Oil and CSR means Business

CSR as a Business Strategy among Oil Companies in South Sudan 2005-2011

Sindre Sørhus

Master thesis Human GeographySGO 4090

Autumn 2012

Department of Sociology and Human GeographyFaculty of Social Sciences

University of Oslo

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Acknowledgements

This master-thesis, though sometimes felt as a solitary endeavour, is a result of collaboration and massive support. I have relied heavily on assistance and support from countless persons and institutions to who I am forever grateful. First of all I would like to express my gratitude and sympathy towards the people of South Sudan who opened their country, doors and hearts to a bewildered and bearded Norwegian. From the offices at the Ministry of Energy and Mining to the open-air churches, meeting diplomats, former child soldiers or the street-kids at Konyo-Konyo, my encounters with the South Sudanese people were always positive.

I would also like to thank the informants at the Ministry of Energy and Mining, ECOS, PACT Sudan, PETRONAS, WNPOC, Total, and “Peter” from the local community who agreed to be interviewed. Without your participation I would have been stranded.

Jamus at Norwegian People`s Aid became an important discussion partner in developing my thesis questions. In Juba he and the rest of the hardworking staff at Norwegian People`s Aid assisted me with accommodation, transportation, contacts, excursions and valuable discussions. The reputation and high standing NPA in South Sudan reflected positively on me and I am proud to have been associated with you. My cousin Kari at the Norwegian embassy made sure I saw more of South Sudan than offices and laptops and introduced me to a world of fun and interesting expats as well as Juba’s number one boda-boda driver: Alex. Thank you all for showing me Juba and South Sudan.

At the University of Oslo, my supervisor, Hege M. Knutsen, has been immensely helpful. It has no doubt been frustrating going through my unfinished manuscripts that made little sense, but her comments have been important to guide me towards the final result. She has undoubtedly supervised more than supervisors are supposed to and saved me from the gravest errors. As for the remaining errors, they are my own.

Finally I want to thank my beautiful wife, Christina, for supporting me and for letting me skip work to study in South Sudan. Not every wife would visit in Juba, and very few would be happy spending her holiday volunteering when her husband is organising interviews all day. I will now return from the computer and give you the attention you deserve (almost a full week before September 7 th whey you are scheduled to give birth to our child).

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Table of Contents

List of abbreviations 5

1. Introduction 61.1 Defining Corporate Social Responsibility 71.2 Objectives and research questions 91.3 Choice of case 101.4 Structure of the thesis 10

2. Theoretical framework 122.1 Economic theories 12

2.1.1 Neoliberal theories 122.1.2 Radical political economic theories 132.1.3 An account of the CSR-debate 15

2.2 The concept of Corporate Social Responsibility 172.2.1 Carroll`s CSR-pyramid 172.2.2 Affirmative and negative injunction duties 21

2.3 Why do companies engage in CSR? 232.3.1 Institutional theory 232.3.2 Stakeholder theory 25

2.4 The resource curse 27

3. Background 313.1 Historical and geographical context 313.2 Socio-economic conditions in South Sudan 323.3 History of oil in Sudan 32

3.3.1 Controversies regarding the oil industry 333.4 Oil-contracts 343.5 Oil companies in South Sudan 353.6 Legal regulation of the oil industry 37

3.6.1 Regulation of the oil industry in the CPA 38

4. Methods 404.1 Philosophy of science 404.2 Choice of method 424.3 Preparations for fieldwork 434.4 Selecting and getting access to informants 44

4.4.1 Choice of informants 444.4.2 Securing access to informants 46

4.5 Research methods 494.5.1 Qualitative interviews 494.5.2 Interview guides 504.5.3 Choice of location 514.5.4 Documentation of the interviews 52

4.6 Informal data gathering 534.7 Desktop research 544.8 Analysing data 55

4.8.1 Handling of data 574.8.2 Evaluation of data 57

4.9 Challenges during my fieldwork 584.9.1 Ethical considerations 60

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5. CSR-policy and practice in South Sudan 625.1 The CSR-policy of oil companies operating in South Sudan 62

5.1.1 International oil companies 635.1.2 Joint Operating Companies (JOCs) 655.1.3 Petrodar Operating Company 665.1.4 Greater Nile Operating Company (GNPOC) 685.1.5 White Nile Operating Company (WNPOC) 70

5.2 From policy to practice 725.2.1 Profitability 735.2.2 Employment 745.2.3 Securing oil supply 755.2.4 Environmental protection 765.2.5 Compensation 805.2.6 Community development 815.2.7 Summary 85

5.3 Assessment of CSR-practices 855.3.1 Oil companies 865.3.2 Government of South Sudan (GoSS) 895.3.4 The international civil society 915.3.5 Local communities in the oil producing areas 92

5.4 Reasons for resentment 955.4.1 The importance of the economic responsibilities 955.4.2 The importance of legal responsibilities 975.4.3 The importance of ethical responsibilities 985.4.4 The importance of philanthropic responsibilities 99

6. Explaining social performance 1026.1 A lacking culture of CSR in the Sudanese oil industry 102

6.1.1 The legacy of the civil war 1026.1.2 Weak legal framework and no will to enforce it 1046.1.3 The influence of the Government of Sudan in the oil industry 1076.1.4 The prevalence of national companies with a limited culture of CSR 1086.1.5 The organisation of the oil industry in JOCs 110

6.2 CSR in a world of powerless stakeholders 1136.2.1 Civil society as demanding, dependent and dangerous stakeholders 1136.2.2 Government of South Sudan as discretionary stakeholder 1186.2.3 Government in Khartoum as dominant and definitive stakeholder 1216.2.4 Owners as dominant and definitive stakeholder 122

7. Conclusion 1247.1 Consequences for policy 1287.2 Consequences for theory and suggestions for further research 130

References 132

List of Exhibits

Exhibit 1. Figure 1 Carroll’s Pyramid of Corporate Social Responsibility 19Exhibit 2. Table 1 Composition of the different JOCs in South Sudan 36Exhibit 3. Figure 2 Map of Oil Blocks in Sudan 37Exhibit 4. Table 2 Informants, sources of data and methods used 46Exhibit 5. Table 3 Categorisation of stakeholders based on attributes 123

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List of Abbreviations

CNPC China National Petroleum Company

CPA Comprehensive Peace Agreement

CSR Corporate Social Responsibility

ECOS European Coalition on Oil in Sudan

EPSA Exploration and Production Sharing Agreement

GOSS Government of South Sudan

GNPOC Greater Nile Petroleum Operating Company

JOC Joint Operating Company

NGO Non-Governmental Organisation

ONGC Oil and Natural Gas Company

SPLM/A Sudan People`s Liberation Movement/Army

WNPOC White Nile Petroleum Operating Company

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1. Introduction.

This study is conducted to shed light on the conditions that affected the corporate

social performance of international oil companies operating in what is today South

Sudan during the period from 2005 to 2011. The impacts of the oil industry can be

devastating and it is of vital importance that companies behave responsibly, especially

in poor countries where marginalized communities are more vulnerable to

exploitation.

The oil producing areas in South Sudan contain large oil-reserves, but are still among

the least developed areas on the planet. Following the discovery of oil, a war broke

out in 1983 between the central government of Sudan and a southern rebel group

called Sudan People`s Liberation Army (SPLA). During the civil war that lasted more

than 20 years, approximately two million people were killed and twice as many were

displaced. Because of their proximity to the oil fields, the local communities in the

oil-regions suffered more than others and were subject to forced displacement and

violent attacks by government troops and local militia. Villages were destroyed,

civilians killed, raped or taken as slaves. Oil companies have been criticized for

complicity in these war crimes and their actions during the war created resentment in

South Sudan. The Comprehensive Peace Agreement (CPA) that was signed in 2005

brought peace and promises that the local communities in the areas of oil production

shall benefit from oil extraction. This study will look at whether and how the

companies contribute to this through their Corporate Social Responsibility (CSR) and

why the companies have acted as they have. Conducted using the qualitative methods

of semi-structured interviews, informal data gathering and desktop research this study

will examine both the policies and actions of the oil companies and the conditions

present in South Sudan during the time of the CPA in order to explain their policy and

practice.

The term Corporate Social Responsibility (CSR) has become the most common term

used to express the responsibility business has towards greater society. CSR has been

embraced by companies and nations across the globe and promoted by global

institutions through initiatives such as the UN Global Compact. The concept of CSR

is not new, but gained renewed attention in the 1990s when scandals on child labour,

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human right abuses and pollution uncovered the negative effects of globalisation. As a

response to its own scandals, the oil industry have been among the leading industries

in promoting CSR and oil companies have been at the forefront when it comes to

CSR-reporting and development of CSR-policies (Frynas, 2010; Shankleman, 2006).

Literature on CSR has differed based on the economic theories the writers base their

research in (Broomhill, 2007). While literature based in neoliberal economic theories

generally portrays CSR as a win-win solution that benefits both business and society,

literature based in more radical economic theories has focused on the failures of both

companies and CSR-itself (ibid). According to Frynas “…too many books on CSR fail

to appreciate the importance of context in the evolution of CSR” (Frynas, 2010, p. 2).

Frynas further argues that context is important both to understand the emergence of

CSR and to determine what companies can and should do in a given setting (ibid). In

this study I have described both the nature of the oil industry in general and the

particular economic and political conditions in South Sudan during the CPA-period

from 2005-2011.

The oil industry is chosen as the object of study, because I noticed that oil companies

behave differently in different parts of the world and became curious about how this is

compatible with centrally developed CSR-policies. This study uses the CSR-policies

as a starting point to analyse the practices of companies. It further goes on to discuss

what responsibility civil society and government expected the companies to assume

and discusses the achievements of CSR in South Sudan in the given period. Finally it

discusses the conditions present in South Sudan and how they have affected the policy

and practice of the companies.

1.1 Defining Corporate Social Responsibility (CSR)

Before I move on to my research questions I find it necessary to clarify the meaning

of Corporate Social Responsibility (CSR). The term is widely used, but there are a

number of different definitions and conceptions about what CSR is. After looking at

37 different definitions of CSR, Dahlsrud identifies five common dimensions: an

environmental dimension, a social dimension, a stakeholder dimension, an economic

dimension and a voluntary dimension (Dahlsrud, 2008). These five dimensions

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indicate that CSR is seen as something that goes beyond the law (voluntary) to

manage their responsibility towards the nature (environmental), wider society (social)

and various groups affected by the business (stakeholder) while being profitable

(economic). None of the definitions actually address what social responsible practices

entail, but rather describe CSR as a phenomenon (ibid). Definitions of CSR therefore

provide little guidance for business on how to manage their social responsibilities.

In this study I will use a definition of CSR similar to the one applied by Blowfield and

Frynas (2005). They propose that given the plethora of definitions it may be more

useful “…to think of CSR as an umbrella term for a variety of theories and practices

all of which recognize the following: (a) that companies have a responsibility for

their impact on society and the natural environment, sometimes beyond legal

compliance and the liability of individuals; (b) that companies have a responsibility

for the behavior of others with whom they do business (e.g. within supply chains);

and (c) that business needs to manage its relationship with wider society, whether for

reasons of commercial viability or to add value to society” (Blowfield & Frynas,

2005, p. 503)

I see social and environmental impacts as the core of CSR. Hence, in this study CSR

is viewed as an umbrella term covering various ideas and practices that recognise

that business has impacts on society and the natural environment and that

business has a responsibility to limit their negative and maximise their positive

impact. CSR-activities are thus activities on part of the company to limit the negative

or enhance the positive impact of the company. This way of viewing CSR is

intentionally wide, and includes ideas and practices that don’t necessarily contain a

voluntary or stakeholder dimension. This allows me to look at any part of the

operation of the oil companies that has social or environmental impacts.

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1.2 Objectives and research questions

Developing countries with large oil resources are found to perform worse than their

neighbours with fewer natural resources (Auty, 1993). At the same time international

oil companies operating in developing countries have been criticised for unethical

behaviour. This has made me curious about how the oil industry can contribute

positively to the economic and social development of a country.

My study consists of two research objectives. The first research objective addresses

the CSR-practice of the international oil companies in South Sudan in the CPA-

period, how this corresponded with their CSR-policy and how local government and

civil society experienced their actions. I will shed light on this with the following

three research questions.

- What is the CSR-policy of the oil companies in South Sudan?

- How does the CSR-practice of the oil companies correspond with

their CSR-policies?

- How do civil society and the Government of South Sudan (GoSS)

consider the practice of the oil companies?

My second research objective is to explain the CSR-practice of the

companies by looking at conditions that impact how they practice

CSR. Using institutional theory and stakeholder theory as starting

points I will analyze how the organization of the oil industry and the

ability of various stakeholders1 to hold the companies accountable

can explain the social performance of the companies. This is done

with the help of the following two research questions.

- What conditions in South Sudan have influenced the culture of CSR

in the oil industry?

1 A stakeholder is defined as ”any group or individual who can affect or is affected by the achievement of the organisation’s objectives” (Freeman, 1984 p. 46).

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- What stakeholders did the oil companies listen to, and what was

the relationship between the companies and their main

stakeholders?

1.3 Choice of case

The case was chosen for several reasons. The oil industry is of interest because of its

negative externalities2 combined with large profits. For the oil industry, the most

obvious negative externalities are connected to environmental damage. Pollution and

oil spills affect negatively on third parties without the companies bearing the total cost

of it (Humphreys, et al., 2007). The large profits provide the companies with the

means to invest in managing the impact of their activities, while the negative effects

of oil production provides them with a reason.

South Sudan provides an interesting case because of its dire needs and high

dependency on oil revenue. It is also interesting because the regulation of the oil

industry in South Sudan was weak which means that there was a large scope for

voluntary action from the oil companies. During the war the companies were severely

restricted by security concerns, so the period of 2005-2011 was chosen because this

was a period with consistent regulation. The Government of South Sudan was

extremely weak in this period and there were disputes over the regulation of the oil

industry. The scope for agency on part of the oil companies was therefore anticipated

to be particularly large. After independence things changed and it is too early to judge

how this will affect the companies.

My aim is that this study will provide new information on CSR in international oil

companies in developing countries. Research on CSR among oil companies operating

in Africa is mainly focused on companies from Europe and North America who are

most active in West Africa. The oil industry in South Sudan, on the other hand, is

dominated by Asian companies on which the literature is more limited.

1.4 Structure of the thesis

2 Externalities are costs or benefits that are inflicted upon third parties.

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In Chapter 2, I will present the theoretical framework of my study. I start by

accounting for economic theories that form the basis for much of the discussion on

CSR. First I will look at how different economic theories view CSR. I will then

present Carroll`s hierarchical CSR-pyramid as well as some of its critics. A

presentation of the views of Simon et al (1972) on affirmative and negative injunction

duties follows, before I present institutional theory and stakeholder theory. Finally I

will present the theory of the resource curse as put forward by Richard Auty (1993).

Chapter 3 presents background information for my study. I will briefly present the

historic, geographic and social context in which the companies operated. After

presenting the context, I turn to the oil industry. The account of the oil industry in

South Sudan contains the companies involved; their operating areas, as well as how it

has been regulated.

In Chapter 4, I account for my choice of method and challenges I faced during the

fieldwork. Before presenting my choice of method I will state what theory of science

this research is conducted in relation to. Following the reasons for my choice of

method, I will present my preparations for the fieldwork and the choice of informants.

Thereafter I will go through the different methods used and their strengths and

weaknesses. The chapter will end with an account on the practical and ethical

challenges encountered during the fieldwork.

Chapter 5 and 6 forms my analysis. In chapter 5 I look at the CSR-policy of the

different companies, before I turn to how they have actually performed. Following

this, I look at how different groups view the actions of the oil companies. I further

discuss why there is a discrepancy between how oil companies present themselves

and how others experience their actions, using the views of stakeholders and different

theories. In chapter 6 I analyse the oil industry based on institutional theory and

stakeholder theory and discuss whether this can help explain the performance of oil

companies in South Sudan.

Chapter 7 is the conclusion. I will present a summary of my findings and its

implication for policy and theory, as well as give some recommendations for future

research.

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2. Theoretical framework

In this chapter I will give a summary of the theoretical framework for this study. I will

start by providing some economic theories that form the basis for much of the debate

on CSR, before I turn to the discussion on CSR itself. The next part of the chapter will

focus on theories on CSR and different approaches to the phenomenon. I will start

with Carroll’s CSR-pyramid that provides a model to identify different dimensions of

CSR before I look at Simon et al’s (1972) theory on the importance of different

responsibilities. I will further account for two different theories on why companies

engage in CSR: institutional theory and stakeholder theory. Finally I will present the

theory of the resource-curse to highlight the specific challenges of CSR in the oil

industry.

2.1 Economic theories

Different views on CSR are based in different economic theories. I will therefore give

a summary of the different economic theories that have shaped the CSR-debate to

understand the different approaches to CSR and their arguments. Obviously attitudes

towards CSR vary among adherent to the different economic theories. This is not an

attempt to give a thorough account of all the different views on CSR, but to outline

how different views of CSR are based in different economic theories.

2.1.1 Neoliberal theories

Neoliberal theories are economic theories that focus on the laws of supply and

demand and stress the importance of open markets and free trade. Neoliberalism

further supports deregulation of markets and believe that competition among the

private sector will yield the best result for society. Full employment is reached

through non-intervention, as market forces will make sure capital and manpower is

allocated to sectors where they are most needed.

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The neoliberal view of a company’s social responsibility has generally corresponded

with the famous statement of Milton Friedman in 1970:

“… there is one and only social responsibility of business –to use its resources and

engage in activities designed to increase its profits so long as it stays within the rules

of the game, which is to say, engages in open and free competition without deception

or fraud” (Friedman, 1970).

