csr practices in africa's extractive industries

8/9/2019 CSR practices in Africa's Extractive Industries

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408 BUSINESS AND SOCIETY REVIEW

investment or direct trade), or indirectly (via extra-company supplychains), underlines the importance of the international dimensionof CSR agenda.

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This article addresses the gap by providing a typology for theinvolvement of stakeholders in the firms CSR policy processes in adeveloping country context. It contributes to the understandingof stakeholder involvement with the above processes in terms ofstakeholders ties with the firm. The aim of the article is to highlightcertain aspects of corporate stakeholder engagement, by investigatingthe role that stakeholders have played in negotiating and shapingShells CSR policies and practices in Nigeria. The article generates

insights about the scope and limitations of stakeholder participationimposed by corporate culture, operational history, and institutionalcontext. It argues that the new space for engagement between thebusiness organization and its societal context is value laden andreflects stakeholders ideology, strategy, and power structures, allof which may steer the firms CSR practices in certain trajectoriesrather than others.

BACKGROUND AND CONTEXT OF THE STUDY

In the context of globalization, businesses are increasingly operatingin international markets and consequently encountering a range ofhuman rights risks that differ from their domestic markets.

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Thebulk of research on corporate environmentalism and social respon-sibility has concentrated on domestic issues in developed countrieswhile little is known about the firms CSR policies and practices

in international context, developing countries in particular.

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Whileconcentrating on domestic issues such as market power, philanthropy,racial discrimination, the position of women, and the environmentin developed countries, the widely held view, but subject to furtherscrutiny, is that the drivers of CSR strategies of firms are the factorsrelated to efficiently functioning market institutions, pressuresfrom highly informed and mobilized consumer groups, regulatorypressures, globalization, and local community pressures

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to

mention but a few. For example, Saha and Darnton (2005), in theirsurvey of multinational firms, found stakeholder pressure andgovernment legislation to be the primary motivations for corporategreening. This argument, however, presumes a developed country


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ALEXIS RWABIZAMBUGA 409

context where the aforementioned institutions driving the firmsCSR agenda are well established.

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In most developing country contexts, the aforementioned institu-

tional conditions are often an exception. There are either no legaland regulatory frameworks for MNC activities and their socio-ecological impacts, or such regulations may exist but not adequatelyenforced. Furthermore, the lack of institutionalized capabilitiesto anticipate and/or indeed respond to societal crises

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may increasethe vulnerability of developing-country societies in the face ofnegative impacts associated with the activities of MNCs in general,and by the extractive industries in particular. Markets may not be

so efficient; while in most cases, the civil society may lack thecapacity and resources to mobilize.

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Hence, with the institutionalweaknesses associated with developing countries, the role of pre-sumed institutional drivers for CSR strategies of firms that operatein international contexts is not well determined. As explored in thenext section, this gap has raised a lot of concerns, with criticsquestioning the merits of the trade globalization project without anadequate regulatory framework for global business activities of

MNCs.

Coping with Diversity: Globalization and MNCs in the

International Context

The intense debate over the impact of MNCs and FDI in developingcountries has been the subject of a vast literature and highlights alarge number of conflicting arguments among those who favor therole of MNCs as channels for FDI to developing countries

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and

critics.

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What is clear, however, is that the growing involvement ofMNCs in the development process of developing countries will havesignificant environmental and social consequences. According tocritics, these are likely to be negative. The reasons advanced arevaried and have often been addressed in the general literature onglobalization.

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Such authors argue that the process of globaliza-tion, perceived as a process that involves the interpretation of theuniversal and the particular, may generate conflicts between long-

standing local forces and new globalizing forces. These elements inconflict have been described as consisting of the globalized world ofthe modern rationality of global capitalist production on the onehand and the world of locally rooted cultures, and informal and


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nonorganized production

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on the other hand. Hence, it is arguedthat due to incommensurate rationalities, the differentiation betweenglobal and local spheres fosters tensions between economic and

political objectives,

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functional domains and the life-world

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ormodern societys systems and the external effects of their operations.

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Inevitably, the above observations have serious implications forMNC activities. While globalization opens up a world of unpre-cedented commercial opportunities for business, it also opens oneof risks and uncertainties.

First, MNCs are used to relying on the legal and normativeframeworks of nation states to ensure the legitimacy of their activi-

ties. However, they have faced increasing difficulties in sustainingthis legitimacy in contexts where there are legal and institutionalgaps.

