Corporate social responsibility Essay Example

Answer:Over the past years,there has been a shift by oil and gas companies to Corporate Social Responsibility(CSR).[1]CSR is a self regulatory policy whereof businesses monitor and ensure it actively complies with the spirit of the law,ethics and international rules.In the case of oil companies, most have failed to effectively meet its economic,social and environmental responsibilities.Thus often discrediting the genuineness and reliability of the CSR policy most especially considering the fact that the rule of every game; is ”business” as noted by Milton Friedman: ”…there is one and only one social responsibility of business-to use its resources and engage in activities to increase its profit so long as it stays within the rules of the game…”[2]

Once such a rule takes over the primodial rules of CSR,then the cliché ” a paradox of plenty” justifiably fits to support the positions of other proponents who argue its merely a window dressing.[3]For every business has the capacity to increase or decrease the quality of life by creating profits or negative externalities such as pollution,accidents and oil spills in an oil company stemmed as forms of ineffiency in production.In as much as businesses must obey the law,in the absence of such law,they ought to act ethically to avoid any damages forming the triple bottom line-economic,social and environmental(Corporate Social Responsibility).

[4]The efforts of oil companies are commendable towards leveraging the standards of CSR;that notwithstanding as proven in the preceding oil and gas cases under study; such shifts does not denote a tangible change in its operations as an oil company and its public relation exercise due to setbacks of globalisation influenced by the variation,ineffectiveness and unenforceability of local and international laws and treaties governing oil and gas exploitation within different parts of the world.Therefore,such cases ring a warning bell, serves a lesson and a challenge to future investors,oil companies and indigenous peoples in the ”new” Arctic on the flaws,amendments and challenges expected in the field once an oil company is issued a licence for exploitation.

Besides ascertaining the degree of applicability of the policy of CSR by the oil companies,a number of other pertinent questions arises such as ”Will the melting of the ice cap in the High North pose security threats due to access to oil and gas extraction? Threats due to oil spills(Environmental risks)? Threats as to ‘self interest’ profit-making and other illegal and unethical practices such as overstating earnings and reserves(Economic risks) and Threats to the indigenous people such as displacement,unemployment and death (Social risks).[5]

Moreover, mindful of all the international conventions and national laws that bind and guide mineral(oil and gas) exploitation such as the Stockholm declaration 1972,the Bonn Conventions 1969,the Arhus Convention and the Stockholm Convention 2001 just to name a few,some oil companies still play the window dressing game despite the repercussions.In the preceding paragraphs,some leading cases that stand the test of time will be closely examined to unravel the creditability and questionable character of oil and gas companies while underpinnning its flaws and also bring to the fore lessons for its stakeholders in the ”new” Arctic.

One of the first cases to be analysed is the Exxon Valdez case[6].It is one of the most disastrous oil incidents that tested the abilities of local, national amd industrial organisations[7] spilling more than eleven million gallons of crude oil off the coast of Laska in US records.[8]The respondent,Joseph Hazel,captain of Exxon Valdez was convicted of a misdemeanor charge of negligent discharge of oil with a fine of $50.000 and a sentence of 1000hrs of community service.[9]What is more is the fact that,though not charged on alcohol abuse,Hazelwood[10] has a history of alcohol abuses which makes the oil company liable for his negligent act[11];for the charges metted do not correspond to the harm caused.

For instance it posed a threat to the Alaskan fishing industry and other species like the migratory shore birds,waterfowls,sea lions and varieties of whales[12].With the aid of the US Coast Guard and Alyeska, cleaning measures were taken care of promptly.Significantly,this incident necessitated the passing of the OilPollution Act 1990.[13]

As a contrary, the Piper Alpha Disaster[14] case which occurred in an extremely forgiving corporate climate of the time whereof despite the heavy destruction of the Piper Alpha due to a conflaguration of fire and explosions,provoked a spontaneous popular demand or public interest (Scots)[15] that the State should take action.Surprisingly, the Lord Advocate,Fraser decided not to penalise Occidental Petroleum for the damages noting that: ”public interest would not be served by prosecution”[16]. Unlike the prevailing cause of this disaster was due to negligence by Occidental Petroleum to act in the interest of its employees, its lack of corporate accountability and influence on the CSR policy.In effect, Mathias Becks notes:

”Occidental,even before the Piper Alpha disaster,was not a company with a pristine safety record.On the contrary,in 1984 it had narrowly escaped a near disaster that required a mass evacuation of its platform.In 1987,it experienced a fatal incident caused by key factors that were present in the later disaster.The company had to learn from its mistakes even though it was fined on a number of occasions prior to the Piper Alpha explosion.[17] This corroborates the frustration of the Scots based on the judge’s ruling despite the call to preserve the pristine nature.