Among neoliberal approaches an extreme attitude to CSR has been to view CSR as an

intrusion on business and a distraction from their real objective. According to this

view, CSR is principally wrong because companies, by pursuing social and

environmental targets, may hurt shareholders by lowering their profit (Levitt, 1958;

Henderson, 2001). This has lead critics of neoliberal theories to argue that CSR is not

compatible with neoliberal theory and that these theories must be discarded once one

admits that CSR is desirable (Dubbink, 2004). However, most neo-liberal adherents

see engagement in CSR as a profitable choice for business in the long run and

therefore rational (Broomhill, 2007). Neoliberal definitions of CSR tend to see it as

“…the adaptation of a set of voluntary principles and guidelines, initiated and driven

by the corporation” (ibid p. 6), with the ultimate goal of increasing profit. CSR is

seen to minimize risks and therefore cutting costs and is promoted as a win-win

situation between business and society (Grossmann, 2005). This argument has been

named the “business case” for CSR. It is the central message of most books on CSR

and is widely adopted by companies and business students (Vogel, 2005).

The neoliberal approach to CSR has been criticised for ignoring the negative impacts

of business as well as neglecting instances where ethical behaviour runs contrary to

profit. Critics also claim that neo-liberal theories pay too little attention to market

failures and market manipulation. The fiercest criticism has come from various radical

political economic theories.

2.1.2 Radical political economic theories

Opposed to neoliberal economic theory are a number of political economic theories

inspired by Marxism and socialism. In development studies these theories are labelled

dependency theories, but other economic theories also fall under the category of

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radical political economy. These theories trace their roots to Karl Marx and Andre

Gunder Frank’s theories on development and underdevelopment.

Radical political economic theories are sceptical to free markets and promote an

active state to regulate the private sector. The neoliberal idea that the interest of

business and society are always in harmony is seen as unrealistic and is therefore

rejected by radical political economy. Radical political approaches instead see large

corporations as powerful entities with self-interests that sometimes collide with the

rest of society (Broomhill, 2007). Pollution, child labour, corporate fraud and tax

evasion are seen as examples of the mismatch between the interest of society and

corporations. Just as adherents to radical theories are critical to free markets and the

role of multinational corporations, they are also critical to CSR. The abuse of

corporate power has lead these radical approaches to view many of the current CSR

initiatives as naïve, ineffective and inadequate. CSR-policies are seen to avert

attention from proper regulation of business because of the self-regulatory and

voluntary nature of many CSR-initiatives (ibid). The role of the state and civil society

in controlling the potentially negative impact of private companies is therefore a

major concern.

Many political analysts and activist groups based in radical political theories reject

voluntary CSR completely and prefer to talk about Corporate Social Accountability.

Instead of focusing on how business should behave responsibly, they rather focus on

how to hold them accountable when they don’t. This position has been particularly

common among activist groups and NGOs, but has also gained a foothold within

larger international organisations such as the UN (Utting, 2002). Still, radical theories

have been criticized for not acknowledging the positive impact of business and the

positive effort conducted by individual firms.

As shown, neoliberal and radical political economic theories provide very different

justifications for engagement in CSR. While neoliberal theory claim companies

should engage in CSR when, and if it is beneficial for the company, radical political

economy claim companies have an obligation to act responsibly. CSR should

therefore be enforced on companies to limit their negative impact on society. There

are a number of economic theories that occupy the middle ground between these

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theories. However, the main disagreement are found between neoliberal and radical

political theories, with alternative views positioned somewhere on the spectre.

2.1.3 An account of the CSR-debate between different economic theories

In the on-going debate between adherents of the different economic theories the

debate has focused on different aspects of CSR. A heavily debated subject has been

the business-case for CSR; the idea that its good for business to engage in CSR.

Critics claim that evidence shows that companies often make choices indicating that

sound ethics is bad for business. They pollute, violate human rights, use child labour

or treat workers poorly. This has led some to argue that CSR needs to be regulated. As

we have seen, neoliberal approaches have generally heralded CSR as a win-win

solution for business and society. By incorporating ethics in their business strategy,

companies will not only contribute positively to the society, they will also experience

new opportunities, better PR, saved expenses, limited risks and new markets. As

Grossman concludes, there is therefore no need for regulations: “The link between

social engagement and financial performance ultimately suggests that companies will

be motivated to self regulate and implement socially responsible strategies regardless

of legislative reform” (Grossmann, 2005, p. 594). This is what Vogel calls “The

market for virtue” (Vogel, 2005), where companies gain a competitive advantage by

being virtuous, i.e. act responsibly.

A related point of disagreement concerns the focus on voluntarism in CSR. Neoliberal

approaches tend to see voluntarism as an essential part of CSR. If CSR is to give the

corporations a strategic advantage it should come from the corporations, not be a legal

requirement. Only by going beyond what the company is forced to do by law can a

company be said to be responsible. While voluntary solutions puts more pressure on

companies to develop strategies themselves, and allows consumers to reward

companies that go the extra mile, at the same time it opens a window for companies

that choose not to act responsibly. Some based in radical economic theories interpret

the surge of CSR in the 90s as a strategic choice by the companies to avoid regulation

(Jenkins, 2005). Being sceptical to deregulation, they therefore question the focus on

voluntarism in CSR.

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Critics of voluntary initiatives claim that focus on voluntarism leads to companies

only acting responsibly when it serves their own economic interests (Corporate

Watch, 2006), which will not protect society from the abuse of corporations. The

focus of companies is assumed to be on profit and additional responsibility will only

be taken if it serves the financial interest of the company. Corporate Watch claims this

happens because companies are governed by, often anonymous, shareholders. To a

large extent profitability determines the stock-value, meaning that CSR-initiatives that

lowers profitability are not welcomed by the owners (ibid). Neoliberal approaches

don’t deny that profit is the motivation for engaging in CSR, but claim that profit-

seeking companies will benefit all of society.

Vogel believes that this critic of CSR is based on two misunderstandings: That it

never can be in a company’s financial interest to behave responsibly and that

companies only care about profit (Vogel, 2005, p. 13). On the contrary, he argues,

many business owners are concerned that their company have a positive impact on

society. He claims there is a market for virtue, though it has limits.

A third argument concerns CSR´s implications for accountability.

Within radical political economic theory it is claimed that the focus

on voluntary action makes it harder to hold companies accountable.

Voluntary initiatives like UNs Global Compact have been criticised

for containing mechanisms that prevents accountability (Dueholm,

et al., 2008); particularly in third world countries where local

communities are often marginalized and has limited capabilities to

fight against large multinational corporations. These are also the

ones suffering the most from the negative impact of large

corporations (Newell, 2005, p. 543). As a consequence it is argued

that ethical and social standards should be incorporated in national

and international laws instead of being left to the goodwill of

companies. Instead of focusing on encouraging companies to

behave responsibly, one should focus on building mechanisms to

hold them accountable (Bendell, 2004).

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A proposed solution to the accountability-problem has been to

encourage civil regulation through multistakeholder-initiatives

where different stakeholders meet, cooperate and hold each other

accountable. Newell finds civil regulation partly problematic and links this to the

power-relation between companies and local communities. Big multinational

corporations tend to wield much more power than poorer local communities,

especially in third world countries (Newell, 2005). To enable communities to hold

companies accountable, Newell argues that they must be able to hold local and

national government accountable. As the regulator, the government has much more

leverage towards large companies. Through access to justice and a functioning legal

system and by applying pressure to government, the local communities may be able to

influence companies. For this to work, though, the government needs to be able to

sanction the companies. If not, the communities are dependent on the will of the

companies to listen to the population (ibid p. 551). Vogel agrees that civil regulation

is problematic and sees it as an attempt to bridge the gap between law and market.

However, while many prefer that corporations be strictly and efficiently regulated

through national and international law, this is not always possible. When it is not, civil

regulation may be the second best option (Vogel, 2005, p. 9).

2.2 The concept of Corporate Social Responsibility

According to Frynas “There is no accepted theoretical perspective or research

methodology for making sense of CSR activities” (Frynas, 2010, p. 12). This poses a

challenge for a study attempting to shed lights on the phenomenon, and requires the

researcher to chose both the appropriate method and theoretical perspective for his

study. In the following section I will provide an overview of the different approaches

to CSR I have found most relevant for this study.

2.2.1 Carroll’s CSR pyramid

Archie B. Carroll’s CSR pyramid has been the most durable and widely cited model

of CSR in the literature (Crane & Matten, 2007) and serves as a good starting point.

Though it has limitations, it provides a useful model for defining and exploring CSR.

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Carroll claims there are different components of CSR and that companies have

responsibilities that are arranged in a hierarchy (Carroll, 1991). The most fundamental

responsibility for a company is economic. This responsibility is directed both to its

shareholders, its employees and the larger society. Without profit a company will not

be able to survive, people will loose their jobs, government will loose tax income and

the company will no longer contribute to growth in a country. Carroll acknowledge

that companies pursue profit out of self-interest, but still claims that “...economic

viability is something business does for society as well, although we seldom look at it

this way” (Carroll, 1999, p. 284).

The second step on the pyramid is legal responsibilities. A company has a

responsibility to follow rules and regulations. For those who define CSR as voluntary

action by the company, this is not regarded as CSR, as it is taken for granted. It is

however, possible to argue that a company that does not follow rules and regulations

is irresponsible and cause social harm. Hence it is closely related to the company’s

social responsibilities.

The third step is labelled ethical responsibilities. This is the companies’ obligation to

do what is right, just and fair. It also includes the obligation to not cause harm. Ethical

responsibility is connected to the core activities of the company and exceeds the legal

requirements. Thus it falls within voluntary action by the company. This is not to say

that the companies always do this by their own conviction. Carroll acknowledge that

stakeholders influence companies and may push them to behave more ethically.

The fourth step is called discretionary or philanthropic responsibility. Hereunder lies

gifts, sponsorships and social projects; efforts that contributes to a better society and

shows good citizenship on part of the company, but are not related to its core

operations. Carroll claims that philanthropic responsibility ”...is highly desired and

prized but actually less important than the other three categories of social

responsibility” (Carroll, 1991, p. 42). According to Carroll, companies that engage in

philanthropic endeavours, but forget the more fundamental ethical responsibility, are

less responsible.

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Figure 1

Source: (Carroll, 1991, p. 42)

Figure 1 shows Carroll’s pyramid with explanations of the different responsibilities.

The most fundamental responsibility is at the bottom, while the least important forms

the top of the pyramid. Carroll sees his pyramid as a metaphor and admits that it is not

perfect. His pyramid is intended to “…portray that the total CSR of business

comprises distinct components that, taken together, constitute the whole. Though the

components have been treated as separate concepts for discussion purposes, they are

not mutually exclusive and are not intended to juxtapose a firm's economic

responsibilities with its other responsibilities” (ibid). However, Carroll does not give

any reasons for the hierarchical order, something that has led others to speculate

whether the pyramid should be seen as a descriptive or normative model (Visser,

2006, p. 46).

According to Visser (2006), Carroll’s CSR-pyramid may not be the best model for

understanding CSR, especially not in Africa. He further claims that in an African

context the same four elements are present, but the hierarchy is different from western

19

societies. The African CSR-pyramid would have economic responsibility as the most

fundamental, followed by philanthropic, legal and ethical responsibility, showing that

CSR is understood differently in the West and in Africa. While there certainly are

differences between Africa and Europe or the U.S, differences also exist within

Africa. Therefore, to talk of an African context does not cover the wide diversity of

the African continent. However, Visser shows that what people understand as the

social responsibility of business is dependent on culture (Visser, 2006). A similar

conclusion is reached by Crane and Matten who has examined how Carroll`s CSR-

pyramid fit a European context (Crane & Matten, 2007, p. 51). Hence, the CSR-

pyramid should be seen as a dynamic model dependent on context.

Lantos (2002) uses neoliberal economy to challenge the morality of the different

components of Carroll’s pyramid. He separates between ethical, altruistic and

strategic CSR. Ethical CSR corresponds to the economic, legal and ethical

responsibilities of a Carroll’s pyramid, while altruistic CSR corresponds to

philanthropic responsibility. Finally strategic CSR is the philanthropic responsibilities

“…which will benefit the firm through positive publicity and goodwill” (Lantos, 2002,

p. 2). Lantos claim that “…ethical CSR is morally mandatory and goes beyond

fulfilling a firm’s economic and legal obligations, to its responsibilities to avoid

harms or social injuries, even if the business might not benefit from this” (Lantos,

2001, p. 16). This goes beyond the business case for CSR by claiming that the

responsibility to avoid harm trumps the economic responsibility of a company.

However, Lantos agrees with Milton Friedman that philanthropy is not the role of

business and argues that altruistic CSR is immoral because it violates shareholder

property rights and steals their wealth. On the other hand, Lantos argues that strategic

CSR is good for both companies and society. His argument is that companies should

only engage in philanthropy if they can expect to profit from it (Lantos, 2001), thus

making it part of the economic responsibilities of firms. The implication of this would

be to remove philanthropic responsibilities from the CSR-pyramid altogether.

Carroll’s CSR-pyramid offers a valuable model to analyse CSR-policies and practices

because it identifies different components of CSR. Their relative importance is

disputed and they are not mutually exclusive. However they are valuable for

discussion purposes and to identify nuances in CSR policies and practices.

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2.2.2 Affirmative and negative injunction duties

A critique of Carroll’s model is that it does not say anything about instances where

different responsibilities collide (Crane & Matten, 2007, p. 51). I will now look at

theories that address this issue.

Simon et al (1972) introduced the distinction between affirmative and negative

injunction duties in the CSR-debate. Affirmative duties are the responsibility to do

good, while negative injunction duties are the responsibility to not cause harm. Simon

et al (1972) argue that the duty to not cause harm is the most important and calls this

responsibility a “moral minimum” of which all men and companies are obliged:

”Although reasons may exist why certain persons or institutions cannot or should not

be required to pursue moral or social good in all situations, there are many fewer

reasons why one should be excused from the injunction against injuring others”

(Simon, Powers, & Gunnemann, 1972, p. 62).

Negative injunction duties as well as affirmative duties connected to the core

activities of a company falls under what Carroll calls ethical responsibility, while

affirmative duties unrelated to the core activities correspond well to what Carroll calls

philanthropic responsibility. Simon et al (1972) claim that when different

responsibilities collide, companies’ primary responsibility is to avoid causing harm.

Thus they agree with Carroll’s view that ethical responsibility is more important than

philanthropic responsibility.

The relevance of this view on the oil industry has been examined. Through analysing

the Nigerian oil industry, Uwafiokun Idemudia noticed that community development

projects were popular among the oil-companies (Idemudia, 2007). He further found

that projects that were “bottom-up” oriented with communities having a stronger

influence were more likely to have a positive impact on the communities than projects

that were “top-down”. However, neither of these types of community projects

changed the day-to-day activities of the companies with its negative impacts, which

was the main concern of the communities. Instead of focusing on the negative

injunction duties of their ethical responsibility, the companies focused on the

21

affirmative duties corresponding to their philanthropic responsibility. The neglect of

their negative injunction duties thus undermined the contribution to the host

communities.

Idemudia shows that the size of the CSR-budget or the participation in different

initiatives does not necessarily tell anything about the contribution to the society.

Though context determines what action will provide the best result in any given

setting, Idemudia points out that the most fundamental part of CSR is to accept

responsibility for the negative consequences of the operations of a company.

According to Simon et al (1972) the negative injunction duty may also install a moral

responsibility on persons and companies to avoid harm even though they are not the

ones inflicting the harm. This responsibility increases based on need, proximity,

capability and last resort. Increased need increases responsibility to aid. Increased

proximity and capability likewise increases the responsibility. Finally one becomes

more responsible for providing assistance the less likely it is that someone else will be

able to aid (Simon, Powers, & Gunnemann, 1972, p. 74).

Using a utilitarian perspective on CSR in the Angolan oil industry, Wiig and Ramalho

come to a similar conclusion. They argue that oil companies have a moral obligation

to take responsibility that normally would be taken by the government: ”If other

institutions/agents do not take responsibility while corporations are able to (have the

capability) take this responsibility, then the companies should take additional

responsibility” (Wiig & Ramalho, 2005, p. 2). However, these views are contested.

For the oil industry operating in developing countries this view would mean that they

share a responsibility to help the needy in their operating area. This responsibility

increases with the proximity and capability of the companies, as well as the need of

the people and the likelihood that others will correct the social injury. With oil

companies often operating in areas where the needs are great and the capability of

other actors to fulfil the needs are lacking, this way of thinking assign a lot of

responsibility to the companies.

The view of Simon et al (1972) and Idemudia (2007) has implications for the oil

industry where environmental or social concerns are often weighed against

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profitability. While the oil industry has been among the leading industries in the

adoption and development of CSR (Shankleman, 2006), this can in part be explained

by the potentially harmful nature of the industry. Oil extraction potentially has a

number of negative consequences for both host countries and local communities.

Pollution, oil spills, corruption and violent conflict has followed oil-extraction and led

to bad publicity and pressure from civil society and governments to change the

business in a more ethical direction. According to Simon et al (1972) and Idemudia

(2007) the primary moral concern of oil companies should be to limit the harm caused

by the industry.

2.3 Why do companies engage in CSR?

According to Frynas, “What is particularly lacking is a general explanation as to why

and how firms engage in CSR” (Frynas, 2010, p. 13). To understand why companies

act as they do, it is important to understand why they accept social responsibility. By

uncovering why companies engage in CSR it is also possible to uncover how they

engage in CSR, as different reasons for engaging gives different strategies. Carroll’s

pyramid is not an explanatory model to why business has adopted CSR. To answer

this question we need to look at other theories. Frynas lists several different

perspectives on CSR activities (ibid), but claims that two of these perspectives have

become dominant: institutional theory and stakeholder theory.

