
president Omar Bashir and the people of South Sudan was tense.
The Government in Khartoum had influence over the oil industry in various ways.
Firstly they controlled the legal framework and were the contractual partner of the oil
companies. As the regulator of the industry they approved what cost the oil companies
could deduct as cost oil. This included expenses for CSR-activities and compensation
payments. According to Total, it was harder to get approval for CSR-projects that
only benefited people in South Sudan (interview). Total further claimed to have
conducted some projects even though they were not approved as deductible expenses,
so this did not prevent the companies from conducting the projects. It does however
show that the Government in Khartoum discouraged initiatives that only benefited
South Sudan. This is a continuation of the arrangements during the civil war, when oil
companies treated Northerners better than Southerners. By not accepting deduction
request, the Government in Khartoum pressured companies to not consider the needs
of Southerners. Through the process of coercive isomorphism a culture emerged
where companies were taught to prioritise the needs of Northerners.
The Sudanese national oil company Sudapet holds shares in all oil blocks in Sudan.
As we have seen, the Government in Khartoum did nothing to encourage measures to
better the situation of people in the oil-affected areas. As a shareholder in all the oil
blocks, Sudapet had the possibility to promote the policy of Khartoum within the
companies. None of the companies I spoke to had any examples of this, but it was a
concern among local Sudanese in Juba.
Companies claimed to be a-political, but were nevertheless closely tied to the
Government in Khartoum. This is not surprising. To maintain in business, oil
companies have to secure contracts and drilling rights. It is therefore natural for them
to try to have good relations with the government who awards them contracts.
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However, the influence of the regime in Khartoum over the oil industry in South
Sudan has not helped to create a commitment to CSR. Rather it has led to
continuation of the different treatment of Southerners and Northerners. By linking the
companies to an abusive regime in Khartoum the companies have been influenced by
a culture of unethical behaviour.
6.1.4 The prevalence of national companies with a limited culture of CSR
While commercial oil companies see it as their fundamental responsibility to be
profitable, national oil companies sometimes have other priorities. Being
compromised of mainly national companies, the oil industry in South Sudan is also a
place where foreign powers exert their foreign policy. Since oil companies deal with a
strategic resource that is fundamental to the growth of their home countries, political
decisions form part of their strategy. This is not to say that commercial oil companies
are not engaged in national strategies, but rather that this is even more evident among
national oil companies. India and China are both countries with a growing energy
demand. As shown in chapter 5.1.1 the national ownership has made the political
responsibility of the national oil companies their main priority.
According to DiMaggio and Powell (1983) another process that creates similar
behaviour among companies is mimetic isomorphism where “…organizations tend to
model themselves after similar organizations in their field that they perceive to be
more legitimate or successful” (DiMaggio & Powell, 1983, p. 152). The most
successful company in Sudan in terms of production and getting contracts is CNPC
followed by PETRONAS. Therefore, the process of mimetic isomorphism implies
that companies in Sudan would copy the way CNPC operates. This study has not
uncovered whether this has happened. However, in the case of South Sudan the
process of mimetic isomorphism does not have the potential to create a positive CSRculture, because the most successful company, CNPC, has aligned itself closely with
the regime in Khartoum at the expense of local communities in the oil producing
areas. With the most successful companies in terms of production and contracts being
close allies with the Government in Khartoum and having a weak focus on their
ethical responsibilities any result of mimetic isomorphism would lead to poor CSRpractices.
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For the national companies, especially CNPC and ONGC, their political responsibility
of securing oil supply has been more important than their ethical responsibilities
towards the local population. The trumping of political concerns over ethical
decisions is evident in Sudan. In 2008 ONGC spokesperson M. Selva Panadin was
faced with concern about ONGC’s operations in Sudan and the human rights
situation. Panadin said the company acknowledged the dilemma, but added:
“However, we are a 74% state-owned company and a purely commercial entity. It is
not really in our hands, we follow the directions given by the Indian government”.61
To secure their contracts and gain new ones they have become an ally of the regime in
Khartoum and withstood from criticism of its actions. China has gone even further by
supplying the regime with arms and supporting it in the UN security counsel. Their
focus on keeping the contracts and securing the oil supply has thus prevented them
from meeting their ethical responsibility.
A third process that causes similarities in the CSR-policy and performance is
normative isomorphism (DiMaggio & Powell, 1983). Normative isomorphism is the
result of professionalization and workers getting shared norms through education and
training institutions. While China, India and Malaysia all have national CSRguidelines; their involvement in CSR is fairly recent. Their CSR-policies are
immature and they have limited experience in implementing them. While CSRtraining is now conducted in all major oil companies, this has not been part of the
education of staff except for the last years. The knowledge of CSR is therefore limited
and highly unevenly distributed among companies and employees.
Little is known about the various minor companies that have been involved in the oil
industry in South Sudan. Companies like Ascom, Star Petroleum, Hemla Energy,
White Nile Ltd, and Tri-Ocean Energy all had very limited experience with oil
extraction in Africa when they entered the country. While some of them had CSRpolicies, this does not necessarily lead to a culture of CSR-practices in the field. The
minor companies had no experience in implementing CSR-policies in a context
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similar to the one in South Sudan and the potential for normative isomorphism to take
place was therefore more limited.
