Chevron Corporate Social Responsibility - Essay Example

?Analysis for Chevron Corporate Social Responsibility This research report provides emphasis on the corporate social responsibilities of Chevron, one of the largest multinational oil companies in the US. The company with its various motives participate in the CSR activities. A detail discussion of its involvement in CSR activities have been mentioned in this report. The company has huge contribution in politics, government, business ethics, human rights, environments and other non-governmental organisations. This report attempts to understand the aspects and the performance of the company in its market and non-market environments. The company also looks at various stakeholders’ benefits. The company has adopted quite a few CSR strategies to get involved in the market. Table of Contents Abstract 2 1.0 About Chevron 4 2.0 The Corporate Social Responsibility Activities of Chevron 5 2.1 Business Ethics 6 2.2 Government 8 2.3 Human Rights 8 3.0 Evaluation of the Motivations for CSR Activities Drawing Upon the Company's Market Environment 9 4.0 Evaluation of the Motivations for CSR Activities Drawing Upon the Company's Non Market Environment 11 5.0 The Stakeholder Theory in Relation to Chevron 14 6.0 Conclusion 17 7.0 Recommendations 18 References 19 1.0 About Chevron Chevron is regarded to be one of the largest American multinational oil producing companies. It is considered as one of the top energy companies with various subsidiaries all over the world. The company is engaged in a string of activities such as exploration, transportation, production of crude oil along with natural gas as well. They are engaged in generating power and in the production of geothermal energy. The company is focussed on providing safe and healthy environment to the people. Their main objective is to uphold the organisational reliability and effectiveness in the minds of the people. It also produces mining, pipelines, chemicals and is involved in power construction businesses as well. In the US, the company owns 9,600 gas stations that function under the brand name of Chevron along with Texaco. It also own or has stakes in around 12,400 gas stations outside the market of the US with brand name of ‘Caltex’. Chevron signed a $4.3 billion deal with Atlas Energy in 2011 (Chevron, 2008) 2.0 The Corporate Social Responsibility Activities of Chevron Corporate responsibility at Chevron is the use of ‘The Chevron Way’ across social, environmental along with governance issues and concerns. The corporate responsibility of the company is implemented through existing systems, procedures and policies of management in order to operate ethically and responsibly. The major aim of the company is to constantly develop the performance and activities in the organisation. The business is performed in an efficient, ethical and responsible way. Through the corporate social responsibility activities Chevron looks to perform their business responsibly by delivering not only energy but also creating sustainable partnership. Chevron has prepared an Action Plan in which climate change has played a significant part in their projects related to emissions reduction, research improvements and also efficiency improvements. Chevron also sustains their CSR activities by touching the requirements of the human lives by initiatives such as ‘Corporate Champion of The Global Fund’ in order to fight against diseases such as Tuberculosis, AIDS and Malaria. They were working towards controlling as well as eradicating these harmful diseases in six different countries that has high level incidence rate (Chevron, 2008). Chevron’s Operational Excellence Management System (OEMS) defines the expectations with regard to the organised management of safety, reliability, environment, health and efficiency in order to attain outstanding performance in operational excellence (Chevron, 2010). Chevron uses various motives for their role towards corporate social responsibility. The motives are ethical motives, economic motives and strategic motives. CSR and Brand Equity The corporate social responsibility and brand equity are the integral parts of business strategy of Chevron. Incorporation of CSR activities in any organisation helps to enhance their brand equity. CSR is related to the responsibility of Chevron towards global issues and their new brand named ‘Human Energy’ strengthens company-wide incorporation of CSR. The company’s CSR brand campaign is recognised at the corporate level but it is implemented in both regional and national level. The integration of brand-CSR is found in the companies who generally provide importance to social responsibility (Holding & Pilling, 2006). In this case the company uses both strategic as well as economic motives. The strategic perspectives of motivations for performing CSR emanates from the need for managing as well as anticipating external pressures. Whereas, economic perspectives works as a motivation for CSR when the expected benefits related to CSR is much higher than the expected costs. For Chevron, integrating brand equity with CSR will provide them not only a strategic head start from the perspective of gaining competitive advantage but will also provide them an avenue for increasing their economic profits. 