CSR: When reputation is at stake

Those days when companies and their directors were only worried about profits are gone. Now the spotlight is also on adopting Corporate Social Responsibility (CSR) policies, defined as “the voluntary integration by companies of social and environmental concerns in their commercial operations.” As noted by the report “Business Relations and Communities” prepared by the Institute of Social Innovation of Esade’s Spanish Business School, “today, the competitive scenario where companies operate is defined by two driving forces: the economic continuity in a highly competitive context and the greater social pressure that requires the private sector to play a more active role in its contribution towards sustainable development.”

In the end, 21st century multinationals put their reputation at risk facing an ever increasing judgment. Although there are lots of cases of companies with unfinished businesses or which have applied not so responsible practices (we all recall Chevron-Texaco’s oil spill in the Ecuadorian Amazon rain forest, or the conflicts between Pluspetrol and the Peruvian indigenous people), there are also other companies that have shown their evolution in the commitment to the environment, social development, or the assistance to the indigenous communities, either as a result of social pressure or by true conviction. Most of them are European companies, such as Norway’s Statoil, which has taken the first steps towards the adoption of the social and sustainability policies. In the Latin-American energy context, this is the case of companies such as Iberdrola or Repsol.

“In general, companies, especially the large ones, have managed to incorporate the CSR transversally, by integrating it in the key, strategic departments,” claims Ignasi Carreras, director of Esade’s Institute of Social Innovation, when taking an in-depth look at the 15 years of CSR policies since the United Nations Global Compact was implemented. Since effective in 2000, over 8,000 companies have adopted a series of commitments that advocate for a responsible management model (see Figures 1 and 2). Now the CSR has turned into an investment rather than an expense, as noted by Ignasi Carreras. Despite the crisis, “today we find companies that have actually moved forward in risk management (they have improved the supply chain, paid more attention when it comes to choosing suppliers, and analyzed the possibility of spillages) and made a significant progress in efficiency, in all matters related to sustainability, water, energy, waste…” says Carreras.

Oil industry

The industry of oil and gas is one of the industries with greater effects on climate change and resource exhaustion, as well as one of the most controversial as to conflicts with communities that live in the exploitation areas. That is why they play a key role when adopting responsibility policies, although it has not always been so. Repsol is one of the multinationals with the best track record in the oil sector in the recent years. It began with a very negative image that led to several conflicts, including the one defended by the campaign of the NGO Intermon Oxfam in 2004, which requested a series of measures aimed to mitigate labor risks in oil exploitation areas where it operated and more respect to the rights of the indigenous and tribal people. This case even reached Repsol’s stockholders meeting, in which Oxfam’s intervention was aimed at finally having the multinational company adopting a specific policy for local communities, becoming the first oil company to do so. Thus, the company learned that including social matters in the risk analysis process was an effective way to integrate the views of different stakeholders in the company’s decision-making process.

More recent examples in the social domain are brought to the table. In February 2014, Repsol and the UNDP entered into the first agreement in Colombia, which aimed at the development of the Wayuu people, in the province of La Guajira. “It is a very dry area, so many projects are intended to provide wells to the community and foster the development of the population, mainly composed of fishermen,” explains Mikel Berraondo, from the Global Compact Regional Center for Latin-America, which supervises the project that includes Colombia’s state-owned Ecopetrol, that has various social projects with ethnic groups.

The case of the state-owned companies such as Ecopetrol, Pdvsa, YPFB andPetrobras is also important as they are ruled by governmental and business policies. According to Berraondo, Petrobras is one of the companies of the region that is lately working the most in order to adapt its responsibility policies in a country like Brazil. On the other side, there is Petroamazonas, whose management of the communities of the Yasuni National Park, where block 31 is operating, has been severely criticized according to Berraondo. While Petroamazonas claims that “block 31 is developed under social and environmental responsibility standards, according to an official communication. “We have been working with several companies of the area, managing the prior consultation made to the inhabitants of the area before exploitation. It is a complex ground where government, companies and communities come together,” adds Mikel.