While we have seen that the regulatory framework was weak, Total expressed that the
issue was not so much a lack of regulation, but a lack of responsible companies,
saying: “You don’t necessarily need to control everything provided you have
companies that have their own standards… In a new country, the main thing would be
to have responsible companies like Exxon and Total. Then you don’t need to supervise
each and every move” (interview). While this may be interpreted as a sign that Total
uses CSR as a deregulatory argument, it also shows that Total considers the other
companies in South Sudan as less responsible. Total has a better track-record in South
Sudan, but it is hard to tell whether they would have behaved differently if they had
discovered oil during the civil war, like the oil producing companies. Still, evidence
suggests that Total has better practices of managing its impact, which supports the
argument that the composition of oil companies operating in South Sudan is poorly
suited to create a culture of good CSR.
6.1.5 The organisation of the oil industry in JOCs.
In South Sudan, all the oil-producing fields are operated by Joint operational
companies (JOCs). The JOCs are organized as separate companies, which means that
they have their own CSR-policy and projects. Total is organised differently and act as
the operating company, though so far not producing, without establishing an
independent JOC. The organization of the oil sector in JOCs means that there are
links between all the companies in the different JOCs, though companies said the
interaction was limited in the field of CSR. The prevalence and continuous
development of sophisticated CSR-policies among the international oil companies
shows that there exists a culture for CSR in the global oil industry. However, as
shown, the CSR-policies of the JOCs are less sophisticated and cover fewer areas,
indicating that this culture is not as strong within South Sudan. A reason for this is
found in the organization of the oil industry in South Sudan. This organization of the
industry in JOCs means that the JOCs have to apply to the shareholders (the
international oil companies) for funding of their CSR-projects. The international oil
companies, as shareholders, have to approve of the budgets, but are not involved in
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minor projects. This has made the shareholder companies less engaged in the CSRpractices of the JOCs.
When asked what responsibility the company had towards the local population,
PETRONAS said “this is also JOCs responsibility” (interview). On a study of CSR
among the oil companies in South Sudan, Integrity Research also found that:
“Company respondents stated that they felt responsibility for community issues lay
with the JOC. Two respondents felt that their JOC could do more to coordinate CSR
at the national level” (Ives & Buchner, 2011, p. 20). This is consistent with my
findings. WNPOC expressed that shareholders should be more involved in CSR and
that at the moment they were not fully committed to it. When asked what the
Government could do to help CSR work better, WNPOC answered: “[they] should
ask the shareholders to fully commit to this CSR in their oil areas, the oil exploration
area and that’s at least to give more funds on this” (interview). My informant at
WNPOC further blamed the lack of funding on the rules of cost recovery indicating
that the shareholders were reluctant to spend money on CSR unless it was all
recoverable as cost oil. When asked why he thought JOCs felt stronger about CSR
than international oil companies, the informant at WNPOC answered: “Because these
are the people in contact with the environment, with the community, with the
government. Shareholders are there, -they´re just paying money and waiting for their
share” (interview). Even though the international oil companies have more
sophisticated CSR-policies, the impression given is that they distance themselves
from their social responsibility and are reluctant to spend the necessary money on
CSR.
As seen in chapter 5.1.3-5.1.5, the major shareholders seem to have the biggest
influence on the CSR-policy of the JOCs. This way of organizing CSR-work raises
questions on where one should assign responsibility. By separating themselves from
the extraction, the international oil companies, with the exception of Total, have also
tried to separate themselves from the negative injunction duties involved with it.
Instead they only engage in projects that relate to the positive impact of the
companies. Generally speaking, efforts by the international oil companies have
focused on Juba and Khartoum and been of philanthropic nature as well as larger
infrastructure-projects that require extra funding. As shown in chapter 5.4.4 this
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should be seen as strategic CSR, as it is generally done for the benefit of the
companies. Roads and infrastructure are also important for the development and has
provided farmers with access to market, education and health services. This has also
been among the demands of the local communities (ECOS, 2011, p. 16). However,
some projects have also had adverse effect on the local communities with roads
blocking the waterways and causing floods in the rainy season.
This separation between international oil companies and JOCs is artificial, as the
JOCs are full of staff from the different international oil companies. Even in Juba it
can be hard to separate the JOCs from their operating companies. WNPOC have
offices on the second floor of PETRONAS’ office and GNPOC and CNPC have
offices in the same compound. So, while it seems like responsibility is fragmented in
a consortia with more companies than when the company is operating on its own,
other stakeholders do not view it this way. Local communities in the oil areas
generally don’t differentiate between the JOC and their leading shareholder. In block
5A, Fallet found that out of 40 informants, “Only a handful knew the name of the
company. One said WNPOC, the others said PETRONAS” (Fallet, 2010, p. 52). So
even though PETRONAS say that operations in the field and dealing with the local
communities are the responsibility of the JOCs, they are still the ones being held
responsible by other stakeholders.
By giving the JOCs responsibility for the implementation of the CSR-policy, the
international oil companies have tried to release themselves from their social
responsibilities. The JOCs, on their hand, are dependent on budgets and approval
from their shareholders. As a result the companies responsible for CSR are dependent
on the cooperation of their shareholders. This has created a situation where the ones
with real decision-making power (the international oil companies) are less involved in
the CSR thus restricting the possibility for a CSR-culture to evolve.
To conclude there is little evidence of any culture of CSR in the Sudanese oil
industry. Rather there has been a culture of lacking ethics causing companies to lower
their standards when operating in the country. I have identified five conditions that
have influenced the CSR-culture in South Sudan in a negative way. While there are
probably more conditions that affect the CSR-culture and not all of the mentioned
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conditions influence all companies similarly, the conditions discussed have all
contributed to create a culture where the ethical responsibilities of companies are
neglected.
