Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry

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1. UNLOCKING POTENTIAL Blake Pickering DISSERTATION 2013 Uncovering the Motivations behind Corporate Social Responsibility in Qatar’s Oil & Gas Sector University of…
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  • 1. UNLOCKING POTENTIAL Blake Pickering DISSERTATION 2013 Uncovering the Motivations behind Corporate Social Responsibility in Qatar’s Oil & Gas Sector University of Wales, Cardiff
  • 2. UNLOCKING POTENTIAL Blake Pickering worxpace@yahoo.co.uk +(974) 7701 3456
  • 3. ABSTRACT In recent years, Qatar has transformed from a dry and unconsidered peninsula on the Arabian Gulf into the world’s leading supplier of liquid natural gas and a regional hub of expanding power and influence. The nation’s bold ambitions are enshrined in the Qatar National Vision 2030, a statement of intent by the nation’s leadership that reads like a treatise on sustainability. Qatar’s oil and gas sector is comprised of national and multinational organisations that engineer, extract, refine and distribute the country’s hydrocarbon wealth. Beyond this core function, these companies are imbedded in a multi-faceted mission to make the national vision a reality. This dissertation explores and explains the motivations behind the revolution in corporate social responsibility in Qatar today. 3
  • 4. Abstract Introduction Literature Review Defying Definition Rise of a modern phenomenon Driving Demand Constructing Glass Houses Agency Theory Game Theory Resource Based View in Strategic Management Stewardship Theory Theory of the Firm Stakeholder Theory Institutional Theory The CSR Spectrum CSR in the Oil & Gas Theory Qatar in Context Qatar National Vision 2030 Qatar National Development Strategy 2011-2016 Research Methodology Research Philosophy Research Approach Survey Archival Data Analysis Hypotheses Questionnaire Development Challenges and Limitations CONTENTS 4
  • 5. Finding & Results Survey Results Demographics Personal Perspective Organisational Policy Motivations for CSR Implementation Archival Data Analysis Regulation Reporting Sector performance Climate Change Environment Health and Safety Workforce Society Economic Development Analysis Survey Analysis Demographic Information Personal Perspectives Organisational Policy Motivations Implementation Theoretical Implications Porter’s Model and a Definition of CSR within Qatar Theories of CSR Conclusions & Recommendations 5
  • 6. INTRODUCTION As a resident in Qatar, one cannot help but notice the perpetual focus on sustainability and social development that pervades every element of the national dialogue. For a nation of less than 2 million in a land half the size of Wales, there is a specific bent in the lexicon of the land that sets it apart from anywhere else. From local media to corporate culture, and issues of personal safety and responsibility to the grand ambitions of its political elite, Qatar speaks with a vocabulary that is borrowed from new landscapes in academia; repurposed for this nation’s vision of tomorrow. Corporate social responsibility (CSR) and its many synonyms are not new concepts, but have driven their way to the fore with the rise of globalisation and the prevailing debate on the role the private sector has to play within the new world order. Without a concrete theoretical foundation or any consensus on its definition, businesses globally are faced with a real challenge in adopting CSR into their folds and practicing it in a way that serves their own interests and those of the greater good. The oil and gas industry today are global champions of CSR, with some of the largest stakes in social investment in its many facets. With greener, cleaner identities and a new focus on managing their many stakeholders, oil & gas is worlds apart from the industry it was two and three decades ago. Whereas the literature has countless examples of corruption, negligence, environmental catastrophe and exploitation in the past, oil & gas companies the world over do seem to have changed their ways. Despite contemporary examples of the same, such as BP’s Deepwater Horizon disaster in 2010, there is genuine evidence of a new way of doing business, with multinationals collaborating with environmentalists, developing communities, building local infrastructure including hospitals and schools and conceding harshly fought territory in the debate on climate change. The motivations behind this transformation are complex and contentious, and many still regard them with great scepticism. What is clear is that the changes have not come about out of pure benevolence, and while the benefits of social investment may not return in direct revenue, there is clear empirical evidence that companies can reap tangible rewards for engaging in more transparent, more ethical and more generous ways of doing business. The image of the socially responsible multinational is relatively simple to rationalise. Wiig and Kolstad (2011) found a link between Chevron’s achievements in community development and their award of Angola’s most lucrative oilfield. As competition grows fiercer and access to hydrocarbons narrows (Frynas, 2011), issues of reputation and record have a larger role to play in long-term success. The picture is less clear when one regards the national oil companies, which are almost exclusively extensions of government and not subject to the same external pressures of the global concerns. In some cases, such as Venezuela’s PDVSA, the oil company forms part of a socialist apparatus that is mandated 7
