Corporate Social Responsibility of Colombias Mining Industry - Research Paper Example

Corporate Social Responsibility of Colombia’s Mining Industry: Positively Affecting Communities and the Whole Nation Introduction The current growthof Colombia’s mining industry, which following the definition of the North American Industry Classification System includes establishments that engage in extracting natural minerals of all kinds, such as solid minerals like coal and ores, liquid mineral like crude petroleum, and gases like natural gas (Industries at a Glance, 2014), has generated debate as to the impact of the mining industry on the country’s economy, environment, and communities (Reyes, 2012). Haunted by the malpractices of big oil companies in the 1980s and 1990s that had harmed the environment and communities (Utting & Ives, 2006); an immense pressure is unsurprisingly placed now on Colombia’s mining sector with regards to its corporate social responsibility (CSR) to improve its sustainable development (Reyes, 2012). Current pressure will not only be about the sufficient supply of energy, but it will also be about clean energy that is environmentally sustainable (Pemberthy, 2012). Confronted with diverse issues so common in a developing nation, just like Colombia, CSR in this country is more easily criticized than appreciated. One factor Haslam (2004) cited is the low involvement of the private sector in carving Colombia’s CSR policies. As Blowfield and Frynas (2005) have observed, most CSR cases show that stakeholder dialogue and engagement is key to the success of CSR. Added to this, Haslam (2004) furthers, is the weak involvement of the Colombian government in the promotion of CSR and its failure in integrating CSR policies into its whole government policy. This perhaps could explain the conflict between corporations and communities. For example, the adoption of several corporations for sustainable CSR, which impact could not be immediately felt, was not appreciated by communities which due to deep level of poverty would understandably prefer short-term, yet easily felt benefits such as direct economic benefits or positions. (Baena, 2009/10) Whether CSR is good for business or good for the people or good for both, remains debatable until today. Focusing on the CSR of the two main oil companies in Colombia – the ECOPETROL S.A. and the OXY (Occidental Petroleum Corporation) – this study argues that CSR is good for the company and likewise for the people. As many corporations have argued, “… there is a solid business case for CSR, which is associ­ated with ‘win-win’ strategies; doing good environmentally and socially can simultaneously improve a company’s competitive advantage, reduce costs, enhance staff morale and reduce staff turnover” (Uttin & Ives, 2006, p. 15). ECOPETROL S.A. and CSR Formerly known as the National Oil Company (NOC), not only is ECOPETROL S.A. the largest company in Columbia that is 100 percent state owned, but it is also the country’s main petroleum company (ECOPETROL, 2008). In fact according to Silberwasser and Gomez of the Compass Group, a major part of Colombia’s commodities growth is Ecopetrol with its $60 billion worth of investment in oil development (Greenberg, 2008, p. 1). Other than this, ECOPETROL is also among the four main petroleum companies in Latin America and among the 35 largest world’s petroleum companies (ECOPETROL, 2008). Fully engaged on exploring, exploiting, refining, transporting and distributing hydrocarbons and its by-products (ECOPETROL S.A., 2014) and with its oil producing field widely spread in and its transportation network of pipelines and polyducts installed throughout Colombia (ECOPETROL, 2008), ECOPETROL has undeniably impacted on the lives and conditions of the people (Benavides, 2012), hence the need for the company to make communities see that the company is good for them. Aside from its massive commercial activity in Colombia, Baena’s (2009/2010) study on the CSR in Colombia reveals that ECOPETROL has had a strong CSR principally focused on five areas, such as education, infrastructure (i.e., roads, aqueducts, sewer systems and rural electrification), productive projects for economic development, institutional and communitarian reinforcement, and environmental preservation. In the conduct of its CSR, ECOPETROL has made efforts, like attending community inquiries and putting-up Citizen Participation Offices in areas of its operation, purposely to directly communicate and engage with community in order to have a better grasp of their needs. Other means of direct communication with its stakeholders also include periodic publications, the Web page, and reports to outside bodies (Ecopetrol: SCR Report, 2006). To carry out its socio-economic development programs, ECOPETROL also founded and administered a number of oil-related foundations, such as ECOPETROL Foundation for the Development of Catatumbo Region (FUNDESCAT), ECOPETROL Foundation for the Development of Middle Magdalena Region (FUNDESMAG), High Magdalena