6.2 CSR in a world of powerless stakeholders
Institutional theory helps explain why the CSR-performances of the international oil
companies have been relatively similar. However, it does not sufficiently explain why
the companies have fulfilled some responsibilities and neglected others. In order to
make sense of the companies’ priorities I have turned to stakeholder theory.
Stakeholder theory focuses on the role of management and sees the engagement of
business in CSR as a result of external pressure by various stakeholders.
I have used the concepts of Power, Urgency and Legitimacy developed by Mitchel et
al (1997) to classify the different stakeholders and explain their importance for the oil
companies. The analysis reveals that the CSR-activities of the companies were shaped
by stakeholders with power over the companies. The ability of stakeholders to hold
the companies accountable thus strongly influenced the CSR-activities of the oil
industry in South Sudan. The analysis shows that:
1. Local communities lacked power and/or legitimacy
2. Government of South Sudan lacked power and urgency
3. Government in Khartoum had power, legitimacy and sometimes urgency
4. Owners of the oil companies had power, legitimacy and sometimes urgency
6.2.1 Civil Society as demanding, dependent and dangerous stakeholders
“We shout, but nobody is listening.”
“Peter”
As already discussed, it was hard for the local communities to enforce change in the
CSR-activities of the companies because of inadequate legal framework and lack of
enforcement by the authorities. However, stakeholders can also force companies to
change their behaviour through informal pressure.
113
In the CPA-period the local communities and oil companies were kept separate 62 .
This made it hard for the local communities to hold companies accountable for their
actions. According to Nyok (2010) “It is not possible to talk of any established links
between local communities and oil companies. When there is a chance for community
representatives to meet with the company, only high level personnel from the north
are allowed to meet with them, and no company experts are allowed to meet with
local people” (Nyok, 2010, p. 17). The representatives I talked to from the local
communities in the oil producing states also complained that they had no access to the
oil companies. When local community members approached the companies with
concerns, common responses from the companies were to say: “I am not the right
person to talk to, go to Khartoum!” or “Don’t talk to the company, talk to the
government” (interview “Peter”). While the Government in Juba may have been in
reach for some among the local communities, the Government or the companies’
headquarters in Khartoum were inaccessible.
A common complaint among both NGOs and the local community was that the local
communities were not consulted before companies made decisions. WNPOC claimed
they had a system to assess the needs and wants of the local communities, but this was
limited to decisions about their community development projects and primarily
directed at the state authorities in the oil producing areas (interview). By not dealing
directly with the communities, the companies further blocks the influence of local
communities on the companies’ operations.
The complicated accountability-relations between the different stakeholders became
evident when WNPOC explained how complaints from communities reached the oil
company. Communities had no direct access to the companies. First they had to
approach the local government who took the matter to the central Government of
South Sudan (GOSS). GOSS could not go directly to the companies either, but had to
take the complaint to the corresponding minister in Khartoum who would then
approach the companies (interview WNPOC). In some instances the JOCs would then
bring on the complaints to their shareholders. Needless to say, the complaints often
62
Total has a different approach than the other companies. They have liaison-officers
that handle contact with local communities and encourage people to come and voice
their concerns.
114
got lost or were discarded along the way. We can therefore conclude that the local
communities in general lacked power to influence the companies whether through
legal prosecution or social pressure.
While local communities affected by the oil industry lacked power, they possessed
urgency in the sense that they had desperate needs and claims towards the companies.
Their claims therefore called for immediate attention. However, claims concerning the
philanthropic responsibilities to provide services were not considered legitimate by
the companies who saw them as a result of unrealistic expectations or political
conflict between northern and southern Sudan. They therefore denied the local
communities legitimacy. Other claims of the local communities concerning breach of
laws, pollution or payment of compensation were considered legitimate by companies
who also acknowledged legal and ethical obligations. Thus the local communities
were sometimes seen as possessing legitimacy, while other times not. Mitchel et al
(1997) names stakeholders that possess urgency but lacks power and legitimacy
demanding stakeholders. A demanding stakeholder may be bothersome, but is not
seen as a threat by companies. Hence their claims are not prioritised. Stakeholders
who possess urgency and legitimacy are called dependent stakeholders (ibid). A
dependent stakeholder has legitimate claims, but is dependent on others for the power
to carry out its will.
The international civil society also possessed urgency in their claims towards the oil
companies. However, they had no power to make the companies change their
practices and the Asian oil producing companies did not consider their claims
legitimate. As demanding stakeholders they were not listened to. An exception was
western companies like Total that recognise the role of NGOs and thus grant their
claims legitimacy. By possessing both urgency and legitimacy NGOs became
dependent stakeholders towards Total. As dependent stakeholder NGOs are
dependent on others with power or voluntary action of companies to meet their
claims. At Total, who works closely with NGOs (interview Total) they have
voluntarily taken the view of NGOs into consideration. At Talisman who changed
their CSR-policy and finally left the country before the CPA was signed, NGOs
depended on the support of the shareholders of the company who possessed power to
enforce change.