In addition,the Shell -Nigeria case has unravelled charges of human rights violations.Worthy of note is the fact that,its activities in the mid-1990s,where totally ruthless.According to World bank report,”oil activities have undoubtedly caused significant and extensive environmental degradation in the Niger Delta region.”[18]Hence posed environmental risks due to oil spills and pollution which affected the crops and food market of the ogoni people.Social risks stemmed from the fact; most of the ogoni people were displaced due to pipeline construction or died as a result of riots that ensued.

No doubt; after over fourteen years of judicial proceedings on grounds of complicity in human rights violations against the Ogoni and the execution of Ken-Saro-Wiwa,the U.S.Federal court (June 8,2009) under the U.S.Alien Tort Statute and the Torture Victim Protection Act forced Royal Dutch Shell to pay a sum of 15.5 million out-of-court settlement and the establisment of a 5 million Trust Fund to benefit the Ogoni people.[19]

Besides Wiwa v.Shell[20] lawsuit, another law suit: The People of Nigeria v.Royal Dutch Nigeria[21] was filed in the Netherlands Shell’s headquarters with the intervention of Friends of the Earth Netherlands by four Nigerians,fishermen and farmers whose lands and livelihood suffered major damages from oil spills which resulted to the contamination and pollution thus requested clean up of the soil and the purification of its water resources. Jurisdictionally,the court ruled itself competent to hear the claim against Shell Nigeria due to its connectedness to as Royal Dutch Shell,RDS as parent company and owed the ogani people a duty of care to such environmental breaches caused by its subsidiary.[22]RDS refutes liability on the grounds that it was not present at the time of its occurrence[23].

That notwithstanding,this lawsuit provokes plenty of unanswered questions such as questions as to which plaintiffs have standing,whether or not RDS can be held accountable for acts of Shell Nigeria and also on point and choice of law;for the defendants may wish the court to apply Nigeria law(weak) unlike the plaintiffs will wish the application of Dutch law.In this regard,the EU Regulation on the Law Applicable to Non-Contractual Obligations[24] fits in this context because it adds a distinctive environmental principle that permits anyone seeking compensation for extraterritorial environmental damage the options to make its claim on the basis of the law of EU Member State wherein the company to be sued is incorporated granted such a member state could be considered as the country where the event giving rise to the damage occurred(the parent company).[25]

Paradoxically,it is not clear whether or not this rule applies in transnational tort cases such as the Dutch Torts law[26].Thatnotwithstanding, one of the three grounds for tortuous liability could be invoked under international law(hard or soft) based on the legal doctrine of indirect effect :[27] violation of a rule of unwritten duty of care.

Besides,should Nigerian law take precedence,the Dutch court could still apply international environmental law by ignoring rules of foreign states if it violates international law.In sum,”soft law such as codes of conduct might be relevant to support constructing the violation of the duty of care.Given contemporary calls for the corporate sustainability,many companies have either volunteered to adhere to codes of conduct and /or have their own ones in place ….through interpretation of a rule of unwritten duty of care with reference to such codes of conduct,they might be uplifted from a merely public relations effort to a useful purpose in transnational tort law.”[28]

Based on the two cases cited,a defence counsel for Royal Dutch Shell objects that ” U.S and international law do not allow corporate liability for alleged offences…the Post-World War Two Nuremberg tribunals covered prosecutions for individuals,not corporations”.[29]These points of law showcases the paradoxes associated with oil and gas exploitation.

Furthermore,British Petroleum,BP is considered a champion and a driving force for the shift to CSR because its success is its CSR vision which amongst other is geared at doing positive actions for the global environment,efficient use of natural gas and cement the connection between responsibility and profitability.[30]Unfortunately,BP was the first company to elicit a lapse in environmental CSR,the 2006 Alaskan Oil spill disaster to the tune of about 5000 barrels of oil due to its internal corporate culture which is ”dominated by pressure to keep costs down” whereof ”budgeting often took precedence over routine maintenance and…safety.”

Coupled with the 2005 explosion in BP’s Texas refinery due to poor maintenance and safety measures by TAPS; led to the death of 15 and injured 180 workers forcing its CEO John Browne to resign.[32]

The Deepwater Horizon incident[33] occurred in the Gulf of Mexico spilling about 4.1m barrels of oil over 87 days making it the biggest unintentional offshore oil spill in the history of the petroleum industry[34] which stemmed from a sea-floor oil gusher due to an explosion of the Deepwater Horizon, which drilled on the BP-operated Macondo Project which killed some workers and injured others.[35]

A relief to cap the gushing well head was only effected in July 2010 and completed in September 2010 with the Federal government styling it ”effectively dead”[36]The damages caused by the spill were extensive to marine and wildlife habitats,the Gulf fishing and tourism industries[37] despite measures taken and dispersants used to protect the beaches,wetlands and estuariesl[38].