  • 7. to redistribute the national wealth as widely as possible (Frynas, 2011). In other cases, such as Angola’s Sonangol, the company has exclusive rights to the country’s oil concessions and can dictate which foreign companies gain access to those resources, which includes mandatory ‘social bonuses’ valued in the tens of millions of dollars. Little evidence of the reinvestment is apparent (Ettenborough, 2003). The question of what motivates CSR in the oil and gas sector is central to this dissertation, with exclusive focus on the Qatar market. Qatar is an ideal study individual. In the literary review, I look at CSR’s definitions, origins and the various theories that underpin contemporary thinking on the matter. I then look at the context of Qatar, describing the economic, socio-political and business environments that form the foundation of the study. A critical element of this exploration is the Qatar National Vision 2030, enshrined in 2008, and the Qatar National Development Strategy 2011-2016, which are an integral aspect of the narrative. Research is undertaken with a two-pronged approach. The first is a survey aimed at professionals in the CSR and related fields within Oil and Gas companies. The aim of the survey is to gauge perceptions of the policies, motivations and effectiveness of implementation of CSR among those that work most closely with it within the industry. The second aspect of the research is a study of the archival data that looks at the specific initiatives being undertaken by five of the largest oil and gas companies, both local and multinational, within Qatar. Here the objective is to gain insight into the extent of social investment and its possible motivations, taking into account the frameworks revealed in the literary review. This dissertation looks to answer a number of central questions: How does one explain the disproportionate focus on CSR in Qatar? What is its source and what gives it impetus? To what extent do the various stakeholder groups, government and competitive organisations in particular, play in shaping the CSR dimension? How effectively is CSR implemented, and is the oil and gas industry the most appropriate actor to be tasked with its implementation? Through a process of analysis, the results are triangulated to present a solid rationale for the primary drivers of CSR activities in the nation, and what this could mean for the field from a broader perspective.
  • 8. Defying Definition As a concept, corporate social responsibility (CSR) is a relatively new field within corporate governance, however the ethics and social perspectives of engaging in business activities can be traced to the Greek philosophers. Many contemporary theories, such as Edward Deci and Richard Ryan’s (2010) Self-Determination Theory, are based on Aristotelian ideas of fulfilment seeking, while others are derived from Socratic duty and responsibility and the Stoic’s treatise on change within the extent of one’s sphere of individual propriety. The meteoric growth of socially responsible investment (SRI) has positioned CSR as the fastest growing facet of the modern corporation. In the United States in 2012, socially responsible investments represented $3,74 trillion in assets (USSIF, 2012), more than the combined GDP of Brazil and Canada. As definitions go, there is little consensus, with an almost infinite number of descriptions that range from the simple to the complex, which in turn draw in a vast number of related terms that include ‘corporate citizenship, accountability, sustainability, social investment, the three pillars’ and many others. Lockett et al. (2006) argue that while “the CSR field is becoming more established and distinctive”, there is no evidence of a scientific foundation emerging for its measurement or implementation. Godfrey and Hatch (2006) assert that an attempt to come to a single definition is untenable since CSR is in no way a single activity, but rather a collective name for a range of activities. This is apparent when one contrasts environmental remediation with support of a charitable organisation for example – each represents a unique kind of social interaction with completely unrelated root issues – they cannot both be considered within the same context of a company’s commitment to the community. There is an extensive body of work that attempts