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Corporate social responsibility is the phenomenon reflecting societal imperatives of entrepreneurial success. It takes into consideration all the strategies adopted by corporations suggesting their liabilities for greater communal good. CSR means a proactive and self initiated step that combines motives of shareholders, stakeholders and managers for molding the structure of an organization (Matten & Moon, 2008, p.405-406). "CSR is concerned with the ways an organisation exceeds the minimum obligations to stakeholders specified through regulation and corporate governance" (Johnson, Scholes & Whittington, 2008, p.191). Frynan (2005, p.583) proposed that companies are bound to engage in CSR activities due to four intriguing factors:
To gain a competitive advantage in the retail industry
To ensure stability in the work environment
To deal with external pressures like NGOs' concerns for safer environment
For maintaining a motivated and pleased workforce
Through corporate social responsibility, companies inculcate in themselves the adherence to law, norms and ethical standards. In United Kingdom, it is a manner through which businesses appraise their social, environmental and economic mechanism for improving positive gains and curtailing downsides (CSR, 2004). This assignment is an effort to appraise the corporate social approach and activities of Premier Oil Company. In this study the "Social Performance Report", illustrating the main policies as devised and implemented by the company during the time duration of 2008 till 2009, will be taken into account.
CSR initiatives in oil companies:
Oil companies are trying to prove their mettle by getting engaged in the social and environmental investments so that communities value their corporate services. BP Amoco and Shell are among the major contributors aimed at promoting renewable energy and mitigating the total amount of carbon dioxide emitted in the atmosphere thus reducing global warming. CSR initiatives in the oil companies are continually being augmented due to the usurping evidence that there exist loopholes in the intended aims of corporate investors and their applicability in the real world situation (Frynas, 2005, p.581). Such paradigm shift has resulted in the fundamental growth of social reporting and business "codes of conducts". For example in 2001, a custom-built audit of Shell declared that in Nigeria, minimum one third of the development projects launched by the company were found to be successful only because of their functionality while the other ones merely gave a falsified impression to local people as no practical steps were executed as claimed, therefore CSR had to be involved in order to keep a stable organization environment and improve the brand image of the organization (Frynan, 2005, p.587).
Porter and Kramer (2002) proposed that Corporate Social Approach is adopted by the organizations to gain competitive advantage in the retail sector by means of sufficient social investment. With a more integrated approach towards tackling social issues, organizations can manage to lessen the risk associated with a diminishing brand image by incorporating new strategies and regulations. This is possible by creating value when social shifts are utilized (Bonini et al., 2006, p.28). Oil companies are striving to eradicate sustainability concerns by launching schemes like the "Global Reporting Initiative" and "Global Compact" etc. In 2001, an estimate revealed that oil and gas sector is spending nearly 500 million dollars on programmes related to community development. They are involved in hospital and school infrastructures also promoting employment opportunities in developing nations by initiating micro credit lending policies. Major developmental projects are being put into action in collaboration with "UNDP (United Nations Development Programme)" or "USAID (United States Agency for International Development)" (Frynas, 2005, p.581).
Premier Oil Company-Brief Overview:
A London based "FTSE 250"oil and gas production and exploration firm, Premier Oil operates in almost eight countries around the globe. It aims to incorporate a higher level research and assessment of success by properly managing assets and configuring judicious commercial deals. The company has its operations in Middle East, West Africa, Pakistan and the Northern Sea. In order to maintain sustainability, Premier Oil assesses its annual progress against the standard guidelines put forward by the "Global Reporting Initiative (GRI), Carbon Disclosure Project and Industry Environmental Conservation Association (IPIECA). Currently it holds a loyal workforce of nearly 500 employees mainly recruited in Asia and United Kingdom. Performance improvement is made possible by the policies derived for security and human rights of staff personnel, pay benefits and political donations (Premier-oil, Social Performance Report 2008-09).
Corporate Social Responsibility in Premier Oil
In the recent years, Premier Oil has not only progressed in terms of functional operations, but also has staunchly maintained its CSR stance. Premier Oil recognizes its responsibility to meet the needs of stakeholders, employees, business associates, society, special interest organizations or NGOs and overall community. An example of this could be. community investment of Premier Oil at North Sea operations for ensuring enhanced support for key local groups such as the Scottish Fishermen's Federation (SFF). It had also partnered with different local organizations in Pakistan for flood relief operations in 2008.
