UNLOCKING POTENTIAL
Blake Pickering
DISSERTATION 2013
Uncovering the Motivations behind
Corporate Social Responsibility
in...
UNLOCKING POTENTIAL
Blake Pickering
worxpace@yahoo.co.uk
+(974) 7701 3456
ABSTRACT
In recent years, Qatar has transformed from a dry and unconsidered
peninsula on the Arabian Gulf into the world’s...
Abstract
Introduction 	
							
Literature Review
Defying Definition							
Rise of a modern phenomenon					
Driving Deman...
Finding & Results
Survey Results								
	 Demographics								
	 Personal Perspective							
	 Organisational Policy					...
INTRODUCTION
As a resident in Qatar, one cannot help but
notice the perpetual focus on sustainability and
social developme...
to redistribute the national wealth as widely as
possible (Frynas, 2011). In other cases, such as
Angola’s Sonangol, the c...
Defying Definition
As a concept, corporate social responsibility
(CSR) is a relatively new field within corporate
governan...
economic, voluntariness and environmental.
The most commonly cited definition was
provided by the Commission of the Europe...
Rise of a modern phenomenon
To better understand what motivates CSR
activities today, it is important to have some
insight...
A ground-breaking paper was published by the
Committee for Economic Development (1971),
which further expanded this notion...
The turn of the 21st Century saw a move away
from theoretical explorations of the concept
CSR to a greater focus on empiri...
developed nations have CSR deeply imbedded
in the social order, with a far closer relationship
between business, governmen...
support and provide ‘ammunition’ for rivals
(Elsbach & Sutton, 1992). Empirical evidence
clearly shows that organisations ...
Constructing Glass Houses
The lack of consensus among academics on
what CSR is what direction it should take goes
beyond t...
capabilities, viz. pollution prevention, product
stewardship and sustainable development.
	 Stewardship Theory
In contrast...
must consider all parties’ interests that are
affected by their actions as a matter of social
responsibility. Decision-mak...
Wood (1991) suggests that at its core, CSR is
an acknowledgement “that business and society
are interwoven rather than dis...
Research has shown extensively that financial
incentives can be created by subverting quality
standards, exploiting regula...
The CSR Spectrum
Godfrey and Hatch (2006) offer a simplified
model that presents CSR as the relationship
between two polar...
TYPE
SHAREHOLDER
CAPITALISM
CAUSERELATED
MARKETING
STRATEGIC
PHILANTHROPY
STAKEHOLDER
MANAGEMENT
BUSINESS
CITIZENSHIP
Tabl...
sustainable development were added to the
company’s business principles, and lines of
engagement were opened with several ...
scandals and more recent examples such
as the Deepwater Horizon spill in the Gulf of
Mexico, has attracted a convergence o...
were extensive, with exploration projects
underway in all corners of the world. Today, the
picture has changed. Nationalis...
economy and a civil infrastructure on a par with
the world’s leading nations.
In 1994, Qatar Foundation was developed
to b...
Qatar National Vision 2030
Virtually all nations within the developing
world have committed to sustainable
practices in so...
•	 Human Development - development
	 of all its people to enable them to 		
	 sustain a prosperous society
•	 Social Devel...
“…provides a means to invest in world-
class infrastructure; build efficient delivery
mechanisms for public services, espe...
Fig.4 Themes and sub-themes selected for analysis of Sustainable Development
THEME
Economics
Social
Environment
Partnershi...
Research Philosophy
In linking research and theoretical
considerations, two primary approaches are
available (Teddlie and ...
Research Approach
This analysis is based on two-pronged approach
to assessing the motivations, implementation
and effectiv...
Archival Data Analysis
An extensive review of existing literature
was undertaken, focusing on 5 oil and gas
companies with...
Within the personal perspective section,
respondents were asked to offer their own
definition of CSR. This was then contra...
FINDINGS & RESULTS
Survey
	 Demographics
As experienced professionals working in the oil
and gas sector in Qatar, all nine...
A company best contributes
to society through the
pursuit of profit, as well as
jobs, taxes and product
Shareholders have ...
Seven of the nine respondents consider CSR
a growing concern for oil and gas companies,
while two found it to be stable. S...
and community and manage meaningful
	 relationships with the community and
	 stakeholder expectations. RLC-COP
	 conducts ...
motivations, with even billing at 44% among
‘major’ and ‘minor’ influences (Fig. 11).
Among the most influential stakehold...
Three respondents offered insights into how
their CSR programmes are developed:
•	 Monitoring social development events 	
...
0
4
6
8
2
Government
Business System
Company Values
Power Relations
Expat Influence
Social Network NGOs Globalisation
Cons...
The wider community
Only the communities
we impact
Only internally
Not sure
0 1 2 3 4 5 6
Fig.14 CSR Community Target
25% ...
According to The Directorate, its ambition is to
become a single regulatory body, to ensure that
HSE risk is managed in ac...
Fig.15 Sustainability Venn Diagram
Environmental
Social Economic
A viable natural
environment
Nurturing
community
Sustaina...
The opening statement from the Chairman
includes a mandate that all sustainability reports
must support the Qatar National...
Sector Performance
Within this section of the research, an overview
of each of the target company’s initiatives is
provide...
All five target companies adopted a
standardised measure for GHG emissions,
introduced by Qatar Petroleum (QP), which is
b...
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry
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Unlocking Potential - Uncovering the motivations behind CSR in Qatar's oil & gas industry

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Master's dissertation for University of Wales, 2013

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

  1. 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. 2. UNLOCKING POTENTIAL Blake Pickering worxpace@yahoo.co.uk +(974) 7701 3456
  3. 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. 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. 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. 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. 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. 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. 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. 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. 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 responsiveness and social issues organised in a framework of principles, processes, and policies. The 1980s featured a range of corporate ethical scandals, including the Union Carbide explosion in India that killed thousands, the rise of Apartheid in South Africa and several Wall Street scandals that rocked global financial markets. The 1990s saw few meaningful contributions to expanding CSR theory (Carroll, 2008), but the core themes continued to grow and take shape. Two key issues, sustainability and corporate citizenship, became distinct areas of study, with the latter competing with CSR for conceptual and academic prominence. Philanthropy and social investment began the exponential rise that continued into the new Millennium, with globalisation and the rise of the internet age fundamentally transforming the way people communicated, traded and interacted. One significant step forward was in the realm of business practice, with the establishment of a non-profit organisation called Business for Social Responsibility (BSR), which has grown to become the world’s leading resource on equipping “its member companies with the expertise to design, implement and evaluate successful, socially responsible business practices”. BSR has been instrumental in defining key terms including business ethics, corporate citizenship, corporate accountability, and sustainability, as well as providing models and frameworks that focus on providing practical tools to business managers. Notably, many of the world’s leading organisations began focusing on CSR reputation in the 1990s, including Coca Cola, IBM, Merck, Johnson & Johnson and McDonald’s (Carroll, 2008). 13
  12. 12. The turn of the 21st Century saw a move away from theoretical explorations of the concept CSR to a greater focus on empirical research, as well as a greater expansion of related topics such as sustainability, CSP, corporate citizenship and stakeholder theory (Carroll, 2008). Several studies began correlating the impact on social reputation with long-term financial performance, brand perception and employer attractiveness. Conceptually, Schwartz and Carroll (2003) refined Carroll’s earlier four category framework to a three dimensional Venn diagram that placed economic, ethical and legal dimensions at the forefront, and related each dimension to a set of organisational characteristics that could be utilised to analyse social performance. By placing different emphasis on each dimension, organisations could develop one of a range of CSP ‘portraits’ that could serve as benchmarks. In the business sphere, benchmarking and best practice took the lead, the Kotler and Lee (2005) publishing a pivotal book that catalogued the performance of 25 leading companies in six categories of social investment, demonstrating how an ethical strategy and proactive approach to stakeholders was instrumental in value creation and reputation management. The new Millennium also witnessed the globalisation of CSR, with lagging markets in Eastern Europe, Middle East, the Subcontinent and Asia all engaging socially responsible ways of doing business on an unprecedented scale (Frynas, 2009). Globally, there has been a marked elevation in CSR management expertise, with the institutionalisation of legal and ethical compliance standards, internal practices, specialised consulting and auditing and reporting of activities. Today, many