Nevertheless, “many companies are already aware of the economic relevance of adapting responsible policies and not creating conflicts in the area, as they cost a lot of money. This would be the case of the Anglo-Dutch oil company, Shell,which after the oil spill in Niger’s delta area and its subsequent legal process and millionaire fine, admitted its responsibility as to the damages to the ecosystem and the rural community of Bodo. Now, Shell integrates a series of measures to prevent damages in the environment. “We have evaluated the potential environmental, health, and community impacts of our projects and we are committed to the indigenous communities of the area,” points out theSustainability Report 2014. The oil company is also a founding member to the Subsea Well Response project, engaged in managing offshore wells and take action in emergency cases, a core factor in offshore deposits as those operated in the Gulf of Mexico and Brazil.

Another positive example of an international company that has developed best practices in Latin America is Canada’s Pacific Rubiales, honored with the EO100 Standard certification of Rubiales and Quifa sites by Equitable Origin in Colombia, based on its social and environmental responsibility practices in its extractions fields. Its work on CSR also gives support to exploratory projects in Peru, Guatemala and Guyana.

Other energy companies

As for the electric sector, Spain’s Iberdrola is on the top of the rankings of companies committed especially to sustainability and access to resources, as acknowledged in the report issued by the British association Climate Disclosure Project (CDP). “Energy for all” is one of its flagship programs which, since its implementation in 2014, has allowed for electric supply to over 800,000 users from deprived areas in various countries, with a special focus on Brazil and the initiative “Light for all.” The program has three action lines that includes project funding through capital investment, trying to frame them within the UN initiative Sustainable Energy for All (SEE4All); activities managed by businesses in countries where it is present; and the development of social projects through NGOs and corporate volunteering.

Iberdrola is also one of the few electric utilities that have taken seriously the commitment to alternative energy to reduce the environmental impact. It also has various CO2 emission-reduction commitments, such as the one scheduled by late 2030 to generate half the current emissions, up to 150 grams per kWh, as indicated by the company. “We are committed to a green growth model which is properly regulated, that makes environmental quality preservation compatible with a sustainable, carbonlow, economic development,” claimed its CEO, Ignacio Galan, during the presentation. The latter joins other initiatives as those adopted by the CEOs of 43 large companies such as DONG Energy, Acciona, Schneider Electric and Iberdrola itself which claim for firm and specific actions to reach an ambitious agreement in the Climate World Summit to be held in Paris in December.

For its part, another Spanish company, Gas Natural, adds to its strategic action lines ensuring access to energy to disfavored neighborhoods such as “Cuartel V” in Buenos Aires (25,000 beneficiaries). It is also corporate policy to allocate a budget item to social action projects, and to manage and assess the social impact of its operations as per directions of the world Business Council for Sustainable Development. Other actions are focused on commercial management in areas lacking electric infrastructure, with projects such as the one developed in the Colombian Caribbean coast. In analyzing these actions actually performed by the company or through its foundations, experts assure that CSR moves forward when it guarantees reputation for the company, when it means savings, efficiency, when innovation is in, and when it contributes with competitive elements and advantages (see Figure 3).

Challenges

But there is still much to do. Maybe the biggest challenge is not only large companies but small ones joining the challenge of including CSR practices into their own. According to experts, companies already working on it shouldimprove dialogue with local communities and ensure compliance with the international standards for prior consultations, so that it may guarantee respect to indigenous people’s rights. “Colombia is governed by its local regulations. Argentina does not have a consultation law, and Peru is much challenged,” explains Berraondo.

For its part, “risks not properly addressed leave a bigger mark, and such is the case of BP’s oil spill in the Gulf of Mexico,” according to Ignasi Carreras, who considers that his risk analysis did not take into account the dangers of the in-depth prospection. “It was the management of the oil spill rather than the spill itself which affected the most.” Hence, this is a key factor and has to be framed within companies’ CSR policies, and included in the communication departments both to convey the projects and to manage the crisis.

Source: http://www.energia16.com/analysis/csr-when-reputation-is-at-stake?lang=en

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