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When local communities were unable to take claims directly to the companies some
sought alternative ways to make their claims heard. Nyok (2010) has done a study of
business’ responsibility to respect human rights in GNPOC’s operational area and
writes:
“Armed people from the Arab nomads and the southern Sudanese soldiers carry a
large number of fire arms which allows them to commit offences, knowing that they
are out of reach of the law, as there is no existence of police, or because they are
ready to fight against anybody who opposes their behavior. Random killings and the
looting of belongings are examples of normal incidents that occur throughout the oil
zone, which has resulted in a repeated practice of oil companies paying nomads when
they ask for compensations” (Nyok, 2010, p. 9).
This situation is confirmed in a wiki-leaked report form the American embassy in
Khartoum from 2009. In it the southern Minister of Energy and Mining is referred to
as saying that local officials “…routinely put up bureaucratic and physical barriers
(e.g. road closures) in disputes with oil companies over compensation”63. This clearly
shows that some civilians, soldiers and officials have all resorted to violence to hold
oil companies accountable.
While Nyok’s description of the situation implies that the claims for compensation
were not considered legitimate by the companies, Nyok links the aggression towards
the companies to the inability to approach the companies and the CSR-failures
concerning employment: “The large military presence and the tight security system
make it almost impossible for community members to have access to companies. Thus,
the nomads and militias who come from nearby towns on the northern border side to
seek seasonal employment, believe there is justification in constructing road blocks,
firing at company vehicles, and killing or abducting company staff, as a way to show
discontent” (ibid p. 10).
63
http://www.cablegatesearch.net/cable.php?id=09KHARTOUM763 05.12.12
116
According to WNPOC such initiatives were often successful: “… sometime they held
up the facilities. For example, they can take up, they can say okay: this thing is
damaging us and you are not compensating us, or you are delaying the compensation.
They will capture maybe a machine, yeah, a seismic machine or whatever it is. Just a
sort of prisoner. But when they get their money, I think that they will leave it”
(interview).
By taking up arms local officials and local community acquire power. By possessing
both urgency and power these groups become what Mitchel et al (1997) calls
dangerous stakeholders who the companies are more likely to pay attention too. This
happened in South Sudan where companies often met their demands.
The attacks and roadblocks are carried out by certain segments of the population,
most notably Arab nomads and southern militia. Such disturbances to production
inflict a cost on both companies and government and the amounts are substantial: “In
2008, GNPOC reported to GOSS and GONU64 that local disturbances had resulted in
production stoppage at the cost of US$ 10.7 million in the first half of that year, more
than twice the amount GNPOC claimed to spend on community programs in 2010”
(ECOS, 2010, p. 20). Whatever the justification for the attacks, they show that
companies will listen to dangerous stakeholders who are able to put force behind their
demands. Along with the financial cost, the attacks have further strengthened the
security-measures around the oil companies. Ever since oil exploration began during
the civil war, companies have been under the protection of government and private
security forces. This protection, while often necessary to secure oil operations, has
served to alienate the local communities and makes it hard for the local communities
to approach companies. The attacks and roadblocks should be viewed as a last resort
to hold companies accountable. Unfortunately the result has been that only the
concerns of individual groups are met. Other groups have not shown the same, armed
aggression against companies and have experienced that they are not listened to.
During the CPA-period local communities had no legal way to hold companies
accountable and therefore possessed little power towards the oil companies. The only
64
Government of National Unity in Khartoum
117
effective way to acquire power was through civil disobedience and armed aggression.
While this was effective it only concerned individual groups. For the remaining
population their access to the companies was further restrained through increased
security.
6.2.2 Government of South Sudan (GOSS) as a discretionary stakeholder
“There is no obligation to listen to South Sudan.”
Interview M.E.M.
Under the CPA, oil companies in South Sudan had to relate to both the Government
of National Unity and the Government of South Sudan (GOSS). While the oil industry
was managed from the north and companies maintained offices in Khartoum all the
way up until independence, this meant that both Government of National Unity and
GOSS possessed legitimacy, as their status meant claims were considered legitimate
by oil companies.
Even if GOSS wanted to hold the companies accountable, they expressed that the
companies were not willing to listen because their contractual agreement was with the
north: “So, the oil companies, of course, these international companies that are
having responsibilities over the document that they have signed, the contract. There is
no obligation to listen to South Sudan” (interview M.E.M.).
According to my informant “Peter” there were instances when the authorities tried to
hold the companies accountable. However, because of missing regulations oil
companies challenged the Ministry back when they complained, saying: “where are
the benchmark that we have broken?” (interview). Without a proper legal framework,
the Ministry was unable to hold the companies accountable.
This was also experienced in Upper Nile State where the local authorities set up an oil
commission, but this commission was not given access to the oil fields. Upper Nile
Oil Commission complained that when they approached the oil companies, the oil
companies alerted the Ministry who complained to the Upper Nile Oil Commission
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and told them to back down65. Without access to the oilfields, local authorities were
unable to monitor and hold companies accountable. Through their alliance with the
Government in Khartoum, companies were protected from scrutiny by local
authorities.
WNPOC describes a situation were GOSS could not go directly to the companies to
present complaints. Instead they had to go to the corresponding minister in Khartoum,
who was in control of the oil companies: “They never complain to the oil … because
at the end these oil company is being controlled by the Government” (interview). This
relation is confirmed by Moro (2009) and Nyok (2010) who claim that the
Government of South Sudan “has no power over the oil companies” (Nyok, 2010, p.
13). Thus, while GOSS possessed the attribute of legitimacy they generally lacked the
attribute of power.