  13. 13. developed nations have CSR deeply imbedded in the social order, with a far closer relationship between business, government and non- governmental organisations (Moon, 2005). The evolution towards more ethical, more transparent and more equitable ways of doing business has given rise to a host of non- governmental organisations such as the World Resources Institute (WRI), Global Reporting Initiative (GRI), AccountAbility, various arms of the United Nations and the International Standards Organization (ISO 14000) that play a significant role in making CSR a universal practice. However, despite considerable research, the link between social investment and long-term profit remains tenuous (Godfrey and Hatch, 2006), and with increasing global competition and perpetually uncertain financial markets, the future of CSR, at least in its most idealistic sense, is anything but assured. 2.3. Driving Demand Why do companies engage in CSR, and why is it growing today at an unprecedented rate, even when a direct link with profit is anything but clearly established? Several studies have found that companies are more likely to engage in CSR activities if they believe CSR will have long term benefits (Graafland, 2002; Spence, 2008). Porter and Kramer (2006) identify four core arguments that proponents of CSR rely on when making their case, namely moral obligation, sustainability, license to operate and reputation. Appealing to morality is an argument for businesses to ‘do what is right’, and is central to a number of CSR definitions and organisational visions. Sustainability is generally a focus on environment and community, arguing that it is within an organisation’s best interests to foster both in order to ensure longevity. License to operate ties into the idea of the social contract – namely businesses cannot exist without the implicit sanction of the communities, societies and networks they engage with. This idea derives from stakeholder theory, discussed later in this dissertation. Reputation is the argument for organisational benefit through an increase in brand equity, customer and employee loyalty and in some cases revenue and market share. This framework is particularly poignant within the context of Qatar. As will be illustrated later, the role that that these four rationales for CSR have adopted considerably different meanings when the relationship between company and government is objectively considered. There is empirical evidence that CSR can benefit an organisation over time. Certainly, a well-coordinated CSR campaign can and very often does result in improvements in company reputation (Fombrun and Shanley, 1990). Customers have been shown to choose or reject consumer goods as a result of a social reputation (Alexander, 2002). Reputation can also have an impact on influencing customer appraisal of a given product, with negative reputations lowering scores and positive reputations enhancing them (Brown and Dacin, 1997). One could also make a strong case for seeking out ethical behaviour as an ideal. Garratt (2010) demonstrates that unethical behaviour at a board level commonly results at unethical conduct at strata throughout the organisation. Success, and even survival, in the contemporary marketplace depends on a company’s ability to meet the normative expectations of the business environment (Scott, 2008). When companies adopt an air of controversy to observers, they lose constituents, external 15
  14. 14. support and provide ‘ammunition’ for rivals (Elsbach & Sutton, 1992). Empirical evidence clearly shows that organisations that stand out as ‘bad apples’ within a market sector can suffer poor staff retention, declining sales, lawsuits, reduction in market share and network partner loss as a result of poor reputation (Haunschild and Sullivan, 2006). While the literature predominantly focuses on the positive aspects of CSR activity, the result of the opposite, namely social irresponsibility, can clearly have long-term detrimental effects on an organisation, with considerably greater impact in arousing the ire of a firm’s observers (Lange and Washburn, 2012). In Qatar, reputation with stakeholders is a primary driver behind the delivery of CSR initiatives. While in other markets these stakeholders are widely varied, in the local market the evidence suggests that the impact of the regulatory body has the greatest impact in drawing CSR efforts into focus. Then there is the question of attracting and retaining talent, a key advantage in the knowledge economy. With a limited pool of exceptional individuals available, they are fiercely fought over in corporate circles. Studies indicate that losing a key member of staff can cost up to 213% of their annual compensation (CAP, 2012). Bhattacharya et al. (2007) showed that CSR is a crucial point in the “employee value proposition” and that CSR humanises a company, and is instrumental in developing an emotional bond with staff. An ethical workplace improves loyalty and job satisfaction, raises productivity and reduces absenteeism (Sims and Keon 1997). There are a number of interrelated actors that give CSR its impetus. These are presented in Table 1. MOTIVATORS NOTABLE AUTHORS Table 1. Motivators for CSR Government National business systems Personal values Power relations Institutional isomorphism Social network pressures Social actors & consultants Competition Globalisation Amran & Devi, 2008; McWilliam & Siegal, 2006 Matten & Moon, 2008; Tengblad & Ohlsson, 2010 Hemingway & Maclagan, 2004 Prakash, 2001 Husted & Allen, 2006; Moir, 2001 Burke & Logsdon, 1996; Aguilera & Rupp, 2007 Fassin, 2008 Porter, 2008; Smith, 2007 Werther & Chandler, 2005 16
  15. 15. Constructing Glass Houses The lack of consensus among academics on what CSR is what direction it should take goes beyond the lack of a definition. There remains a lack of agreement too on how CSR should be studied, its core facets and the theories that underpin it. It has been variously explained as a consequence of government action or inaction and the dynamics of global governance (Jenkins, 2005); the propagation of global communications and the resulting corporate scrutiny by external entities (Fabig and Boele 1999); as well as a symptom of globalisation and a new economic paradigm (Korhonen 2002). What motivates organisations to engage in CSR and how they choose to do it also lacks a clear explanation. In many instances, companies take up the mantle of CSR with little external pressure, and pursue programmes out of proportion with their size, while in others, companies put under severe duress remain unmoved (Frynas, 2009). It is thus worth examining some of the prevailing theories that have been identified as drivers of CSR globally to better understand the dynamics. Management studies identify seven primary theories to explain organisational responses to social and environmental pressure, namely agency theory, stakeholder theory, stewardship theory, institutional theory, game theory, theory of the firm and the resource-based view in strategic management (Fynas, 2009). Of these, stakeholder theory and institutional theory dominate in the literature as more generally accepted and widely explored, and for the purposes of this dissertation will be looked at in more detail, while the others warrant brief explanation. Agency Theory Agency theory holds that the contemporary manager is held under consistent and unrelenting pressure by a variety of stakeholder groups to commit resources to CSR initiatives, with customers, suppliers, employees, community concerns, government and institutional shareholders each advocating a distinct agenda. As a result, senior executives feel compelled to adopt strategies that respond to these pressures, even when these strategies are costly to shareholders and are not necessarily within the organisation’s best interests. Agency theory has been supported by empirical study demonstrating that managerial strategies are often caused by extra-economic pressure as opposed to value enhancement objectives (Wright & Ferris, 1997). Game Theory Simply put, game theorists propose that organisations, as rational self-serving entities, are forced into CSR programmes via a game of brinkmanship with other actors within their given field, where present costs are traded off for perceived future benefits, as is illustrated in the prisoner’s dilemma (Fehr and Fischbacher, 2003). In order to meet the normative standards of an industry, no company dares be the one to be informed upon, and resultantly pre-empts that eventuality through actions that do not serve their best interests (Sacconi, 2010). Resource Based View in Strategic Management The assumption within the resource based- view of the firm is that CSR has the potential to utilise specialised skill or capabilities to capture a competitive advantage (Hart, 1995). By the nature of its internal or external resources, an organisation can create inimitable strategic capabilities based on technology, design, procurement and production. This can in turn be leveraged for three kinds of strategic 17