2.1 Business Ethics The business conduct of Chevron and Ethics Code is developed on the core values of the company and the principle is highlighted which act as guidance on the business conduct. The Code may not be able to address all the probable situations of the workplace or list all the Corporate Policies and Process of Chevron (Chevron, 2010). The performance and conduct of the employees are strictly judged by the company and if any queries regarding the conduct come up then it need to be reported to the Chevron Hotline. The company caters prior importance for not violating the policy of the company or the conduct of Chevron Business and Ethics Code. Chevron Hotline is an independent agent which is working outside and controlled by Global Compliance Services known as “Alert Line”. In 2008, it had been observed that 555 reports were received by Alert Line, when compared in 2007 with 391 reports and 262 reports in 2006. The reports related to people management issues were found to be 63% and the issues of finance and internal controls were 17%. These two related reports were considered to be the major issues of the company (Chevron, 2008). The company uses ethical motives while performing towards the ethical standards of the business. Chevron undertakes CSR from the point of view of ethical perspectives as they feel that it is their moral as well as ethical duty. 2.2 Government The company plays a significant role with the government with an intention of using both ethical along with strategic motives. The experts and employees of Chevron are engaged in different activities related to their participation in the procedures of the “Intergovernmental Panel on Climate Change”. This is a two-year program work which has been started in order to calculate the rank of renewable energy resources in worldwide basis and their impact of project on global climate change. They are involved in National Academy of Sciences which is related to the program of climatic change and atmospheric change. Chevron is one of the principal members of “Renewable Energy Coalition” in Philippines. The company is involved in partnership with government agencies, foreign as well as local corporations and other non governmental organisation (NGO) as WWF and Greenpeace. To the regulatory agencies in the US, the Chevron provides proficient advice in order to support implementation of “Global Warming Solutions Act” and the “Low-Carbon Fuel Standard” of California (Chevron, 2008). 2.3 Human Rights Chevron plays a significant role towards human rights and uses their ethical motives in their activities. Chevron’s Human Rights Policy reaffirms the longstanding support for universal human rights. This commitment is grounded in Chevron Way’s vision and values and other corporate policies that make certain to function safely, responsibly as well as in compliance with appropriate laws and policies. The position of Chevron on human rights is evidently laid out in the Human Rights Policy. The vital elements of human right policy of Chevron are employees, communities, suppliers and customers. The employees are treated equally and through diverse processes they keep in touch with the employees globally. For customers, the company has launched “Human Energy” campaign for efficiency and conservation of energy. The efficiency of energy assists to moderate requirement for carbon intensive fuel, conserve limited natural resources and decrease cost of energy. A forum was planned to widen and enhance the quality of oil and gas related goods of Kazakhstan. The human rights are provided importance by improving the socio-economic development of the communities and by promoting ongoing two ways of communications with communities along with skilled stakeholder. Environmental Social and Health Impact Assessment (ESHIA) of Chevron develops a process in order to engage the stakeholders in a comprehensive way (Chevron, 2008). 