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The global economy is increasingly organized in cross-border networks and value chains largely beyond the control ofpublic actors. This has fueled growing popular concern as well ascalls for stronger government regulation of MNCs operating indeveloping countries. The necessity to regulate the behavior ofMNCs has grown with the scale and scope of economic globaliza-

tion. In contrast to economic organization in the era of embeddedliberalism,

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where capital was predominantly national in terms ofownership and management and integrated into a historic socialcompromise, the current economic order is largely organized aroundtransnational capital in terms of ownership, management, exchange,and relevant stakeholders such as shareholders, suppliers, andconsumers. Correspondingly, MNCs have emerged as the newpowerful actors in the era of globalization, largely unrestrained bydomestic regulation but facing the unpredictability and risks

associated with an unregulated international context.Second, it has been argued that the relationship between MNCs

and developing countries is asymmetric. They argue that not onlyare these countries unable to regulate such huge and powerfulorganizations, but that they might sometimes be obliged to lowerexisting regulatory standards, a race to the bottom destined to boosting domestic competitiveness for foreign investments. Theempirical evidence supporting the assumption of the increasing

influence of business actors in world politics falls roughly into threecategories. First, statistics on foreign direct investment (FDI) are agood indicator of the increase in economic activities taken by largeMNCs. Between 1981 and 1985, annual FDI flows equaled $50 billion


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on average, by 1990 they had reached over $240 billion, andcontinued to rise steadily to a new peak of $612 billion in 2004. Asa consequence, the stock of FDI in relation to world GDP doubled

from 4.9% to 9.7% between 1980 and 1994. The actual importanceof MNCs in the world economy is even greater than these figuresindicate, because FDI accounts for approximately 25% of totalinvestment in international production. Foreign affiliates oftenfinance their expansion through retained profits and borrowing ondomestic or international capital markets

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(Held et al. 1999: 246). A second indicator is the substantial increase of MNCs. Theirnumber has risen from 7,000 in 1970 to over 40,000 in 1995.

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Already in 2001, the number of MNCs peaked at 63,312, controlling821,818 affiliates abroad.

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A third indicator for the increasingimpact of MNCs is the sheer size of their operations. For example,the annual sales of General Motors (GM) exceed the GDP of indus-trialized states such as Norway, Finland, and Israel.

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In addition,the $5 trillion sales annually generated by the MNCs foreignaffiliates exceed the total volume of international trade. Con-sequently, only 49 of the largest 100 economies are states.

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What is

most interesting in this context is the geographic and economicconcentration. Roughly 90% of all MNCs are based in North America,Europe, and Japan. Moreover, the top 300 global firms account forone quarter of the worlds productive assets. But the impact ofMNCs is not only reflected in abstract terms, but also manifestsitself on a very practical level. Consider for example the ecologicalfootprint of MNCs.

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Companies consume huge quantities ofresources such as water, energy and raw materials and produceenormous quantities of waste; they transform the environment

through resource extraction and the introduction of new materials,substances, and species. As Rowlands

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notes:

If we did not have TNCs spreading new forms of resourceextraction, production, and technological development aroundthe world, then we could well not have many of the globalenvironmental problems that we are experiencing today.

Third, although the ethical values as associated with CSR strate-

gies are not very different from a developing country perspective,than when seen from a developed country point of view, the maindifference is that, in the local developing country context, itbecomes less clear what the objectives and values of society are.

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While addressing the legal, cultural, administrative, economic, andsocial differences in the local context, there are heated debatesregarding the scope, boundaries, and norms of CSR. For example,

besides viewing business regulation according to its source ofauthority, the abstract content of regulation and the appliedverification procedures, forms of regulation may also be analyzed with reference to their specific content, such as environmental,labor or human rights standards. However this trajectory oftengenerates into relativist versus universalist debates in the humanrights discourse, which centers on the question of whether the relevantparadigm of human rights ought to be universal or culturally

relative. With regard to the global diffusion of norms pertaining tothe CSR project, relativists contend that economic and socialrights, which are allegedly local, must take precedence over the globalcivil and political rights that are said to dominate the CSR discoursein developed countries. Hence, they fear that the liberal formulationof human rights may be a form of developed country impositionon developing country societies, especially, in the CSR context.

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Universalist perspectives, however, argue for limited cultural varia-

tions in the form and interpretation of particular human rights, while insisting on their fundamental moral universality.

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Theypoint out that the general inability of the developing states toinstall laws and other forms of regulation to indicate the absolutestandards for business behavior, might result in business taking toethical relativism, when MNCs automatically place local values andnorms above international standards.

As critics of both perspectives point out, this line of zero-sumreasoning tends to ignore the fact that civil and political rights are

needed, not only to anchor economic and social development, but toprotect society itself from the worst effects of even natural catastro-phes.