2.3.1 Institutional theory

Institutional theory focuses on the institutionalisation of behaviour. According to

these theories companies adapt to institutions within a given context. Such institutions

can be national norms or recognised ways of doing things within an industry.

Companies are believed to adapt to social norms because they cannot survive without

a certain level of acknowledgment from its surroundings. In other words “companies

imitates what others do in order to remain socially acceptable” (Frynas, 2010, p. 16).

The process where companies behave similarly within a defined business environment

is called isomorphism. Isomorphism can be both competitive and institutional

(DiMaggio & Powell, 1983). Competitive isomorphism is when competitive pressure

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excludes companies, whose organisation is unsuited to the environment, leaving the

remaining companies with similar organisations (Hannan & Freeman, 1977).

Institutional theory focuses on the second form of isomorphism, institutional

isomorphism. DiMaggio and Powell (1983) identify three mechanisms that explain

why companies become similar:

- Coercive isomorphism results from “…both formal and informal pressures

exerted upon organizations by other organizations upon which they are

dependent and by cultural expectation in the society within which

organizations function” (ibid p.150). An important part of this pressure is the

legal framework. Another way of applying pressure is by withholding

financial funds or social approval.

- Mimetic isomorphism is the imitation of other companies to reduce

uncertainty. “Organizations tend to model themselves after similar

organizations in their field that they perceive to be more legitimate or

successful” (DiMaggio & Powell, 1983, p. 152).

- Normative isomorphism is the result of professionalization and is a normative

source for change. Professionalization rest on formal education and

universities and other training institutions that are centres for development of

norms and normative rules. Workers who are trained in these institutions

develop common norms. After their training they spread to different

companies and create professional networks.

According to institutional theory oil companies will develop similar CSR-policies and

practices due to the mentioned mechanisms. It explains why companies within the

same industry often have the same approach to CSR, or why companies operating in

the same country have similar CSR-policies. According to Kolk and Van Tulder

“MNCs appear only willing to state active commitment if others in their sector do as

well” (Kolk & van Tulder, 2006, p. 798).

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2.3.2 Stakeholder theory

Stakeholder theory has been the dominant perspective within the CSR-debate,

following Freemans influential book “Strategic management - a stakeholder

approach” (1984). The theory evolved as a response to pressure on company

managers from government regulators, media, and competitors. According to

Freeman, managers find”…an increase in external demands” (Freeman, 1984, p. V)

and management of these demands is at the core of stakeholder theory. A stakeholder

is defined as ”any group or individual who can affect or is affected by the

achievement of the organisation’s objectives’” (ibid p. 46). Freeman believes that “if

business organizations are to be successful in the current and future environment

then executives must take multiple stakeholder groups into account“ (ibid p. 52). The

ability of companies to manage their stakeholders will thus determine their success.

To manage their stakeholders successfully, companies need to be able to identify their

stakeholders and their stakes in the company’s operations, have procedures to take the

stakeholders and their concerns into account and balance the different interests to

achieve the objective of company (ibid p. 53). CSR has been interpreted as a reply to

demands and concerns and therefore a way of managing the stakeholders.

The importance of various stakeholders has been discussed in stakeholder-theory.

While Freeman acknowledges the dilemmas in conflicting interest, he is mainly

concerned with the identification of stakeholders, not a further classification of

stakeholders. The very process of identifying stakeholders assigns legitimacy because

the firm acknowledges that the stakeholder is affected by, or can affect its business

(ibid p. 45). Once the firm has recognised the legitimacy of the stakeholders,

conflicting interests are to be resolved by the firm based on the expected actions of the

stakeholders (ibid p. 132). Mitchell et al (1997) suggest that “… the degree to which

managers give priority to competing stakeholder claims… goes beyond the question

of stakeholder identification” (Mitchell, Agle, & Wood, 1997, p. 854). According to

Mitchell et al the importance of a stakeholder is based on three factors: “power”,

“legitimacy” and “urgency”. Power refers to the ability of a stakeholder to bring about

the outcomes they desire (ibid p. 865). Legitimacy is determined by whether the

claims (e.g., moral, legal and property based) of the stakeholder are considered

25

legitimate by the company (ibid p. 882). Finally urgency refers to “…the degree to

which stakeholder claims calls for immediate attention” (ibid p. 867). The possession

of any of these attributes makes an individual or group a stakeholder.

Mitchell et al (1997) further categorizes the different type of stakeholders based on

their combination of attributes. Stakeholders who only possess one of the attributes

are called latent stakeholders and receive the least attention from companies. There

are three types of latent stakeholders:

- The dormant stakeholder possesses power, but lacks legitimacy and urgency

in its claim. Its power is therefore not used.

- The discretionary stakeholder has legitimacy, but no power and no urgency in

its claim. This is the group most likely to be recipients of what Carroll calls

philanthropic responsibility. Lacking power and urgency, “there is absolutely

no pressure on managers to engage in an active relationship with such a

stakeholder” (Mitchell, Agle, & Wood, 1997, p. 875) and the discretionary

stakeholder is dependent on the goodwill of the company.

- The demanding stakeholder has urgency, but lacks legitimacy and power.

While he can be bothersome to companies he is not considered a threat.

According to Mitchell et al (1997) companies pay more attention to stakeholders who

possess two attributes. These are called expectant stakeholders and are also divided

into three types:

- Dominant stakeholders have power and legitimacy but lack urgency. Because

they have power to enforce their claims, they receive much attention from

company management. Examples of dominant stakeholders are owners and

government.

- Dependent stakeholders lack power, but have urgent and legitimate claims.

They are called dependent because they depend on others for the power to

carry out their will. These stakeholders are dependent on the voluntary action

of the company or on advocacy by more powerful stakeholders.

- Dangerous stakeholders have power and urgency, but lack legitimacy on their

claims. This type of stakeholders can be violent and use unlawful tactics to

advance their claims.

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Finally we have the definitive stakeholders, the ones who possess all three attributes

of power, legitimacy and urgency. For company management, this is the group whose

claims are considered most important. It is important to notice that any expectant

stakeholder can become a definitive stakeholder by getting the last attribute (ibid).

Stakeholders are not static and may change categories over time by gaining or loosing

attributes. Another important point is that the stakeholder-categories are based on how

the stakeholder is viewed by the company. The stakeholders themselves may have

different perceptions about the urgency and legitimacy of their claims.

According to stakeholder theory, a company will engage in CSR as a result of

pressure from various stakeholders. The typology of Mitchell et al (1997) provides a

framework to identify and evaluate the importance of different stakeholders. The

CSR-policy and practices of companies are expected to be a response to claims from

stakeholders with different attributes. Stakeholder theory can therefore provide

valuable explanations for the CSR-policy and performance of oil companies in South

Sudan.

Both stakeholder-theory and institutional theory are reactive perspectives; they both

emphasise the role of external actors in influencing the companies. Furthermore, they

are not mutually exclusive. Mechanisms described in institutional theory may exist

together with mechanisms described in stakeholder theory. The same group or

individual may also be classified both as an institution and a stakeholder. In the oil

industry, the government is an important institution because it creates social norms as

a lawmaker. At the same time it is an important stakeholder for the oil companies.

2.4 The resource curse

It has long been acknowledged that abundance of natural resources has had a negative

impact on many countries. Resource abundance has been linked to increased

corruption, eroding of institutions, inequality, poverty, the Dutch disease, rent-seeking

behaviour and armed conflict. This phenomenon has been termed the “paradox of

plenty” or “the resource curse” (Auty, 1993). Since the social responsibilities of

companies are connected to their impact on society, it is important to understand the

impact of the oil industry when one analyses the CSR of oil companies.

27

According to Humphreys et al (2007) there are at least three different processes that

come into play when a country starts extracting a valuable resource:

1. Currency appreciation

When the revenue of a country increases substantially because of income from a

valuable natural resource, the currency will appreciate. This in turn has negative

effects on other industry that becomes less competitive. Because of this effect,

revenue from natural resources may lead to a deindustrialisation of the nation. This

has been named the “Dutch disease” after the effect on the Dutch manufacturing

industry when the country discovered natural gas in the North Sea in the 1970s

(Humphreys, Sachs, & Stieglitz, 2007, p. 5).

2. Fluctuation in commodity prices

Commodity prices are highly volatile. For oil prices the history has shown that they

are strongly affected by both disruptions in supply and demand and speculation. This

makes long-term planning very difficult. An increase in the oil price may give the

country unexpected revenue. This has led countries to increase spending and

borrowing. When the price drops, it can leave a country unable to repay the loans and

force it to cut spending.

The non-renewable nature of oil and gas resources has led some to argue that “…any

consumption of revenues from sales should be viewed as a consumption of capital

rather than consumption of income” (ibid p. 8). This view puts emphasis on how the

revenue is spent. If it is not invested wisely in future income, the country’s total

capital declines. This form of over-consumption is often coupled with

underinvestment in important sectors like education and health. Countries depending

on non-renewable natural resources tend to forget that they need to invest in building

a diversified and skilled workforce for the future when the natural resource runs out

(ibid p. 10).

3. Negative effect on political conditions

When a country receives a large share of their revenue from resource extraction they

have less incentive to tax their population. The state becomes less reliant on its

citizens. The consequence is that the linkages between state and citizen may weaken.

Relying on external income sources further limits the need for the state to develop

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institutions to raise revenue and may inhibit the flow of information from the state to

the citizens. Controlling the revenue from the resource becomes more important than

making sure people earn money to pay taxes.

Taken together these processes have also caused corruption and armed conflict to

secure control of the resource. The evidence has been particularly strong in countries

abundant in minerals or petroleum resources. The mining and petroleum-industry is

capital-intensive and has historically been dominated by national companies and large

multinational oil companies. The production is mechanised and requires special

knowledge and skills, which means the oil multinationals tend to bring specialists

from abroad instead of investing in the local workforce. Often the production takes

place in remote areas where production-chains are unlikely to appear, thus further

limiting the transfer of technology and knowledge (Potter, et al., 2004).

The oil companies have limited control over the processes of the resource curse. Still,

the resource curse poses challenges for the oil industry because the negative impacts

are related to their core operations. The cure for the curse has been heavily debated

and while some focus on the actions of government (Barma, et al., 2012) others also

see an important role for oil companies (Humphreys, Sachs, & Stieglitz, 2007, p. 15;

Frynas, 2010). There is currently consensus that transparency and accountability are

important ways to overcome the resource curse (Humphreys, Sachs, & Stieglitz, 2007,

p. XIV). The contribution of oil companies is therefore to be transparent (ibid, Barma,

Kaiser, Le, & Viñuela, 2012, p. 225) and to promote accountability. Guldbrandsen &

Moe (2005) has named this responsibility “Macro CSR” saying: “Macro CSR refers

to the responsibility for the indirect consequences of relatively sudden, steep rises in

revenue from extractive industries on a country’s economic, political and social

development” (Guldbrandsen & Moe, 2005, p. 55). While there is little acceptance of

Macro CSR among oil companies, it is included in this study to see if conceptions of

Macro CSR explain the CSR-practices of the oil companies in South Sudan. A final

way companies can help countries overcome the resource curse is to stay away from

countries where government uses the oil revenue in a way that harms its people.

Oil is a particularly important commodity, whose importance for both the economy

and security of states has been acknowledged for the last century (Mohr, 1925;

29

Noreng, 2006). Dependency theory suggests that the powerful nations will strive to

control such a valuable resource through national and transnational corporations.

Governments in resource rich developing nations are therefore permitted to continue a

corrupt and damaging regime as long as they are loyal to the dominant nations and

allow “the natural resource wealth within their borders to be looted by firms from

wealthy countries” (Rosser, 2006, p. 17).

As opposed to dependency theory, which focuses on the role of the state in limiting

the harmful effects of globalisation, neoliberal theory puts more emphasis on the role

of the state in facilitating free trade. Ross (1999) proposes two different explanations

as to why resource dependent nations perform worse: “that much of the resource

curse is caused by the state’s ownership of resource industries”, which is seen as less

efficient (Ross, 1999, p. 319), and “the failure of states to enforce property rights”

(ibid p. 320), thus discouraging investment in manufacturing and causing resource

extraction to be the dominant industry. Other critics of the resource-curse theory

claims it is too deterministic and points to the fact that there are huge differences

among resource-rich countries as well as differences within the same country. They

point to other factors, like good institutions that are just as important as the resource

base (Mehlum, et al., 2002). Validating or discarding the theory of the resource curse

is beyond the scope of this study. However, because of its impact on the conception of

the oil industry in developing countries, it can help explain both the CSR-policy and

actions of the oil companies in South Sudan, as well as the attitude of other

stakeholders.

To sum up, there is no commonly accepted theoretical perspective for making sense

of CSR activities. Instead a large number of theoretical perspectives exist that are

based in different economic theories. This study incorporates theories that

differentiate between different aspects of CSR as well as theories that explain why

companies engage in CSR in order to examine how and why the oil companies have

acted on their social responsibility in South Sudan.

3. Background

30

“South Sudan is one of very few places worthy of the description “Dark Africa””

NGO-worker in Juba

To understand the actions of companies and expectations of stakeholders, one needs

to understand the context. The context has implications for both the bargaining power

and the responsibilities of the companies. The situation in South Sudan is complex

and this thesis does not allow for an in depth description of the context. Instead I have

focused on giving a brief account of elements that influenced the situation during the

CPA-period, as well as describing the oil industry in South Sudan.

3.1 Historical and geographical context

Sudan declared independence from its Anglo-Egyptian rulers 1st of January 1956, but

was soon cast into a civil war between a mainly Arab and Muslim North and a

predominantly Christian South. In 1972 a peace agreement was signed, South Sudan

was given semi-autonomy and peace ensued until oil was discovered in the border

areas in 1979. Conflict ensued over the control over the resources and eventually a

civil war between North and South broke out that left 2 million dead and 4 million

displaced (Collins, 2008).

On the 9th of January 2005, after years of negotiating, the Comprehensive Peace

Agreement (CPA) was signed. The Government of National Unity was formed in

Khartoum where southerners participated, though in a minority. At the same time the

Government of South Sudan (GOSS) with limited autonomy was formed. Among the

provisions in the CPA was the right of South Sudan to hold a referendum on

independence in January 2011 as well as regulations for the distribution of oil revenue

(CPA, 2005). Despite problems a referendum was held and about 99% of the voters

voted in favour of secession. Finally, on the 9th of July 2011, South Sudan celebrated

its independence. This study examines the period between the signing of the CPA and

independence. During this time the oil companies had to manage a tense political

situation with an unknown outcome. There is little doubt that this shaped their CSR-

policy and practices.

South Sudan is a landlocked country with great geographical and ethnic diversity.

Seasonal rainfall and geographical features such as the river Nile with its tributaries

31

and the Sudd swamp creates flooding that damages what little exist of infrastructure in

the country. The major oil fields are all located close to major rivers, thus being in

environmentally fragile areas highly volatile to water pollution.

3.2 Socio-economic conditions in South Sudan

In their first calculation of GDP per capita after independence, the government of

South Sudan estimated the GDP per capita of South Sudan to be US$ 1546 in 2010.

This is by far the highest in East Africa, amounting to twice that of Kenya. These high

numbers are almost solely created by the oil industry, with oil exports amounting to

71 % of GDP in 2010 (South Sudan National Bureau of Statistics, 2011). The

importance of the oil industry is also clearly visible in government budgets. In 2010

an estimated 97,8 % of GOSS revenue came from oil (SSCCSE, 2011). This makes

South Sudan the most oil dependent nation in the world (Shankleman, 2011).

Despite the oil wealth, South Sudan is a poor country with 51% of the population

living below the poverty line (SSCCSE, 2011). Tropical diseases are common and

there is little access to proper health facilities. The literacy rate in the country is

among the worst in the world. According to a 2009 survey, only 27 % of the

population over 15 years are literate (ibid). The problem of literacy is enforced by the

fact that many in rural communities use their tribal language and has little knowledge

of English or Arabic. This is also a challenge for companies who want to employ local

skilled labour. South Sudan is clearly a country with massive need for development.

One would therefore expect this to shape the CSR-policy and actions of the oil

companies operating in the country.

3.3 History of oil in Sudan

Oil was first discovered in the late 1970s by Chevron. However, in 1984, the southern

rebel army, Sudan People’s Liberation Army (SPLA) attacked Chevron’s oil facilities

and forced the company to leave the country. Production started a decade later in 1993

when smaller companies invested in the country despite the on-going civil war

(Shankleman, 2011). In 1996, Sudan became the first African country to receive

large-scale investment in its oil industry by China. China National Petroleum

32

Corporation (CNPC) was followed by Malaysian owned PETRONAS and the Indian

national company, Oil and Natural Gas Corporation Limited (ONGC). These

companies developed the oil fields further and constructed pipelines to bring the oil to

the Red Sea coast near Port Sudan.

Since November 1997 Sudan has been under US sanctions for supporting terrorism,

destabilisation of neighbouring governments and human right violations (U.S.

Department of Treasury, 2008). Combined with divestment campaigns against

western companies this has lead to a domination of the industry by Asian companies.

In 2009 the total oil production of Sudan was 490 000 barrels per day (BP Statistical

Review, 2010). When South Sudan separated, they kept the majority of the oil

production. The first numbers after independence showed that South Sudan alone

produced around 300.000 barrels per day3. Although a substantial production, most of

the oil fields in South Sudan are considered mature. If no new discoveries are made

production will most likely plateau and decline after 2012 (Government of the

Republic of South Sudan, 2011).

3.3.1 Controversies regarding the oil industry

The oil industry was heavily criticised during the civil war for its strong alliance with

the regime in Khartoum. Over more than 500 pages Human Right Watch (2003)

account for the involvement of the oil industry in the atrocities committed during the

civil war. They conclude that the oil companies has been complicit in human right

abuses and that the oil companies’ treatment of southerners were considerably worse

than the one received by northerners in the same area (Human Rights Watch, 2003, p.