to narrow the scope of the CSR definition (Carroll, 1999; Joyner & Payne, 2002; van Marrewijk, 2003; Carter & Jennings; 2004), generally with the goal of delivering a more concrete foundation upon which future development of corporate sustainability and its implementation can advance, however even within this body of work, there are conflicting definitions (Windsor, 2001). The issue is further complicated by the apparent gap between the way CSR managers explicitly define CSR and their perceptions of the concept when asked to explore it in greater detail. Azer (2001) and Johnston & Beatson (2005) reported that while approximately half the respondents interviewed could offer a given CSR definition, they had considerable difficulty in aligning the definition with their CSR activities or articulating their definitions in more depth. Dahlsrud (2006) provides an empirical study of 37 contemporary definitions of CSR within five dimensions, namely stakeholder, social, LITERATURE REVIEW 9
  • 9. economic, voluntariness and environmental. The most commonly cited definition was provided by the Commission of the European of Communities in 2001: “A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.” The second is from the World Business Council for Sustainable Development in 1999: “The commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life.” Of the above definitions, only the first incorporates all five CSR dimensions. Another such inclusive definition was presented by Business for Social Responsibility in 2000: “Business decision making linked to ethical values, compliance with legal requirements, and respect for people, communities, and the environment.” For the sake of this dissertation, two definitions have been selected. The first is a definition for sustainable development presented by Norwegian Prime Minister Gro Bruntdland at the World Business Council for Sustainable Development: “Meeting the needs of the present without compromising the ability of future generations to meet their own needs”. The second is a definition offered by Kilcullen and Kooistra (1999): “CSR is the degree of moral obligation that may be ascribed to corporations beyond simple obedience to the laws of the state.” While this definition only incorporates the voluntariness aspect of CSR, it does raise an interesting issue with the remit of this paper. The issue of voluntariness within Qatar’s oil and gas sector is indistinct. While there certainly is free will among companies to direct their efforts and fierce competition to deliver, there is also an obligation to meet regulatory expectations that is growing with each passing year. The hydrocarbons sector is held under close scrutiny by official sources, which grant an annual Consent to Operate (CTO) that is based upon several performance metrics. This will be revealed in detail later. Another definitional dimension that features within the research is the Triple Bottom Line, first coined by John Elkington (1997). A concept ratified by the United Nations in 2007, the Triple Bottom Line highlights three spheres of value creation: people, planet and profit, which provides organisations with a measure for assessing success in social, ecological and financial terms. Beyond definition, Adi & Amaeshi (2007) identified twelve interpretations of CSR that are useful in understanding the business motivations that drive ethical management. Authors have variously construed CSR to be business ethics and morality (Stark, 1993; Freeman, 1994; Phillips, 2003), corporate citizenship (Carroll, 2004; Andriof and Waddock, 2002), corporate accountability (O’Dwyer, 2005), corporate philanthropy (Carroll, 2004), corporate greening (Crane, 2000; Hussain, 1999), environmental responsibility (Desjardins, 1998), diversity management (Kamp & Hagedorn-Rasmussen, 2004), human rights (Cassel, 2001; Welford, 2002), responsible buying and supply chain management (Spekman et al., 2005; Amaeshi, 2004; Graafland, 2002), socially responsible investment (McLaren, 2004; Warhurst, 2001), stakeholder engagement (Andriof et al., 2002, Freeman, 1994), and sustainability (Korhonen, 2002; Bansal, 2005). Many of these terms are used interchangeably with CSR, which further expands the purposes and delineation of the construct. 10