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Inevitably, the above concerns and debates over the meritsof MNCs activities and the global regulation of their activities haveimplications on the individual multinational firms. The increasingscrutiny of MNC activities and the desire to mitigate the negativeimpacts of business practices on human rights as well as maximizetheir positive contributions to the protection and promotion of

human rights, has motivated most of these firms to adopt andmainstream CSR policies within their operations. While firms thathave adopted these values are said to be on sustainability spectrumthat involve fast or slow-paced organizational culture change, it is


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argued that this change is mostly effective provided that thepressures and criticisms leveled against the firms are perceived bythe latter as a potential threat to their legitimacy and reputation.

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Hence, on one end of the spectrum, there are firms that proactivelyrespond to CSR issues and conceptualize mounting pressures ontheir corporate reputation as a strategic opportunity to create realbusiness value. At the other end, firms that react negatively viewthese reputation challenges as a new source of financial risk andliability, which has the potential to undermine their shareholdervalue.

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However, whether the firm views these issues as a riskrather than a strategic opportunity to create value, or vice versa,

there are either way some practical implications in terms ofbusiness practices, such as the introduction and mainstreaming ofnew CSR values in the firms strategic policy formulation, planning,and implementation processes. The methodological framework forthe research reported here is outlined in the next section togetherwith highlights of the empirical data and the method of analysis.

EMPIRICAL DATA AND METHOD OF ANALYSIS

While stakeholder engagement is at the core of CSR processes, thispaper seeks to establish the nature of this interactive engagement,how participating stakeholders gain legitimate access to the stake-holder status and what means they find and deploy to influence theCSR policy processes in relation to their respective objectives. Theidea of stakeholders as communities or constellations of issues/value communities draws attention to different group of stakeholders

involved in the firms CSR development processes, and which havedifferent objectives, characteristics and modes of engagement suchas volunteers, secondments, integrated stakeholders, claimants,influencers, etc. This article aims to highlight the interdependenciesforming between the different groups of stakeholders and the firmat different levels of interaction.

The data presented in this article are drawn from 50 individualand semi-structured interviews, conducted with Shell executives

and several stakeholders in the Nigerian oil sector, and from anonline survey conducted in 2005 on Shell Nigerias stakeholders.Their analysis involved a two-step process. First the materials wereorganized thematically and then were organized in more depth


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using a form of discourse analysis. This involved the identificationof the particular domains of reference, types of calculation andforms of statements connected with specific knowledge domains,

and the examination of the associations made between them

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(Shell Nigeria, and stakeholders, the institutional environment, etc.).

RESEARCH FINDINGS

A typology for understanding Shells engagement with its stake-holders in the Nigerian oil sector is developed in the next section,

based on the analysis of empirical data. The typology reflects thenature of company-stakeholder relations, such as the sponsorship,employment, and other forms of collaborative relationships withinthe CSR domain. This is followed by a consideration of the dynamicsof cooperation developing between Shell and its stakeholders basedon the collaborative ties in the CSR domain.

Types of Stakeholders per Volunteering, Employment and

Sponsorship

From the analysis of the interview data it seemed that, dependingon the kind of mandate they are given, stakeholders of Shell Nigeriacould be divided in the following categories:

a.

Mandated outsiders

are friendly with a clear mandate, hiredor compensated to solve a particular problem, or to developspecific tools that can be deployed by business operations.

This type of involvement is akin to contracting

. They mayinclude individuals who formally worked for Shell, specialistconsulting firms, or individual experts hired on secondmentarrangements. The latter has specific skills or experience neededwithin the firm and are often drawn from friendly organizations.This group of stakeholders also includes NGOs and researchand academic institutions (or single researchers or academicsacting on their own right without necessarily implicating

their respective institutions). They operate from inside out, andhave special access to the internal environment of the firm.

b.

Independent sponsors

are independent and receive noinstruction from the firm, and is motivated by the fact that


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CSR features among their main areas of interest. This includesseveral research and/or advocacy-oriented development andenvironmental NGOs, development agencies, and multilateral

agencies. They operate from their own resources and interactwith the firm from the outside in. They draw their influencefrom their ability to reach and sometimes influence wideraudiences.

c. Those that can be qualified as influential observers

areindependent entities with varied interests in the firms CSRagenda. Members of the media, academia, and regulatoryinstitutions, political agents mostly feature in this group.