521).

In 2001 the Presbyterian church of Sudan sued the Canadian oil company Talisman

for assistance to genocide. The US federal district court in New York dismissed the

lawsuit in 2006, but the pressure from human right advocates had already pressured

the company to withdraw from the country in 2002. After reading a 2010 report4 on

3 http://af.reuters.com/article/investingNews/idAFJOE78L00920110922 04.06.124 (ECOS, 2010) ”Unpaid Debt” published by ECOS in June 2010

33

the Swedish company Lundin’s operations in South Sudan, the Swedish prosecutors

decided to open an investigation of which the result is still unclear. The controversies

over human right abuses also led to a divestment campaign and the US imposed

sanctions barring American companies from operating in Sudan.

Another controversy concerns the way contracts have been awarded. After the signing

of the CPA the government of South Sudan (GOSS) was free to negotiate contracts.

During the CPA-period this resulted in disagreement between companies and GOSS

because contracts where awarded to blocks that were already taken. The new

companies consisted of small, inexperienced companies, which have led some to

speculate “why the government of Sudan has continually issued concessions to new,

untested, unknown or inexperienced explorations firms” (Coalition for International

Justice, 2006, p. 37), thereby questioning the process of assigning contracts.

3.4 Contracts

The contracts used in Sudan were, and still are Exploration and Production Sharing

Agreements (EPSAs) signed with International oil companies in partnership with the

Sudanese oil company, Sudapet. These companies have then normally joined together

to form Joint Operating Companies (JOCs) who operate the oil field. Under an EPSA

the operating company deducts some of the oil produced to cover costs (cost oil),

while the rest (profit oil) is shared according to a certain percentage (Radon, 2007).

The government share is calculated after the companies have deducted their expenses.

The EPSAs were negotiated during the civil war and were not changed with the

signing of the CPA. The EPSAs state, among much else, how the profit oil is to be

divided, what obligations the oil company has, what constitutes cost oil, custom

exemptions, responsibilities for damages, health and security instructions and

community development obligations5. The EPSAs have been, and still are

confidential, which means it is hard to uncover their true content.

3.5 Oil companies in South Sudan.

5 Found in EPSA I was given access to.

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The oil industry in South Sudan has been organized in joint operating companies

(JOC) consisting of several international oil companies and the national Sudanese oil

company, Sudapet. Lately, South Sudan has also set up a national oil company named

Nilepet. During the CPA-period the composition of the JOCs changed, but the major

companies have remained mostly the same.

The oil industry in South Sudan is confusing. First, the Joint Operating Companies are

organized differently. While the shareholders of the EPSAs own Petrodar and

GNPOC, WNPOC is owned 50% by PETRONAS and 50% by Sudapet.6 Second, the

legal standing of the contracts has been uncertain, with the government in South

Sudan awarding contracts during the CPA-period that were not recognized by other

oil companies. This has been particularly evident in Block 5B and B. Finally, reliable

information is hard to come by. Company webpages are rarely updated and the

information on the webpages of the Joint Operating Companies (JOCs) is often

wrong. Sometimes this is evident, but other times information is given that is hard to

verify. For example, Star Petroleum claim on their webpage7 that they “have been

appointed to be awarded” a 20 % share in Block B even though Total denies this and

no contract appear to have been signed.

Table 1 shows the composition of the different JOCs operating in South Sudan, while

the following map shows the distribution of the oil blocks in former Sudan.

Table 1

Composition of the different JOCs in South SudanBlock Activity Shareholders 20118 Operating company1,2,4 Production CNPC 40%

PETRONAS 30%ONGC 25%Sudapet 5%

Greater Nile Petroleum Operating Company (GNPOC)

6 http://www.wnpoc.com.sd/ 03.03.127 http://www.starpetroleum.org/south-sudan-block-b.php 05.15.128 The list of shareholders may not be comprehensive as I encountered no official data on this. The information is gathered from various sources and may therefore contain minor errors.

35

3,7 Production CNPC 41%PETRONAS 40%Sudapet 8%Sinopec 6%Tri-Ocean 5%

Petrodar Operating Company

5A Production PETRONAS 68,875%ONGC 26,125%Sudapet 5%

White Nile Petroleum Operating Company (WNPOC)

5B No activity, previously exploration

PETRONAS 39%Sudapet 13 %Ascom ?

White Nile (5B) Petroleum Operating Company (WNPOC)

B Small scale exploration

Total 32,5%Kufpec 27,5 %Free 20%Sudapet 10%Nilepet 10%

Total

Ea No activity Star Petroleum 75%Hemla Energy 5%Sudapet 20%

Star Petroleum

Changes during the CPA-periodBlock 3 & 7: Al Kharafi held 3% of shares until 2008 when Tri Ocean bought Al Kharafi’s share and 2 % from Sudapet.Block 5B: Lundin held 24,5 % until 2009 when they left Sudan due to disappointing exploration. ONGC held 23,5 % until 2009 when they left the block due to disagreement over the validity of the contract of Ascom from Moldova.Block B: In 2009 White Nile Oil Company of Guernsey UK was awarded shares in the block. This was refuted by Total who won the complaint (Total 2010).Block Ea: Contract was signed in 2010, so far no activity registered.

Sources: ECOS, 2007; ECOS, 2010http://www.sudantribune.com/Sudan-oil-body-endorses-Ascom,32245 14.06.12Personal communication with representatives from oil companies

36

Figure 2

Source: ECOS, 2007

3.6 Legal regulation of the oil industry

The oil industry before independence was subject to The Petroleum Resources Act of

1998 and the Petroleum Regulations of 1973. There are also a number of laws that

37

cover environmental and land-issues in the Sudanese legal framework. However, the

oil companies were primarily bound by their contracts, which were said to “…embody

the entire rights and obligations of the Government and the Oil Company” (Samasu

International Company Ltd., 2004, p. 15). A lawyer at one of the international oil

companies confirmed this and claimed they never had to look at the laws, as

everything was in the contract (personal communication).

Although it is hard to assess the contracts when they are confidential, there are signs

that the oil companies were pleased with them. They fought hard to keep them

unchanged and confidential after independence. The C.O of Star Petroleum has said

that “…the contractual obligations are impossible to improve” and that it is

“impossible to get conditions this favourable in other parts of the world”9. On their

webpage Star Petroleum also claim that Block E has “favourable contractual & fiscal

terms.”10

Some have argued that production-sharing agreements can limit regulation by the host

government because “… the PSA has given the oil companies a voice, if not a

modified veto over regulatory enforcement by the inclusion of regulations as

contractual provisions” (Radon, 2007, p. 101). Instead of regulation being debated in

parliament, it is negotiated with the oil companies. Whether it was due to the nature of

the contracts or not, it seems evident that the regulatory framework regarding the oil

industry was weak.

3.6.1 Regulation of the oil industry in the CPA

The legal regulation of the oil industry did not change much with the signing of the

CPA, but the CPA also contains some guiding principles for management and

development of the oil-industry. Articles 3.2-3.4 state that a National Petroleum

Commission shall be established with members from both North and South Sudan,

including the two presidents. Its responsibility shall be the management of the oil

industry (CPA, 2005, p. 52).

9 http://www.expansion.com/2010/08/15/empresas/energia/1281898326.html My translation 05.15.1210 http://www.starpetroleum.org/south-sudan-block-e.php 01.06.12

38

The CPA also sets some binding guidelines for how the oil industry should act.

Article 1.10 in chapter 3 on wealth sharing states: “That the best known practices in

the sustainable utilization and control of natural resources shall be followed” (ibid p.

66). However, the CPA does not say anything about what the best known practices

are, leaving this to the judgement of the companies.

The CPA further states that revenue from the oil fields in the South shall be shared

50-50 between the South and the North (ibid article 5.3 p. 54). It also contains

provisions for compensation: “Persons whose rights have been violated by oil

contracts are entitled to compensation. On the establishment of these violations

through due legal process the Parties of the oil contracts shall be liable to

compensate the affected persons to the extent of the damage caused ” (ibid article 4.5

p. 53).

Concerning legal regulation of CSR it states that contracts are not subject to

renegotiation (ibid article 4.2 p.53) but that “if contracts are deemed to have

fundamental social and environmental problems the Government of Sudan will

implement necessary remedial measures” (ibid article 4.3 p. 53). According to the

CPA both a National Petroleum Commission and a technical committee was supposed

to be formed to administer the oil industry. However, the technical committee never

became functional.11

Though weak, it is still clear that there were rules and laws that the companies were

bound by, both in the field of environment, employment, compensation and

engagement with local communities.

11 Personal communication with informant at the ministry in Juba who was supposed to be in the technical committee.

39

4. Methods

“I think this (CSR) would be very dangerous to talk about.”

Vice president of Petrodar in Juba

In this chapter I will explain my choice of methods during the research process.

Before I start I will state what philosophy of science this study is grounded in. I will

then move on to state the reasons for my choice of methods, present my choice of

informants and give insight into evaluations I made during the fieldwork regarding

my research method. A central part of this chapter will be my reflections on the

challenges I met during my research and the implications of doing research in a

difficult environment.

4.1 Philosophy of Science

In this study I use different methods to uncover structures that can explain the nature

of the CSR-practices in the South Sudanese oil industry between 2005 and 2011. As

such, this study is based on the thoughts of critical realism. An important part of

critical realism is the notion that all research should have generalizing claims

(Danermark, et al., 2002). That is to say that the claims should also be valid outside of

the researched case. Another important statement is that the fundamental goal of

social research should be to uncover the causal mechanisms that produce social

phenomena (ibid).

Critical realists argue that there exists a true world independent of our consciousness;

but that all knowledge of this world is dependent on context and that neutral

observations of facts on reality do not exist. Hence, conceptualisation becomes the

most central activity for social scientists. This is done through conceptual abstraction,

a process where one identifies which aspects of a phenomena or object are vital and

necessary for the phenomena or object to be what it is, and which aspects are

contingent. This process is a thought-process (ibid).

Conceptual abstraction will help in order to perform the two other parts of a study

based on critical realism: structural analysis and causal analysis. Objects in the social

40

sciences are relational, and to understand them one need to map the relation between

different social objects. The structural analysis is an exchange between a concrete

study and an abstract analysis. It starts by looking at the concrete phenomena. From a

description of a concrete phenomenon, it moves to the abstract for an analysis before

it returns to the concrete through a planned study (ibid).

Critical realism is based on the understanding of natural conditions. Objects have

power based on their structures, and mechanisms exist and are determined by the

structures. There is an internal and necessary relation between the nature of an object

and its causal powers and tendencies. The goal of a causal analysis is to uncover the

causal power of objects and phenomena. Critical realism believes that the world is too

complex to predict the future. However, critical realism still believe that one can

produce generalizing claims because they deal with the structures and causal powers

of a phenomenon, not how this manifests itself in a given setting. Hence, people’s

actions are never determined by the structures. The structures simply facilitate certain

behaviour.

In critical realism the choice of methods should be governed by theory and several

research methods should be used in the same study. The separation between

quantitative and qualitative research should be abolished and be replaced with

extensive and intensive research based on the objective of the research (Sayer, 1992).

Intensive research is concerned with uncovering causal powers and how they play out

in a case, while extensive research is concerned with finding patterns and common

properties. In this regard, this study belongs to intensive research.

In this study I have used abduction, the method where one sees an empirical

phenomenon in the light of a theory to get a new interpretation of the phenomenon.

This means seeing the phenomena through a new analytical frame. In this study the

empirical phenomenon is the CSR-practices of oil companies in South Sudan. The

theories used to get a new interpretation of the phenomenon are institutional theory

and stakeholder theory.

41

4.2 Choice of method

Charles C. Ragin claims that identifying “…order and regularity in the complexity of

social life” (Ragin, 1994, p. 31) is the most fundamental goal of social research. To

reach this goal, this research was conducted as a case study using qualitative research

methods. Qualitative research differs from quantitative research in that it explores a

greater number of variables than quantitative research (ibid), thus making it suitable

for case-study research. According to Merriam a case study “…is an in-depth

description and analysis of a bounded system” (Merriam, 2009, p. 40); meaning that

it is possible to delimit the object of study. In this study the case chosen is the oil

industry in South Sudan during the period from 2005 to 2011. Ragin argues that

qualitative methods are well suited for in-depth examination of a case because they

make it easier to identify the important aspects of a case (Ragin, 1994, p. 79). He

further argues that it is easier to see how different aspects fit together when much is

known about a case (ibid p. 84). By keeping my options open and not limit myself to a

set number of variables, I aimed to get a deeper understanding of how CSR was

practiced and the reasons behind it. This meant exploring a number of variables, many

of which were not clear at the beginning of my fieldwork. Also, I have not limited my

study to oil companies, but also studied others that influence or are influenced by the

oil industry.

In total I conducted 7 qualitative interviews, all of them lasting about an hour. Three

with representatives from different oil companies, one with a representative from the

Ministry of Energy and Mining (M.E.M.)12, two with different NGOs working on oil

in South Sudan and one with a respected representative from the communities

affected by the oil industry.

In addition I used informal data gathering. I did not expect to use this method, but

during my fieldwork it became obvious that this was a very valuable way to attain

data. During my fieldwork I stayed three days at the Ministry of Energy and Mining

in Juba and attended an oil conference in Upper Nile State focusing on how the oil

wealth could benefit the people of South Sudan. Both these occasions allowed me to

12 The name of the Ministry has changed to the Ministry of Petroleum and Mining, but I use the name of the CPA-period.

42

talk to a number of people with knowledge about the different aspects of the oil

industry. I also had shorter talks and discussions with people from Petrodar and

ONGC Videsh, representatives from the Norwegian Oil for Development-program,

civil society leaders and several NGOs.

Finally I also relied on desktop research. A lot of information already exists on the oil

industry in South Sudan. I therefore searched for secondary data collected and

presented in company CSR reports, reports by different NGOs, webpages, public

databases and newspapers.

While I didn’t expect to use informal data gathering as much as I did, the use of

different research methods was a conscious choice. This was done in order to achieve

method-triangulation. Method-triangulation involves using different research methods

in the same study, which will help decide whether the data are valid, thereby

strengthening the validity of the conclusions. By using interviews, secondary data and

informal data gathering my objective was to get a more nuanced picture of the South

Sudanese oil industry. Though all my methods are qualitative, the ability to use

different data from the same groups of informants (oil companies/local

community/NGOs etc.) was important, especially since the number of informants was

limited.

4.3 Preparations

Before I started my fieldwork I read up on South Sudan, the oil industry in South

Sudan and CSR in general. I studied different approaches to CSR to guide my

research. I also looked at the web pages for the oil companies and read their country-

and CSR-reports, as well as reports on the oil industry written by various NGOs. This

was important in preparing my interview-guides, although these guides changed

substantially during my fieldwork.

In addition I contacted Norwegian People`s Aid in South Sudan to discuss my

research questions. The objective of the research was further worked out in discussion

with Norwegian Peoples Aid in South Sudan and my supervisor. After this we had

sporadic contact and it was only because Norwegian People`s Aid in South

43

coincidently had an available room that I ended up staying with them in Juba. This

research is not conducted on behalf of Norwegian People`s Aid, but their help has

been invaluable. Upon arrival they provided me with a desk at their office for the first

weeks and while I did not report to Norwegian People`s Aid, I discussed frequently

with them. Others therefore most likely perceived me as affiliated with Norwegian

People`s Aid although I operated independently.

My cousin worked at the Norwegian embassy in Juba at the time and provided me

with insight into the conditions in South Sudan, but when I left for Juba I still was not

sure what to expect. I therefore decided to keep my options open regarding which

qualitative methods I would use. By being open to different research methods I hoped

to be able to use the methods best suited to answer my research questions. However,

the limitations of the fieldwork in time and the difficulty of moving outside of Juba

meant that some research methods were never considered. I knew qualitative

interviews would be an important part of my research, but I was unsure whether it

would be possible to get access to some groups of informants and how much

information they would provide.

When I arrived in Juba I primarily wanted to interview representatives from the

international oil companies, the government and civil society. Arranging interviews

from Norway proved difficult, as communicating with South Sudan is hard at best, so

prior to my arrival I had no contact with any informants apart from Norwegian

People`s Aid.

4.4. Choosing and getting access to informants

Picking the right informants and securing access to them is an important part of

conducting research. In the following section I will state why I chose the informants I

did and how I secured access to them.

4.4.1 Choice of informants

Qualitative studies are based on a strategic choice of informants. In order to

understand the conditions for CSR in South Sudan under the CPA, I wanted to talk to

44

people from at least three groups; International oil companies and their Joint

Operating Companies (JOCs), the Government of South Sudan (GOSS) and

representatives from the civil society in the oil producing regions. There are only 3

JOCs producing oil in South Sudan and during my visit only 4 international oil

companies, including one currently not producing oil, were present in Juba. Since the

JOCs have their own CSR-programs I wanted to interview them as well as the

international oil companies. My informants needed to have knowledge on the oil

industry during the CPA-era, but their views should also as far as possible represent

the views of their group. In order to secure this I wanted to talk to as many as possible

from the different groups.

Among civil society I wanted to talk to people who were knowledgeable on how the

companies had behaved in the country. I was not primarily interested in individual

projects or detail knowledge on specific action. The focus of this study is how and

why companies approach CSR, not to evaluate the success of the individual projects.

This meant I needed to talk to someone with knowledge going beyond the local level.

Since the international community is an important group in South Sudan I wanted to

interview both NGOs that work on questions related to the oil industry and

representatives from the local communities affected by the oil extraction

In government I wanted to interview someone who had worked with the oil industry

during the CPA-era and one sufficiently senior to be able to express the view of the

Government of South Sudan (GOSS) on the actions of companies. Since the oil

industry is highly political I feared that some might try to use me to express their

political views. Therefore I preferred to talk to a member of the bureaucracy, whom I

assumed to be more neutral, as opposed to politicians.