Conditions worsen as scientific reports indicate the presence of immense invisible underwater plumes of dissolved oil[39] Worst of, in January 2011,it reported that tar balls continue to wash up, wetlands marsh grass remains fouled and dying, and crude oil lies offshore in deep water[40].A research team found oil on the bottom of the seafloor in late February 2011 that did not seem to be degrading.[41] In October 2011, report stated that dolphins and whales continue to die at twice the normal rate.[42]

Just as the case of Alaskan case,BP[43] was liable on grounds of a series of cost-cutting and the lack of better safety measures offshore.Thus concluded that the spill was not an isolated incident caused by “rogue industry or government officials”, rather “The root causes are systemic and, absent significant reform in both industry practices and government policies, might well recur”.[44]BP admitted the claim which led to the set up of a $20 billion fund to compensate victims of the oil spill. To July 2011, the fund has paid $4.7 billion to 198,475 claimants.[45]

In a final investigative report,it was stated that the main cause was the defective cement job, and Halliburton, BP and Transocean were liable in different ways.[46]No doubt,on Wednesday 22nd February 2012, a judge of the federal court ruled BP and its partner liable for civil penalties under the Clean Water Act unlike some hold BP’s partners are only liable per-barrel civil penalties for oil discharged from the well though full trial is scheduled for 27th February.[47]

Paradoxically,exploration in the Arctic was much more technically and physically challenging than in other areas.With the current global warming,it is estimated to have about 90 billion barrels of undiscovered oil especially in the Arctic Alaska,Amerasia and East Greenland Rifts Basins should the ice cap melt faster hence styled a ”New” Arctic due to its hidden economic and geopolitical potentials that is attracting oil companies from non-Arctic States due to growing demand.[48]

Despite its economic viability (large oil reserves),some consider it a mixed blessing based on past and present challenges; associated with its exploitation as seen in the Exxon Valdez and the Deepwater Horizon cases and the associated risks in the Barent[49] and Bering seas[50]It is against this background that Stakeholders of the Arctic under the canopy of Arctic Monitoring and Assessment Programme[51] and other international NGOs like Greenpeace,Bellona Foundation and Friends of the Earth International are doing to propagate zero liability safety measures in cases where such risk is unavoidable.[52]

As a recap of the present and future challenges and lessons to this development in the Arctic on the indigenous people,oil companies and the states.I will like to corroborate these challenges with a citation by an official at a recent E.U Conference with subject:”the vulnerable Arctic”[53] :

”I would like to invite members of the European Parliament to Yamal in the Russian Arctic where the so-called clean gas consumed in Europe comes from, and see with their own eyes what kind of working conditions, environmental conditions and safety conditions there are there,”[54]

From the perspective of the State, the challenge boils on whether to terminate oil and gas operations which is a major source of income and employment in most Arctic states in disregard of the human impact.For it is clear that despite the strict call for CSR and the enforcement of better control machinery and regulations,oil spills and and other accidents can not be eliminated rather rescue measures must be instituted to reduce emissions.[55]Moreover,it is challenging for a State to claim civil liabilities for want of jurisdictional conflicts of laws and interests.[56]

Unlike the indigenous people,it is a socio-economic and environmental challenge which bounds them to adapt a new way of life and dressing habit due to unforseen threats of pollution,oil spills and possible unemployment due to the suspension of a company’s licence[57].

Meanwhile,the challenges are enormous for oil companies.First,the inability to conform to the policies of CSR[58] despite the slogans on its website.Most are identified as perpetual polluters such as BP and Exxon Mobil.Therefore, are faced with the challenge to rebuild its reputation : ”reputational risks”[59] once it breaches the terms of its licence such as exceed the limits of uncontrollable emissions [60] and the challenge to preserve corporate culture provokes overstatement of its oil reserves and profit returns to the public.[61]Lastly,the resistance to admit better safety measures despite calls from international NGOs and other stakeholders.[62]

From the above, there are a number of lessons worth learning as indigenous peoples, government (State) and oil companies in the Arctic bearing in mind the watchword: ”the reality is,wherever oil companies operate,they create havoc”.[63]

To the indigenous peoples,they are gradually assimilating into a new culture and way of life but fear oil accidents because the Arctic is helpless against Deepwater Horizon-type blowouts since it has no infrastructure to provide massive responses for clean-up.[64]Such threats are channelled by international NGOs like Bellona Foundation which protect the interest of the people[65].