These stakeholders are driven by the interest of their respec-tive profession, and operate from the outside in, akin to knowthe internal workings of the organization.

d. Those that are influential claimants

have direct interests inthe firms CSR programs, and mostly consist of local com-munity organizations and other organizations that championthe cause of local communities. They are often invited by ShellNigeria to their annual stakeholder consultation workshops,

and engage with the company on the basis of certain claimsand grievances related to the allocation of oil proceeds,compensation schemes, environmental matters, etc. They oftenuse confrontational tactics to promote their cause, and areoutsiders to the organization. They draw their influence fromtheir ability to mobilize public opinion and run negativecampaigns against Shell. They may include such organizationsas the Movement for the Survival of Ogoni People (MOSOP),Friends of the Earth Nigeria, to mention but a few.

The next section outlines Shells operations in Nigeria, and thesocial political and institutional contexts within which the companysCSR strategies emerged.

The Context of Shells Stakeholder Engagement in Nigeria

The interviewees from Shell conceded that Shells engagement with

external community stakeholders is primarily based on the latterseligibility as stakeholders who were affected and can affect thecompanys oil production activities. Moreover, Shells stakeholderengagement has had two overarching objectives: mending corporate


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reputation, which has been tainted by the 1990s incidents, and securinga license to operate, by abating societal hostility to the companyand its operations in Nigeria. These two main objectives have shaped

the implementation of Shells CSR policies in Nigeria, and determinedstakeholder engagement processes and mechanisms at all levels.

First, reputation building was reported to be very importantfollowing decades of bad publicity that the companys Nigeriaoperations received. The Nigerian oil sector is known for its volatilityand low levels of security and violence. As depicted in Figure 1, oilconflicts, conflict of territorial boundaries and resource control,and politicalmilitary conflicts abound in the oil-producing regions

of southern Nigeria. Inevitably, Shell Nigeria has become part ofthis context, which has had considerable impacts on its operationsas demonstrated by frequent disruptions of oil production activitiesand their repercussions on global oil prices, and local politicalstability. These conflicts started off as a conflict between local com-munities and the federal government over the lack of oil revenuesflowing back from the federal government via the regional governmentand through the local government. In the absence of federal

government officials to whom grievances could be expressed, oilcompanies became proxy targets as the best way to obtain govern-ment response to community grievances, given the vital nature ofoil production for Nigeria. Given that, under the existing operatingagreement between the government and the multinational oilcompanies, security in the operating regions is the responsibility ofthe state, the latter has often responded to community protestsheavy handedly rather than seeking dialog and peaceful conflictresolution. The succession of dictatorial military regimes did little

to appease these conflicts, but consolidated its violent dissidencerepression tactics over the years. These practices culminated in theexecution of Ken Saro Wiwa, the notorious leader of the environ-mental justice movement of Ogoni people from the Delta regionof Nigeria in 1996. Given the historically close collaboration thathas existed between the Nigerian State and Shell, the latter wasincreasingly perceived as an accomplice of government violenttactics. As such, an attack on Shell was regarded as an attack on

the Nigerian government. Shell is accused of having been supportiveof repressive tactics directed toward protesting communities, andwas at some point linked with the import of arms on behalf ofgovernment security forces.


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The interviewees indicated that it was the responsibility of thegovernment to guarantee operational security, to which the latterresponded by deploying their structural domination over communi-ties. This heavy-handed response has fostered a lasting climate ofmistrust not only between the government and communities but

also between communities and Shell.Second, the interviewees pointed out that stakeholder engage-

ment at the community level was paramount in order to secure alicense to operate. Community protests and blockade of oil facilities

FIGURE 1 The Geography of Conflict in Nigeria: Violent ConflictsPer Region from 19732003.

Source: Struan Simpson, CIA. Data.)


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financially undermine company operations where on-time projectdelivery is an important constraint having serious financialimplications. Given that Shells day-to-day operations are close tocommunities and the relationship between Shell and the federalgovernment, communities treat the oil company as the de factogovernment. In recent years, most oil companies have approachedcommunity relations with a growing financial and institutionalcommitment. There is a marked change in community dialogue

strategy and tactics since the mid-1990s. For example, the com-pany kicked off a process of stakeholder consultation in 1997 andproceeded to a design of its sustainability agenda. Shell executivesclaim that ever since, the companys relationship with externalstakeholders became central to their CSR strategy. This is reflectedby survey data presented in Table 1, which depicts the interactionbetween oil companies and stakeholders in Nigeria. Shell wasmore active in contacting external stakeholders, while the companyremains the one to be contacted the most by stakeholders during

the 19962004 period.

