Corporate Social Responsibility Reporting within the Malaysian Oil and Gas Industry - A Questionable Publicity Stunt

Corporate Social Responsibility Reporting within the Malaysian Oil and Gas Industry - A Questionable Publicity Stunt

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  Corporate Social Responsibility Reporting Within TheMalaysian Oil and Gas Industry A questionable publicity stunt Dayana Mastura Baharudin
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  Introduction  Srivastava etal (1997) – Corporate Reputation (CR) being an important criteria as current or potential investors perceive companies with good reputation are less risky investments  Davies et al (2003) - CR as a force that can attract customers  Bontis et al (2007) – CR encourages loyalty among patrons  Corporate Social Responsibility (CSR) may enhance CR via the CSR activities being reported within the Annual Report or separate Sustainability Report, Corporate Citizenship Report, Corporate Sustainability Report and the Corporate Social Responsibility Report.  The absence of CSR would reflect a negative stance on the organisation as a whole (Corporate Watch Report, 2006)  CSR activities needs to be a genuine co-operation between the organisation and society  CSR activities should not only be a corporate greenwashing tactic
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  Abstract  CSR –most intense topic deliberated amongst financial reporting critics  CSR voluntary in nature  Organisations are more than willing to publish their CSR events – media (TV, radio, newspaper, magazine), social media (Twitter, Facebook & LinkedIn ) & Annual Report despite being non-compulsory and would not be penalised in the absence of CSR reporting  Oil and gas companies are exposed to a range of Environmental, Social and Governance (ESG) risks within their daily operations  CSR will improve Corporate Reputation (CR) indefinitely
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  Study Objectives  Toascertain on the number of Malaysian oil and gas companies involved in high-fit CSR activities  To establish on the monetary amount spent on CSR activities which should be linked to the Annual Report  To determine on the number of unreported CSR violations in the Annual Report but published in the media  To identify the correlation between the high-fit CSR activities and the share price of the public listed entities and the net asset value of the private entities.
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  Research Questions  Whatare the proportions of oil and gas companies involved in the high-fit CSR activities?  Are the CSR activities quantifiable and can be linked back to the financial statements?  What are the percentage of CSR violations unreported in the Annual Report?  What is the correlation between the high-fit CSR activities and the share price or net asset value of companies?
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  Literature Review  High-fitCSR activities – conduct CSR activities which are closely related to the core activity or competencies of the organisation (Ferguson, 2010)  Low-fit CSR activities – CSR do not relate to the core capabilities or competencies of an organisation (Al Hinai 2014)  Sen and Bhattacharya (2001) suggested that consumers evaluate the company in a more favourable way when CSR activities are relevant to the company’s existing product  Generally when the company’s reputation is poor or tainted, conducting a high-fit CSR would only raise suspicion and disbelief within the global community (Ferguson, 2010)
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  Literature Review  Blowfieldand Frynas (2005)- CSR seen as the alternative to the government and acts as a voluntary mechanism to regulate business behaviour.  Doane (2005) – CSR is purely voluntary, lies within the framework of markets, and requires market-based incentives  CSR has become a prominent concept in management literature (de Bakker, Groenewegen & den Hond, 2005; Dobers 2009; Nejati & Ghasemi 2012)  Despite large body of literature on CSR, there is still no unified and precise definition (Scherer & Palazzo, 2007; Wood 2010)  Regardless lack of clear definition, all contending definitions of CSR agree on one issue which his that firms must meet the expectations of society when planning their environmental management strategies (Gossling & Vocht, 2007)  CSR is a tool often used by many sinking and dying companies to revive or enhance their public appearance and to charm their clients and the general public (Al Hinai, 2014)  Swanson (1995) suggested three main types of motivation for CSR practiced by organisations: 1. The Utilitarian perspective – an instrument to help achieve performance objectives 2. The Negative Duty approach – compulsion to adopt socially responsible initiatives to appease stakeholders 3. The Positive Duty approach – business is self-motivated regardless of social pressures
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  High-Fit CSR: TheBody Shop Tea Tree - The Body Shop - Beauty With Heart
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  Low-Fit CSR: BakerHughes Pinkwashing: Make Your Drilling Rig Less Carcinogenic, Paint it Pink!