Besides international and local instruments governing environmental protection,cognisant of the vulnerability of the Arctic region, the Arctic council through AMAP has advocated for a unifying Arctic Environment Treaty that will cover and rescue weak legal institutions and States like Greenland that has recently issued licences to oil companies despite its worrying topography and climatic conditions.Meanwhile,States have to re-enforce the application of such rules by oil companies who sometimes hide under the cloak of CSR policy to make profit rather than preserve the pristine nature of the universe and mankind as contended by Friedmans.[66]

Oil companies have to uphold, rebuild and its reputation through the complete ownership of corporate social responbility binded by components of ethics and law,partnership and public relation.They must be remain accountable and report every activity good or bad to its stakeholders meanwhile undertake routine monitoring and evaluation exercises.[67]It has also improved its clean-up processes in case of inescapable circumstances and revived its degree of commitment most especially BP and Shell unlike ExxonMobil and TotalFinaElf(see Limits to Corporate Social Responsibility,Fridtjaf Nansen Institute,December 2004).[68]

From the above,there is no gainsay that oil and gas exploitation is greatly a ”paradox of plenty” because of its mixed blessings often styled as ”oil curse”.For as Hauge[69] the environmental effects are so enormous and complex that even Norway,a country recognised for having one of the best drilling standards is a victim.In this vain,I will end with this recommendations for the license issuing State and the above all the Arctic council[70]:

Ensure such company should operate in a manner that it creates sustainable value of its stakeholders,take steps to forsee the forseeable through open dialogues with stakeholders,consider with whom you are associating with,minimize side-effect harms by setting higher standards and use moral imaginations (if side-effects are inescapable,can such operation be justifiable?)

and what measures can be taken to minimise it.[71]Should these guidelines and international regulations be fully respected, oil exploitation will be considered more of a blessing than a curse to humankind if it does not falls short of international environmental conventions and declarations that safeguard the pristine nature of the universe[72] or a possibly unified ” Arctic Environment Treaty”.[73]


Jay .G.Martin,Sustainable Developments:Impacts of Current Trends on Oil amd Gas Development,24 J.Land Resources and Envil.L.257,at 258(2004). Stockholm declaration 1972

Thomas R.Kline,P.Burton Gray and G.G.Logan,Energy Resource Law: Environmental Constraints on Energy Development Clark Law Review,Chicago Law ReviewWorld bank Group practices on CSR.

Fridtjof Nansen Institute,Report for Fridtjof Nansen Institute/ECON Project Oil Companies in the New Petroleum Province: Ethics,Business and Politics Revised version Dec.2004 Milton Friedman,Nobel Laureate in Economics,Observation made by New York Times Magazine,Sept.13.1970 Gregory Dess and Alan Eisner,Strategic Management 2006

Mathias Beck and Charles Woolfson,eds.Corporate Social Responbility Failures in the Oil Industry 2(2005). U.S.Environmental Protection Agency(EPA),Oil Program:Oil Spill Profiles,Feb.26.2009 at 1 Bomann-Larsen,Responsibility in the World Business,142.

Rome II enterred into force in January 2009.Nelson Schwartz,Can BP Bounce Back?Fortune Magazine Online.Oct.31,,accessed Feb.15,2009 . . Litigations-Royal Dutch Shell ,Reuters by John Donovan 25th February 2012. . .

———————–[1]Jay .G.Martin,Sustainable Developments:Impacts of Current Trends on Oil amd Gas Development,24 J.Land Resources and Envil.L.257,at 258(2004). [2]Milton Friedman,Nobel Laureate in Economics,Observation made by New York Times Magazine,Sept.13.1970 [3]Peter ,Socially Resonsible Oil Companies:Corporate Ethics [4]Gregory Dess and Alan Eisner,Strategic Management 2006

[5]Ibid 1[6]Thomas R.Kline,P.Burton Gray and G.G.Logan,Energy Resource Law: Environmental Constraints on Energy Development p.278 ff. [7]U.S.Environmental Protection Agency(EPA),Oil Program:Oil Spill Profiles,Feb.26.2009 at 1 [8]Exxon Valdez smashed into Bligh Reef in Prince William Sound Alaska, March 24,19889 [9]Daniel Coyle.The Captain Went Down with the Ship,OUTSIDE MAGAZINE ONLINE accessed Feb.2009 [10]Ibid 1

[11]Tortuous liability:Principle of Forseability Donoghue v.Stevenson rule [12]EPA,Supra note 6,p.1[13]US Congress: Oil Pollution Act 1990 and the Oil Spill Trust Fund [14]Mathias Beck and Charles Woolfson,eds.Corporate Social Responbility Failures in the Oil Industry 2(2005). [15]Scottish newspaper, Daily Record “Charge them!

[16]Ibid 1[17]Mathias Beck,Supra note 13.[18]Bomann-Larsen,Responsibility in the World Business,142. [19]The cases were brought under the Alien Tort Statute, a 1789 statute giving non-U.S. citizens the right to file suits in U.S. courts for international human rights violations, and the Torture Victim Protection Act, which allows individuals to seek damages in the U.S. for tortu