Even so, GOSS possessed power in some areas. During the CPA-period GOSS was
entitled to negotiate new oil contracts in South Sudan. This happened on three
occasions, all with smaller companies with limited experience 66 . During the
negotiations there are no signs that GOSS enforced stricter rules and regulations on
the companies, but rather that the contractual terms were highly beneficial for the
companies67. International Crisis Group express concern on how these contracts were
negotiated and the effect they could have on the CPA:“It is difficult to tell if the White
Nile fiasco is a case of nascent corruption among a few or a symptom of inefficiency
and lack of governance structures. It is likely a mix of each that at least demonstrates
how the SPLM's lack of transparency can potentially ruin the CPA” (International
Crisis Group, 2005). Whether through ignorance, negligence or abuse the new
contracts did not contain any new ways of holding the oil industry accountable. This
indicates that GOSS did not prioritize CSR in dealing with oil companies.
65
Personal communication with member of Upper Nile Oil Commission.
One contract signed with Ascom of Moldova, one with White Nile Ltd of U.K and
one with Star Petroleum of Luxembourg and Hemla of Norway.
66
67
http://www.expansion.com/2010/08/15/empresas/energia/1281898326.html?a=f1a73b
33c04e3d1c3e8eab6d1cc5273c&t=1336590930 18.03.12 (CEO of Star Petroleum
quoted saying the contractual terms are impossible to improve)
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As we have seen, as dependent stakeholders local communities were dependent on
other stakeholders to carry out their will. Since communities were prevented from
talking to the oil companies directly, they often approached the government of South
Sudan (GOSS) to seek assistance. Communication with Juba is hampered by unstable
cell phone and Internet reception, and the long distances and poor infrastructure
meant that Government was more commonly approached on the local level (Nyok,
2010, p. 17). However, communities who approached GOSS with their complaints
were often disappointed.
While the ability of GOSS to hold the companies accountable was restricted some
also felt that GOSS was not doing enough. “Peter” expressed that GOSS had to weigh
the concerns of the communities against the risk of increased tension with the North:
“SPLM did not want to rock the boat and spoil the peace agreement. As a result
people in the area suffered” (interview). GOSS was also dependent on revenue from
the oil operations. My informant at the M.E.M. said that the GOSS had an economic
incentive to not halt the operation of the oil companies, because any cost inflicted on
the companies due to halts in operation would be deducted as cost oil:
“And like I told you if for one reason or the other the South Sudan decided to stop the
oil companies operation it will result into paying standby charges. It will not
immediately pay it, but of course from the profit oil, you know, the company will
calculate and add into to cost oil. So this would be recoverable cost. So there is no
point to stop companies maliciously like that” (interview M.E.M.).
A similar understanding was conveyed by WNPOC who said that GOSS silently
accepted the behaviour of the companies while they waited for independence and the
control of the sector. “Because they knew at the time. And all the time they will have a
different country. Most of them they are: wait, wait, lets agree, lets wait till we have
our source of the information or the facilities” (interview WNPOC). While the
reasons are understandable, this meant that GOSS also lacked the attribute of urgency.
Possessing legitimacy, but lacking power and urgency, makes GOSS what Mitchel et
al (1997) calls a discretionary stakeholder. According to Michel et al “there is
absolutely no pressure on managers to engage in an active relationship with such a
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stakeholder” (1997, p. 875). While this may have been true in other settings, the oil
companies in Sudan during the CPA-period had to consider that South Sudan would
become a separate state with power towards the companies. At the ministry in Juba
they commented on the relationship between GOSS and the oil companies during the
CPA-period saying:“I can not say it is very bad or it is very good. But the
relationship is like I told you; it is guided by the exploration. They check our
concerns. You know, it is just like… They are very aware of the […] light at the end of
the tunnel. And they don’t want to tarnish their relationship with us as well as with
the North” (interview). Still, based on their actions, the companies do not seem to
have considered GOSS an important stakeholder and the concerns of GOSS have not
been acted upon sufficiently.
6.2.3 Government of National Unity as dominant and definitive stakeholder
“There is not much interference from the government.”
PETRONAS
As we have seen the Government of National Unity in Khartoum possessed
legitimacy towards the oil companies because of their status as the owner of the
contracts, the regulator and the partner of the oil companies. They further possessed
power because they could hold companies accountable. As we have seen they made
few claims regarding the environmental and social part of the oil-operations. In these
fields the Government of National Unity can therefore be said to lack urgency.
However, we have also seen that they have been more concerned with the production
and profitability of the industry (see chapter 6.1.2). In these areas the Government in
Khartoum can therefore be said to possess urgency.
When a stakeholder possesses both legitimacy and power, but lacks urgency Mitchell
et al (1997) calls it a dominant stakeholder. Because a dominant stakeholder has
power to enforce its claims they are a priority for management (ibid). When a
stakeholder possesses all three attributes Mitchell et al (1997) calls it a definitive
stakeholder, which is the most important for companies. The government in
Khartoum has been both a dominant and a definitive stakeholder to the oil companies
in South Sudan. Their claims, and securing a good relationship with the Government
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in Khartoum has therefore been important for the management of the oil companies.
As the Government of National Unity has been mainly concerned with the production
and profitability of the industry, this has lead to a focus on the economic and political
responsibilities of oil companies in South Sudan.