  16. 16. capabilities, viz. pollution prevention, product stewardship and sustainable development. Stewardship Theory In contrast to Agency Theory, Stewardship Theory rejects the concept of self-interest and opportunism as the core motivator of the executive manager, and instead presents the image of an executive as an individual motivated to serve the best interests of the organisation and to do a good job (Donaldson, 1990; Davis et al., 1994). Rather than driven merely by financial incentive and a quest for personal status, the manager has a strong sense of duty and the desire to work with others to achieve collectively. When a company adopts stewardship, certain policies and procedures naturally follow. Objectives are clearly defined and managers are given the freedom to achieve them. Within this context, a successful steward satisfies most groups, since most stakeholder groups benefit from an increase in the company’s wealth (Robbins, 2008). Theory of the Firm The Theory of the Firm is a concept whereby CSR is driven by a supply of or demand for social activities by political entities within the marketplace (Baron, 2001). The premise of the theory is that an activist group will seek to transform a firm’s production practices to affect redistribution to the interests it supports through support for its cause by the public. As a result, firms will respond for one of three reasons. The first is out of moral obligation, the second as a response to the external threat, and the third for the potential for market reward. Institutional and Stakeholder Theory are governing themes that are closely interlinked and inescapable in the modern discussion and analysis of CSR. Analysis by Garriga and Melé (2004) of the extensive body of research on ethics and social responsibility show that a significant majority of the literature is devoted to stakeholder and institutional theory in one form or another. Stakeholder Theory Stakeholder Theory holds that a business should reject the classical view of business simply as a profit making enterprise, and instead embrace either a socially-aware view, whereby firms should be sensitive to the potential harms that its actions cause on various stakeholder groups, or even adopt the more open social- activism view, whereby business must use its resources and capabilities towards the greater good (Lantos, 2001). Freeman (1998) defined stakeholders as “groups and individuals who benefit from or are harmed by, and whose rights are violated or respected by, corporate actions”, which may include but are not limited to government, employees, customers, suppliers, creditors and debtors, trade unions, stockholders, lobbyists and local communities. Even to CSR’s most ardent critics, stakeholders remain a primary consideration. Carr (1968), who exemplified the extreme classicist view, even suggesting that a strong measure of dishonesty was a natural and acceptable part of business, recognized that if a company aimed at long-term profitability, “it will need to preserve amicable relations with whom it deals. A wise businessman will not seek advantage to the point where he generates dangerous hostility among employees, competitors, customers, government, or the public at large.” The classicist view and social view depart at the point of pursuing social good for its own sake: “value-seeking should be a company’s only objective function… managers should not be allowed to pursue moral goals at the expense of profitability” (Freeman, 1998). Stakeholder theorists affirm that organisations 18
  17. 17. must consider all parties’ interests that are affected by their actions as a matter of social responsibility. Decision-making should go beyond considering shareholders alone to include anyone who is or may be affected (Branco and Rodriguez, 2007). This stands in contrast to the classical view by asserting that “the goal of any company is or should be the flourishing of the company and all its principal stakeholders” (Werhane and Freeman, 1999). Stakeholders are divided into ‘primary’ and ‘secondary’, representing those that are integral to a business’ survival and those who are not respectively (Clarkson, 1995), and ‘mute’ and ‘absent’, representing groups such as the environment and future generations respectively (Capron, 2003). The latter present considerable challenges to Stakeholder Theory, as neither can be consulted or made recipients of a benefit scheme. In taking a stakeholder approach to management, it is then critical that the needs and impacts of stakeholders are prioritised and managed correctly. Mitchell et al. (1997) provide an approach to stakeholder identification and ranking based on a manager’s assessment of three factors, namely their power to influence the company, the legitimacy of the relationship with the company and the urgency of their claim on the company. Here many authors depart from the profit- maximisation classical view, and offer models that refocus stakeholder engagement in a way that provides broader benefits. One such example is Jensen (2001), who proposes ‘enlightened stakeholder theory’, where he argues that value cannot be maximised if any relevant stakeholder is overlooked or abused, and that long-term value can be achieved through a holistic view of stakeholder issues.
  18. 18. Wood (1991) suggests that at its core, CSR is an acknowledgement “that business and society are interwoven rather than distinct entities; therefore, society has certain expectations for appropriate business behaviour and outcomes.” Ultimately the point of difference between the two schools of thought is the relationship between ethics and enterprise. Freeman et al. (2004) refer to the ‘separation thesis’, arguing that values are not necessarily and explicitly a part of doing business. Detractors of this Institutional Theory Institutional theory emphasizes the role of social and cultural pressures imposed on organisations that influence organisational practices and structures (Scott, 1994). Taking it from a classicist viewpoint again, if the raison d’être for a company’s existence is the pursuit of profit and the maximisation of shareholder value, then a programme of CSR is extenuating view argue that businesses do not operate in isolation, and that any economic activity is “infused or embedded with ethical assumptions, implications, and overtones” (Carroll,2000). Carroll (1991) presents a pyramid of responsibilities (Fig 1.) that places economic responsibilities as the base upon which all other efforts are predicated and where philanthropy is the apex, however he points out that all efforts can only be achieved harmoniously and in synergy with the others. and unnecessary, unless it directly benefits the firm’s bottom line. Said differently, if a company can gain financially in ways that are irresponsible, then there is a sound argument within the classical view for doing so. Several lines of academic inquiry have been based on this hypothesis, finding that when companies are presented with opportunistic prospects that go against ethical values, they will most often do so. Fig.1 Carroll’s Pyramid of Responsibilities Economic Responsibilities Be profitable The foundation upon which others rest Legal Responsibilities Obey the law Play by the rules of the game Ethical Responsibilities Philanthropic Responsibilities Do what is right Protect the environment Be a good corporate citizen Improve quality of life 20
  19. 19. Research has shown extensively that financial incentives can be created by subverting quality standards, exploiting regulatory loopholes and separating lines of political control between the firm and its stakeholders, particularly employees and suppliers (Crouch & Streeck, 1997). There are countless examples of organisations that will go to extreme lengths in irresponsibility, including poisoning the environment, cheating customers, dehumanizing employees, releasing unsafe products, defrauding the receiver and many others (Hearit, 1995). On the opposite side of this coin is organisations that contribute extensively to the good of society through philanthropy, community development, outstanding corporate governance, superior employee welfare standards and environmental initiatives. The question this poses to academia is why this should be. In environments of equal opportunity, with the base objective of profit maximisation, why would one organisation go well beyond the remit of regulation to contribute, while others flaunt all ethical norms with no regard for the social impact? Research indicates that institutional behaviour varies widely from country to country (Maignan and Ralston, 2002), and even from city to city within the same country (Lambooy and Moulaert, 1996). That said, institutional researches have established a direct correlation between the way corporations treat their stakeholders and the institutional framework within which they exist (Hall and Soskice, 2001). There are several base factors, including the company’s overall financial status, the state of the economy and level of competition that all have a role to play in whether a corporation is likely to act responsibly or not (Campbell, 2007). Waddock and Graves (1997) showed that the better a company performs the more likely it is to engage in social responsible activities. This is particularly relevant in the case of Qatar’s oil and gas sector, where extensive profit is a given. Fligstein (1996) showed that when successful firms are seen engaging in positive action, there is a high probability of other organizations with ill-defined environments mimicking their behaviour. Perhaps the most powerful influencer of institutional transformation is the professional manager. Managers undergo formal training, gain insight and experience, and then take that with them through their career, importing new practices into an organizational environment (Edelman, 1990) and allowing for the spread of knowledge and practices (Abrahamson and Fombrun, 1994). When a practice such as CSR is seen as effective and essential in one organisation, the managers can symbiotically bring the same sense of legitimacy to the organisations that they then move on to (Dobbin and Sutton, 1998). In the global economy, this has larger implications, and could account for the rapid growth of CSR in geographic locations such as the Middle East, where the philosophical traditions that underpin CSR are not immediately apparent. 21