However, wanting access and getting access is not the same. The number of potential

informants from both the international oil companies and GOSS are limited and

getting access to all of them proved about as difficult as anticipated.

45

4.4.2 Access to informants

I feared that access to informants would be a challenge, as the situation in South

Sudan just after independence was expected to be somewhat chaotic. Oil companies

were in the process of setting up offices and while some were up and running, others

only had one person working from a hotel room. Table 2 shows my informants and

sources of data, as well as the methods used.

Table 2

Informants, sources of data and methods usedInterviews Informal data gathering Desktop research

Oil companies

PETRONAS Total WNPOC

Petrodar ONGC Videsh Hemla Energy

GNPOC WNPOC Petrodar CNPC PETRONAS ONGC Videsh Total Lundin Talisman Star Petroleum Tri-Ocean Energy

NGOs ECOS PACT Sudan

Norwegian People`s Aid (NPA)

Justice Africa

Human Rights First Global Witness Fatal transactions IKV Pax Christi ECOS Sign of Hope

Government Representative of the Ministry of Energy and Mining in Juba

Upper Nile oil commission

Various people working at the Ministry of Energy and Mining

Local government of Upper Nile State

Newspaper articles Press releases

Civil Society Local Community leader “Peter”

NPA oil task force Unity State

Representatives of local communities in Unity and Upper Nile State

Letter of complaint from communities of Unity State

Newspapers Academic research

Other groups Oil for development Integrity research Norwegian union of

petroleum workers

Academic research Newspaper articles

In order to talk to me, the oil companies demanded that I get an authorization from the

Ministry of Energy and Mining. Through Norwegian People`s Aid I was introduced to

46

advisors from the Norwegian Oil for Development-program, who in turn advised me

on whom to contact at the ministry. To get the letter of authorization I had to spend

three days waiting at the ministry. The people at the Ministry of Energy and Mining

were very welcoming and I was treated as a guest. However, they were also in a

process of transition. In one office eight people shared three desks. People were

overloaded with work and had limited resources. Still they took their time to talk to

me and the days waiting at the ministry gave me the opportunity to talk to a number of

interesting people, both employees and external visitors. During these days I

encountered the person who was to become my main informant within the Ministry of

Energy and Mining. In addition to his interview I also talked to several others at the

ministry. To make sure their views and opinions were not marginal, I also read

newspapers and press releases that expressed the view of the Government of South

Sudan on the behaviour of the oil industry.

Even after producing the letter of authorization some of the international oil

companies and their JOCs were reluctant to talk with me. Being in a transition period

some of the companies only had technical staff present, while others needed

permission from Khartoum to talk to researchers. The oil industry in South Sudan has

received a lot of criticism; especially form western organisations and media. Not

surprisingly they were fairly defensive on certain topics. The result was that 2 of the

JOCs and 1 of the international oil companies refused to be interviewed or only

allowed me to talk to persons with little or no knowledge of the company’s CSR-

policies and practices. Though this could make my findings less valid, I have tried to

correct this by also using other methods, like desktop research and informal data

gathering.

Access to informants from civil society was gained through my contacts in the

international community. Since many of the local community leaders live and work in

the oil producing states, few were available for interviews. Although I ended up with

only one interview with a local community leader, I also rely on interviews with

NGOs who work with oil-questions to get the view of the local population in the oil

producing states.

I quickly found that not everyone in South Sudan worked on a schedule. Some

interviews were continuously postponed, which left me with two important interviews

47

on my final day: one with Total and one with a local community leader. Unfortunately

I was never able to interview ONGC Videsh and Leben Moro, a professor at Juba

University. Even though I had appointments they were postponed and later cancelled

due to their prolonged absence.

The method of informal data gathering was particularly important during three

settings. First, during an oil conference in Malakal in Upper Nile State set up by

Norwegian People`s Aid. The topic of the conference was how South Sudan could

benefit from its oil wealth. Only one oil company, Petrodar, was present, but a

number of civil society members and representatives from local authorities attended.

A number of NGOs and members of the international community also contributed.

Particularly interesting for my study was a presentation by Integrity Research on the

situation of CSR in South Sudan. This led to a discussion where several local

community leaders from both oil-producing states (Unity State and Upper Nile State),

voiced their concerns on the oil industry and CSR.

Second, during my three days spent waiting at the Ministry of Energy and Mining.

These three days was probably when I learned the most during the fieldwork. People

walked in and out more or less unconstrained. Sharing lunch and chatting with the

representatives of the ministry gave me a unique insight in the relationship between

the Government of South Sudan (GOSS) and the oil companies and the challenges the

oil administration faces. I got to see how the ministry worked and were allowed to

talk to advisors, oil companies, local Sudanese searching for employment and officials

working under difficult conditions.

Third, during my interaction with members from the international community. This

took place over lunch or dinner, at parties, at meetings or during random encounters.

This form of networking was absolutely crucial in getting access to informants and

my contacts in the international community also gave me a unique insight into the oil

industry. I had only just arrived in Juba when Norwegian People`s Aid asked me to

comment on a report on CSR in the South Sudanese oil industry. Later I attended

meetings between NGOs concerned with oil-related questions and was asked to

comment on the draft of the petroleum bill before a group of NGOs would present

their view on it to the parliament. Although the new petroleum bill is not part of this

48

study, I learned a lot about previous mistakes from the discussions on the subject. I

was able to discuss legal terms with Norwegian lawyers working on the petroleum bill

and discuss my preliminary findings with experts in the field.

To sum up getting access to the informants I wanted was challenging, but on the other

hand I also got access to data and informants that I did not expect to get access to.

While there are people and organisations I regret not having talked to, the informants I

got access to provided me with a volume of data that together with desktop research

was more than sufficient to answer my research questions.

4.5 Research methods

In this study I have primarily relied on three research methods: qualitative interviews,

informal data gathering and desktop research. I will now give my reasons for

choosing these methods and discuss their strengths and weaknesses in relation to this

study.

4.5.1 Qualitative interviews

Qualitative interviews are well suited if you want to uncover the meanings or feelings

of the informants. I considered it an important method to answer my research-

questions. Partly because written material from independent sources on CSR in South

Sudan is limited, but also because qualitative interviews have several advantages as a

research method. Interviews enable the researcher to cover many topics and gather

large amounts of data in short time. Another advantage to interviews is that it allows

the researcher to “uncover” misunderstandings and probe into new topics that arise

during the interview (Valentine, 2002).

However, using interviews to gather data is not unproblematic. An interview is an

interaction between researcher and informant. The quality of the interview depends to

a large extent on the researcher interpersonal- and listening-skills (ibid). Also, while

interviews may give information on the informant’s views and opinions, it is

dependent on the informants will to divulge their true views. In all interaction, the

information one gives away mirrors how one wants to appear, which may or may not

49

be sincere. Despite these shortcomings qualitative interviews give important data.

Used together with other sources it can also provide valuable information on both

distinct phenomena and historical events.

4.5.2 Interview-guides

Interviews are defined by their level of structure. In a structured interview the topics

and questions are formulated beforehand and the order of the question is set. This

makes it easy to compare the answers from different interviews. While mainly used in

quantitative studies, it can also be uses as a method in qualitative research. As

opposed to a structured interview an interview with a loose structure resembles a

conversation where both informant and researcher are free to ask questions or bring

up new topics. This approach has the advantage that the informant can provide

information that the researcher does not know exist and it allows the researcher to

pursue interesting topics that appear in the course of the interview.

In this study I have relied on semi-structured interviews which lie somewhere in

between the two extremes already described. Using interview-guides is a way to

structure a semi-structured interview. An interview-guide consists of topics that a

researcher wants to cover during an interview. It might also contain formulated

questions, but these are supposed to be used as a guide and not a form to be followed

strictly. An interview-guide should be flexible and allow the researcher the possibility

to ask follow-up questions and prod deeper into certain areas while covering all the

planned topics (Arthur & Nazroo, 2003).

The interviews all took place in Juba and were conducted in September and October

2011. I sometimes had to do interviews without much preparation because the

informant insisted on doing it right away, as he did not know when he would be

available later. On one occasion I had to do the interview without having my

interview-guide present. My interview-guides started out rudimentary, but grew in

complexity as more interesting topics appeared during desktop-research and in

conversations and interviews. The result was that the guides used in the first

interviews were quite different than the one used in my last. Although this means that

topics, which were found to be less interesting for my study, or topics that appeared

50

during the course of the research are not covered by all informants, the majority of the

topics and questions were kept in the interview-guides for all interviews. If new

questions appeared later that were thought particularly important, these were asked

informally when the informant was available. Comparison between informants from

the different groups of stakeholders is therefore still possible.

4.5.3 Choice of location

The location of an interview can influence the result of it. If the informant is nervous,

uncomfortable or has feelings connected to the setting he might give less or other

information than if he is in known surroundings. The roles of researcher and

informant are created based on the setting and the interaction happening there and

then. These roles further influence the result of the interview (Elwood & Martin,

2000).

Planning the setting of the interview was hard, as appointments changed frequently

and I sometimes had to do interviews on short notice. The interviews with

representatives of oil companies and government were conducted in their offices. This

meant that the informants were in a safe and known environment and one might

expect that this would make them more open. At the same time this might make the

informants less critical to their own working-place than if they were being

interviewed in a neutral space. Although I welcomed personal opinions on the

operations of the oil companies, I was primarily interested in the view of the

companies or government, so this was not considered a major issue. The interview

with Total was conducted with two representatives present. This was by their own

choosing and while this may have prevented them from saying things they did not

want the company to know about, it provided me with two informants that could give

their separate views on my topics. Apart from this, interviews with government and

oil companies were conducted one to one.

My interview with “Peter” from the local communities in the oil producing area was

conducted in an office of an NGO with 4 other local men present. This was the choice

of “Peter” and probably distracted me more than him. The reason for their presence

was not explained, but my informant wanted them to attend. The representative from

51

PACT Sudan was interviewed inside their compound while the representative from

ECOS was interviewed in a quiet corner of a restaurant.

In total I was rarely able to control the choice of location for the interviews. On the

other hand, leaving this choice to my informants gave them some power. Although I

mainly interviewed persons who were considered elites, the researcher also has power

because he controls how the information given in interviews is presented. Oil

companies have received a lot of criticism and some are vary when meeting

researchers. Letting them choose the location perhaps made them less defensive and

more open. The government is also used to dealing with foreign advisors and my

impression was that I was greeted with respect because my student-status meant I was

perceived as a foreign specialist.

4.5.4 Documentation of the interviews

I used a recorder on some of the interviews. A recorder helps document everything

that is said so that the researcher avoids loosing important information. It further

allows the researcher to be more attentive as he does not have to make as many notes

during the interview. The drawbacks are that the recordings have to be transcribed,

which can be a time-consuming process. The presence of a recorder may also make

the informants nervous and less willing to give up information.

The use of a recorder was completely voluntary and many of my informants preferred

not to use it. Only two interviews were taped, those at WNPOC and the Ministry of

Energy and Mining. During one interview I sensed that the informant seemed tense,

possibly due to the presence of the recorder. I asked if I should turn the recorder off,

but he said it was not a problem. Still, I felt he was more stressed with a recorder, and

spoke a bit more freely once the interview was finished and the recorder was turned

off. The recordings were transcribed when I came home to Norway and later deleted.

The other interviews were documented by taking notes on a laptop during the

interview. This made it harder to ask questions at the same time, but I also had to be a

more attentive listener because I was afraid I’d miss some important information.

After every interview I went back to my room to work on my notes while the

52

interview was still fresh in my mind. This was even done with the interviews where I

had recordings, as I wanted to make notes on the things I found most interesting that

could further guide my research.

4.6 Informal data gathering

The use of informal data gathering consists of both informal conversations and the use

of statements intended for a larger audience/third parties. The method raises several

questions, both ethical and practical.

An ethical implication of informal data gathering is that the information is given

outside the researcher-informant context. Hence, the informants are not informed that

their statements will be used in a study, or that they are free to withstand from

partaking in the study. While I seldom asked for permission to use informally

gathered data, I always made it clear what I was doing in South Sudan and the subject

of my thesis.

Practically, informal data gathering is hard to plan. However, although one doesn’t

make interview appointments, it is possible to plan informal data gathering by seeking

out places where one is likely to encounter potential informants. For me this meant

attending the oil conference in Malakal, spending time at the ministry, eating lunch at

Central Pub and being as social as possible. An advantage to informal interviews and

data gathering is that people speak more freely when they are not in a formal setting.

People from one of the oil companies that refused a formal interview were

comfortable talking informally, although this were much shorter conversations.

To sum up, informal data gathering is problematic, but can be very productive,

especially combined with other methods.

4.7 Desktop research

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In order to understand the context of the oil industry in South Sudan I read up on the

history of South Sudan and the political situation in the country. This helped me

identify areas of interest for my further research. I also read reports and articles

covering the oil industry in Sudan and CSR in general. Before, during and after the

fieldwork I also gathered data through desktop research.

All the major oil companies operating in South Sudan have webpages containing

information on their CSR-policy. Some also publish CSR-reports and other reports on

their operations in South Sudan. Comparing these with the response I got in

interviews and other reports helped me get a clearer picture on the nature of the oil-

industry.

Desktop research was particularly important in answering my first research objective:

“How was the CSR-practice of the international oil companies in South Sudan in the

CPA-period, how did this correspond with their CSR-policy and how have local

government and civil society experienced their actions?” I relied heavily on desktop

research to account for the CSR-policies of the oil companies. I have also relied on

reports from researchers, companies and NGOs to form a picture on the actions of the

international oil companies and how different groups have interpreted their actions.

Since the oil industry is highly political one must be careful not to accept data at face

value. CSR is often considered as part of a company’s PR-strategy, and one would

expect the informants to strive to portray their view, more than facts, in interviews,

reports and documents. In a country where there has been little independent research

done on the actions of the international oil companies it is difficult to determine what

has really happened. Using different methods and seeking information from different

groups of informants was a way for me to triangulate the data I collected. I constantly

had to be critical and interpret my responses based on whom I was interviewing.

Other researchers in South Sudan complained that some companies fed them

exaggerations and others outright lies. For me, uncovering misrepresentations,

exaggerations and understatements was an interesting finding in itself, as it gave

insights into the way the different groups would like to present themselves. Instead of

being concerned with if the information I was given was true, I focused on whose

truth I was presented.

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Whether the reports and web pages should be viewed as primary or secondary data

depends on what one is looking for. If one looks at a CSR-report to learn what

projects the company has conducted and their success, it is secondary data. However,

if one uses the same report to see how the company presents itself through its reports,

it is primary data. In this study the same sources have been used both as secondary

and primary data.

Using secondary data saves time and allows a researcher to add more data in the same

study. The danger of using secondary data is that its validity depends on the source.

To account for the companies’ CSR-policy I have used their own reports and web

pages. When accounting for the actions of the companies I have used various sources.

Some of the information obtained from these sources is contradictory. In these

instances I have solved this by stating both views. Evaluating the individual projects

and particular actions of the different oil companies is beyond the scope of this thesis.

Rather this study is interested in what areas the companies have focused on in their

CSR-activities. On this the sources are pretty consistent.

4.8 Analysing data

During intensive research, data gathering and analysis is a parallel process. Already

when one chooses an area of study one will have thoughts on the phenomenon to be

studied. The analysis can be seen as an interaction between the choices of method, the

evaluation of data and the use of theory. This interaction may change the choice of

method, the use of theory and the evaluation of data. I will now account for the stages

in my analysis before I explain how I handled the data during the process.

The different stages of my analysis correspond with the stages of an explanatory

research based on critical realism (Danermark, et al., 2002). The analysis started at the

same time I chose the case and my thesis questions. I read literature and reports on the

subject to form a picture of my case. I also read different theories on CSR searching

for some that fitted both my thesis questions and my case.

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My first goal was to describe the phenomenon in my case. This consisted of

describing the CSR-policies of the various companies as well as their actions and how

it was received. When I had a clear picture of the situation in the oil industry during

the CPA-era, I started looking at different aspects of greater interest. When I had

found what part of the phenomenon I wanted to investigate further I searched for

theories that could answer my new research questions. This meant I had to adjust the

research questions used to shed light on my second research objective.

The different aspects were then interpreted through different theories and conceptual

frameworks. This process corresponds with what critical realism calls abduction and

critical re-description. Several different theories and explanations were presented and

compared to provide a satisfactory explanation of the actions of the oil companies.

This guided my further research and caused me to return to some of my former

informants with new questions. Relations between oil companies and between oil

companies and other stakeholders were of special interest.

Finally the analysis turned to comparing the different theories to see which theories

could best explain my case. Though in some cases one theory is sufficient to explain a

phenomenon, other times “…the theories are rather complimentary, as they focus on

different, but nevertheless necessary conditions” (Danermark, Ekström, Jakobsen, &

Karlsson, 2002, p. 110). I was left with institutional theory and stakeholder theory as

the most fitting theories to explain why companies acted as they did. These

approaches stood out as promising explanations early in the research, but other

theories were also considered.13 Once I had concluded that stakeholder theory and

institutional theory were best suited to explain the behaviour of the companies, I went

through my data once more to get a fuller picture of how the causal mechanisms

described in institutional and stakeholder theory had manifested in South Sudan.

4.8.1 Handling of data

13 Alternative explanations that were considered are: Austrian economics, Game theory and Theory of the firm.

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After every interview I did a quick analysis to see if the interview could guide me in

my future research. Throughout the research I also made notes of information found

through informal data gathering or desktop research that helped answer my research

questions and organized this according to what research question they answered.