6.2.4 Owners as dominant and definitive stakeholders
The owners of the oil companies possess legitimacy as the rightful owners of the
companies. They further possess power because they decide internal rules and can
sanction unwanted behaviour within the firm. Whether they also possess the attribute
of urgency depends on the area. For instance, Total`s shareholders has shown little
urgency (at least publicly) in pushing for exploration and production, while the
Chinese and Indian Governments have shown more urgency in securing oil supply.
Like the Government in Khartoum, the owners of the oil companies should therefore
also been seen as either dominant or definitive stakeholders. When they have urgency
in their claims they are definitive stakeholders, while they are dominant stakeholders
when they do not possess urgency. Both categories are important for managers
because they have power to bring about the outcomes they desire. As such, their
opinions are of major concern for the oil companies in South Sudan. For the owners
of the oil companies, whether they are shareholders seeking a return on their
investment or state governments with geostrategic interests, their main concern is
production and profit. This has lead the oil companies to focus on their economic and
political responsibilities at the expense of their ethical responsibilities. The exception
of Total can be explained by it being based in a part of the world where bad publicity
is considered more damaging.
Table 3 shows the different groups of stakeholders, their attributes and their
categorization as according to Mitchell et al’s (1997) system of stakeholder
classification.
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Table 3
Categorisation of stakeholders based on attributes
Group
Legitimacy Urgency
Power
Type of stakeholder
Local
No
Yes
No
Demanding
communities
Yes
Yes
No
Dependent
No
Yes
Yes
Dangerous
GOSS
Yes
No
No
Discretionary
Government
Yes
No
Yes
Dominant
in Khartoum
Yes
Yes
Yes
Definitive
Owners
Yes
No
Yes
Dominant
Yes
Yes
Yes
Definitive
As we have seen the oil companies have been concerned with stakeholders with
power, namely violent communities, the Government in Khartoum and the owners of
the companies. As a result companies have stayed away from what Lantos (2002)
calls altruistic CSR and focus on strategic CSR in their community development
projects. Managers in the South Sudanese oil companies have further focused on their
economic and political responsibilities at the expense of their ethical responsibilities.
Those stakeholders who have been concerned with the ethical responsibilities of the
oil companies have generally not had any power over the companies. Hence their
claims and interests have not been considered important.
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7. Conclusion
This study has examined the case of CSR in the South Sudanese oil industry from
2005-2011. The first research objective addresses how the CSR-policy of the
international oil companies in South Sudan was reflected in their CSR-practice in the
CPA-period, and how the Government and civil society in South Sudan assessed their
actions.
Using the dimensions of Carroll’s CSR-pyramid I have analysed both the CSRpolicies and CSR-practices of the oil companies operating in the CPA-period. Carroll
proposes that CSR consist of four dimensions: economic responsibilities, legal
responsibilities, ethical responsibilities and philanthropic responsibilities. In addition I
introduced the concept of political responsibilities, i.e. the responsibility to secure oil
supply in my analysis. My findings show that all the international oil companies have
sophisticated and broad CSR-policies. This shows that CSR is widely accepted in the
international oil industry. However, among the Joint Operating Companies (JOCs) in
South Sudan, the CSR-policies are more diverse and far less sophisticated. The
Chinese-led JOCs focus strongly on the economic, political and legal responsibilities,
while Malaysian-led WNPOC focus more on their ethical and philanthropic
responsibilities. Even so, apart from a better community development program at
WNPOC, the CSR-practices have been relatively similar among the oil producing
JOCs.
The analysis of the CSR-practices show that oil producing companies have fulfilled
their economic responsibility of being profitable and providing employment, although
North Sudan has benefitted far more than South Sudan. The companies have also
fulfilled their political responsibility to secure oil supply towards both Sudan and their
home nations. All companies have further been involved in community development
programs meeting their philanthropic responsibility, but these have been motivated by
legal requirements in the oil contracts and strategic interests of the oil companies. As
a consequence programs are conducted without consulting the local communities and
often do not meet the needs of the intended recipients. Finally companies have failed
their ethical responsibility by causing widespread pollution, denying compensation for
harm caused and acting in a non-transparent way.
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The oil producing companies believe firmly in the neoliberal argument that their
profit is good for society and portray their CSR-practices in South Sudan as a success.
This view is not shared by the international civil society, communities in the oil
producing areas or the Government of South Sudan. On the contrary they find the
CSR-practices of the oil companies severely lacking both in content and level of
implementation and judge the practices as immoral. The level of discontent among
local communities varies from ignorance to hatred that has resulted in armed attacks
on the oil installations.
The reactions of the international civil society and local communities show that they
consider the ethical responsibility to not cause harm, i.e. their negative injunction
duties, more important than the economic, political, legal or philanthropic
responsibilities of the oil companies. In this regard they support the claim by Simon et
al (1972) that the negative injunction duties is a moral minimum by which persons
and business are bound. While the oil industry treat CSR as a business-strategy, the
local communities are more concerned with the moral aspect of CSR. In their view
the oil companies have a moral obligation both to help them and limit the negative
impacts connected to their core activities.
My second research objective has been to explain the CSR-practice of the companies
by looking at conditions that influence how they practice CSR. Using institutional
theory and stakeholder theory as starting points I have investigated how the
organization of the oil industry and the ability of various stakeholders to hold the
companies accountable can explain the social performance of the companies.