  20. 20. The CSR Spectrum Godfrey and Hatch (2006) offer a simplified model that presents CSR as the relationship between two polar extremes in academia: economics on the one hand, which focuses on the fiscal health of an organisation and profit as the overriding objective of business, and moral philosophy on the other, with its focus on social and ethical imperatives, and the wellbeing of society as its primary aim. The authors posit that all debates within the spectrum of CSR are a combination of elements from within these two schools of thought and how they relate to a business’ social obligations, and while some of the theories and models view economics and moral philosophy as opposing, others view them as complementary. Within this framework, Godfrey and Hatch devise an array of five categories under which prevailing models fall, illustrated in Table 2. CSR in the Oil & Gas Industry The oil and gas industries have emerged as significant champions of CSR, particularly since the mid-90s, where a number of crises coincided to catalyse the need for a revolution in the way oil multinationals approached their social images. Shell and BP were pioneers in this movement, responding to a barrage of public relations disasters that had positioned them as pariahs through a concerted effort by activists and governments to expose their wrongdoing (Frynas, 2010). The first of these incidents was the planned sinking of the Brent Spar oil storage facility in the North Sea. When the British government approved Shell’s application to dispose of the facility, the environmentalist organisation Greenpeace successfully launched a high-profile media campaign to prevent the plan going forward. For over two months, the Brent Spar issue dominated press in the UK and Europe, with footage of Greenpeace campaigners dodging water cannons and occupying the offshore rig. The issue sparked a massive boycott of Shell petrol stations in the UK and northern Europe, and an official objection from the German government. Ultimately, Shell reversed its decision to scuttle the Brent Spar, while standing by its assertion that this was the safest option for the environment and industrial health and safety standpoint (Rice & Owen, 1999). Shell also faced severe criticism in the same year for its handling of the Ogoni Tribe in Nigeria. Shell has been active in the Ogoni region since 1956. In a 15 year period leading up to 1991, over 2,900 oil spills of some 2.1 million barrels of oil were reported in Ogoniland. The result was that the once fertile land was no longer arable, and groundwater was contaminated with Benzene to 900 times WHO safe levels (UNEP, 2011). In 1990, Ken Saro-Wiwa, an activist leader of the Ogoni people, presented the government of Nigeria with The Ogoni Bill of Rights, asking for political autonomy for the Ogoni tribe and control of its lands. Protests against the laying of new pipelines resulted in military action from the government, where 2,000 Ogoni people were killed and 80,000 more displaced (Terminski, 2011). Shell withdrew from the troubled region in 1993, however as a response the Nigerian government executed Saro-Wiwa and eight others in 1995. This galvanised a global campaign by non-governmental activists that led to worldwide protests and boycotts. These incidents generated a major shift in social strategy in Shell. In 1996, the ‘Society’s Changing Expectations’ project was launched, which involved a worldwide audit of the company’s shareholders and their needs. Statements supporting human rights and 22
  21. 21. TYPE SHAREHOLDER CAPITALISM CAUSERELATED MARKETING STRATEGIC PHILANTHROPY STAKEHOLDER MANAGEMENT BUSINESS CITIZENSHIP Table2.TheCSRSpectrum PropertyRights Asproprietors, shareholdershave fullrightstothe earningsofan organisation.CSR isanunwarranted expensethat cannotbejustified. Socialinvestment hasapositive impactonthe company’sincome andistherefore justified Corporate property rightsformpartof thesocialcontract, andasaresult, thecompanyhasa socialresponsibility tofulfil Corporationsexist withinasocial constructthat compelsthem tocontribute tocommunity institutionsand upholdhuman rights. Aslongas shareholdersplay anactiverolein theexpenseCSR entails,thereisno violationoftheir rights Acompany contributesto societymost effectivelythrough thepursuitof profitandits naturaloutcome intermsofjobs, taxesandproduct Organisations benefitfrom contributing tosocial programmes throughgoodwill, customerloyalty andenhanced brandimage Acompany’s resourcescan contribute positivelytothe socialgood, andshouldbe obligatedto influencewhere theycan Asacorporate citizen,companies areobligatedto contributetothe socialgoodinthe broadestsense Organisationscan positivelyimpact societythrough pursuingboth profitandsocial causes Friedman,1970 Reich,1998 Grayetal.,1996 Margolis&Walsh, 2003 Logsdon&Wood, 2002 Buffett,1997 Ostas,2001 SocialWelfare NotableAuthors 23
  22. 22. sustainable development were added to the company’s business principles, and lines of engagement were opened with several non- governmental organisations (Frynas 2003). In 1996, BP was implicated in colluding with the Columbian government, paying millions of dollars and providing information to paramilitaries and the army about anti-oil activists, which led to severe punitive measures including assassinations, assaults and disappearances. While not as quick to react as Shell, there is evidence that the Columbian situation and an emerging age of scrutiny had fomented a change in direction. David Rice, a senior manager at BP, stated: “We’ve learned from our mistakes, not least because we’ve been challenged by NGOs. In Colombia we were accused of getting too close to the army and police in order to protect our operations. We listened, approached Human Rights Watch for advice, and then organised new security arrangements.” BP initiated a major overhaul of its stakeholder strategies, began engaging non-governmental organisations and began embracing CSR initiatives such as the United Nations Global Compact (Frynas, 2011). In the US, Exxon’s defining moment came with the infamous Exxon Valdez oil spill off Alaska in 1989, where over 11 million barrels of oil devastated hundreds of miles of shoreline. The spill ultimately cost the company US$4.5 billion in clean-up costs and legal settlements. The organisation also met with rising criticism over its policies on climate change, beginning in the mid-1990s. However, rather than engaging critics, Exxon spent millions promoting alternative explanations for rising global temperatures and lobbying lawmakers. The lack of willingness to bend to environmental critics can be explained with stakeholder theory. The stakeholders it faced simply lacked the power to meaningfully shift public opinion, while Exxon’s internal capacity to shape the debate won over in a cost-benefit analysis (Frynas, 2011). Although stakeholder theory does explain the strategies held by Shell, BP, Exxon and Chevron at the turn of the Millennium, it does not explain the evolution of CSR within the four since. Today, all four feature very similar commitments to social investment, including community development projects, emission reductions, revenues transparency and corporate governance. All four organisations have put signatures to the Voluntary Principles on Security and Human Rights and the Extractive Industries Transparency Initiative (Frynas, 2011). The global change is better explained by institutional isomorphism, whereby CSR policies have become generalised through competitive forces, mimicry and the shift of senior managers from one organisation to another (Delmas and Toffel, 2004). Studies have indicated that organisations are initially shaped by institutional pressures within their local sphere, and this shapes their responses to the issues that confront them. However, as these issues are elevated across the industry, the mechanisms for dealing with those issues become more sophisticated and ultimately are institutionalised across the sector and adopted uniformly (Levy and Kolk, 2002). This goes some way to explaining why Exxon’s leadership, which has never publicly acknowledged the existence of global warming, have recently begun to discuss the merits of a cap-and-trade carbon system versus a flat carbon tax, and even entering into dialogue with environmental activists (Colvin, 2007). The oil and gas industry, following the above 24
  23. 23. scandals and more recent examples such as the Deepwater Horizon spill in the Gulf of Mexico, has attracted a convergence of activist attention from a range of disparate causes that can be associated with a larger picture of anti-globalisation struggle. Rather than simply a result of the growth or improved organisation of these groups, it is instead a case of ‘the more the public domain is privatised, the more that the private is politicised and becomes a matter of public concern’ (Shamir, 2005). This expansion of ‘civil regulation’ represents what some authors refer to as a ‘third way’, where activists and NGOs, wary of what they view as state failure, have looked to shape their actions through softer channels. These include publicising and denouncing malfeasance, imposing boycotts, legal action both in international and national courts, utilising complaints procedures available in codes of practice or CSR guidelines, consumer rights advocacy and collective bargaining (Utting and Ives, 2006). Oil companies have responded, developing broad based strategies to build reputations and shape the dialogue in their favour. This has taken the form of global advertising and PR campaigns, as well as substantive changes to codes of conduct, environmental management systems, engagement with NGOs, investing in recycling and renewables, involvement in community development projects and the publishing of sustainability reports (Utting and Ives, 2006). While there has been a considerable shift in all the multinational oil companies towards embracing CSR, the movement has not been identical. One explanation is the influence that such strategies have on unlocking access to new oil and gas fields. As little as a decade ago, the opportunities for multinational oil companies