Shells Approach to Stakeholder Engagement in Nigeria

As mentioned earlier, the interviews indicated that Shell Nigeriasstakeholder engagement has two overarching objectives: to improvethe companys reputation nationally and internationally and tosecure a license to operate. However, the interviews and the survey

conducted reveal a certain degree of fragmentation in the companysCSR program than is apparent in its annual sustainability reports.For example, The Health and Safety Department managed allissues relating to such sustainability targets as acidity of water

TABLE 1 Frequency (%) of Oil Company vs. StakeholderInteraction in Nigeria (19962004)

Shell Chevron Mobil Agip TotalFinaElf. Texaco Statoil

Oil company

contact initiative

35.7 17.8 17.8 3.57 3.57 10.7 10.7

Stakeholdercontact initiative

30.9 21.4 14.2 7.14 7.14 9.52 9.52

Source: Survey of Shell Stakeholders in Nigeria, 2005.


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discharged, CO

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emissions, and other targets that may often beachieved through improved technological efficiency or innovation.The External Relations Department managed all issues relating to

stakeholder management. When the field research was conducted,the two departments were separate and belonged to differentsections of the business. Despite the apparent fragmentation in thecompanys CSR program, Shell appeared to have stakeholderengagement strategy with a strong business rationale. Faced withheterogeneous stakeholder groups, which is essentially a reflectionof Shells complex operational impacts and related business risks,Shell adopted a tiered approach to stakeholder engagement.

The first tier of stakeholders consists of national and internationalorganizations comprising development agencies, human rights,environmental and development NGOs, research institutions,advocacy groups, to mention but a few. One Shell Nigeria executivewas referred to this group as the movers and shakers that shapeour reputation. They are the ones who have resources, know-how,know-where, and who above all speak to the press.

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They are theelite that pose a reputation risk, and the chosen CSR practices

address this problem. These engagement processes are financedfrom the public relations resources. These stakeholders interactwith the company in different capacity throughout the differentprocesses of the CSR policy cycle. They are knowledgeable from thepoint of view of the topicality of the various CSR issues and mayhave influence in their respective constituencies. They often formcollaborative arrangements with Shell as part of the companyspartnership program and either act as overseers or implementers ofthe companys development programs. For instance, the USAID

Nigeria has formed US$25 million partnerships with Shell to super-vise the cassava development and promotion being implementedby the International Institute of Tropical Agriculture in Nigeriaover 5 years.

The second tier consists of community stakeholders. Theseorganizations pose an operational risk to the company, and are themajor players in Nigeria. Repressive tactics have failed to detercommunity dissidents from disrupting oil production operations,

and instead undermined both the reputation of Nigeria and Shell.However, we observed that Shell and the Nigerian government haveradically changed their approach to community engagement overthe recent years. While the newly elected government now seems to


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prefer dialogue rather than muscular tactics of the past decades,the oil company has adopted a broad-based community consulta-tion program. This perfect co-evolution between government new

approach to participation and social dialogue, and Shells new con-version to the merits of stakeholder collaboration and consultationmark a new era in companycommunity relations, where com-munity capital is key to ensuring the true operational license tooperate beyond what states can guarantee. As a consequence, Shelland the Nigerian government have approached community relationswith a growing financial support. Shell has established a robustcommunity engagement program in oil-producing areas. According

to the results of a 2005 survey on stakeholder dialogue highlightedin Table 1, Shell most frequently took the initiative to establishdialogue with stakeholders, while the majority of stakeholders tookthe initiative to engage Shell more than the other oil companies inthe Nigerian oil sector. Oil companies operate in parts of Nigeriawhere 70% of communities lack access to clean water, electricity,passable roads, and bridges to connect riverside communities.

The significance of these increases in CSR investment high-

lighted in Table 2 was however made during a period of intensifiedpressure from communities and NGOs, media and political scrutiny,as shown in Table 3. It seems that as an integrated supply chain,

TABLE 2 SPDCs community development spendingprofile ($ million)

1998 1999 2000 2001 2002 2003 Total

Roads and bridges 7.5 11.8 33.6 5.2 23.3 4.1 85.5Education and schools 8 9.2 7.1 8.1 12.6 8 53Electrification 0.4 0.5 1 7.2 6.7 4.8 20.6

Other infrastructure 7.2 11.1 0.5 13.3 5 2.9 40griculture 2.8 1.7 1.9 3.8 4.8 2.3 17.3

Business dev. and

micro-credit

2.7 0.5 2.9 4 1.9 12

Health care 5.7 5.8 5.9 4.9 3.9 2.6 28.8Capacity, IEC and

new ventures

6.8 1 1.2 2.2 3.8 2.5 17.5

ater schemes 4.2 8.2 8.5 4.4 2.8 1.7 29.8Total 42.6 52 60.2 52 66.9 30.8 304.5

Source: SPDC Nigeria.