My findings show that the CSR-performance in South Sudan can partly be explained
by a lack of a CSR-culture. Between 2005 and 2011 there was no culture of ethics in
the industry that the companies had to comply with to be accepted. In this study I
have identified five conditions that have prevented a CSR-culture from forming in
South Sudan: 1. The legacy of the civil war. 2. A weak legal framework and no will to
enforce it. 3. The influence of the Government of Sudan in the oil industry. 4. The
prevalence of national oil companies with a limited culture on CSR. 5. The
organization of the oil industry in JOCs. Together, these conditions have created an
atmosphere where harmful activities were tolerated by the industry and the
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Government in Khartoum. While local communities and NGOs protested, this was not
where companies turned for approval of their practices. There is further no evidence
of companies imitating competitors that were behaving more ethically, but rather that
the most successful companies were successful despite irresponsible actions. In the
sense that there has been any isomorphism towards a common culture of CSR in
South Sudan, it has been a move in the wrong direction. The analysis shows that if a
certain CSR-culture existed in South Sudan, it was a culture of poor CSR.
This study has further showed that managers in the oil industry are mainly concerned
with the claims of stakeholders who have power over the oil companies. In South
Sudan this has been the Government in Khartoum, the owners of the oil companies
and violent groups from the local communities. Groups who were unable to hold
companies accountable received far less attention.
The general conclusion in this study is that international oil companies in South
Sudan during the CPA-period treated CSR as a business strategy and not a moral
obligation. As a result they have focused on areas that they considered being both
good for business and society. In South Sudan this has meant focusing on their
economic and political responsibility to increase production and profit, as well as
aligning themselves with a dubious regime that were responsible for the oil contracts.
This has exacerbated the negative impact and reduced the positive impact of the oil
industry. The local communities, the international civil society and the Government of
South Sudan have all interpreted CSR as an ethical obligation. However, the actions
of the international oil companies reveal that for the oil industry, CSR and ethics have
been just other words for business.
This study has further unveiled mechanisms and causal powers that shaped the oil
industry in South Sudan. First, this study shows that oppressive regimes encourage
companies who have less concern for how the local communities are treated in their
area of operations and how the oil revenue they produce is spent. As noted by
Humphreys et al (2007) the responsible action by companies, is to not aid oil
production if the revenue does not benefit the population. However, assuming Macro
CSR in this way is not a viable option for the oil industry. While other industries are
free to locate anywhere, oil companies are bound by the location of the resources.
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With a large share of the worlds oil reserves located in non-democratic countries, it is
hard for companies to boycott such countries. The distribution of oil resources thereby
lead to a race to the bottom where the companies willing to cooperate with oppressive
regimes enjoy the most success. This is not to say that the least responsible oil
companies are the most successful. Many other factors influence the success of a
company. It does however show that oppressive regimes have the causal power to
encourage and reward irresponsible companies.
Another important mechanism is that weak regulation of the oil industry leads to
weak CSR. Contrary to neoliberal arguments, weak regulation does not cause oil
companies to self-regulate or develop moral resoluteness. Instead weak regulation
hinders CSR in two ways: by obstructing coercive isomorphism, thus hindering a
culture for CSR to develop and by stripping stakeholders of the power to hold
companies legally accountable. As shown in this study, the CSR practices of oil
companies are shaped by powerful stakeholders and the culture in which they operate.
Weak regulation creates a big scope of action for the oil companies, but when given
this scope of action they no longer consider the claims of the local population as
important because they no longer have the power to hold the companies accountable.
Again, this is not to say that weak regulation will always lead to weak CSR. A range
of other factors, such as pressure by external stakeholders, shareholder awareness,
company standards and the awareness among oil workers also influence the CSRpractices of companies. However, I have shown that weak regulation affect negatively
on the CSR-culture and strips stakeholders of the power to hold companies
accountable, which in turn weakens CSR. Thus, one must conclude that weak
regulation has the causal power to weaken CSR.
Finally, this study shows that lack of transparency lead to weak CSR. Since the lack
of transparency hinders accountability it also strips stakeholders of power. Without
power to affect the oil companies, companies will pay less attention to their concerns.
A transparent oil industry facilitates accountability and together transparency and
accountability is important to counter the effects of the resource curse.
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7.1 Implications for policy
The findings in this study may not be surprising. Oil companies are commercial
entities with commercial interest and should be expected to act accordingly. However,
the potentially harmful nature of the industry and its impact on society causes
challenges. To paraphrase Peter Maass (Maass, 2010, p. 126), the problem is not that
the oil industry is more unethical than other industries, the problem is that it has to be
better because of the environment in which it often operates and the huge negative
impacts of its operations. In South Sudan the oil industry has not been able to live up
to this requirement.
There is currently consensus that two factors are important to overcome the resource
curse: transparency and accountability. In South Sudan the adoption of CSR-policies
by oil companies has lead to neither. In order to limit the negative impact of the oil
industry and make sure the oil wealth benefits the whole nation other measures are
necessary.
If the oil companies are serious about their claim to care about the environment and
the communities in the vicinity of their operations there are several changes they
should make. First of all, the oil companies should be more concerned with the ethical
responsibilities connected to their core operations, most notable the responsibility to
not cause harm. The oil companies should also be transparent and open about all parts
of their operation to limit the risk of corruption and improve accountability. This
includes making their contracts public and publish production figures and what they
pay the government. And perhaps most importantly, if the companies want to be
considered as responsible, they should stop lobbying for deregulation that hinders
accountability and transparency.