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  Proposed Conceptual Framework Independent MediatingVariable Dependent Variable Variable CSR Company's true intention/ Company's Activities motivation in performing reputation / such CSR activities public profile Company's current social profile / financial standing Moderating Variable
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  Corporate Social Responsibilityactivities - Independent Variable  Corporate philanthropy – donation to charities enhances reputation. Examples include McDonald’s network of Ronald McDonald Houses and BP’s sponsorship of the National Portrait Award.  Cause-related marketing – in partnership with a charity, a firm uses the charity’s logo, alongside its own, in marketing campaigns or brand promotions. Examples include Tesco’s ‘computer for schools’ promotion and Avon Breast Cancer challenge.  Sponsoring awards – award schemes give firms positive exposure and position themselves as experts on particular issues. Example would be the Reebok Human Rights Awards.  Codes of conduct – explicit statements of a firm’s ‘values’ and standards of corporate behaviour. Examples include the environmental impact, human rights commitment and health and safety monitored by external audit firms such as Ernst & Young and PricewaterhouseCoopers.  Social and environmental reporting – linked to codes of conduct. Reports on social and environmental performance were pioneered by the Royal Dutch Shell.  Stakeholder engagement – dialogues between stakeholders but some may not be able to speak for themselves such as the future generation and the environment.  Community investment – running health programme, sponsoring schools, playgrounds or community centres or signing a MOU with communities affected by the company’s adverse activities.  Eco-efficiency – describes the need for firms to improve their ecological as well as economic performance in line with the Rio Earth Summit.
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  Company’s true intention/ motivation in performing such CSR activities - Mediating Variable  Chevron invested millions in the fight and treatment of HIV/AIDS in Africa  A form of distraction by Chevron  Chevron’s smart long-term business tactics in order to survive and thrive in Africa where oil is in abundance (Kaye, 2012)  Hilson (2012) further supports Kaye (2012) in his findings where Western oil and gas companies have no reservations working in countries with repressive regimes against good CSR qualities.  Gardner et al (2012) further supports Hilson (2012) and Kaye (2012) when he reported that Chevron had failed to fully connect with the villages surrounding its operations at the Bibiyana Gas Field in Bangladesh.  Gardner et al (2012) further argues that Chevron’s Community Engagement Program does little to meet the needs of local people in need of employment and long term investment.  The general misconception of the CSR brand being promoted by the extractive industries throughout the developing world.
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  Company’s reputation /public profile - Dependent Variable  The Royal Dutch Shell reports on its Sustainability activities with guidance from the Global Reporting Initiative (GRI) G3.1 guidelines  GRI awarded Royal Dutch Shell with the A+ level in 2013  Shell also followed the International Petroleum Industry Environmental Conservation Association (IPIECA)’s guidelines which are in line with GRI for the oil and gas industry.  Shell also supports the UN Global Compact and its 10 principles covering human rights, labour, environment and anti-corruption.  This is in contrast to the US Supreme Court decision in 2013 when it issued a disappointing decision in Kiobel v Royal Dutch Shell Petroleum (Shell) that the Alien Tort Statute will not provide justice for Nigerian human rights victims.  Shell argued that the law used to bring Shell before a US court, The Alien Tort Statute should not apply  Shell is essentially fighting to limit a law that remedies corporate-related human rights abuses wherever they occur (Forbes, 2010)  Hilson (2012) agrees that this incident is due to the fact that Shell is economically more powerful than Nigeria  Shell is ranked second in the 2014 Fortune Global 500 companies list with an accumulated revenue of US$460 million (Fortune Global 500, 2014)
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  Company’s current socialprofile / financial standing - Moderating Variable  Four years have passed since the explosion at the BP’s deep-water rig in the Gulf Mexico on April 20, 2010.  BP took three months to cap the deadly flow of 4 million barrels of oil  BP was then involved in the gulf restoration programme but the image restoration agenda proved more costly  Sadly a known fact that once the reputation is tarnished, even a high-fit CSR activity can only result in cynicism  Polls showed that a majority of Americans held BP responsible and disapproved their handling of the disaster  Williams (1990) noted that if a positive corporate image is lost then it may possibly lead to economic losses
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  Proposed hypotheses ofthe study  H1: There are high proportions of oil and gas companies involved in the high-fit CSR activities compared to the companies involved in the low-fit CSR activities  H2: There are low proportions of oil and gas companies involved in the high-fit CSR activities compared to the companies involved in the low-fit CSR activities.  H3: The CSR activities can be linked directly to the figures in the financial statements  H4: The CSR activities cannot be linked directly to the figures in the financial statements  H5: The CSR violations can be found published in the media but not in the traditional Annual Report  H6: There is a positive correlation between the high-fit CSR activities and the share price or the net-asset value of the oil and gas companies
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  Scope and methodology Secondary data will be extracted from the Annual Reports of Malaysian public listed companies from Bursa Malaysia  Secondary data will also be extracted from the financial statements of the private limited companies filed under the Companies Commission of Malaysia  Data will be gathered from 2010 to 2014  This paper proposes a random sample of 200 companies combined between the private and public limited companies operating within the Malaysian oil and gas industry  Proposed regression analysis methodology for data analysis
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  Conclusions and recommendations CSR will only enhance a company’s reputation or access to capital if the public is convinced that their CSR events are genuine.  For CSR to effective in any location there must be a foundation of robust regulations and enforcement in place  Organisations should capitalize on building sustainable alternatives such investing in:  Fairtrade  Local and organic food  Community renewable energy projects  Social enterprises  Consensus based decision making
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  THANK YOU Any questions?