The data was continuously compared with relevant theories and organized according

to which theory they fitted. This helped me rule out certain theories that did not fit my

data material. After the fieldwork was finished the analysis continued in Norway

where I tried to make sense of all my data. I started organizing quotes and reports

depending on what research-question I felt they were most closely related to. After

this I tried to give a preliminary answer to the different research questions based on

my data.

In this study data is expressed explicitly through quotes, as well as implicitly by

guiding the research and as additional confirmation of my statements and conclusions.

The amount of data is large, especially the data resulting from desktop research.

Therefore not all relevant data is included explicitly in the analysis. Quotes are used

when appropriate. A problematic issue with using quotes is that it takes a statement

out of its original context (Coffey & Atkinson, 1996, p. 30). To limit this problem I

have stated in what context the quotes were made or what questions they were

answering.

Transcripts of the taped interviews are kept, while the recordings are deleted when the

thesis is submitted. Notes from my fieldwork are also kept, as well as a file of

documents and reports used in this study in case future researchers want to benefit

from my collection of documents.

4.8.2 Evaluation of data

According to Tove Thagaard (1998) data in qualitative studies should be judged by

their credibility, confirmability and transferability. Credibility in a qualitative study

depends to a large extent on the sources and informants. The credibility of my data

has been strengthened by my use of different qualitative methods and by using

informants from different groups. When they all concurred, the information was

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highly credible. When there were discrepancies it was interesting in itself as it

allowed me to examine further why there were discrepancies. Some of the data I

gathered was discarded because it did not fit the rest of my data-material and was

found to be of low credibility.

Confirmability refers to the critical self-examination by the researcher on his own

interpretations and whether other research would be able to confirm the result

(Thagaard, 1998). Due to the difficult situation in the oil producing areas it is hard to

confirm the data about the action of the oil companies. However, researchers with

access to the oil producing areas would be able to assess the actions of the oil

companies and thereby confirm the first part of my study. It is harder to confirm the

explanation as to why the companies have acted as they have, as countless alternative

explanations potentially exist. Still, the relationships between companies and their

stakeholders can be confirmed as well as the organisation of the oil industry. By

comparing this with the actions of the oil companies one can also confirm my

conclusion. Thus, this study is confirmable. I have also focused on separating between

the data and my interpretations, although I acknowledge that data are never objective,

but always to some extent interpreted.

Transferability refers to whether one might expect to find the same in similar

situations. According to critical realism reality is too complex to make predictions

about the future or other contexts. However, the mechanisms or causal potential that

are uncovered in this study are likely to be present in other situations as well.

4.9 Challenges during my fieldwork

South Sudan officially gained its independence on the 9th of July 2011. I arrived one

month later to find a country in rapid transformation. Up until independence, most of

the oil companies had offices in Khartoum and little presence in Juba. However, the

new Government of South Sudan (GOSS) demanded that they also open offices in

Juba. Most companies were in the process of doing this, or had just recently opened

their offices when I arrived.

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Upon my arrival in Juba my first task was to search for informants. As I considered

the oil companies my most important informants, my first challenge was to find the

offices of the different companies. Juba has no street-names and some of the

companies had not had time to establish proper offices, so it took me weeks just to

map out the whereabouts of the different companies. As my fieldwork coincided with

Ramadan several of the companies were also short of staff or had temporarily closed

their offices. In one bizarre incident I was shown around an empty office by a local

man who mistook me for a representative of the oil company. Apart from a clean

desk, there was no sign of human activity and nobody knew when the oil-company

would move in.

Another challenge was related to the restrictions on mobility in South Sudan. During

my flight to Malakal I got to see the oil fields from the air and got some perspective of

the geography and topography of the area. I had hoped to visit the oil producing areas

in person, but due to a rapid change of plans I did not get to stay in Unity to visit the

oil fields. Instead I had to return to Juba. Seeing the oil fields first hand and talking to

the local communities in their environment would have been helpful to get a fuller

picture of the situation in the oil-producing areas. Unfortunately, getting to the

oilfields independently is very hard due to bad roads, no public transport and security

issues, so going at it alone was not an option.

I also had to deal with the politics of the oil industry in South Sudan. A number of my

discussions and one of my interviews were conducted in public places that were not

soundproof. Even though I tried to isolate us as much as possible, it is not impossible

that some information was altered or withheld because of the potential of other people

overhearing us. There are certain things I was told were not to be spoken openly about

in South Sudan and the oil politics is a particularly sensitive subject. I was explicitly

told to hide certain documents I was given access to and sometimes people lowered

their voices when discussing sensitive issues. While I didn’t feel uncomfortable with

this at the time, it may have affected the data I was given access to.

During my fieldwork I learned that research can be hard to plan and unexpected

events may ruin the best laid plans. I had to rely on the help of my contacts in order to

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find informants and get the data I needed, but luckily South Sudan is full of helpful

people.

4.9.1 Ethical considerations

Interviews are morally binding even when the topic is not sensitive. The use of quotes

and the analysis itself can have implications for the informants -both positive and

negative. Although the interviews were confidential, I can not guarantee that I have

been able to secure full confidentiality. I have maintained anonymity of my

informants when it comes to their names, but included whom they spoke on behalf of

when this was relevant. However, Juba is a small place and it is possible for someone

with knowledge of the oil industry there to work out who I have talked to. While some

of my informants would like to be identified, others expressed indifference to this.

The only name mentioned in this study belongs to “Peter”, my informant from the

local community in the oil producing areas. Although he made no reservation against

being identified, I have chosen to use a false name to maintain his anonymity.

I am also aware that a conflict of solidarity may have arisen between my relation to

informants and the place of South Sudan that can affect my interpretation and the way

I present the thesis. The people of South Sudan have suffered much hardships and it is

hard to not be moved by their needs. Awareness of this dilemma has been important

to keep the analysis as objective as possible.

For most of my informants I was considered an outsider. As a white Norwegian I was

sometimes mistaken for an aid worker, a foreign consultant or an oil worker. For both

the local communities and the government in South Sudan I was an outsider because I

was a foreigner. For the oil companies I was a person from outside the industry. The

only groups of informants that might possibly consider me an insider were the NGOs

and the international community. This might have affected the information I got from

my informants. At the Ministry some mistook me for an advisor from the Oil for

Development program and although I tried my best to correct these mistakes, I cannot

rule out that I was given information I was not supposed to get because of my

nationality and association with other Norwegians. In this report I have tried to avoid

using such information explicitly and taken care to anonymise my informants.

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I acknowledge that this study may have implications for my informants and others. I

have tried to avoid personal implications by maintaining anonymity and only use

statements that were perceived as potentially damaging after securing the consent of

my informants. This means I have avoided using some data that was gathered through

informal data gathering that I considered to be harmful to my informants.

To conclude, South Sudan is a challenging environment to do research in, but also

very rewarding. During my fieldwork I adopted new methods of data collection and

altered my research questions to adapt to the situation in the field. Flexibility was

important to deal with the challenges, but in the end I was totally reliant on the help of

others to conduct this study.

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5. CSR-policy and practice in South Sudan

In the following chapters I will present my empirical data and analyse them with the

help of relevant theories. The aim of the analysis is twofold: First to uncover how the

companies acted in the CPA-period, how this corresponded with their CSR-policy and

how local government and civil society experienced their actions. Second, to

explain why the CSR-practices have caused resentment among

stakeholders in South Sudan.

5.1 The CSR-policy of oil companies operating in South Sudan

Most of the companies operating in South Sudan from 2005-2011 had an official

CSR-policy. This can be found on their webpages and in company-reports. Obviously,

the CSR-policies are not static and some have changed substantially during this

period. Likewise CSR-policy may differ within a company and its subsidiaries.

However, what the companies state as their official CSR-policy is interesting in itself,

as it shows what impression the companies want to project and provides a standard on

which to measure their actual performance.

When analysing the CSR-policies of the different companies I have used the areas of

Carroll’s CSR-pyramid. I have also included a fifth area, which I have called political

responsibilities. This refers to the responsibility of companies to secure oil supply.

Political responsibility to secure oil supply differs from the economic responsibility

because the focus is on production, not profit. Since oil is a strategic resource that

countries are dependent on, national companies are often given the political

responsibility to secure the supply of this resource. Commercial companies also

frequently stress the importance of their production for the global economy and

thereby society at large. As with economic responsibility, it can be argued that this is

something companies do for themselves to keep operating. However, looking at the

rhetoric used, companies claim that this is something they also do for society. I have

included this as I think it helps explain both the policies and the actions of the

companies.

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5.1.1 International Oil Companies

The CSR-policies of the international oil companies operating in South Sudan has not

been the same, nor has it been consistent for the CPA-period. Some oil companies

have left South Sudan, while others have arrived. For some of the companies, their

CSR-policy was formed during these years. Naturally the policies of 2011 will be

quite different from the policies of 2005. To analyse the CSR-policy of the

international oil companies in South Sudan I have looked at reports and statements

published by the companies as well as interviews with some of the companies.

The international oil companies in South Sudan focus on many common areas in their

CSR-policy. All the major international oil companies operating in South Sudan refer

to environmental protection, health and safety, securing energy supply and

community development as part of their CSR-policies (PETRONAS, 2007; Sinopec,

2009; Total, 2009; CNPC, 2010)14. However, there are differences among the

companies.

All the major companies mentions securing energy supply, i.e. their political

responsibility, as their primary social responsibility (CNPC, 2010; PETRONAS,

2007; Sinopec, 2009; Total, 2009). CNPC states this explicitly as the most important

part of their CSR: “Securing national energy resources is PetroChina’s long-term

and foremost social responsibility” (CNPC, 2007, p. 10), while ONGC has as their

company vision to: “To be a world-class exploration and production company

providing security oil to the country”15. PETRONAS (2009) highlights the connection

between energy and economic growth: “We recognize that our responsibility to

society begins with ensuring a sustainable and reliable supply of energy to drive

economic progress” (PETRONAS, 2009, p. 6). Finally, Total includes the element of

sustainability in their political responsibility: “Our principal responsibility is to meet

the demand for energy on a sustainable basis” (Total, 2007, p. 1). This includes

14 For the CSR-policy of ONGC Videsh see their Global Compact reports (2009) and their webpage: http://www.ongcvidesh.com/Company.aspx?tab=4 06.19.1215 http://www.ongcvidesh.com/Company.aspx?tab=0 06.19.12

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investment in green technology, but refers primarily to investment to enhance oil and

gas production (ibid). CNPC, Sinopec and ONGC are national companies from big oil

importers and focus on their political responsibility to secure the oil supply of their

home countries. PETRONAS and Total also see it as their most fundamental

responsibility to secure energy supply, but as a commercial company and a national

company from an oil exporting country, they refer to the global energy supply.

When operating in foreign countries all the international oil companies acknowledge a

responsibility towards their host nations. Total claims this responsibility is met

primarily through being profitable and creating employment: “Contributing to the

social and economic development of our host countries and communities is one of the

principles set out in the Total Code of Conduct. First and foremost, we fulfil our

responsibility as an economic player.”16 The economic responsibility to be profitable

and contribute to the economy through tax-payments and job-creation is also

prominent at CNPC, Sinopec and ONGC (CNPC, 2010; Sinopec, 2009; ONGC

Videsh, 2009, p. 48). They all believe firmly in the neoliberal argument of mutual

benefits and mutual economic growth. This was also the position of PETRONAS in

2007 when their sustainability report state that: “Strong business growth and

performance record has enabled PETRONAS to make significant contributions to the

economic and social well-being of Malaysia, as well as that of our host countries and

their people” (PETRONAS, 2007, p. 9). However, in later reports there are no

references to their economic responsibility (PETRONAS, 2009; PETRONAS, 2011),

showing that they focus less on this in their CSR-policy today.

In the areas of environmental protection and health and safety, the companies use

different rhetoric concerning their responsibilities. CNPC (2010), ONGC (2009, p.

48) and Sinopec (2009) focus more on their legal responsibility to be in compliance

with laws and regulation, as opposed to PETRONAS and Total who during the period

have shifted their focus towards a higher focus on developing company standards.

Thus they focus more on the ethical responsibility to behave responsibly towards the

environment and their stakeholders.

16 http://www.total.com/en/our-challenges/driving-shared-development-/our-approach/our-business-principles-201045.html 06.18.12

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Finally all the international oil companies acknowledge a philanthropic responsibility

to assist local communities and give donations. For PETRONAS this is the only

dimension of CSR mentioned in their CSR-reports. It is also a major focus of CNPC,

Sinopec and ONGC (CNPC, 2010; Sinopec, 2009; Sinopec, 2010; ONGC Videsh,

2009, p. 48). Total claim to have learned that “philanthropy doesn’t lead to

sustainability”17, indicating that the philanthropic responsibilities are not a central part

of their CSR-policy. However, they still engage in it saying: “Some communities in

our host countries are very poor or are contending with specific problems. We can

provide material assistance to help improve their situation.”18

To conclude, the international oil companies operating in South Sudan during the

CPA-era all have sophisticated CSR-policies covering all of the dimensions of

Carroll’s CSR-pyramid. Although there are differences, this points to a common

understanding of CSR. The main difference in CSR-policies concerns the ethical and

legal responsibilities of companies. CNPC, Sinopec and ONGC generally have a

higher focus on legal compliance regarding environmental protection and

transparency. Total and PETRONAS on the other hand have shifted their focus

towards ethical responsibility by focusing on company standards instead of legal

compliance with laws and regulation.

5.1.2 Joint Operating Companies (JOCs)

In Total’s block B a Joint Operating Company (JOC) has not been formed and Total is

the operating company. They have therefore developed their own CSR-strategy and

Ethics Charter (Total, 2009). Total’s CSR-policy for Sudan harmonizes with their

central CSR-policy, though with a higher focus on security and human rights. In the

other blocks the production is handled by JOCs who have their own CSR-policies.

CNPC is the dominating shareholder of two JOCs: Petrodar Operating Company and

Greater Nile Petroleum Operating Company (GNPOC). The second largest

shareholder of both consortia is PETRONAS. As the biggest shareholders, one would

17 http://www.thejakartapost.com/news/2010/02/22/total-eampp-%E2%80%98philanthropy-doesn%E2%80%99t-lead-sustainability%E2%80%99.html 04.10.1218 http://www.total.com/en/our-challenges/driving-shared-development-/our-resources/corporate-philanthropy-initiatives-201056.html 04.10.12

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expect CNPC and PETRONAS to have the largest influence on the CSR-policy of the

two JOCs. The analysis shows that while the CSR-policy of the JOCs are evidently

influenced by the international oil companies, their policies are far less sophisticated

and focus on fewer dimensions of CSR.

None of the JOCs in South Sudan publishes CSR-reports of any kind and only

WNPOC were willing to be interviewed. While I also got to talk to representatives

from Petrodar more informally, I have not talked to anyone from GNPOC. A lot of the

data on the CSR-policies of the JOCs is therefore collected through desktop research

and informal data gathering.

5.1.3 Petrodar Operating Company

“No Data Found”

“Corporate values”-page on Petrodar’s webpage19

Petrodar Operating Company operates block 3 and 7 in Upper Nile state and is owned

by CNPC 41%, PETRONAS 40%, Sudapet 8%, Sinopec 6% and Tri-Ocean 5%.

Petrodar does not publish CSR-reports, but contain information on their CSR-policy

on their webpage.

Petrodar stress the economic responsibilities of the companies. Petrodar mentions

several strategies that correspond to what Carroll calls economic responsibilities and

express their belief in mutual benefits between companies and society. Among those

strategies are: “Achieve nation building through adding value to the economy and

society” and “Recognize valuable link between business and society”20. The focus on

nation building and the link between business and society shows that Petrodar sees

their profit as beneficial for the society. Their claim that this is sign of their moral

commitment clearly shows that Petrodar feel they have a social responsibility to be

profitable.

19 http://www.petrodar.com/content.php?GL=1&PL=3 06.16.1220http://www.petrodar.com/content.php?GL=4&PL=17 06.16.12

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There is no clear reference to the political responsibilities of Petrodar, although the

reference to “nation building” can be interpreted this way. This is still consistent with

CNPC’s CSR-policy, as it focused on the political responsibility towards China, not

host states.

Petrodar seem to accept a philanthropic responsibility towards the local

communities: ”As part of our corporate social responsibility, we continued to provide

local communities with the necessary services and basic needs such as clean water,

health care and education in addition to the establishment of social facilities.”21

However, legal regulation is also central in the area of community development.

Community development-programs are covered by the oil contracts, and the rhetoric

used by Petrodar implies that they see community development as a legal

responsibility. The major objectives of the community development programs are

firstly to: “Improve the socio-economic level of the communities surrounding

PDOC22’s operation areas and recognize their rights and interests by complying with

the applicable laws and regulations” (my emphasis).23 Though they say they will

recognize the rights of the communities, something that would imply an ethical

responsibility, they will do this by complying with laws and regulations, thus reducing

it to a legal responsibility. Even though Petrodar claim to have gone beyond the

provisions of the contract in their community development program, there is no

reference to this being an additional philanthropic responsibility that Petrodar

assumes.

Like CNPC, Petrodar focuses on following regulation in their environmental policy:

”Environmental protection is an integral part of PDOC corporate social

responsibility and PDOC is committed to an environmental-friendly operations.

PDOC makes every effort to comply with all applicable Environmental [regulation?]

in both national and international standards and legislation and has been certified to

both the ISO 14001 and OHSAS 18001 standards. A routine environmental

monitoring programme and reporting procedures are in place to ensure that all

21 http://www.petrodar.com/content.php?GL=1&PL=1 03.20.1222 PDOC = Petrodar Operating Company23 http://www.petrodar.com/content.php?GL=4&PL=17 03.20.12

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activities are within the environmental regulations (my emphasis).”24

This understanding of environmental protection indicates that Petrodar sees this as

part of their legal and not ethical responsibilities. In total the ethical responsibilities of

Petrodar are almost entirely reduced to a legal responsibility of compliance with laws

and regulations. This differs from PETRONAS who focuses more on company-

standards and sees environmental protection as an ethical responsibility.