Suppliers and contractors are deemed to respect the business ethics standards set by the company. It has been agreed that the firm will make investment decisions in accordance to the environmental and social impacts of its work activities. Stakeholder interest will be of prime importance and the business strategy will promote a balanced workplace environment. Premier Oil will abide by the local laws and communicate with the local authorities if there arise any issue related to the strategies of host countries in which it operates. Social and environmental appraisal will be made before any kind of investment (Premier oil, 2011).
The Company has always remained focused on controlling CO2 emissions. The Anoa field in Indonesia is the main source of these emissions therefore Premier Oil has continuously strived to increase the efficiency of the plant by trying to control unplanned gas flaring events. As a result of these efforts, gas flaring has remained stable since 2001. Therefore, by managing its production in an efficient way, the company has succeeded in reducing its greenhouse gas (GHG) emissions from gas flaring by 15% (Premier Oil, 2011).
Premier Oil, Plc publishes a sustainability progress report after every two years for making the public aware about the company's performance across the environmental and social sector. CEO of Premier Oils (2008-2009) states that "despite achieving very high levels of activity, Premier delivered its program of exploration and expansion without compromise on its commitment to the highest health and safety standards or levels of environmental proficiency". This adherence to the social governance and CSR activities proclaims that the oil company's expansion into other countries is welcomed by the host governments since they promote an environment and community friendly image (Premier-oil, Social Performance Report 2008-09).
The CSR dimensions for Premier Oil are based on ethical considerations like strengthening moral values together with maintaining a strong brand reputation. Investments are focused on the welfare of community, creating an aura for efficient work activities (Premier-oil, Social Performance Report 2008-09). Following figure illustrates a comprehensive overview of company's operations in relation to CSR.
Figure: Scope of Premier Oil's Social Performance Report 2008/2009
Key issues being considered by the company in terms of social responsibility:
The social responsibility at Premier Oil is concerned with how the company deals with the community and the society. All Premier Oil entities are subjected to these well defined initiatives; however the local prevalent conditions alter priorities according to the needs of potential clients. Meeting the corporate sustainable development needs is another issue. It is "an ideal towards which society and business can continually strive, â€¦ by creating value, creating outcomes that are consistent with the ideal of sustainability along social, environmental and economic dimensions" (Wheeler et al. 2003, p.17).
.Human Resource Policy:
Human rights are considered the essence of corporate social responsibility mostly in the international retail sector (Cassel, 2001). The human resource function deals with business ethics policy and the employment social justice. These policies not only reflect the best practices the organization thinks it has adopted, but are comparable to the worldwide benchmarks and standards in these areas (Premier-oil, Social Performance Report 2008-09). The pillars on which the human rights policy of Premier Oil rests are the Declaration of human rights and the labor standards of the International Labor Organization. The framework of human right policy encompasses the following:
Figure shows that the company is aware that it has certain responsibilities and obligations towards the indigenous people it works with, and the countries in which it operates. The global diversity of organization is appreciated, and the company realizes that integration and adaption of ethical policy requires flexibility and adjustment. Continuous improvement is possible through proper applicability of the CSR initiative set by the Premier Oil. Uninterrupted flow of communication with stakeholders and bi-annual progress reporting will be practiced. Developmental rights policy not only addresses concerns related to the employees and their health and safety issues, but also to the external environment in which it operates which includes the localities in which they have set ups or affiliated businesses. Employees coming from different geographical regions have perceptions and they all have to be molded into the framework of the organization's standards. If the company has to face barriers in relation to the cultural, political or social conditions of the host country, efforts will be put forward to ensure that business partners in international supply chain are able to bring about fruitful results (Premier-oil, 2011).
