Corporate social responsibility

Chapter 1: Introduction

 Background to the study

Iraq is one of the richest developing countries in terms of oil wealth. According to the BP Statistical Review of World Energy of June 2013, Iraq’s is endowed with estimated reserves of 150 billion barrels. This puts the country in the fifth place in terms of oil reserves. This puts the country in very important place in the global oil industry, especially considering today’s steady  increase in the global demand for energy.

Politically, Iraq suffered a long period of regional war and sanctions, which extended from early 1980s until 2003 when a U.S.-led invasion ousted the regime of Saddam Husain. Saddam’s regime was replaced with a democratic that was more acceptable to the Iraqi community as well as regional and international community. Similarly, the Iraqi economy has been operating in a social environment characterized by operational difficulties as well as lack of recourses and support. A massive proportion of the country’s resources were being directed to military support and defense capabilities of the country. This led to decades of economic neglect, lack of growth in the country’s GDP, and economic instability. This resulted in a negative impact on oil production, which support’s 95 percent of the Iraqi national budget (Salaheddin, 2013).

In 2003, a chain of change started unfolding in Iraq in all aspects of life. The country’s economic and market conditions started improving. Legislative developments also started taking shape, forming the foundation of a modern and up-to-date legal base. These urgent improvements were required to support proposed journey of the country’s development aimed at creating a prosperous future. Unfortunately, the flame of internal civil conflict emerged to make scene more complicated to the entire nation and more difficult for improving the intended economic and internal governance landscape.

In 2007, the Iraqi parliament approved a draft for the new oil and gas law, which allows international oil and gas companies to participate and invest in the Iraqi oil industry through the development of oil fields and production operations (Shafiq, 2013). Many international oil companies (MOCs) demonstrated their interest in joining Iraq oil industry and investing in Iraq. They were aware of the projected growth in production capacity of Iraq from about 2.5 million barrels a day to a capacity of 4.5 million barrels by the end of 2014 (sky news, 12 June 2013). For these MOCs, investment in the Iraqi oil and gas industry is aimed at securing a better market position internationally. This desire is driven future expectations of huge profits that will benefit both the companies involved and the country.

Iraq is a developing country with serious socio-economic problems that are reflected in the recent history of conflicts and economic decline. For MOCs to achieve the goal of sustainability in their business activities, they are compelled by circumstances to engage in corporate social sustainability (Eweje, 2007, Gulbrandsen & Moe, 2007). They are forced by circumstances to engage in social action in cooperation with government agencies, international organizations, and non-governmental organizations (Smith, 2012).

Because of their large economies of scale, MOCs are able to contribute immensely to a wide range of social and environmental problems being encountered by local people in Iraq(Smith, 2012). This potential tends to trigger a pile-up of pressure from different groups and commentators, particularly those who are concerned about social action (Anderson &  Bieniaszewska, 2005, Kotler & Lee, 2005, García-Rodríguez et al, 2013). In engaging in CSR, one of the greatest challenges that the MOCs face is that of choosing the right initiatives to demonstrate commitment as well as positively participate in and maintain the environmental and social tapestry of the host community.

According to the World Business Council for Sustainable Development (WBCSD), corporate initiatives of social involvement are defined as “a broad range of activities, including community assistance programs that support educational needs; foster a shared vision of a corporation’s role in the community; ensure community health and safety; and enable employees to do voluntary work within the local community”.

The oil companies are also faced with the need to adopt proper evaluation mechanisms to assess the impact of social and environmental initiatives on the community as well as the local and the international authorities in order to ensure suitability of the CSR policies (Kotler & Lee, 2005; Blowfield & Murra, 2011). This way, the companies can avoid catastrophic feedback from local communities and national governments.

MOCs, and indeed other corporate entities operating in the oil industry, are expected to be more socially conscious with wider-reaching initiatives that can go beyond environmental and ethical issues. The existence of such international companies in unstable and politically volatile regions normally attracts attention from local and international media. They also draw the attention of many local and international non-governmental organizations. These entities actively evaluate the CSR performance of the companies in these regions mainly in terms of social action (Gulbrandsen & Moe, 2007).

Aim and Objectives

Aims

This dissertation sets out to:

  1. Examine the CSR actions and plans being rolled out by MOCs and IOCs operating in the Iraqi oil industry.
  2. Evaluating the ability of MOCs and IOCs to maintain a sustainable model that leads to profitability, economic prosperity, and positive social outcomes.
  3. To understand the nature of social action being undertaken by MOCs by examining the extent to which multinational oil companies have been successful in their social responsibility efforts in their newly launched operations in Iraq.
  4. To address the impact of various external factors and complications that influence MOCs’ social initiatives, including Iraq’s legislative framework and infrastructure both locally and nationally, with the aim of comparing what the companies really do and what they can do.
  5. To assess the sources and mechanisms that MOCs use to address society issues as part of their CSR strategies.
  6. To evaluate the effectiveness of micro-level CSR strategies that the MOCs use to promote social action and gain legitimacy in their business operations in Iraq.
  7. To investigate the MOCs’ social initiatives in Iraq in terms of planning, execution and organizational implications.

Objectives

The objectives of this study include:

  1. To explore the effectiveness of multinational oil companies’ approach to social responsibility within the new operational and social structure in Iraq by focusing on the CSR activities of BP and CNPC/Petro China in Rumaila oil field at Basra state.
  2. to determine how multinational oil companies work with local communities to understand social needs
  3. to evaluate the ways in which the companies select projects aimed at creating positive social impact
  4. to determine how closely these social-action projects meet local needs.
  5. To contribute to literature on CSR in the Iraqi oil industry.
  6. To emphasize the important role of MOCs and IOCs in adopting CSR in the Iraqi oil industry.
  7. To identify ways of bridging the gap between what is being done and what can be done in the social aspect of corporate social responsibility in the Iraqi oil industry.

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