  24. 24. were extensive, with exploration projects underway in all corners of the world. Today, the picture has changed. Nationalisation, depletion, regulation and restriction of access have made the prospects for global oil companies far narrower (Frynas, 2011). There is evidence that a positive CSR record can play a role in the awarding of oil contracts. Greater emphasis is now being placed on multinational oil companies to go beyond their basic role of developing economic growth as concepts such as resource curse gain international status. Today, oil companies are expected to alleviate local poverty, develop community infrastructure such as schools and hospitals and make meaningful environmental remediation through all project stages. The capacity and willingness to invest in these areas are largely attributed to Chevron’s award of the ‘Block 0’ project in Angola, the countries more profitable oil asset (Wiig and Kolstad, 2011). The costs of these investments have grown considerably over the course of the decade. In 2001, it was estimated the $500 million was spent on local social investment by all oil, gas and mining companies globally. By 2006, the same outlay was made by Shell, BP, Exxon and Chevron alone (Frynas, 2011). This pales into insignificance when contrasted with the investments made by national oil companies. Venezuela’s PDVSA spent $13.3 billion on social investment in 2006, double that of its spending a year earlier, with Saudi Arabia’s Aramco and Russia’s Gazprom also spending in the billions. These investments come as a direct result of governmental orders, where the organisations are viewed as an extension of the bureaucracy. Ultimately, with all global oil and gas companies investing significantly in social schemes, the nature of the organisations have been fundamentally transformed. Today, as well as engaging in the specialised field of hydrocarbons, oil and gas companies have taken on a quasi-developmental nature, requiring entirely new skill sets and management techniques (Frynas, 2011). Qatar in Context Qatar’s growth and development has had few equivalents in recent times, and cannot be explained merely by the abundance of hydrocarbon resources that the nation is blessed with. A tiny peninsula on the Arabian Gulf with a landmass of some 11,000 square kilometres, Qatar’s success has largely been due to the steady hand of its leadership and the visionary development of its liquid natural gas (LNG) reserves. Despite seeming preordained, the unlocking of the North Field, the world largest gas reservoir, took three decades to profitably accomplish (Ibrahim & Harrigan, 2012) Today Qatar is the world’s leading exporter of LNG, supplying an international network of end users with 77 million tonnes of capacity annually. Qatar’s economy has grown rapidly over the past three years (2009: 12%, 2010: 14%, 2011: 18.7%) (see Fig 2.), doubled in size between 2006 and 2010; today ranking Qatar as the world’s fastest growing economy. Qatar’s leadership have been careful to learn from the mistakes of their neighbours, ensuring that the wealth accumulated from hydrocarbons has been appropriately distributed among the nation’s citizens, with higher living standards and increased consumer spending a key feature of Qatari life. Despite reserves of natural gas that are expected to last for more than a century, Qatar’s political establishment have moved quickly to develop a diversified knowledge-based 26
  25. 25. economy and a civil infrastructure on a par with the world’s leading nations. In 1994, Qatar Foundation was developed to broaden the nation’s reach in education, research, technology and science. Qatar Investment Authority (QIA) was established in 2005 to manage state investment, which today spans the globe in diverse asset classes that includes real estate, securities, luxury brands and the arts. Institutions such as Qatar Airways, Al Jazeera Media Network, Qatar Education City, Qatar Science Technology Park, ICTQatar and Qatar Financial Centre further underscore the broad-based development underway in the country. Qatar has a population estimated at 1,9 million, which has grown at 5% a year for the past 5 years, making it the world’s fastest growing nation (See Fig 3.), predominantly the result of migrant labour. Qatari nationals account for only 14% of the total population, with 61% of the population men aged between 20 and 49 years old. The rapidly expanding population brought with it a slew of challenges for the nation. By 2007, Qatari citizens expressed distress at the dilution of the culture and traditions. Water resources, electricity, urban infrastructure and the administrative capacities of government were stretched to breaking. Inflation soared to 15% early in 2008 and public service delivery failed to keep up with the rising demand. Acknowledging the need for a response to the unprecedented rate of change, the Emir of Qatar, HH Sheikh Hamad Bin Khalifa Al Thani, appointed the General Secretariat for Development Planning (GSDP) in July 2006. The Secretariat was briefed to define the path forward that Qatar would take, with a framework for holistic development that would be to the benefit of all the nation’s residents. 0% 6% 9% 12% 15% 3% Qatar NJA LATAM Turkey Global Russia USA Saudi Kuwait UAE Fig.2 Qatar’s Economic Growth 27
  26. 26. Qatar National Vision 2030 Virtually all nations within the developing world have committed to sustainable practices in some form or another. Major global sustainability forums such as Rio+20 and Cop18, held this year in Doha, provide a platform for leaders to debate, provide solutions and sign accords towards this end. Few countries however, have managed to integrate sustainability as fundamentally and broadly as Qatar has into the constitutional framework of the nation. The unveiling of the Qatar National Vision 2030 (QNV2030) in November 2008 was a landmark moment in the nation’s history. Based on Qatar’s permanent constitution, which was ratified in 2005, the QNV2030 was developed within a comprehensive stakeholder engagement process between 2005 and 2007. It lays out a clear set of national values, goals and ambitions, defining a framework for sustainable development. The Qatar National Vision identifies five main challenges that the nation must balance to remain true to its values: • Modernisation and preservation of traditions • The needs of this generation and the needs of future generations • Managed growth and uncontrolled expansion • The size and the quality of the expatriate labour force and the selected path of development • Economic growth, social development and environmental management The Vision describes four interdependent pillars that form the basis of this sustainability, namely: 0 1.0 1.5 2.0 2.5 0.5 1981 1988 1995 2002 2009 2016 Fig.3 Qatar’s Population Growth (millions) 28
  27. 27. • Human Development - development of all its people to enable them to sustain a prosperous society • Social Development - development of a just and caring society based on high moral standards, and capable of playing a significant role in the global partnership for development • Economic Development - development of a competitive and diversified economy capable of meeting the needs of, and securing a high standard of living for, all its people both for the present and for the future • Environmental Development - management of the environment such that there is harmony between economic growth, social development and environmental protection Beneath each of the four pillars, a set of desired outcomes is described: Human Development • An educated population • A healthy population: physically and mentally • A capable and motivated workforce Social Development • Social care and protection • A sound social structure • International cooperation Economic Development • Sound economic management • Responsible exploitation of oil and gas • Suitable economic diversification Environmental Development • A balance between development needs and protecting the environment In an address to Rio20+, the Secretary General of the QNV2030 committee, Saleh Al-Nabit, stated: “Qatar’s development is being carried out with responsibility and respect, balancing the needs of economic growth and social development with the conditions for environmental protection, ensuring the country is on a pathway for sustainable development.” Qatar National Development Strategy 2011-2016 A roadmap for the achievement of the QNV2030 was launched in March 2011. The National Development Strategy 2011-2016 (NDS) delivered a course of action with clear targets, milestones and mandates for each governmental ministry. Qatar’s NDS is a plan of action that aligns national growth and prosperity to the reality of environmental limitations. It prioritises national development projects and initiatives, and provides targets for advancing the nation towards the objectives of QNV2030. The formation of the Supreme Committee for Development Planning in 2011 provided the oversight needed for the sweeping changes that were required to take place. Processes were implemented align and coordinate government in its entirety, incentive schemes and controls were developed to ensure optimal efficiency was achieved, and a budget assigned to fund each action point (Ibrahim and Harrigan, 2012). A simplified version of the sustainable development framework developed by the NDS is presented in Fig. 4 The NDS makes direct reference to Qatar’s hydrocarbon sector, stating that it: 30
  28. 28. “…provides a means to invest in world- class infrastructure; build efficient delivery mechanisms for public services, especially health and education; create a highly skilled and productive labour force; and support the development of entrepreneurship and innovation capabilities. These resources also provide a means to invest in new technologies and frontier scientific research and development. It is thus anticipated that these investments will form a strong foundation for Qatar’s long term sustainable development vision.” It goes on to state: “Where hydrocarbon rents are shared with private investors, the government will seek to ensure that these rents are compensated by other benefits that flow to the country, such as the acquisition of technology, infrastructure and knowledge and skills.” What is apparent in the QNV2030 and NDS is a commitment to sustainability that is enshrined at the highest level. These concepts essentially represent a constitutional commitment to the development of Qatar that goes beyond the public sector. It sets standards and expectations for all sectors to work towards fulfilling the broader vision through a tangible and workable action programme based on consecutive five year windows. As the cornerstone of the economy, the hydrocarbon sector is given a specific mandate that extends well beyond the pursuit of economic ends. Whether quasi-governmental or private interest, oil and gas companies are obligated to contribute to Qatar’s realization of QNV2030 through initiatives of infrastructure development, public services, healthcare, education, environmental protection, community building and many more.
