Does Corporate Social Responsibility Make a Difference?

Abstract

We have always known that heedless self-interest was bad morals. We know now it is bad business. --Franklin Delano Roosevelt (1937) Lundin Petroleum's First Steps in Corporate Social Responsibility The introduction of corporate social responsibility (CSR) in a company is often linked to a crisis. The Exxon Valdez oil spill in US waters and the proposed sinking of the Brent Spar platform in the North Sea represented seminal events leading to a higher awareness of environmental issues within the sector. The recent Deepwater Horizon accident in the Gulf of Mexico will no doubt have a similar impact. Likewise, allegations of complicity in human rights violations in Burma, Nigeria, and Sudan brought sociopolitical issues onto oil companies' agendas. In each case, traditional business models that focused on technical and financial parameters proved inadequate to deal with the crises and criticisms regarding the companies' possible role in them. The conflict in Sudan led Lundin Petroleum to review its business model and integrate CSR in its business strategy. (1) In 1997, it had acquired a license to explore for and produce oil and gas in South Sudan (Block 5A). Although the government of Sudan was embroiled in a civil war and not perceived well internationally, there were no legal impediments (sanctions) to the company doing business there. Peace prevailed in the concession area and the prospects of finding oil seemed significant. A couple of years after the company acquired its license, however, certain tribal factions, who claimed the government was violating the local peace agreement, started to join the rebels engaged in the civil war. Concerned about the security of its staff and operations and about mounting allegations of human rights violations in an adjacent oil field, the company hired a consultant to review the sociopolitical implications of its presence in the area and advise on steps to be taken. If at the time the company was not linked to the problems on the ground, management felt that ties with the local communities should be reinforced to preserve the company's social license to operate. Community development projects were thus initiated locally. (2) This first step, albeit necessary and beneficial to the recipients, proved to be insufficient to make up for the deteriorating relationship between local tribal leaders and the government. The working environment became unsafe, as rebels declared oil fields and staff legitimate military targets, and certain nongovernmental organizations (NGOs) began to criticize the company for its alleged role in that conflict. The company ceased all field operations, except for its community development projects, and hired a corporate responsibility (CR) manager to develop its CSR framework. The adoption of the CSR framework represented a strategic shift in the way the company operated. Until then, the company had considered geology and its commercial prospectivity as the overriding business drivers, but the situation in Sudan led it to review its business model and integrate sociopolitical considerations to preserve its legal and social license to operate, and to ensure the sustainability of the company and its operations. Lundin Petroleum's values and business principles were rendered explicit in a Code of Conduct, which was adopted further to discussions with management and the board of directors. The CR manager also elaborated health, safety, environment (HSE) and community relations policies; developed a Human Rights Primer; launched a community development and humanitarian assistance program; and initiated a process of stakeholder consultations. There were multiple stakeholders with divergent views about the situation in Sudan. If all the stakeholders wanted to see a sustainable peace, they each envisioned a different way of reaching this outcome; certain NGOs and media contended that oil was the cause of the conflict and that oil activities should be suspended until a peace agreement was reached. …