Region Foundation (FAM), and Pipelines of Colombia Foundation (ODC) (Baena’s (2009/2010, p.6) Cognizant of the importance of quality education for the long-term development of the developing nation of Colombia, Baena’s (2009/2010) study has further revealed that central to ECOPETROL’s CSR is the encouragement of academic excellence among Colombian communities, hence its program of Scholars for Colombia since 1986. Under this program, ECOPETROL has sponsored selected students to higher education at home and abroad, has donated computers to public schools, and has helped build public libraries complete with reading materials. ECOPETROL has also committed to help improve the labor skills of Colombians and to help provide employment in the region, hence its training program for certified skilled electricians, mechanics, and welders. It has also taken up the issue of adequate housing through its program of Solidarity ECOPETROL. Under this program, employees are encouraged to volunteer in building houses for Colombia’s poorest urban communities. Having learned from its painful experience against the workers some years ago, ECOPETROL together with the Unión Sindical Obrera (Worker’s Union) worked together in the establishment of a National Commission on Human Rights and Peace with corresponding regional sub-committees, purposely to foster and to push for peaceful coexistence and conflict resolution (Ecopetrol: SCR Report, 2006). ECOPETROL’s CSR initiatives, Baena (2009/2010) notes, have undeniably raised employment rates in recipient communities and have greatly improved their conditions of living. However, knowing that such improvements could potentially result to people’s rural to urban migration that may in the future jeopardize community development; it is noteworthy that ECOPETROL’s education program is being developed within the framework of “educating the communities for the benefit of the communities” (p.8). Furthermore, workers have been trained towards conflict resolution hence the attainment of a better management-worker relationship and a relatively peaceful working environment (Ecopetrol: SCR Report, 2006). On the part of the company, these initiatives, particularly the encouragement of citizen participation, have also provided ECOPETROL valuable information regarding the fears, interests, perceptions, and issues of communities regarding the company. For example, “Interest was expressed in issues such as the quality of gasoline, the products the company sells, the mechanism established by Ecopetrol for co-financing social investment projects, and the payment of royalties to Departments and municipalities up until 2004…” (Ecopetrol: SCR Report, 2006, p.1). This enables ECOPETROL to deal more effectively with its stakeholders (consumers, communities, investors, government) thereby strengthening its economic and political positioning in the country. Aside from addressing various issues of communities, ECOPETROL has also improved its corporate governance to ensure quality product and good service. To avoid corruption, it has used the national transparency index (ITN), garnering a score of 93.32/100 points and since then has been recognized by the Corporación Transparencia por Colombia to be among the 10 best companies in terms of sustainable results. (Ecopetrol: SCR Report, 2006) OXY and CSR Not only is OXY among the world’s ‘independent’ oil firms operating in three core regions, such as the United States, Middle East/North Africa, and Latin America with more or less 11,000 employees worldwide (OXY, 2010), but it is also among the top oil firms in Latin America, aside from becoming the leading transnational oil company in the entire Andean region since its discovery of more than 700 million barrels of oil in Peru in 1971. Then in 1983, it discovered the Caño Limón oilfield in the Department of Arauca in the north-eastern part of Colombia. This suddenly made the oil-importing nation of Colombia become an oil-importing nation. (United Nations, 2003) Besides, this oil field has provided OXY hundreds of millions of dollars of profit, has significantly funded the Colombian government, and has drawn substantial US military aid to Arauca (Occidental Petroleum in Colombia, 2008). OXY has a massive production plant in Colombia with more than 100 oil producing wells making the country a strategic part of OXY’s global production and operation. (United Nations, 2003) However, OXY’s earlier operation in Colombia was met with great resistance, more prominently by the U’wa people and was marred with grim cases of human rights violations, environmental degradation and total disregard of indigenous people’s ancestral domain (Goldman, López, & Ramos, 2007). Its hostile relationship with the community has made it a favorite target of guerilla attacks (Izquierdo, 2001). From 1989 to 2000, its Caño Limón pipeline in Arauca has been struck for more than 473 times hurting OXY and the ecosystem with 1.5 million barrels of crude oil spilled into the forest and rivers – far greater than the 