3.0 Evaluation of the Motivations for CSR Activities Drawing Upon the Company's Market Environment The objective of the motives is to separate corporate social responsibility into various categories. CSR is an ethical motivation of the company for achieving the reliable and correct thing; and for achieving the profitable objective and economic goal, the instrumental motives of CSR is used. Every motives of CSR are united, thus it is not possible to claim one motive or another. The chief target of the companies is to maximise the economic profit because the company needs revenues in order to provide their owners with profitable return on investment, otherwise it will not survive. The company is generally focussed on the ways and methods to acquire profit. The stakeholders are considered as a significant part for a long period of profit orientation. CSR provides importance to both as an economic focus with a motive for profit and an ethical focus with an obligation for social betterment motive. The economic focus has recognised CSR as a method to the end of profits. The company is considered as a device for the increase in wealth and this represents its social responsibility. The economic relations between society and business are also measured. In ethical focus, the relationship between society and business is surrounded with the values of the ethics. From the viewpoint of ethics, the company has considered obligation of ethics in social responsibility than other considerations (Smith & Nystad, 2006). The strategic motives for performing CSR activities generally originate from the external pressure mainly from the stakeholders that an organisation such as Chevron requires to cope up with. Strategic motives for CSR also can provide a path for building a competitive advantage which a well crafted CSR can help to provide an organisation such as Chevron. Economic perspective of CSR helps an organisation such as Chevron to gain profits through factors such as brand equity which further can be augmented by CSR activities. From the economic perspective of CSR long-term value maximisation can also be achieved which can in turn provide profit maximisation. Success of CSR is generally judged by an organisation if it aids them to achieve improvement in their financial performance. Thus, cost-benefit analysis is the general as well as significant focus and motivation for an organisation such as Chevron to undertake CSR. The view of positive strategy on CSR states that companies are in the consideration that a win–win connection between financial achievement of the company and CSR exists. The strategic view of managers on CSR was calculated by the response to the definite proposal: ‘Our firms own effort with respect to CSR will have a positive influence on our financial results in the long term’. The strategic view creates definite policies of CSR regarding consumer relations and to a smaller extent of employee relations (Ven & Graafland, 2006). 4.0 Evaluation of the Motivations for CSR Activities Drawing Upon the Company's Non Market Environment The company while acting with the non market environment uses ethical and strategic motives for their business. The communities and stakeholders are influenced by the various ethical activities of Chevron. Besides using the motives of strategy, ethics and economic in the market environment of the business, Chevron also acts significantly in the non-market environment. The company is involved with various non-governmental organisations for taking part in various social activities. Chevron has a partnership with the project of ‘America’s Energy Coast’. The policies regarding various issues of economic, social and environment are recommended with the purpose of development of gas and oil of the US. The company has also been engaged in working with industry and NGO partners for generating online information of database of biodiversity. This ‘Biodiversity Assessment Tool’ has been developed with a view to assist businesses to be active for the conservation of biodiversity from the outset of project planning. Chevron, NGO partners and industry in addition to the U.N. Environment Programme’s World Conservation Monitoring Centre, Conservation International, and the International Union for Conservation of Nature and Birdlife International work together in order to develop a boundary that allows perfect access to their combined data collected from a similar source (Chevron, 2008). The company focuses upon three major areas for investments in community for improving the basic need of people, providing training and education opportunities as well as encouraging for sustainable living. Chevron also provides prior importance to protect environment. Chevron in December 2009, declared that it would make contribution of more than $1.5 million to the Environment Ministry of Angola. The funds will help the region in various ways. The company emphasises to fight with the worldwide diseases. Chevron is the first Corporate Champion which has contributed $30 million in order to fight against Tuberculosis, AIDS and Malaria. They donate funds to a public-private joint venture known as ‘Global Fund’ which was formed in 2002 by the help of the United Nations. Program for Appropriate Technology in Health (PATH) was organised in Thailand to increase the awareness of HIV/AIDS and progress education of