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Towards enhanced CSR impact? The merits and limitations of cooperation between oil companies and multilateral organisations.

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Presentation on theme: "Towards enhanced CSR impact? The merits and limitations of cooperation between oil companies and multilateral organisations."— Presentation transcript:

1 Towards enhanced CSR impact? The merits and limitations of cooperation between oil companies and multilateral organisations

2 2 The resource curse – a common challenge Resource curse – is it real?  More and more studies and evidence point to the negative impact of (large) oil revenues  Quote from March 2004 IMF Survey on Nigeria: ”Thus, oil and the institutional deterioration that it has led to, has perhaps been the single most important cause of Nigeria’s economic and political problems”  Oil companies and multilaterals seemingly outplayed – how can it be addressed?

3 3 Oil –according to Financial Times FT editorial, October 2003 ”By past experience, you could wish nothing worse upon a developing country than an oil find. Oil wealth have done little or nothing to make the world’s poorest better off. It breeds corruption among greedy elites. The money it generates is habitually misappropriated or misspent. It creates dependence and squeezes other economic activities out. Under its influence, governments loose control of their budgets. No longer needing to rely on taxes, they become less answerable to their people and taxpayers. Oil has proved an addiction for rulers, a malediction for the ruled.”

4 4 Why an oil company challenge? Evolving CSR agenda since 1995  Oil curse subject to increasing scrutiny Many international oil companies (IOCs) want to be forces for good  Growing need to convince the public that oil revenues bring tangible benefits Even if the IOCs are not the main culprits:  They need success stories, not new Nigerias  Nigeria revisited means growing credibility problems – rethink of ambitious CSR profile?  Geopolitics, hunt for fresh reserves exacerbates the pressure on legitimacy

5 5 Why a concern for multilaterals? Who: UN, development banks, IMF Their mandates from governments:  Fight poverty, stimulate growth that benefits the poor  Address governance problems with vigour But in comes the resource curse:  Erodes structures that sustain development  Breeds corruption, violence, civil war  No motivation to care about foreign advice  Otherwise powerful multilaterals lame ducks

6 6 A joint agenda materialises IOC/multilateral cooperation  Part of a wider development towards multi stakeholder approaches to globalisation The grand (but unrealistic) design:  Joint IOC/bi- and multilateral conditionality: no oil investment without strong performance Towards a more refined agenda:  Criticism of IOCs deflect to multilaterals  Eliminates/reduces collective action problems  Sustains the leverage of multilaterals

7 7 What do multilaterals bring to the table? Six relevant contributions of multilaterals  Provide finance and/or associative benefits in exchange for conditions  Develop and promote standards  Provide advice and technical assistance  Provide fora to share experience and good practice  Provide fora for coordination  Serve as honest brokers Key quality: –Can convene companies and other stakeholders globally, including, potentially, Indian, Chinese and Malaysian oil companies that increasingly compete with Western players in troubled oil provinces

8 8 Multilaterals and governments Most important ”service” to oil companies:  What they achieve in their direct interface with government institutions; i.e. beyond any specific oil company involvement Multilaterals have broad agendas in new oil provinces  IMF, development banks, UN agencies But faces severe shortcomings due to oil-induced incentive problems –Scope for influence severely restricted –But it exists, and can be widened, including by developing the reputational/branding aspect of policy tools

9 9 Specific partnerships approaching A number of promising partnerships –The Chad-Cameroon Oil Development and Pipeline project –The Baku-Tibilisi-Ceyhan (BTC) pipeline project –The Extractive Industries Transparency Initiative –The Joing research project ”Best practices in dealing with social impacts of hydrocarbon operations –The Voluntary Principles on Security and Human Rights Different nature – formal and informal approaches

10 10 Helping oil companies address critics Critics increasingly impact on licence to operate IOCs fear being pressured into non- defendable actions/initiatives Deals with multilaterals can deflect tricky criticism and clarify stakeholder roles  Conclusions: –Multilaterals important in defining/defending licence to operate –Criticism has been deflected, roles clearer –But also a double-edged sword – attract rather than deflect criticism?

11 11 Abating collective action problems Why a collective action problem?  Oil governments can play split and rule games with companies that are seen to intervene in ”internal” affairs  Companies addressing macro CSR issues risk losing market positions Chad/Cameroon and BTC –No real collective action problems existed, different mechanics at work EITI can come to play an important role –Levels the playing field –Facilitates sound role structures among key stakeholders –Formal multilaterals may take on key facilitation functions

12 12 Increasing multilateral leverage Key approach to help otherwise toothless multilaterals to wield influence  Findings: –Generally, the more corporates they bring to the table, the more governments are bound to listen –Real impact in Chad/Cameroon, unique design, but uniqueness may also limit replicability –Environmental/social demands on projects get extra push with corporates on board  But: –Extra push mainly important in early phases of project –Multilaterals may be trapped into defending projects and developments not necessarily of their liking

13 13 Conclusions I: Merits and potential  Two major groups of players who increasingly compare notes and may wield real influence  The global mandate of multilaterals an important asset to address collective action problems  Evolving CSR agenda an integrative force –The more demanding CSR agenda, the more the two stakeholders need each other’s contributions  Partnership experience crystalises lessons to be built upon in future deals –Crucial to sustain and build relevant competence in both categories of organisations –World Bank Group and IMF in particular – need relevant mandates and portfolios in order to make a difference on resource curse issues

14 14 Limitations and dilemmas Incentive constraints still limit the scope of action for direct partnerships Therefore: Not likely to become the main approach to handle resource curse ”Direct approach” will continue to be main multilateral line of action –And micro CSR cooperation may continue to be main interface between companies and multilaterals Challenge for multilaterals:  Widen the window of opportunity beyond project start- up period Challenge for oil companies:  Partnerships may attract rather than deflect criticism, but they still have much to gain from partnerships


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