  29. 29. Fig.4 Themes and sub-themes selected for analysis of Sustainable Development THEME Economics Social Environment Partnerships SUB-THEME Sustained Economic Prosperity Sound Social Development Strengthened International Coopoeration Cleaner water and sustainable use Cleaner air and effective climate change response Nature and heritage sustainably managed Reduced waste, more recycling and efficient use Sustainable living environment Governance for effective environmental management Expanding the productive base Enhancing economic stability and efficiency Building a diversified economy Building global partnerships for development Advancing human development Nurturing a healthy population Building knowledge and skills Fostering a capable and motivated workforce Encouraging sports Encouraging family cohesion Ensuring public safety and security Promoting sustainable water consumption Reducing greenhouse gasses Reducing air pollution Valuing biodiversity Maintaining fisheries Preserving coastal areas Improving waste management Managing urbanisation Improving governance and increasing awareness 32
  30. 30. Research Philosophy In linking research and theoretical considerations, two primary approaches are available (Teddlie and Tashakkori, 2008). Deductive reasoning is the most common stance applied in linking theory and research, whereby a developed theory is subjected to specific testing to measure its fallibility (Burney, 2008). Most commonly, five steps are characteristic of the deductive approach, namely inferring a hypotheses, expressing the hypothesis in practical terms, testing the hypotheses, examining the outcomes, and finally confirming the hypothesis or explaining the need for its modification (Saunders et al, 2003). In inductive reasoning, the contrary approach is taken, where the hypothesis emerges from observations that result from the research, and generalised theories are shaped by a larger body of work (Douglas, 2003). Two epistemological positions dominate the formation of business theory: positivism and interpretivism (Bryman and Bell, 2007). Positivism promotes according the same methods applied in the natural sciences to develop insights in the social sciences, using deduction to develop hypotheses that can then be tested rigorously. Interpretivism draws on the existing body of knowledge in the prevailing literature to develop the understanding inductively, based on a consensus that the social sciences and natural sciences are fundamentally dissimilar (Eriksson, 2008). Although there are exceptions, the deductive approach to research is most commonly linked to quantitative analysis, while the inductive approach lends itself to qualitative outcomes. For the purposes of this dissertation, the emphasis is strongly skewed towards qualitative analysis, with inferences drawn from the perceptions of professionals working within the oil and gas industries contrasted with the available data from sustainability publications. Some deductive analysis is included in an attempt to strengthen the findings, with Bryman and Bell (2007) stating that this approach can add weight to the strengths of the data collection and analysis techniques. Several of the approaches described by Saunders et al. (2003) have been incorporated into this research, including cross-sectional, archival research, ethnography and survey. Survey is generally associated with the deductive approach, allowing a large amount of data to be collected economically and from a large sample of the population. Ethnology describes and explains the world that research subjects inhabit in the way that they would describe it. Archival research makes use of existing documents as the principal source of research. Cross sectional research studies a particular phenomenon at a particular time (Saunders et al., 2003). It is clear that this particular combination of approaches may create conflicts between the inductive approaches, however as Saunders (2003) states: “what matters is not the label that is attached to the exact strategy, but whether it is suitable for the specific research questions and objectives” RESEARCH METHODOLOGY 33
  31. 31. Research Approach This analysis is based on two-pronged approach to assessing the motivations, implementation and effectiveness of CSR programmes among oil and gas companies in Qatar. The first aspect utilised a questionnaire-survey circulated to CSR professionals in Qatar’s oil and gas sector. The second aspect is based on an analysis of existing CSR reports on CSR and sustainability projects undertaken by the same companies in Qatar. The research aimed to: • Assess the motivators and business drivers behind CSR initiatives within Qatar’s oil and gas organisations • To identify or ‘map’ the extent of these investments • To describe the current role of the oil and gas sector in Qatar’s CSR activities • To ascertain to what extent government and its vision plays in driving CSR programmes • To offer a superficial assessment of the success of these initiative in meeting Qatar’s current social, economic, environmental and human development needs Survey Initially, a face-to-face interview methodology was preferred, however due to the challenges presented by internal security measures within the target companies, which prevents non-associated individuals from entering oil and gas facilities, and their geographical distribution across the country, as well as some respondents requesting an email survey due to time convenience, a web-based survey was selected to reach the broadest possible audience. Several benefits of web survey are reflected in the literature, including significantly lower costs, less burden in returning a survey for respondents, greater response speed and a higher response rate (Kwak and Radler, 2002). The self-completion questionnaire was chosen for its appropriateness to a cross-sectional study (Bryman and Bell, 2007) Overall, 42 individuals were emailed based on a mailing list. In total, 9 of those executives responded, representing a 21.4% response rate. Of the 15 companies that were targeted (See Appendix 2), 6 companies were represented, with one respondent opting not to reveal his or her employer, representing a 40% response rate. Respondents were middle and senior management executives working directly or indirectly in CSR, predominantly in corporate and internal communications, public relations or specific CSR or corporate citizenship roles. Email addresses were obtained via a CSR mailing list provided by a CSR executive in one of the target companies, which was supplemented by some of the respondents themselves, as well as via miscellaneous connections in the market. Respondents were assured of the confidentiality of the results and that the survey was for purely academic purposes. The questionnaire was divided into five sections. The first section asked demographic information and some qualifying questions. The second section gauged each respondents personal CSR perspectives, including their definition of CSR, where they fell on the CSR spectrum and their view on CSR in Qatar. The third section looked at specifics about each company’s CSR policies. The fourth aimed to gain insight into the perceived motivations for the CSR programmes, and the fifth measured the perceived effectiveness of its implementation. 34
  32. 32. Archival Data Analysis An extensive review of existing literature was undertaken, focusing on 5 oil and gas companies with significant CSR programmes in Qatar. Three national companies and two multinational companies were selected, these were: Qatar Petroleum, RasGas and Qatargas as national companies and ExxonMobil and Maersk Oil as international companies. It should be noted that the multinational companies in Qatar are not independently owned. As per Qatar’s corporate law, all private sector companies with the country are majority owned by Qatari interests, and as a result, the multinational companies within this study are generally part of joint ventures with the national companies. As a result, many of the CSR initiatives are undertaken as partnerships and there are several synergies and duplications between national and multinational concerns. This aspect of the study involved research archival publications of, inter alia, corporate websites, annual reports and press releases, however the majority of the focus was placed on specific sustainability and corporate citizenship reports published by the companies themselves and by Qatar’s Ministry of Energy and Industry under the Sustainable Development Industry (SDI) Reporting Initiative. The goal within this phase was to develop an overview of the CSR activities undertaken in the oil and gas sector, and to develop profiles of the organisations, their sustainability focus, and the means of implementation. It was during this process and the undertaking of the literary review for this dissertation that the questionnaire for the first aspect of the research was developed. Elements of the diagnostic tools developed by Dr Michael Warner (World Bank, 2006) for the Overseas Development Institute were utilised in this process. Similar study methodologies have been utilised in several national markets, including ‘Corporate Social Responsibility, Public Policy And the Oil Industry in Angola’ (Ettenborough and Shine, 2007). Hypothesis There are a number of central hypotheses that the above research is aimed at confirming or invalidating. The first is that the State of Qatar and its National Vision for 2030 is the primary driver of CSR and sustainability in Qatar. The second is that competitive forces between oil and gas companies and institutional isomorphism also have a considerable role to play in shaping the national social investment landscape. The research also aims to place Qatar’s CSR activities relative to Godfrey and Hatch’s CSR Spectrum and in light of the seven prevailing theories of CSR presented earlier. Questionnaire Development The following describes the rationale behind the questionnaire developed for the empirical data phase of the research. The questionnaire was divided into five sections, namely demographic, personal perspective, company policy, motivations and implementation. Within demographic information, name, age and gender information was omitted as they hold little or no relevance to the findings. Company names were requested to cross-check against the list of targeted organisations, however in the briefing phase, potential respondents were assured that findings would not be tied to employer as this would likely have prejudiced decisions to take part in the survey or biased the results. Job titles, years of experience, direct or indirect exposure to CSR work and personal knowledge assessment questions were added to qualify respondents. 35