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local practices of multinational companys business units in inter-national context hardly pass unnoticed. The research established thatmany international stakeholders were familiar with the problemsexperienced by the communities in the oil-producing regions of Nigeria.

Shells CSR program has received as many interests amongsupporters as well as skeptics. CSR expenditures have reachedlevels that are unprecedented in Nigeria. As a result of thishigh visibility, CSR issues are dealt with at the highest level ofmanagement within the Shell group. New structures and roleshave been created across the company to manage CSR issuesthat have reputation and operational significance to the com-pany. For instance there is a Nigerian desk at the headquartersaimed at keeping a close eye on the CSR issues in Nigeria, and to

ensure that there is a constant liaison with the CSR team in thatcountry.

The next section revisits the stakeholder typology outlined earlierand examines the nature of companystakeholder relations, andforms of collaborative ties between Shell and its stakeholderswithin the context of the companys CSR processes in Nigeria.

Negotiating CSR at Shell Nigeria and the Role of

Stakeholders

Mandated outsiders

Revisiting the typology presented earlier andthe various stakeholder characterizations outlined, there is an

TABLE 3 Media and Political Interest in Shell Nigeria Operations:19972001

Region

Number of

diplomatic visits

(19972001)

Visits from

foreign journalists

(19972001)

Destination of

Nigerian exports

(1997, % of total)

North America 19 6 (USA only) 38%Europe 29 40 37.8%

frica 6 8 4%sia 12 2 4.3%

North America 3 4.3%

Source: SPDC, 2005.


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important distinction to be made between stakeholders that formerlyworked for Shell and are brought in on a contractual basis, andthose that have no previous ties with the company. Independent

contractors are brought to work on specific aspects and at differentlevels of the CSR process. Those with no prior knowledge of theorganization have to adjust to the rhythms and the demands of theinternal business culture. Most interviewees tended to think thatthis group has significant difficulties in adjusting to the internalorganizational culture, and that they had to balance their ownshort- and long-term business interests. For example, a managingdirector of a London-based NGO that has been invited to assist the

organization in implementing a number of community developmentprojects admitted that the job and its scope depended on the discre-tion of a given Shell field manager, and that he and his organizationwere often faced with the dilemma relating to the extent to whichthey could challenge the Shell organization without compromisingtheir short- and long-term collaboration. Those with previous tieswith Shell were able to engage both formally and informally with theorganization. They benefited from an extended social capital and

could engage with more leverage on the CSR processes within theorganization. Although they were contractors, their reach andinfluence extended beyond their terms of references. For example,one high-level executive admitted that those consultants withprior working ties with Shell were very useful to the company. Hefelt that their contributions were very valued based on the factthat they already had experience with the organization, and with abetter perspective about societal expectations, could be trusted togive an accurate indication of what would be required of the organi-

zation by society.

Independent sponsors Stakeholders with a free/independentsponsorship have mostly had an independent relationship with thecompany and seemed to retain the interest of the companys CSRexecutives. This includes several research and/or advocacy orienteddevelopment and environmental NGOs. The latter operate fromtheir own resources and interact with the firm from the outside in.

While some of them interacted with the company formally andpublicly, others preferred an unpublicized engagement. For instancea previous human rights watch executive (HRW) admitted that theyworked with Shell on the companys CSR/human rights agenda


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and interacted at the various levels of the organization such aspolicy and implementation levels. The ex-human rights executiveadmitted having reviewed several policy documents and guidelines

from contacts in Shell, with whom they kept collaborative relationship,and that there was no payment involved. Most interviewees in thisgroup that they were respected by Shell because they were con-sidered knowledgeable and able to offer a constructive andindependent advice further pointed it out. Shell has also consultedwith foreign development agencies in Nigeria such as the UnitedStates Development Agency (USAID) on the community developmentstrategy component of their CSR program in the country. They

claim that the informal contact enabled them to exercise betterinfluence because they did not come across as hostile, and ratherdid have a research-based approach. Similar views were held withmany human rights development NGOs and some stakeholdersfrom the academe. The Shell executives interviewed in Nigeria andin Shell International confirmed that NGOs such as AmnestyInternational and Human Rights Watch played an importantrole while the company sought to establish its group sustainability

agenda in the mid-1990s. The interviewees indicated that the com-pany collaborates with civil society organizations from the highestpolicy level and all the way down the implementation and evaluationprocesses of its CSR program in Nigeria. These external stakeholdersoperate from both outside in and inside out, and operate on thebasis of partnership. As mentioned previously, the accession tothe partner status is based on the stature and influence of therespective stakeholders in partnership with Shell, and they derivetheir influence from their own resourcefulness, capabilities, and

independence, not to mention the perceived significance of theirrespective constituencies in and outside Nigeria.