  • 10. Rise of a modern phenomenon To better understand what motivates CSR activities today, it is important to have some insight into the history and origins of the movement. The earliest indications of a movement toward social welfare in business began at the latter stages of the industrial revolution, where reformers began criticising factories for their negative influence in poverty, unrest, child labour and unsafe working conditions. Innovative industrialists such as John H. Patterson of National Cash Register created programmes that sought both to alleviate labour issues and improve overall business performance, such as provision of clinics, lunch-rooms, recreational facilities and profit sharing (Wren, 2005). It is unclear to what extent these actions, came as a result of a desire to improve worker welfare beyond the minimum requirements for doing business, and to what extent they were merely an attempt to improve productivity. However it is clear that the emerging philanthropy of the era had little precedent beyond the workplace, and that it would take more than half a century before business began to acknowledge any responsibility for the community beyond their individual employ (Carroll, 2008). Much of the literature on CSR points to the 1950s and 1960s as the decades where the contemporary form of the movement began (Godfrey & Hatch, 2006; Carroll, 1999). Patrick Murphy (1978) highlights four eras in the lead up to and beyond 1950 that shaped the modern CSR movement. Murphy suggests that up to the 1950s was the ‘philanthropic era’, manifested by a contribution to charity by leading capitalists of the time. The years 1953- 1967 are dubbed the ‘awareness era’, where the sense of responsibility that business had to its immediate community began to enter the discussion. The ‘issue era’ followed from 1967- 1973, where urban decay, racial and gender- based discrimination and pollution took centre stage. Finally, from 1974 and beyond, the ‘responsiveness era’ began, where companies first started taking managerial action in addressing social issues. One of the first books published on CSR was Social Responsibilities of the Businessman by Howard R. Bowen in 1953. Bowen believed that as centres of power and influence, the decisions businesses made had a direct impact on lives beyond the company walls. He posed the question: ‘What responsibilities to society might businessmen reasonably be expected to assume?’ (p. xi), which remains a core line of enquiry in CSR today. In the 1960s, a confluence of legislation, literature and cultural revolution contributed to the birth of the modern CSR movement, in what was a broader quest for peace and prosperity that dictated the latter half of the 20th century (Amaeshi & Adi, 2007). The authors Keith Davis (1960) and William Fredrick (1960, 1978) were instrumental in formalising CSR and first suggested that socially responsible investment may have long-term financial benefits for an organisation. Towards the close of the 1960s, there was a measurable change in business practices, particularly in philanthropy, workplace conditions, employee relations and stockholder relations; however there was still more talk than action (Heald, 1970). The 1970s heralded an acceleration in the CSR movement, with authors Morrell Heald (1970) and Harold Johnson (1971) first alluding to stakeholder theory that expanded the role of business beyond the organisations direct influence to a ‘multiplicity of interests’ that include ‘suppliers, dealers, local communities, and the nation’ (Johnson, 1971, p.50). 12
  • 11. A ground-breaking paper was published by the Committee for Economic Development (1971), which further expanded this notion by identifying three concentric circles of social responsibility: the inner circle, which ‘includes the clear-cut basic responsibilities for the efficient execution of the economic function—products, jobs and economic growth’, the intermediate circle, representing ‘a sensitive awareness of changing social values and priorities: for example, with respect to environmental conservation; hiring and relations with employees; and more rigorous expectations of customers for information, fair treatment, and protection from injury’, and ultimately the outer circle, outlining ‘newly emerging and still amorphous responsibilities that business should assume to become more broadly involved in actively improving the social environment’. The debate in the 70s saw a greater emphasis on responsiveness (Bauer and Ackerman, 1976) with scholars highlighting the need to extend beyond basic social requirements to ‘a level where it is congruent with the prevailing social norms, values and expectations of performance’ (Sethi, 1975). The decade also saw writers stressing the need for a managerial approach to CSR that incorporated planning, organisation, assessment and institutionalisation of a CSR policy and strategy (Carroll, 1977). CSR in the 1980s was marked by a move to refine and define the concept of CSR more clearly, as well as the exploration of complementary themes such as public policy, social performance, business ethics and stakeholder theory, particularly with the publication of Freeman’s (1984) seminal work on the topic. Thomas Jones (1980) presented a new model of CSR by suggesting managers tackle CSR as a process of decision making, rather than a set of desired outcomes. Corporate Social Performance (CSP) also rose to the fore, with several authors suggesting it become the governing model under which CSR would be incorporated (Wartick and Cochran, 1985), with corporate social responsibilities, corporate social responsive
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