Since it is unlikely that all companies will do this voluntarily, the Government of
South Sudan holds a key position in making sure the industry is transparent and the
companies are held accountable. GOSS should aid transparency by publishing
contracts, production figures and the payments they receive from the oil industry and
require that companies do the same. In the parliament-discussions over the new
petroleum-bill, the controversies revolved around questions of transparency. This
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study shows that lack of transparency on both contracts and payments has made it
harder for civil society to hold companies accountable and opened up for corruption
and cheating.
GOSS should also strive to enforce regulation and hold the companies accountable for
past wrongdoings. In order to heal the relationship between the oil companies and
local communities, compensation has to be paid and practices changed. Companies
should also be obliged to listen to the concerns of local communities and act on them.
After independence GOSS possess both legitimacy and power. What is needed now is
urgency. The development of a strong petroleum policy and proper monitoring of the
industry are important steps in the right direction, as it has the potential to create a
culture for good CSR-practices as well as giving local communities and GOSS the
ability to hold companies legally accountable. However, it is futile if the new
Government in South Sudan is unwilling to enforce regulation.
The international civil society has focused much of their criticism on the oil
companies and the regime in Khartoum. However, without power to influence their
actions, their claims have not been considered important. Western NGOs will
probably be most likely to influence decisions by western oil companies since they
are more vulnerable to bad press at home. Engaging shareholders of western
companies can therefore be a viable way to change their practices. The Asian oil
companies are less likely to pay attention to western NGOs and should therefore be
approached differently. A promising approach would be to work with the affected
communities and lobby the Government in South Sudan to make sure they use their
power to protect the interests of the local population and the environment. NGOs
further play an important role in providing local communities with the tools and
knowledge to supervise the oil industry and claim their rights.
Finally the local communities and civil society in South Sudan should engage in oil
politics and demand better CSR-practices. By organising themselves and present their
claims in unison, they have a better chance of achieving legitimacy in the eyes of the
oil companies and Government. If they receive access to the justice-system and
proper laws are in place they might be able to hold the companies accountable
directly. However, experience from other court-cases around the globe show that
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companies invest heavily in winning such trials and often succeed due to their
experience and resources. A better way would be to work through the political system
and ally with the Government who holds more power over the companies. If GOSS
does not act on the claims of local communities they can in principle hold the
Government accountable through elections.
Ideally building of roads, hospitals and schools should be the responsibility of the
Government, not the oil companies. In a democracy the local population can hold the
authorities accountable through election if they fail this responsibility. It is far harder
to hold commercial companies accountable for projects that do not meet their needs.
However, because of the weak South Sudanese state, companies have a moral
obligation to assist the Government in providing the necessary services in the oil
producing areas.
In the end, the local communities who are negatively affected by the oil operations are
dependent on someone with power over the oil companies to act on their behalf,
namely GOSS or the owners of the oil companies. Oil companies have been
supportive in rhetoric, but abusive in action. Hence, the hopes of the local
communities are pinned to the new Government of South Sudan. Hopefully, they will
be able to live up to these hopes.
7.2 Theoretical implications and suggestions for further research
In the academic context I hope that my findings will be interesting for researchers
who work on why and how companies engage in CSR. My findings confirm both
institutional theory and stakeholder theory and show that these theories are helpful in
explaining why and how oil companies engage in CSR.
This study further demonstrates that CSR in the South Sudanese oil industry is treated
as a business strategy to increase production and profit. My findings are contrary to
the neoliberal argument that the social impact of business is best solved through
market mechanisms. Rather, this study shows that there is not always harmony
between the interests of business and society. Oil companies in South Sudan stress the
business case for CSR, claiming it is in their own interest to manage their social and
130
environmental impacts properly. This may be true in some instances, but in South
Sudan commercial decisions have meant the companies have neglected what the local
communities consider to be their primary responsibilities. While unethical practices
may be bad for profit in the long run, it is not given that companies will sacrifice
short-term profit for a bigger, but more uncertain profit in the future. The findings
from this study show that voluntary CSR is not a solution to ensure that the oil
industry benefits the local communities. Nor does engagement in voluntary CSRinitiatives like the UN Global Compact guarantee improved CSR-practices. While
companies should be encouraged to incorporate socially responsible practices, market
mechanisms are not suited to this task. Consumers have little knowledge about where
their petrol comes from and have few abilities to sanction unethical oil companies.
CSR may hence be a good strategy for business that wants to capitalize on ethical
behavior, but it is a poor solution to protect society against the negative impact of
business. It should therefore not be used as an argument against regulation.
This study further highlights the importance of context in discussing CSR. The social
responsibility of companies varies according to the context. Universal models like
Carroll´s CSR-pyramid are useful for discussion purposes but provide little
information on CSR in different settings. As for the case of the oil industry the
economic responsibility to be profitable should not be considered as the most
fundamental, because the wealth is extracted more than created. My findings further
suggest that the ethical responsibilities to not cause harm, what Simon et al (1972)
calls a moral minimum, should be the most fundamental part of CSR.
Further research is needed to get a fuller picture of CSR in the South Sudanese oil
industry. I agree with those who focus the research more on the impact of business
and less on the rhetoric used when assessing companies, as this may not correspond
with their actions in the field. The new situation following independence provides an
opportunity to study if and how the CSR-strategies and actions of the companies
change when accountability-relations change. Another interesting point would be the
success of the new country to hold companies legally responsible through their new
petroleum law. Further research is also needed to analyze the success of programs set
up by civil society to build relations with companies and hold them accountable.
131
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