  33. 33. Within the personal perspective section, respondents were asked to offer their own definition of CSR. This was then contrasted with questions on CSR’s financial and social roles, which utilised Godfrey and Hatch’s CSR spectrum to ascertain where CSR professionals in Qatar are positioned. Further questions on CSR’s growth globally and relatively within Qatar aim to triangulate perceptions with data collected in the second part of the study – the review of archival publications. Questions in the company policy section aim to ascertain where the emphasis of CSR in lies within these organisations. Respondents were asked to rank their companies focus on social, environmental, economic and corporate governance initiatives. They were then asked to identify which stakeholder groups they believed were most influential. Additional questions looked at the clarity of strategy, impact on employees perceptions, and whether CSR increased or reduced operational cost. On motivations, government, the Qatar National Vision, competitors and other stakeholder influences are compared. The influence of consultants and the global headquarters is also questioned. Within implementation, the perceived effectiveness of implementation and effectiveness of addressing national needs are ranked on a Likert Scale. The question of whether key personnel or organisational strategy drives CSR is posed. Respondents are asked to judge whether brand equity or initiative delivery is more important to the company, and finally how widely the benefits of the CSR programmes reach. Challenges & Limitations The sample of professionals working in CSR in a specific sector in a country the size of Qatar is a narrow one, and even within this scope, the number of respondents to this survey is limited. Despite the author’s best efforts, a majority representation of oil and companies in Qatar could not be obtained. Furthermore, with the limited number of responses to the survey, the results should be considered tentative and not necessarily reflective of the prevailing market environment. Further study and analysis on a broader sample is required to achieve an accurate perspective. 36
  34. 34. FINDINGS & RESULTS Survey Demographics As experienced professionals working in the oil and gas sector in Qatar, all nine respondents were well qualified for the survey and none were redacted. Seven of the 9 respondents work directly in CSR, while 2 work in adjacent roles. The average level of experience across the sample was 6 years, with 10 years as the highest and 11 months given as the lowest. More than three quarters of the sample rated their knowledge as ‘good’, with 1 given as ‘reasonable’ and 1 as ‘excellent’. Personal Perspective Six of the nine offered definitions of CSR in their own words: • National and commercial companies has a duty towards the surrounding society in terms of social development, education, health, safety and environment (sic) • It is the ‘conscious’ of a business with the aim to uphold what it stands for by making socio-economic contributions to the community it operates in and the stakeholders it impacts. Encouraging best practices and contributions to the society. (sic) • Since I am in the energy industry I feel that our company implements an initiative to assess and take responsibility for our and our end user’s effects on the surrounding environment in the northern region of Qatar and impact on social welfare. • Support the community and environment to protect it from the impact of our operations. • Shared value. Managing a profitable and sustainable business that makes a positive economic, social and environmental contribution to the society in which it operates. With regards to the organisation’s CSR’s social role, the following responses were given (see Fig. 5): In contrast, CSR’s financial role returned the following results (see Fig. 6). On the question of the benefits of CSR, respondents were asked to select up to three of a list of benefits. Reputation received the highest response count, with 78%. Helping a company meet the ethical standards required by customers was second highest with 56%. ‘Making a company more attractive to employees’ and ‘developing better relationships with government’ both received 44%, while higher revenues received no votes. 38
  35. 35. A company best contributes to society through the pursuit of profit, as well as jobs, taxes and product Shareholders have full rights to the earnings of an organisation. CSR is an expense that cannot .be justified A company’s resources can be used to contribute positively to society, and a company should be obligated to contribute in its areas of specialization As a corporate citizen, companies are obligated to contribute to the social good in the broadest sense Corporations can do more than governments to change society for the better, and have a duty to spend and make the world a better place Organisations can positively impact society through pursuing both profit and social causes Businesses are part of society, and have a financial responsibility to the people they impact in their day-to-day business Fig.5 CSR’s Social Role Fig.6 CSR’s Financial Role 39
  36. 36. Seven of the nine respondents consider CSR a growing concern for oil and gas companies, while two found it to be stable. Similarly, seven of the nine found CSR to have a major influence on improving reputation with government, while two saw it as a minor influence. Five of the nine stated that there is more emphasis on CSR in Qatar than abroad, while four regard it as equal. Organisational Policy In the section on the respective company’s CSR policies, corporate governance and environmental initiatives ranked equal first place (see Fig 7.). In terms of stakeholder groups, respondents were asked to rank three as highest priority. Employees were favoured by some margin, however beyond that the selections were difficult to critique (see Fig. 8). Eight of the nine respondents testified that their organisations had clear CSR strategies, while one found to the contrary. Three descriptions of company CSR philosophies were offered: • We support the Qatari Social and educational activities (sic) • Cintrubute in areas that the company has expertise in. Providing value adding and sustainable contributions rather than random spending. (sic) • The Ras Laffan Community Outreach Programme (RLC-COP) has been created to serve the neighbouring communities located in the northern region of Qatar. RLC-COP is responsible to build a respectful, trust based partnership between the industry 0 2 3 4 5 6 1 Corporate Governance Environmental Social Economic Fig.7 Ranking of Emphasis 1 2 3 4 41
  37. 37. and community and manage meaningful relationships with the community and stakeholder expectations. RLC-COP conducts routine and non-routine events and participates in select national and international events where the community outreach has relevance. Through these events, the RLC-COP engages the community at large by highlighting its activities and sustainable initiatives. Definitive responses were delivered on the question of whether CSR impacts the organisations and the employee perception of it, with 89% and 78% finding for the affirmative respectively. Less decisive was the question of operational cost – 56% believe that CSR increases costs, 22% believed the opposite and 22% were uncertain. Motivations for CSR As expected, the government and the Qatar National Vision ranked high among the motivators of CSR in Qatar, with 44% ranking government as the greatest influence and 44% suggesting it was a major influence (Fig. 9). The National Vision performed even more strongly, with 78% ranking it as the greatest influence and the balance viewing it as a major influence (Fig. 10). Three respondents indicated the consequences of not meeting this stakeholder’s expectations: • Bad performance • Quite serious consequences • Impact on reputation as a responsible and reliable business partner Competitive forces, while ranked at a lower level of emphasis, still feature strongly among the 0 4 6 8 2 Employees Customers or clients Local Communities Government NGOs Media Opinion Leaders Suppliers Board of Directors Shareholders Fig.8 Stakeholder Ranking 42
  38. 38. motivations, with even billing at 44% among ‘major’ and ‘minor’ influences (Fig. 11). Among the most influential stakeholders, again government was the clear leader (67%), with competition ranked second (44%) (Fig. 12). Outside consulting firms, while influential in oil and gas sector, are seen to be approximately as influential as the firm’s CSR staff. Among Implementation Seven of the eight remaining respondents believed that their CSR activities were ‘quite effective’ in their implementation, with one opting not to offer an opinion. Interestingly, none of the respondents believed that the company was more concerned with reputation than effective implementation. 63% found that multinational respondents, the global head office was viewed as somewhat more influential than the local office. It should be noted however that at least four of the respondent work for national oil and gas companies, while only 2 selected ‘does not apply’, hence this result should be considered suspect. companies were equally concerned with image and implementation, while the balance believed that delivering effectively was the primary goal (Fig. 13) Results relating to an individual manager’s role in implementing CSR were inconclusive. Two of the respondents believed that key people were the key drivers, while the organisation and ‘both equally’ were given 3 votes each. Not Sure The greatest influence A major influence Fig.9 State of Qatar’s Influence 43
  39. 39. Three respondents offered insights into how their CSR programmes are developed: • Monitoring social development events & receiving sponsorship events Setting plan for CSR participation within budget Having Management approval Contacting the social representative Deciding upon the elements of sponsorship Review and assessment of the results • Sustainable value adding projects that are linked to the objective of QNV2030 • Through brainstorming sessions with our partners and CSR team members. The greatest influence A major influence A major influence A minor influence Not sure Fig.10 Qatar National Vision’s Influence Fig.11 Competitor Influence 44
  40. 40. 0 4 6 8 2 Government Business System Company Values Power Relations Expat Influence Social Network NGOs Globalisation Consultants Competition Fig.12 Most Influential Stakeholders Fig.13 Company Reputation VS CSR Objective Both equally important CSR objectives more important 45
  41. 41. The wider community Only the communities we impact Only internally Not sure 0 1 2 3 4 5 6 Fig.14 CSR Community Target 25% of the respondents believe that CSR programmes are ‘extremely effective’ in addressing Qatar’s needs, while 75% believe this to be ‘quite effective’. Five of the eight respondents stated that their CSR programmes target the wider community, while three suggested it only touched the communities that their business activities impact (Fig. 14). Regulation All CSR reporting in Qatar is subject to regulation by the HSE Regulations & Enforcement Directorate (hereafter: The Directorate). The Directorate was created by the Minister of Energy & Industry in 2005. The Directorate falls under the auspices of Qatar Petroleum and currently has 60 full time staff. The archival study compares and contrasts a wide range of published data on CSR, corporate citizenship and sustainability initiatives from five oil and gas companies (Qatar Petroleum, Qatargas, RasGas, ExxonMobil and Maersk Oil) as well as governmental agencies. As the largest organisations in terms of market share in Qatar, this sample is representative of the sector as a whole. An exhaustive list of the publications studied can be seen in Appendix 4. According to The Directorate, its goals are to: “…deliver effective and efficient regulation and enforcement of the petroleum industry in the State of Qatar as well as to maintain and improve standards of health, safety and environmental (HSE) performance and to assure that the HSE risks are appropriately managed in both the short and long- term.” (HSE Directorate Website, 2013) 46