36,000 barrels oil that Exxon Valdez spilled (Leech, 2000). In the past few years following the incessant concern and commitment in CSR policies of Colombia’s both public and private sectors, OXY has implemented well developed CSR programs in Colombia, along with several oil and gas companies (Baena, 2009/2010). Today, OXY proudly claims that all its efforts are geared towards the provision of safe and healthy workplaces, protection of environment, creation of a positive economic impact on communities, and respect and adherence to the cultural norms and values of communities anywhere it operates, recognizing the fundamentality of CSR in the company’s success. It prides itself on the company’s culture of highest standards of and personal accountability in work. Knowing the vitality of building a harmonious relationship with its stakeholders, OXY commits to building trust with all its stakeholders – stockholders and investors, neighbors and local communities, host governments, civil society organizations and educational institutions, contractors and suppliers, employees, and industry partners. This OXY achieves through reliable and transparent communication and coherent actions. Oxy’s local business management ensures that the company’s CSR is congruent to the needs of corresponding local communities. (OXY, 2012) OXY’s efforts to be responsible oil firm in Colombia is in fact being recognized, as it was recommended by the US Embassy in Bogotá for the Secretary of State’s Award for Corporate Excellence (Lefer, 2009). Though it was not able to win the award and though its nomination is being criticized, one thing cannot be denied – that OXY despite the difficulty of operating in the conflict-ridden and poverty stricken nation of Colombia has in fact accepted and performs its CSR to the best of its ability. In fact even the National Jesuits Committee on Investment Responsibility (2011) has noted that “By 2010, it was evident… the Company was fulfilling its objectives of being an industry leader with respect to human rights… Oxy places its corporate reputation as an explicit value to protect and is steadily improving its reporting to stakeholders. (p.9) The Committee furthers that OXY’s CSR did not simply enable it to achieve advantageous social goals but even a significant return on investment. Analysis Both companies studied have illustrated a ‘triple bottom line’ CSR. This model is also known as 3Ps in reference to the company’s profit and loss account, people’s account, and planet account (Hindle, 2008). Although they have gone through a different route, both nonetheless recognized that a company’s success rests on the combined 3Ps. Following this CSR framework, both have proven that CSR is impacting societies in various ways: (1) the socio-economic programs have capacitated communities to improve their living conditions, (2) the responsible corporate governance has increased productivity and thus the higher ROI which in the end also improves the economy of the country, (3) the engagement of oil companies with their stakeholders has resulted to clearer expectations from both sides, has educated both sides, has further improved the concept and implementations of CSR which in some ways have help mitigate conflict. Having impacted positively on communities, having been recognized by award giving bodies, and having been able to operate continuously, it can be assumed that their programs have been effective, although these may not be sufficient to address the structural root of Colombia’s poverty. Furthermore, the experience of OXY has evinced that having the social license from the community is far more important that having a battalion of army for companies to operate safely. As illustrated in the study, community engagement and participation which allows the coordination of the company’s programs that will pave the way for the community to accept and appreciate the program and for the company to better understand the need of the community and be able to implement programs truly relevant to community’s needs. Conclusion Indeed, what is good for the company is good for the people, because if this is not the case, as illustrated by OXY’s earlier practice in Arauca, the company will never succeed. It means to say therefore, that companies should be socially responsible and that profit should not be their sole interest. Rather, companies should understand that their success lies on being relevant, which means being able to positively impact on the development and progress of communities and societies, and on achieving sustainability. These can only be achieved by truly committing themselves to CSR. Hence, what is good for the company is good for the people, if the company follows the triple bottom line principle. References Baena, E. G. (2009/10). CSR in Colombia: A critical approach to industries’ approaches and communities’ needs and conditions. Centre for Energy, Petroleum and Mineral Law and Policy Annual Review 14 (7), 1-13. 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