In all, previous experience with the company and trust seem tobe the most important factors that determined the influence thatthose stakeholders involved at various levels of the companysinternal CSR processes could have on their outcomes at variouslevels. The next section examines how the company has negotiatedwith those stakeholders identified as influential observers and/or

influential claimants.

Influential observers As indicated earlier, this category mainlyconsists of local community organizations and other organizations


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that champion the cause of local communities and hence have adirect interest in the firms CSR programs. They operate as outsiders(outside-in) and draw their influence from their ability to mo-

bilize public opinion in support of their own causes. For instance,organizations such as MOSOP, Friends of the Earth, Global Witnessand Christian Aid often adopted a hostile stand toward oil companiesin Nigeria, and Shell in particular. They are independent and act inpartnership with grass-root organizations, in defense of communityenvironmental rights. They regularly report the impacts of Shellsoperations on the communities. For example, FoEs publication ofThe Other Shell Report, which often coincides with the companys

shareholder meetings casts significant doubts on the companysCSR reports by reporting the demise of local communities as aresult of Shells operations. Many single issue and/or advocacyorganizations, such as Global Witness, feature in this group. Whilethey have a strong influence, and can potentially drive a hostilecampaign against Shell, their weakness is that they invest littlecapabilities in research, and hence their engagement with thecompany often comes across as emotional rather than grounded

in research. There is a climate of mistrust and mutual suspicionbetween Shell and this stakeholder group.

Influential claimants Moreover Shell has established contact with local communities through community-based structuresrepresented by traditional leadership. Oftentimes, traditionalleaders are also the recipients of cash from Shell, which is intendedfor community development projects. It has its own communitydevelopment offices (CDOs) located in company headquarters

that facilitate the companys relationships with communities. Somecommunity members are employed as community liaison officers(CLOs), deployed by Shell to respond to community grievances.However, there was wide dissatisfaction with this arrangement andsystem of representation. Although company officials claimed thatcommunity projects are derived from needs assessments conductedin communities, community stakeholders indicated that they arerarely consulted before oil companies initiate assistance projects in

their communities. They indicate that often, the CLOs would forwardcommunity assistance proposals to company headquarters with noinput from the vast majority of the affected communities. Shellwould view these proposals as reports from the community, while


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they may often only represent the interests of the CLO and hisnetwork. Implementing projects on community level is entrusted tocommunity development committees (CDCs), established before the

presence of the oil companies. Oil companies decided to distributeproject funds through the CDC, since it was a traditional struc-ture already in place to serve communities. However, communitiesdenounce some of the weaknesses in this system.

First, communities report that company processes that affect themlack transparency. Second, while the companys oil operations spanthe entire regions across community lands, the dialogue with com-munities takes place on a community-by-community basis, with

oil-affected communities only, rather than on collective negotia-tion and dialogue with broader groups concerned. Third, companycommunity interaction generally takes place at the companyheadquarters, either at the invitation of the company, or inresponse to a visit by a community delegation. Although companyofficials reported that the objective of community dialogue is toassess the needs and requirements of local communities, communitymembers gave a different impression of how companies approach

dialog. The prevailing sentiment among oil-affected communities isthat company officials engage in community meetings only to gain asense of the mood in the community and to identify groups in thecommunity that may pose a threat to the company or to companyassets. This might be explained by the fact that the company isweary of the fact that villagers made their grievances known viasabotage of company assets and the kidnap of company staff.

The findings also show that the company was keen to exploit theweaknesses of the local institutional and regulatory environment to

ensure smooth running of its operations. For instance, duringprocesses of public consultation, such as the EIA, the processesfrequently denied sufficient time for feedback on reports from com-munities concerned. While time is a major parameter in the fielddevelopment plan, and time saving can have major cost-savingimplications, time loss can often lead to big losses in explorationand production operations. Since the government is also partly tothe business, it has not demonstrated much concern to protecting

community interests in this regard. The findings show that con-sultations with local stakeholders involve bargaining process whereShell engages with communities on a case-by-case basis. With the com-munities denied the option to pull resources in a collective bargaining


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process, they may be unable to protect their interest to the benefitof the company. In short, there is a constant climate of suspicionand mistrust between the company and community stakeholders.