The rhetoric applied by Petrodar points to an understanding of CSR highly focused on

economic and legal responsibilities. The focus on legality in the environmental policy

indicates that the largest shareholders, in this case CNPC, have a bigger influence

over the CSR-policy in the JOCs. Hence the CSR-policy of Petrodar lies closer to the

ones of CNPC and Sinopec, though not as comprehensive, than the one of

PETRONAS.

5.1.4 Greater Nile Petroleum Operating Company (GNPOC)

“So, what is this Corporate Social Responsibility?”Office Manager GNPOC, Juba

Greater Nile Petroleum Operating Company (GNPOC) operates block 1, 2 and 4 in

Unity State and stretching into the Republic of Sudan. It is owned by CNPC 40%,

PETRONAS 30%, ONGC 25% and Sudapet 5% and is the JOC with the least

reference to any CSR-policy. There are some references to health, safety and

environmental concerns in their mission statement, but there is no page dedicated to

this, nor any reports published. It is unclear whether this is because GNPOC has the

oldest website of the JOCs25 or because they don´t see any use in publishing their

CSR-policy. GNPOC refused to be interviewed and has not replied to any of my

requests to their offices in Juba and Khartoum.

Part of GNPOC’s mission is to: “Maximize shareholders’ return on investment,

Contribute towards achieving Sudan’s national aspirations as a net oil exporter and

24 http://www.petrodar.com/content.php?GL=4&PL=16 03.13.1225 GNPOC’s webpage is copyrighted in 2007, while WNPOC is copyrighted in 2009 and Petrodar in 2010-2011.

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Develop a competent Sudanese workforce”26 Another place, GNOPC states “…we

also up heave a social responsibility which primarily focuses on employment apart

from other issues.”27 Thus, the main focus is on nation-building and economic profit;

targets fitting the economic and political responsibilities of a company. As opposed

to Petrodar, the rhetoric of GNPOC’s CSR-policy also admits a political responsibility

towards Sudan. However, taken together the focus on the economic and political

responsibilities reveals the same attitude to CSR as both CNPC and Petrodar: the

belief in the business case for CSR.

The corporate values of GNPOC similarly reveal a focus on profitability and

efficiency.10 While there are also values that refer to the implementation of rules,

practices and ethics, there is no reference to environmental policies, community

development programs or ways to avoid the negative impact of oil operation.

Therefore it is hard to evaluate what the company thinks about their legal, ethical and

philanthropic responsibilities. This is not to say that GNPOC have no policy to

manage their impact on these areas. Rather, that they don’t see the use in publishing

it. While GNPOC’s webpage appears to be little used to convey messages of the

company, there is little other public information coming from GNPOC regarding their

CSR-policy and the company representative in Juba did not know what CSR was.

Thus it seems that CSR is not a priority for the company.

That GNPOC portrays such a small interest in CSR might seem strange, as GNPOC

was the JOC where Talisman held a 25% share from 1998 to 2002 when it was

pressured by activists to withdraw from Sudan28. During this process Talisman tried to

address the critic by publishing CSR-reports and developing a GNPOC code of

conduct29. Unfortunately, this outspoken commitment to CSR seems to have left

GNPOC with Talisman.

Today, what is left of GNPOC’s public CSR-policy seems to be a strong focus on

26 http://gnpoc.com/mission.asp?glink=GL001&plink=PL001 03.13.1227 http://gnpoc.com/career/ 03.17.1228 The Presbyterian church of Sudan filed a lawsuit in 2001 against Talisman for aiding the Sudanese army in atrocities committed during the war. The church’s lawsuit was dismissed in 2009, but the company’s reputation was tarnished.29 http://www.corporatesecretary.com/articles/corporate-social-responsibility/11972/canada-leads-global-interest-csr/ 03.01.12

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economic and political responsibilities. Legal and ethical responsibilities are briefly

mentioned and philanthropic responsibilities only indirectly. However, GNPOC at

least used to have a code of conduct and in 2009 the Health, Safety and Environment-

skills of GNPOC employees were assessed (CNPC, 2010, p. 14). Although the result

of the assessment is unknown this shows that they have some environmental policy.

Most likely the difference in the CSR-policy of Petrodar and GNPOC is caused by a

lack of publication of GNPOC’s CSR-policy. A possible explanation for this is the

influence of other shareholders like ONGC, who holds shares in GNPOC but not in

Petrodar and who have published far less on its own CSR-policy than the other

international oil companies. Furthermore, it seems like CNPC also speak on behalf of

their JOCs in their report on their operations in Sudan (2010). There is little in this

report that provide additional information on the CSR-policy of GNPOC, but the fact

that GNPOC-activities are included suggests that CNPC controls much of GNPOC.

It seems that GNPOC has a limited focus on CSR, which makes it hard to compare

their CSR-policy to that of its shareholders. They believe firmly in the business case

for CSR, that their profitability is good for society and has programs for both

environmental and philanthropic donations. It is however hard to judge whether they

see this as a legal, ethical or discretionary responsibility.

5.1.5 White Nile Petroleum Operating Company (WNPOC)

“Yes, we have some… at least a draft [CSR-] policy that is not even confirmed.”

WNPOC-representative

WNPOC is a JOC owned 50% by PETRONAS and 50% by Sudapet. They are the

operating company of block 5A and 5B, which also have other shareholders.

Although shareholders like ONGC are believed to have some influence over the CSR-

policy of WNPOC, this is expected to be far less than that of PETRONAS and

Sudapet. WNPOC does not publish CSR-report, so the sources used to analyse their

CSR-policy are their webpage and other publications as well as an interview with a

WNPOC-representative.

By the end of 2009 WNPOC had worked out a guideline on corporate donations that

covers their CSR-policy (WNPOC, 2009). In these guidelines, corporate social

70

responsibility is defined as:

“Responsibility of an organization for development of the society and environment,

through transparent and ethical behaviour that:

a) Contributes to sustainable development, including health and the welfare of

society.

b) Takes into account the expectations of stakeholders.

c) Is in compliance with applicable law and consistent with international norms of

behaviour.

d) Is integrated throughout the organization and practiced in its relationships.”

(WNPOC, 2009, p. 3)

This definition recognises both a legal and an ethical responsibility. Furthermore, the

fact that WNPOC have developed guidelines on corporate donations means that

WNPOC sees donations as part of their CSR. Since their donations are not always

connected to the core activities of the company it is clear that WNPOC also

acknowledge, and focus on their philanthropic responsibility.

Environmental concern is one of WNPOC’s basic responsibilities30. In their

environmental policy WNPOC focuses on following both national law and company

standards. The targeted areas are air quality, clean water, waste management and oil

spill response15. The fact that WNPOC has “…developed a broad array of

operational requirements engineering standards and performance guidelines to direct

its commitment”15, shows that the company finds the legal requirements insufficient.

This is a similar approach to the environmental policy of PETRONAS, who have also

moved from a focus on legal compliance to company standards.

WNPOC speaks little of their economic and political responsibility, and acknowledge

that compliance with laws and regulation is not sufficient. The CSR-policy of

WNPOC resembles that of PETRONAS by focusing strongly on the ethical and

philanthropic responsibilities of companies, and less on their economic, political and

legal responsibilities.

30 http://www.wnpoc.com.sd/?page=topics&id=83 03.15.12

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In general, the CSR-policies of the JOCs seem mostly influenced by the major

international oil company in the consortia. Even though the JOCs are composed of

many of the same companies, there is little consistency on what dimensions of CSR

they focus on. Petrodar and GNPOC have adopted CNPC`s focus on the economic

and political responsibilities, while WNPOC has copied PETRONAS` focus on the

ethical and philanthropic responsibilities. This indicates that minor shareholders have

little influence over the CSR-policy, and are not able to strengthen the CSR-policies

of the JOCs. In all JOCs the CSR-policies are far less sophisticated than among their

international shareholders. No CSR-reports are published and there is little

transparency on what standards the JOCs apply.

5.2 From policy to practice

The International Oil Companies and the Joint Operating Companies (JOCs) have

separate CSR-programs. However, the separation between the JOCs and the

international oil companies is not always obvious, as some international oil companies

report on activities that are actually performed by the JOCs. Apart from Total, which

is also the operating company, the CSR-activities conducted by the international oil

companies independent of the JOCs have generally been limited to philanthropic

donations away from the oil fields. In the following section I have included the

activities by both JOCs and international oil companies, but focus on the performance

of the JOCs.

I will first look at the CSR-activities of the oil companies relating to different areas

that are considered central in the CSR-debate in South Sudan. This is not a

comprehensive evaluation of the actions of the companies, but rather a broad

summary of how the companies have performed in various areas in order to identify

what have been the prioritised areas for the companies. I have analysed the

performance according to the different dimensions in Carroll’s CSR-pyramid to work

out what dimensions of social responsibility the companies have fulfilled and

neglected in the different areas.

5.2.1 Profitability

72

The issue of profitability corresponds to the economic responsibility of the oil

industry. The oil-industry in South Sudan was generally profitable during the CPA-

period. According to the Government of National Unity, in 2005 alone, 31 million

barrels of oil went to the oil companies31. For ONGC, Sudan accounted for 30-50% of

their overseas oil production between 2006 and 2011 (ONGC Videsh, 2011).

PETRONAS also claimed that Sudan was an important country because it contributed

to the profit of the company (interview) and it seems unlikely that the situation has

been different for the other oil producing companies.

The economic responsibility of the companies towards the governments of Sudan was

to a large extent fulfilled when it comes to financial contribution. According to the

CPA revenue from the oil industry was to be divided evenly between North and South

Sudan. From 2005 to 2011 more than 10 billion USD was transferred from Khartoum

to Juba.32 This revenue has been of crucial importance to the southern government and

accounted for 97,8 % of the South’s total revenue in 2010 (SSCCSE, 2011). Although

some argue that South Sudan are not spending the money wisely by spending 26% on

security and only 7% on education and 4 % on health (ibid), there is no doubt oil

revenue has been crucial to the functioning of the southern government.

It is however hard to say accurately how profitable the industry has been, as some

have doubted the official production data and claimed that Khartoum understated the

production to avoid paying the South its appropriate share (Global Witness, 2009).

This suspicion is in large caused by the lack of transparency in the Sudanese oil

industry. WNPOC claimed that information was available for the Government of

South Sudan during the CPA, but that they never asked for it (interview), but this was

refuted by PETRONAS who said that it was not possible for them to reveal their

production figures (interview). So, while the companies have fulfilled their economic

responsibility, their ethical responsibility to be fair and transparent towards the

Government of South Sudan has not received the same attention.

5.2.2 Employment

31 http://www.sudantribune.com/Sudanese-presidency-updated-on-oil,14359 03.24.1232 http://www.globalwitness.org/campaigns/corruption/oil-gas-and-mining/sudan-and-south-sudan 03.24.12

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Another part of the economic responsibility refers to creation of employment as a

consequence of a company’s profitability. Here the picture is more mixed. While

CNPC alone claim to “…have created more than 80,000 local jobs” (CNPC in

Sudan, 2010, p. 3) through their localization efforts, the majority of these jobs have

been created in the North. Criticism has been raised against the employment policy of

the oil companies, claiming that Southerners were prevented from getting jobs.

Concerning the employment situation, ECOS comments: “The companies employ no

educated Southerners and routinely dishonor working contracts. GNPOC and

Petrodar recruit Southerners for the lowliest jobs only” (ECOS, 2008). A

representative from the Ministry of Energy and Mining in Juba supported this view,

saying: “… a lot of Southerners were kept out of the participation in the oil industry.

As such, they did not find a chance to work in the oil companies. The few of them who

work is like a drop of ink in an ocean” (interview M.E.M.). Leben Moro shows how

the treatment of Southerners applying for jobs was sometimes cruel, relating the story

of a man encountered at the hospital in Melut county33 long after the CPA was signed:

“Oil company security men were responsible for his suffering. The security men

arrested him, tied him up, and set fire to him. His crime was insisting on a job!”34

Employment of Sudanese is regulated by the contracts that contain minimum

proportions for Sudanese nationals working in the companies. The companies hence

have a legal responsibility to employ Sudanese nationals as well as being part of their

economic responsibility to create jobs. However, the contracts don’t specify whether

they should employ North or South Sudanese. This is left to the discretion of the

companies, which would make it an ethical responsibility to distribute employment

fairly. While skilled workers are in short supply among the local communities in the

oil producing areas, this could have been different if the companies had invested in

educating and training locals. It seems that the companies have prioritized their

economic and legal responsibility towards Khartoum and downplayed their ethical

responsibility towards the local communities in South Sudan.

5.2.3 Securing oil-supply

33 Petrodar operating area.34 http://www.pambazuka.org/en/category/features/42865 05.18.12

74

Along with their economic responsibility, the national oil companies also have a

political responsibility to their home government to secure the supply of a strategic

resource. This is particularly important for countries that are big oil-importers like

China and India. While the leading shareholder in WNPOC, PETRONAS, does not

have the same political responsibility to secure supply towards Malaysia, it’s partner

in block 5A, ONGC is highly concerned about this. The importance of this

responsibility was expressed by the Indian oil minister who in 2002 was asked by a

Canadian newspaper how concerned India would be about the effects of the oil fields

on Sudan's civil war: "I know in the U.S.A. or Canada these feelings are there. But we

in India don't have such feelings on this issue. We feel the investments there are safe

and, since it's a producing field, we are keen to have it… My greatest interest is to

have equity oil as soon as possible."35 This position indicates that securing oil supply

is the main concern of ONGC’s owner; the Indian state. The same attitude can be

found at both CNPC and Sinopec.

In this regard, CNPC and ONGC have been successful. By maintaining production,

and increasing it through both war and peace they have secured the supply of this

strategic resource. During the war they were able to operate and produce oil in an area

where others shied away. Throughout the CPA-period they have managed to keep

their contracts and have kept the oil flowing without major disruptions.

Furthermore, the experiences from Sudan have undoubtedly been valuable for the

companies and their home countries when trying to gain contracts in other parts of

Africa. Increased trade between Sudan and, especially, India and China has also been

a positive result from the oil production (Large & Patey, 2010). A part of this trade

has been the arm-trade between China and Sudan. This trade has been criticized

because it has enabled Sudan to commit atrocities in Darfur (Human Rights First,

2008) and helped North Sudan during the civil war. In this regard the political

responsibility towards the home nations has been more important than the ethical

responsibility to protect, or at least not endanger, the local population in Sudan.

35 National Post, Canada, 24 June, 2002 Quote retrieved from http://www.article13.com/A13_ContentList.asp?strAction=GetPublication&PNID=180 01.05.12

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GNPOC, WNPOC and Petrodar have also fulfilled their political responsibility

towards the Sudanese state by supplying it with oil. After the CPA was signed,

production increased though the lack of any big new discoveries means that the

production will most likely go into decline in few years if nothing changes

(Government of the Republic of South Sudan, 2011).

Total, on the other hand has not been able to fulfil this political responsibility. Instead

they have focused on upholding their ethical responsibility by withstanding from

exploration and production because of the security in the area (Total, 2009). In

interview Total also expressed that another reason for abstaining from operations was

that they felt the government in Khartoum was not fully legitimate (interview). In this

sense they accept what Guldbrandsen & Moe (2005) calls Macro CSR by not

providing funds for the government in Khartoum. This way they have avoided being

part of the conflict and causing additional harm for the population in the area thus

honouring their negative injunction duties. However, Total admits that security

reasons are also behind the decision to halt operations (interview). Hence, the reason

why Total is not operating is not only because they want to avoid causing harm, but

also because they want to avoid being harmed themselves.

5.2.4 Environmental protection

Action to protect the environment can be seen as meeting economic, legal, ethical or

philanthropic responsibilities, depending on its justification. Whether it should be

labelled ethical or philanthropic responsibility, depends on whether measures are

connected to the core activity of the company or not. Normally there are several

reasons why companies engage in activities and they strive for measures that are in

compliance with laws and regulation and protect the environment while at the same

time improving the profit of the company. Their priorities only appear when it is not

possible to combine legal compliance, ethical behaviour and profit.

In Unity state in WNPOC’s block 5A the German NGO Sign of Hope has found

evidence of widespread pollution and water contamination.36 WNPOC refute that they

are the source, but has not been able to explain the high presence of cyanides, lead,

36 http://ngonewsafrica.org/archives/569 03.19.12

76

nickel, cadmium and arsenic in the drinking water. WNPOC replied to the allegations

by saying that they are in compliance with “all the environmental regulations and

procedures and international best practices carrying out its operations”.37 Their

reference to legal regulation indicates a view of environmental protection as a legal

responsibility. However, they also emphasise that they are committed to ethical

behaviour and environmental protection without referring to laws and regulation.

Since compliance with laws are not prominent in their reply, it would seem that

WNPOC sees legal responsibility as a minimum, but still something they accept and

strive to go beyond.

The allegations of pollution by WNPOC causing disease and death are also

documented in Fallet’s study of the same area (Fallet, 2010, pp. 60-63). Faced with

such grave accusations WNPOC have so far not published any evidence to prove their

operations are clean. Despite their outspoken commitment to their ethical

responsibilities, their blatant dismissal of the allegations shows that WNPOC doesn’t

always uphold their negative injunction duties.