Chevron employees, Thai youth as well as Caltex customers in Bangkok. The first ‘AIDS Education Youth Camp’ was organised by the company to strengthen leadership skills and HIV/AIDS awareness programs of 25 youth leaders. The company has introduced ‘PATH's’ to assist parents in improving their perception of HIV/AIDS and freely communicate with their children regarding the disease. Thus, the company has tremendous role in non-market condition other than their market environment. Chevron Vietnam has recently started to work with the non-profit organisation, ‘Save the Children’ to maintain livelihoods of deprived women in the Mekong Delta. Their main obligation is to improve the financial status of 850 women in that region by providing financial-skills training and loans. The women in ‘low income’ receiving households in the areas of animal husbandry, aquaculture, homestead gardening, and service businesses are provided importance. A five-year scholarship program of $250,000 has also been started by Chevron, in southeast Bangladesh with the help of the new Asian University for Women (Chevron, 2010). Impact of Ecuador against Chevron Chevron is engaged in corporate social responsibility but in certain circumstances the company go beyond the responsibility towards its stakeholders and society. There was an incident when the company was charged of polluting the environment of Ecuador by drilling oil in the sea. It destroyed the entire rain forest of that region and caused various health diseases such as cancer as well as serious health hazards to the people. Ecuador has filed for lawsuits since 1993, and insisted that Chevron pay for devastating the jungle as well as creating pollution in the local environment and harming the health of natives. Chevron owned Texaco in 2001 and in 2003; a lawsuit was passed against it by the people of Ecuador. The claim was that the environmental pollution from oil spill affects health of the people living there. An expert in 2008 suggested to the court that the company must pay $7-16 billion for the pollution in the region. After the entire trial of lawsuit, an Ecuadorian judge on February 14, 2011 issued a decision which was against Chevron. Chevron was charged to pay $8.6 billion for the damage as well as clean up charge in this place. Chevron pointed out that it considers the ruling to be "illegitimate" and "unenforceable" and it intends to make petition against the judgment (Business and Human Rights Resource Centre, 2009). The company in order to make profit in Ecuador region used economic motives by unethical way. The intention behind the venture in Ecuador was to gain competitive advantage, thus to fulfil strategic motive by looking to explore unexplored areas for drilling oil. But, in this endeavour of Chevron, their ethical motives came in their way of achieving the desired result. The venture in Ecuador harmed the environment, thus in turn creating damage towards the stakeholders of Chevron, who are considered as powerful, legitimate as well as urgent. 5.0 The Stakeholder Theory in Relation to Chevron In the perspective of stakeholder theory of Chevron the economic as well as strategic motives are used. The stakeholder theory is the management of the organisation along with ethics related to the business that addresses the principles and morals required in managing an organisation. The stakeholder vision of strategy is to integrate both market based view as well as resource based view. A stakeholder or stakeholders may be individual or groups who has/have an effect or is/are affected by the organisation’s objective. Stakeholder theory recommends that firms that develop good quality of the practice of corporate governance can efficiently align the management and stakeholders’ interest and thus build long term value. In relation to Chevron, the management has the ability to recognize the exposure of risk to climate change. The management acts in response to the requirement of stakeholders which is contingent to the quality of the corporate governance of the firm. Stakeholder theory provides a practical structure in order to estimate corporate social responsibility through the activities of social report. The stakeholder theory is used in order to identify the “green” stakeholders of oil and gas companies. It can also be applied together with practical facts to facilitate big oil companies to change their behaviour towards the environment (Gruvstad, 2009). Chevron dynamically works with the government and non-government stakeholders in order to find out the ways of climate regulatory issues. Chevron in 2007 got engaged with various stakeholders including external experts, stockholders, communities, governments and non-governmental organisations (Chevron, 2007). Chevron has been engaged in various corporate social responsibilities and the involvement of their