CONCLUDING REMARKS

The article started by pointing out that there may be some explanatorygaps with regard to what constitute the key driving forces of CSRstrategies of firms operating in international context. The stronginstitutions argument was found unable to explain what drives

these policies in weak institutional environment. The article examinedthe role of stakeholders in the Nigerian oil sector, and proposed toexamine how they interacted with Shells CSR program in Nigeria. Itexamined how participating stakeholders gain legitimate access tothe stakeholder status and what means they find and deploy toinfluence Shell Nigerias CSR processes in relation to their respec-tive objectives. To this end, the article first proceeded by elaboratingan initial framework for understanding the role of these stakeholders

based on the existing ties and collaborative arrangements with Shell.Generally, the findings highlight the complexity of Shells CSRimplementation processes in Nigeria. The various CSR programswere mainly managed under external relations or productions andoperations departments. The findings show that Shells CSR programis underpinned by a business rationale, and that there must be a business case to justify investments channeled through to CSRprograms either as a case for reputation building, or a case forrisk mitigation. The underlying perception of CSR issues seems to

mediate between the scope and substance of Shells investment.For instance, a public relations issue is likely to receive moreattention and resources assigned to it if it is perceived as a risk,or an opportunity. Tribal communities that are large are likely toreceive abundant CSR investments from the company, to the detri-ment of smaller ones. In addition, it was established that generally,pressures from a global institutional environment have increasedpublic scrutiny of Shells operations in Nigeria. Shells operations

constitute a somehow integrated supply chain, and it might beeasier to link the whole Shell group to its business units in develop-ing countries. However, this limelight is limited in scope, as if doesnot necessarily reach and/or understand the dynamics of business


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operations at the site level where Shells CSR practices take placeamidst complex relationship with fence line communities.

With regard to the various categories of stakeholders, the

findings reveal that stakeholders that engaged with Shells CSRprocesses from within and were able to have some impact on theprocesses and their outcomes are those with trusted backgrounds. These may be previous employees or consulting firms withmembers previously employed by Shell. These include other stake-holders from trusted organizations and who joined Shells CSRteams in various capacities. They were able to bring specializedknowledge and had leverage on major policy decisions.

Stakeholders that have an independent sponsorship were highlyrespected by the company. They consist of global non-governmentalorganizations such as Amnesty International, Human Rights Watch,Greenpeace, and development agencies from developed countries.They collaborate with the company at a policy level and at the levelof strategic implementation. This group is motivated by the factthat CSR features among their main areas of activity. This includesseveral research and/or advocacy oriented development and

environmental NGOs. They operate from their own resources andinteract with the firm from the outside in. As mentioned earlier, theaccession to the partner status is based on the stature andinfluence of the respective stakeholders in partnership with Shell,and they derive their influence from their own resourcefulness,capabilities and independence, not to mention the perceived significanceof their respective constituencies in and outside Nigeria.

The stakeholder group categorized as influential observers is anindependent actor with varied interests in the firms CSR agenda.

Members of the media, academia, and regulatory institutions,political agents mostly feature in this group. These stakeholders aredriven by the interest of their respective profession, and operatefrom the outside in, akin to know the internal workings of theorganization. They are handled delicately by the company, butgenerally appear not to interact with the firms CSR processes.Stakeholder described as influential claimants have direct interestsin the firms CSR programs, and mostly consist of local community

organizations and other organizations that champion the causeof local communities. They act from outside in and draw theirinfluence from their ability to mobilize public opinion in support oftheir own causes. In anticipation of the reputation as well as


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operational damages that they can inflict on the company, there isreason to believe that Shells CSR policies are design to address theexpectations of this group in Nigeria. Although the findings reveal

absence of trust and mutual suspicion between Shell and theseentities, they nevertheless influence each other. While thesestakeholders are limited by their lack of capabilities in order toshape the companys CSR program as such, there is a handicap,and somehow a lack of power and overly rely on sponsorship fromWestern-based NGOs for capacity and funding.

Despite its limitations, the article contributes to the understand-ing of corporate stakeholder engagement in international context,

and the complex interdependencies that frequently developbetween companies and stakeholders not only at the institutionallevel, but also within the context of the organizations CSR policydevelopment and strategic implementation processes. In doing so,it invites an examination not just of the differences and barriersexisting between the firm and its stakeholders, home and hostcountry practices, but of the ways they are embedded in each other,and how this affects their collaboration.

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csr practices in africa's extractive industries

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