  42. 42. According to The Directorate, its ambition is to become a single regulatory body, to ensure that HSE risk is managed in accordance with global best practice. As part of its mandate, The Directorate responsible for enforcing the sector’s Sustainable Development Industry Reporting (SDIR) Programme, which obligates all companies within the oil and gas sector to report sustainable development activities in accordance with it reporting guidelines (hereafter: The Guidelines). The following is included in The Guideline’s introductory statement: “The State of Qatar considers the interdependent and mutually reinforcing pillars mainly environmental stewardship, economic growth, social progress and human development together with responsible governance as being essential part of sustainable development of Energy and Industry Sector” Within the scope of the guideline, all petroleum companies are obligated to publish: • A Sustainability Report – Comprehensive reporting on the sustainability indicators of the individual companies’ operations in Qatar • A Fact sheet – with information on the company’s focal point for sustainable development • Sustainability Strategy and indicators - Information on the company’s Sustainable Development Strategy (SDS) or equivalent and information on indicators for sustainable development • Submission of case studies (optional) – Case study of a successful sustainable development initiative, programme or strategy The Guidelines require strict adherence to content and structure. Three groups of sustainability indicators are required, namely: • Environmental indicators, which incorporates climate change and energy ecosystem services and local environmental impact • Health and Safety indicators, which includes workforce protection, product health, safety and environmental risks, and process safety and asset integrity • Social and economic indicators, including community and society, local content, human rights, business ethics and transparency and labour practices In framing the sustainability aspects of the guideline, sustainability is represented in the form of a Venn Diagram (Fig. 15), followed by an explanation of the four pillars of the Qatar National Vision 2030. Throughout The Directorate’s publications, references to the National Development Strategy 2011-2016 and the National Vision abound and form the basis for all strategy, reporting, assessment and awards undertaken by the Directorate, and in turn sets the expectations and reflects in the strategies of all oil and gas companies within its stead. 47
  43. 43. Fig.15 Sustainability Venn Diagram Environmental Social Economic A viable natural environment Nurturing community Sustainable development Sufficient economy Sustainable economic development Sustainable natural built environment Equitable social environment Regulation Every oil and gas company within Qatar is obligated (as of 2012) to publish a sustainability report annually within The Directorates SDIR programme. This is supplemented by a generalised sustainability report published by The Directorate in association with the Ministry of Industry and Energy, which has been in effect since 2010. Participation in reporting increased from 17 companies in 2010 to 33 companies in 2011, which at time of writing was the latest edition. All five of the companies that are the focus of this section of the research were invited to and participated in the SDIR. Within the 2011 report, the following decisions were announced by The Directorate: • Make the scheme for the next reporting period mandatory for all the operators within the sector. • All operators to comprehensively report their HSE and SD performance and evolve a 5-year strategy that incorporates continual improvement in this regard. • The report shall be issued each year to the HSE Regulations and Enforcement Directorate who will have the responsibility to produce the Annual SD Report reviewing the overall sector performance to [the Chairman] (Qatar Energy and Industry Sustainability Report, 2011) 48
  44. 44. The opening statement from the Chairman includes a mandate that all sustainability reports must support the Qatar National Vision 2030 and the National Development Strategy 2011- 2016. This is reiterated in the statements of the Director General of The Directorate, who states: “Notable improvements in this year’s report include… explicit alignment of sector level performance measures with the objectives and measures of the Qatar National Vision (QNV) 2030 and National Development Strategy (NDS) 2011-2016, thereby quantifiably capturing the contribution of the sector towards these national strategies.” (Qatar Energy and Industry Sustainability Report, 2011) The report places greatest emphasis on two issues. The first is the reporting on specific safety standards for employees and contractors, the second is climate change approach and performance. Along with the decision to make reporting mandatory, there is significant evidence within this report of the expanding scope and role that The Directorate will play in sustainability reporting, including: • Development of an IT portal for online sharing of data and best practices. • Creation of a sector-wide sustainable development policy and strategy. • Production of additional guidance on the reporting priority areas for the 2012 reporting cycle (workforce health and well-being, and energy and water management). The SDIR programme framework includes six priority areas and 31 performance indicators. Table 3 provides a snapshot of the 6 priority areas and 11 related indicators:
  45. 45. Sector Performance Within this section of the research, an overview of each of the target company’s initiatives is provided as a means of analysing the social investment to ascertain some of the potential motivations. As can be seen in the sections above, governmental expectations are high and broad-based, however some insight can be gained through scrutiny of specific initiatives, predominantly through speculation, as to what might motivate these programmes. As a point of focus, the priority areas given by the SDIR in Table 4 above will be used to compare and contrast the efforts of each company. Climate Change The Qatar National Vision (2008) states that Qatar will provide “support for international efforts to mitigate the effects of climate change” and take “a proactive and significant regional role in assessing the impact of climate change and mitigating its negative impacts, especially on countries of the Gulf”. Qatar’s oil and gas sector are responsible for producing 49.5% of the nation’s carbon emissions. The SDIR has formulated a strategy to counter this, which includes standardising the measurement and reporting of greenhouse gas (GHG) emissions, flaring reduction, energy efficiency, and carbon capture, storage, recovery and reuse. PRIORITY AREA PERFORMANCE INDICATOR Climate change and energy Total GHG Emissions (Tonnes Co2 e) Total Flaring (MMSCM) Environment Total water consumed (million m3 ) Significant spills (>one barrel) Health & Safety Employee fatalities Contractor fatalities Workforce Workforce size % Qatarisation Society Total social investment budget Economic Performance Revenue (USD) Number of new jobs created Table 3. SDIR Priorities and Indicators 50
  46. 46. All five target companies adopted a standardised measure for GHG emissions, introduced by Qatar Petroleum (QP), which is based on EU standards and IPCC guidelines. The measure brought companies in line with international regulations and ensures verification of reports by a qualified third party. In January 2009, QP signed a three-year partnership agreement with the World Bank’s Global Gas Flaring Reduction (GGFR) initiative on behalf of the oil and gas sector. Qatar was the first Gulf country to do so. In 2011, the QP commenced an initiative to compile a Greenhouse Gas (GHG) emissions inventory, to be launched in 2013 and incorporating all QP business units. It aims to: • Develop an annual emission inventory • Assess GHG emission reduction opportunities • Provide reliable emission data for climate change policy As part of this project, a Guideline for Monitoring & Reporting of Greenhouse Gas & Air Quality Criteria Pollutant Emissions (GMRE) was endorsed in February 2011.The company is also collaborating with other industry players and the Imperial College London in a $70-million 10-year project to provide the foundation for that can be applied globally. In the area of energy efficiency, Maersk Oil’s award-winning Al-Shaheen gas field used highly efficient burners, as well as integrating a multi- dimensional approach to flaring to produce considerably lower emissions. Flaring today has been reduced less than 10% of its 2007 levels, and less than 50% of GHG emissions over the same period. ExxonMobil focuses on increasing energy efficiency in the short term; implementing emission-reducing technologies in the near and medium term; and developing breakthrough technologies for the long term, and supports both RasGas and Qatargas in reducing flaring and improving energy efficiency. The company is also supporting QP in the engineering phase of a project that will reduce energy usage by 20%. ExxonMobil has several large scale global projects in the GHG and energy efficiency fields that are being implemented in Qatar, including streamlined product design, advanced energy generation plants, Controlled Freeze Zone technology and algae-based biofuels. In 2011, RasGas completed a 5-year flaring minimisation programme - the first of its kind in Qatar. In 2005, RasGas was flaring 1.37% of its intake gas. As a result of the measures, flaring had been reduced to only 0.47 per cent of gas by 2010, an overall reduction of 66% over the five years (RasGas, 2011). Both RasGas and Qatargas have incorporated larger vessels in their shipping fleets fitted with reliquefaction facilities, reducing the number of voyages required and emission levels. New hull coatings have been used to cut fuel consumption. RasGas has developed a GHG policy (Fig. 16) which aims to reduce emissions across its entire value chain, which will be implemented from 2012. Qatargas managed to reduce the total volume of gas flared by 24% between 2010 and 2011, despite gas production increasing by 65%, while flaring intensity was reduced by 54%, largely thanks to a multi-disciplinary flare management strategy. Qatargas is also spearheading the innovative Jetty Boil Off Gas (JBOG) project that is expected to reduce JBOG flaring by 90% and recover gas for industrial use. The company has also pioneered a long-term GHG management strategy, which will reduce emissions throughout the value chain. 51

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