stakeholders along with their salient features including power, legitimacy and urgency. The model of Stakeholder according to salient features is provided below: Power– It is the power of stakeholder to influence the Legitimacy– It is the association in terms of desirability and appropriateness Urgency– It is the expectation of stakeholder in relation to criticality along with sensitivity of time for the stakeholder (Subramaniam, 2011). Based on these attributes, main concern is provided to the stakeholders. Source: (Saltlane, 2009) 6.0 Conclusion It has been observed that Chevron actively inculcates various corporate social responsibilities. The major aim of the company is to uphold the health and safety of the environment in accordance with the existing community and the employees of the organisation. They work in both market and non-market condition. The motivation for CSR market environment of the company is related to the motives of ethics, economics and strategies which stimulates the profit maximisation of the company. The non-market environment is related to the communities and stakeholders located in their place of operation. They work with various non-governmental organisations and other government offices for the welfare of the society. Chevron has been engaged in various activities related to health safety, welfare of women, environment safety and contribution in natural disasters along with conservation of biodiversity. 7.0 Recommendations The company develop various corporate social responsibilities for gaining ethical, strategic and economic motive but in certain conditions they fail to retain this entire standard. Thus, it can be recommended to the board of directors to modify the policy towards CSR activities. They become engaged in various CSR activities to maintain their ethical standard but in the cases of Ecuador they failed to maintain the ethical standard which enables them to face various difficulties. Thus, for maintaining the CSR activities positively board of directors should implement the effective ethical policies of the company. The standard organisational policies related to CSR will help them to gain profits in the market environment. The positive changes and modifications in existing policies will facilitate them to gain advantage towards market as well as non market conditions. References Business and Human Rights Resource Centre, 2009. Law and Lawsuits. Home. [Online] Available at: http://www.business-humanrights.org/Categories/Lawlawsuits/Lawsuitsregulatoryaction/LawsuitsSelectedcases/TexacoChevronlawsuitsreEcuador [Accessed February 24, 2011]. Chevron, 2007. Highlights. Stakeholder Engagement. [Online] Available at: http://www.chevron.com/globalissues/corporateresponsibility/2007/stakeholderengagement/#b3 [Accessed February 24, 2011]. Chevron, 2008. Conducting Business the Chevron Way. Developing Partnership. [Online] Available at: http://www.chevron.com/globalissues/corporateresponsibility/2008/documents/Chevron_CR_Report_2008.pdf [Accessed February 24, 2011]. Chevron, 2010. Operational Excellence: Safety, Health, Environment, Reliability and Efficiency. Business Conduct and Ethics Code. [Online] Available at: http://www.chevron.com/documents/pdf/chevronbusinessconductethicscode.pdf [Accessed February 24, 2011]. Chevron, 2010. Economic and Community Development. Human Energy. [Online] Available at: http://www.chevron.com/globalissues/economiccommunitydevelopment/ [Accessed February 24, 2011]. Gruvstad, C. A., 2009. Green Stakeholder Pressure on Oil and Gas Companies. Are “Green” Oil And Gas Companies More Efficient? [Online] Available at: http://studenttheses.cbs.dk/bitstream/handle/10417/1561/anna_christina_gruvstad.pdf?sequence=1 [Accessed February 24, 2011]. Holding, C. & Pilling, B. L., 2006. Organic Partnership. Six Models for CSR/Brand Integration. [Online] Available at: http://www.holding.com/articles/Brand_CSR_Integration.pdf [Accessed February 24, 2011]. Saltlane, 2009. Stakeholder Importance. Stakeholder analysis. [Online] Available at: http://www.saltlane.co.uk/Resources/stakeholder%20analysis.HTML [Accessed February 24, 2011]. Smith, H. K. & Nystad, O., 2006. Different Motives for Corporate Social responsibility. Is The Motivation For CSR Profit Or Ethics? Is The Motivation For CSR Profit Or Ethics? [Online] Available at: http://www.crrconference.org/downloads/2006hauglandsmithandnystad.pdf [Accessed February 24, 2011]. Subramaniam, A., 2011. The Power, Legitimacy and Urgency Model. Stakeholder Engagement. [Online] Available at: http://www.slideshare.net/SteveRaybould/stakeholder-analysis [Accessed February 24, 2011]. Ven, D. V. B. & Graafland, J., 2006. What is CSR? Strategic and Moral Motivation for Corporate Social Responsibility. [Online] Available at: http://mpra.ub.uni-muenchen.de/20278/1/MPRA_paper_20278.pdf [Accessed February 24, 2011]. Read More