Premier Oil has to keep in mind the numerous stakeholders it has. Taking into consideration the stakeholder model as devised by Freeman (1984), it can be hypothesized that employees are not merely humans rather they hold specific associations with the company that make them valid candidates for certain rights. The same can be proposed for customers and suppliers involved in business proceedings (Tullberg, 2005, p.270). Partnerships together with innovations in keeping with the business strategies like the human rights' proactive safety policies is among the manners in which organizations respond to changing trends of the society thus defining business behavioral norms and standards in compliance with stakeholder perceptions (Warhurst, 2005, p.152). Catering to the needs of stakeholders and concerned organizations well before time helps the companies to mold their strategic missions accordingly in order to avoid the turbulence that might present itself in reaction to negligence of stakeholder demands (Bonini et al., 2006, p.26).
Premier Oil does not commit any violation of the policy regarding the human rights in the review period of 2008-09. This shows that the organization has properly enforced their policies regarding employees. A perfect compliance indeed means that ethics and socially responsible behavior has been as much developed within the employees as by the organization. This indicates that the Premier Oil practices are highly in accordance with what the stakeholder expectations are. The company aims for curtailing product price as well as hiring unemployed population to mitigate inflation and poverty from the society as a whole which on the contrary results in lack of business growth potential as rise in prices and skilled workers recruitment are both beneficial for the company (Premier-oil, Social Performance Report 2008-09).
(I still have to add criticism, codes of conduct, relevant policies and international performance standards).
In order to meet with the globalize corporate citizenship trends, a set of codes and principles is defined by organizations to establish the most suitable practice compatible with the international law that provides framework for entrepreneurial activities (Warhurst, 2005, p.155). For individuals of an organization involved in making decisions, responsibility and ethics are normally considered the "atomized problems" that can only be resolved by applying codes of conduct and rational principles (Haigh & Jones, 2006). In general, the term "business ethics is concerned with the study of morality and the application of reason to elucidate specific rules and principles that determine right and wrong for any given situation. These rules and principles are called ethical theories" (Crane & Matten, 2004, p. 8). The following figure represents the affects of ethical stances on key stakeholders of an organization.
Business ethics is an essential part of the operations of Premier oil. The social performance report 2008/2009 proudly claims that there was not even a single unethical practice reported for the past two years. Simon Lockett, the Chief Executive Officer at Premier Oils states that "The right reputation is hard to gain and easy to lose. Therefore we have a clear Business Ethics policy". The organization adopts procedures which are transparent and diligently seek to prevent any activity which may be regarded as illegitimate or unethical in any way.
The code of conduct is based on integrity, honesty and fairness to carry out the business. The value system is supported by an accountability system and recording of all transactions is made to ensure that bribery and corruption are not undertaken. The business not only conforms to theses ethics and conducts in its own operations but also expects and encourages the following of the same standards by its associates and affiliations. The company actively and successfully makes use of disclosure mechanisms such as whistle blowing whereby employees can disclose the illegal, illegitimate or immoral practices occurring in the organization. Premier oil has therefore put in place supportive policies and procedures for whistle blowing because unless supported by the organization's culture, this mechanism fails to work effectively. Business ethics is part of an organization's culture, and Premier Oil inculcates this in its employees during the recruitment process, and this is continuously kept alive with the aid of handbooks and websites (Premier-oil, Social Performance Report 2008-09)..
Ongoing risk assessment is carried out, and regular audits are conducted to ensure the conformance to standards and practices which fall in the ethical framework. Regions like Pakistan and Indonesia are more prone to fall into practices which are not up to the defined standards, and thereby are regularly audited. The business also realizes that ethical policies or code cannot be static and needs to evolve regularly. The business ethics and conduct policy has been revised in 2010 and is more proactive in approach and was implemented together with relevant guidance materials (Premier-oil, Social Performance Report 2008-09).
Ethics should be integrated throughout the organization and should be the part of the day to day business and transactions carried out in an organization. Suppliers and contractors, of course play a significant role at Premier Oil as goods and services have to be acquired for operations. Therefore, the purchase decisions not only take into account the price, quality and service of the supplier, but also the record of the supplier in terms of their business ethics and moral practices (Premier-oil, Social Performance Report 2008-09).
An argument was put forward by Bowie and Dunfee (2002) regarding business ethics. According to them the management concerned with CSR activities is least bothered to highlight the issues related to ethical concerns and profit motives of an organization. It has been figured that the interests of stakeholders range beyond the conventional criteria of "corporate philanthropy". An appraisal for current stakeholders will help to formulate the best strategies (this part is also not complete yet).