Among the few larger projects in South Sudan that would fall under ethical

responsibility is the construction of bioremediation plants to clean the wastewater

from the drilling process. This is done by all the JOCs. Though a sign of taking ethical

responsibility to avoid harm, WNPOC also stress the legal responsibility when

presenting it: “This 13 Million USD worth project serves to treat Central Processing

Facility (CPF) Produced Water which has been proven to comply with Sudan

Environmental Regulations & Food and Agriculture Organization (FAO)

standards.”38 GNPOC has a similar project, although on the northern side of the

border. Though no independent monitoring of the water quality takes place it is

claimed by the service company that the produced water is well within both

international and Sudanese threshold values.39 The focus on legal limits for pollution

indicates that these projects are at least partly motivated by legal restraints.

The legal compliance of companies is hard to evaluate because of the combination of

37 http://www.wnpoc.com.sd/?page=newsViewer&id=7 03.19.1238 http://www.wnpoc.com.sd/Portal/news.php?row_id=50&scKey=c0c7c76d30bd3dcaefc96f40275bdc0a 03.20.1239 http://www.oceans-esu.com/case/casew01.htm 03.20.12

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weak legislation, confidential contracts, isolated oilfields and no independent

monitoring. Either way, complaints have been made that the ethical responsibility has

not been met regarding the discharge of wastewater. ECOS reports that “…the

GNPOC consortium in Western Upper Nile is known to discharge large quantities of

contaminated water onto the surface, much to the chagrin of the agro-pastoralists in

the area. It is not potable for humans, unfit for animals and too filthy for irrigation”

(ECOS, 2008, p. 33). Similar complaints have been expressed towards Petrodar and

caused the commissioner of Melut County to travel to China to present the

complaints.40

PETRONAS was aware that some people “portray oil companies as not beneficial to

environment”, but said that “…this is countered by the company who presents their

business case and that they adhere to international law” (interview). They further

said: “We don’t think we destroy the environment” and indicated that “the protests

may be political” (interview). By “business case” PETRONAS refers to their position

as an apolitical entity indicating that they don’t want to get involved in the politics of

environmental policy, but rather stick to compliance with international law. This

reduce their environmental policy to a legal responsibility albeit a bigger legal

responsibility than if they only complied with national law. As shown in chapter 5.1.1,

the CSR-policy of PETRONAS shifted from a focus on compliance with laws to a

focus on following their own standards during the CPA-period. Still, when I asked the

representative from PETRONAS on the matter, he said that they followed national

laws and did not necessarily go beyond them. This seems odd, as the laws of Sudan

were very weak. So the shift from legal responsibility to ethical responsibility may so

far not have materialised in South Sudan.

Regarding their environmental track record, CNPC say that: “By 2009, CNPC’s

operations in Sudan had no serious pollution accidents. Discharges of waste gas,

water and solids all meet Sudanese and international standards” (CNPC in Sudan,

2010, p. 16). This statement only confirms that CNPC feel they have fulfilled their

legal responsibility. However, there are those who argue that oil companies have

continuously been breaking the environmental laws. Professor Asim El-Moghraby

40 http://www.mirayafm.org/index.php/southsudan/771-malut-citizens-complain-of-oil-pollution- 03.20.12

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said during an oil conference in December 2010 that: “Sudan’s oil industry is

systematically violating a number of Sudanese laws concerning Forestry, Range and

Pasture, Fisheries, Irrigation, Roads and Bridges, Wildlife and Health” (ECOS,

2011). When asked, none of the NGOs I talked to could name the laws broken,

because the confidential contracts were said to replace any legal regulations and the

contracts they had witnessed contained minimal regulation concerning environmental

damage. Leben Moro also points at environmental damage in GNPOC’s area and

refers to an investigation by the committees in the National Assembly and

Southern Sudan Legislative Assembly (SSLA) that links pollution and

corruption: “These committees found significant environmental

problems caused by unsafe dumping of water, mud and other

wastes in the open. According to an ecologist, who conducted an

environmental assessment in Heglig, „produced water requires

careful management because it contains harmful chemicals.

Unfortunately, safety standards are not complied with because of

the rampant corruption”” (Moro, 2009, p. 19).

It seems evident that environmental damage has happened due to the oil operations.

However, there are no references to this in the reports of CNPC that cover the

operations of the CNPC-led consortia GNPOC and Petrodar (2010). In the report they

say they are committed to reducing the environmental impact of their operations, but

does not mention any numbers on pollution or spills. This negligence of problematic

issues is prevalent in reports from both CNPC and PETRONAS (PETRONAS, 2007;

PETRONAS, 2011; PETRONAS, 2009).

The lack of reporting on problematic issues relates to the ethical responsibility of the

companies to be honest and transparent. So, even though the companies may have

fulfilled their legal responsibilities to some degree when it comes to environmental

activities, the prevalence of pollution and the lack of transparency and proper

reporting indicate that the companies have not fulfilled their ethical responsibilities.

5.2.5 Compensation

79

According to the CPA the companies have a legal, as well as an ethical obligation to

compensate those that were negatively affected by the oil operations before the CPA.

Even though this study focuses on the period after the civil war, the responsibilities of

the oil companies are closely linked to their actions before the CPA was signed. Much

of the claims for compensation are due to displacement during the war. While Leben

Moro shows that some displacement also took place in Petrodar’s area after the

signing of the CPA (Moro, 2009, p. 17), the extent of this has been far less than

during the war.

Compensation has occurred to some extent, but there is still a long way to go. The

alleged compliance in human right violations by oil companies during the war has led

to legal processes41 and grievances among the population. Concerning the operations

of Petrodar in Manyo in March 2006, Moro writes: “The oil workers reportedly

recorded the damaged trees, destroyed homes and other losses and

promised to pay compensation. However, the promise was not

fulfilled. The local people were left reeling with bitterness against

the oil company” (ibid p. 17). This became evident during the oil conference in

Malakal where the issue of compensation engaged the attendants more than any other

topic. Reports indicate that the anger is justified. The UN mission in Sudan has

monitored the implementation of the CPA and concludes in their may 2011 report that

“no action has been taken to compensate victims of such contracts provided for in the

wealth-sharing agreement” (UNMIS, 2011, p. 22). This has aggrieved the local

communities and caused resentment towards the companies.

Although WNPOC has also received complaints about missing compensation for

displacement and death caused by the oil operations42, this was not the impression

given by WNPOC who jokingly said about the government in Khartoum: “They give

a lot of compensation. I think most of the oil business is more or less compensation”

(interview). This again corresponds poorly with the statement made by WNPOCs

largest shareholder PETRONAS, who commented on the discussion on compensation

that “JOCs will come to the shareholders with complaints. They update all activities,

but there has been very minimal reports on issues like this” (interview). A partial

41 Lundin and Talisman42 http://www.sudantribune.com/South-Sudan-villagers-environment,26231 05.10.12

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explanation to this discrepancy might be that WNPOC see parts of their community

development programs as a form of compensation (interview) and therefore feel they

meet their obligations.

Still, it seems like the companies have failed to fulfil their ethical responsibility to

provide compensation for harm caused. In this regard they have also failed their legal

responsibility as stated in the CPA.

5.2.6 Community Development

According to their contracts companies are obliged to pay a certain sum for

community development. This makes it possible to view this as a legal responsibility

for the oil companies. In addition to this, oil companies have been involved in projects

related to infrastructure, education, health and sports that go beyond their legal

requirements and could therefore be viewed as meeting their philanthropic

responsibility. Finally, it is possible to see these projects as something the companies

are morally obliged to do as compensation for harm caused thus making it an ethical

responsibility.

CNPC claim that “…by 2009, the Company, through its subsidiaries and joint

operating companies in Sudan, had donated nearly USD 50 million to local charity

groups and neighbouring communities around oil blocks. This cooperation witnessed

an eventual increase in social welfare, including constructing hospitals and schools,

digging water wells, and paving roads, benefiting over two million local people”

(CNPC in Sudan, 2010, p. 25). As the major shareholder in Petrodar this corresponds

well with Petrodar’s claim that they have spent 96 million USD more on community

development than they have been contractual obliged to in the period from 2002-

2010.43 This money has been spent on constructing “hospitals, clinics, dispensaries,

schools, roads, bridges, water wells & tanks, power supply, and donated school and

medicine supplies.”53 When listing the community development projects conducted

from 2002-2010 they also include one airport, although it is not clear whether this is

also funded with the 96 million USD mentioned.

43 http://www.petrodar.com/content.php?GL=4&PL=17 03.20.12

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GNPOC has conducted community development projects covering both their

philanthropic and ethical responsibility. Those programs falling under philanthropic

responsibility are: Distribution of medicines and medical equipment, building of water

tanks, sponsorship of sport events, distribution of school furniture and school

uniforms, setting up a radio station, supplying “watching clubs” with TVs, providing

medical courses and involvement in vocational training and agricultural projects.

Projects aimed at their ethical responsibility are limited to fencing and rehabilitation

of water ponds (GNPOC, 2009). Judging from their community development-report,

it seems that philanthropic activities are far more common than projects related to the

core activities of the company.

WNPOC has a decent community development-program that focuses on a number of

areas. Projects mentioned on their webpage cover water supply, education, capacity

building, agricultural development, humanitarian assistance and emergency response,

social sponsorship and support, road and other construction, health services and

livestock development. Larger products are left to the shareholders because of

limitations in the budget (interview). According to WNPOC the budget for

community development projects was limited: “As I tell you the budget is still

limited, it’s not that much. For example, maybe the oil company will be ready to pay

only 2 million US. This 2 million US you will put up a new project and also sustain

the existing one on that” (interview).

This financial limitation causes WNPOC to focus on smaller projects, like building

schools which only cost 2-4000 US$ (interview) and leave larger infrastructure

projects, like building of roads to the shareholders. WNPOC further expressed that the

company also has a moral obligation to help the communities when the government

does not: “…because as I tell you the government is handicapped. It is not able. It is

unfair that you are working in that area and you are seeing people, -children are not

going to school. People are not taking good water. Or people are sick all the time”

(interview). This shows that WNPOC accept an ethical responsibility that corresponds

with Simon et al’s (1972) view of CSR and shows that WNPOC is willing to accept

additional responsibility when others are not assuming theirs.

One sees that the community development projects of the three oil producing JOCs

cover roughly the same areas. They all focus on water supply, education, health,

82

infrastructure, and social donations. While these areas are important for the country,

the projects have been criticised for not working properly. My informant “Peter”

complained that projects only benefited Northerners: “They have built school and

hospitals on government areas. In Bentiu only people from the north have access”

(interview). Roads constructed by the oil companies have been accused of causing

floods (ECOS, 2008), hospitals constructed by oil companies are left without staff or

patients and a mosque has been erected in an area without Muslims (Moro, 2009).

It may be unfair to judge companies solely on the success of their projects. Even

experienced aid agencies struggle to make their development projects work properly

and projects often have unintended negative consequences. However, unlike aid

agencies oil companies also have a stronger self-interest in many of the projects.

Roads, bridges, power supply and especially an airport are used extensively

(sometimes almost exclusively) by the oil companies themselves. Thus, a large part of

the community-development projects are aimed at the needs of the companies, not the

local communities. While the yearly 300.000 USD contribution mentioned in the

Petrodar’s contract is non-recoverable, this is not the case for any additional sums

spent. Since the production-sharing contract in question assigns the government 64-

80% of profit oil44, the company also loose the same percentage of any barrel that is

deducted as cost oil. The additional sums paid by companies on community

development are deducted as cost oil, which means the company only spends 20-36%

of the money. The government pays the rest through less profit oil for market.

Although WNPOC claims that other contracts only allow for 50% of such projects to

be deducted as cost oil (interview), it still shows that companies don’t carry the whole

financial burden of these projects.

Total’s CSR-projects were mainly done in Jonglei state and covered water access and

guinea-worm eradication as well as projects focused on education. To make this work

Total worked with both NGOs and local communities. Total’s focus on education and

safe water access has resulted in the construction of three primary schools, the

rebuilding of a high school, refurbishment of a teacher’s training institute, opening of

two education and business centres for women and support for the Commercial

Integrated Farming Institute where about 3000 women have enrolled. In 2009 Total

44 For explanation on profit oil and cost oil see chapter 3.4

83

began financing drilling and repairing of water-wells. By the end of 2010, 50 new

wells were drilled and another 51 repaired. In addition a mobile lab has been financed

to aid water quality testing. Apart from these target areas, Total has also been

involved in infrastructure programs and a project aimed at reducing the need for

firewood among rural families45.

In the interview, Total expressed concern that they had no control over the money

they were contractually obliged to pay to the Government for community

development programs and that they preferred to do projects where it was clear to the

communities that they were behind them (interview). While the projects were done to

aid the communities, they were also strategic to ensure that Total kept their contract as

well as securing a safe and good working environment for the company. This

motivation was also expressed by WNPOC who said that community development

programs helped build relationship with the communities thus improving security and

the working operations of the oil companies (interview). The same justification is

found at Petrodar who claim community development programs ”… will lead to

create a good neighbourhood with the local communities and will also allow for

smooth operation”46. The fact that the person responsible for community

development-programs at GNPOC is also responsible for security47 indicates that they

also see these programs in relation to the wider relationship with communities.

The companies have fulfilled and gone beyond the legal responsibilities of their

contracts when it comes to the community development programs. They have also

conducted projects that meet their philanthropic responsibilities, although with varied

success. The most successful community development projects were conducted by

Total and WNPOC, who focus less on the legal requirements of the projects. Apart

from WNPOC there is little evidence that the companies see this as an ethical

responsibility, but rather as a combination of the economic responsibility to ensure

operations and profit and the philanthropic responsibility to donate to society.

5.2.7 Summary

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While the CSR-policies of the JOCs differed, the social performance has been

relatively similar among the oil companies who produce oil in South Sudan. That is to

say, the social and environmental impact of the producing oil companies has been

similar. They have all contributed to the Sudanese state through tax payments and

secured oil supply to their home countries. They have created some employment

opportunities though benefitting Northerners more than Southerners. Furthermore

they have taken some action to limit environmental damage, but not sufficient to

avoid allegations of widespread pollution and neglect. Nor have they been able to

supply compensation to all who are entitled to it. Finally they have engaged in a

number of community development projects with varied degrees of success.

Though the CSR-practices of the oil companies have focused on similar areas, there

are some differences that reflect the rhetoric of their CSR-policy. Total, with its strong

focus on ethical responsibilities has upheld them, at the expense of their political and

economic responsibilities by refraining from oil activities. WNPOC has, in

accordance with its CSR-policy made a greater effort to meet its philanthropic

responsibilities than the other JOCs. Petrodar, who focuses on economic, legal and

discretionary responsibilities, has taken measures on all these areas, but done little to

uphold its ethical responsibilities. Likewise, GNPOC who focus on the economic and

political responsibilities has also to a large extent fulfilled these responsibilities. Thus

it seems that the social performance of the oil companies is not coincidental.

Companies put effort into areas they consider central in their CSR-policies.

5.3 Assessment of CSR-practices

I shall now look at how various actors perceive the CSR-practices of the oil

companies in South Sudan during the CPA-period. These actors are the oil companies

themselves, the Government of South Sudan (GOSS), the international civil society

and the local communities in the oil producing areas.

5.3.1 Oil companies

“Petrodar is proud of its effort in improving the living conditions of the people

85

residing within the vicinity of its operations.”48

If one is to believe their public statements, the oil companies seem to be pleased with

how they have managed their impact. As shown in the previous chapter companies

claim to have followed all rules and regulations and contributed to the economy of

Sudan. The companies also indicate that they are pleased with their general CSR-

practices. They are aware of the criticism of the oil industry, but attribute this to

misunderstandings. PETRONAS expressed this when answering why the oil industry

was criticised: “Maybe because Government of North is not favoured by western

countries. So they think that everyone who works with the government are also bad“

(interview). Other companies have also put off criticism by referring to their ethical

behaviour. When faced with allegation that Petrodar had understated the production

reports, they responded by saying: “We have always operated in a professional and

ethical manner in line with international standards and will continue to do so in the

future (my emphasis).”49

When asked what government and civil society should do to make CSR-efforts work

better, the representative from PETRONAS said that they had to understand the

objective of the oil companies, claiming: “We do it [produce oil] for nation building.

We are doing good things for them and we do not expect them to make things

difficult for us” (interview, my emphasis). The PETRONAS representative also

underlined that the oil companies were “…playing part in facilitating cooperation

between North and South” (interview).

CNPC quotes the President of Sudan Omar al-Bashir from a 2007-speech where he

supposedly praised: “…CNPC for “not only bringing us oil but also bringing us

peace” (CNPC in Sudan, 2010, p. 4). This line of argument is known from other

companies. Both Lundin and Talisman sought during the civil war to promote peace

by partaking in negotiations or supporting peace initiatives, although with little

evidence of effect (Shankleman, 2006, pp. 138-139). The very same companies have

later been charged with human rights violations in their home countries. This has not

stopped the companies from going as far as claiming some credit for the peace

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agreement of 2005. When faced with the investigation, Lundin countered that:

“Through our process of stakeholder engagement and community development

projects, we believe that the Company played a positive role in the peace and

development of that country.”50 Even though the allegations against Lundin are based

on events happening before the peace-agreement was signed, it shows that the

company consider their CSR-practices to be have been both effective and appropriate.

This does not correspond with the impression of other groups.

The most striking feature of the information coming from the international oil

companies is not what it contains, but what it emits. References to problematic issues,

critic or errors on behalf of the companies are almost non-existent. In a 45 pages long

report on CNPC’s activities in Sudan from 2010 there is no reference to the conflict

between the North and South, the CPA or any complaints whatsoever (2010). There is

a short mention of nine Chinese workers being kidnapped in 2008, of which five were

killed. However, there is no explanation as to the motive behind this attack or any

disagreements with the local communities. Rather, the message is one of companies

only contributing positively to the development of South Sudan.

The avoidance of problematic issues and exaggerations of the positive impact of the

companies is not specific to Sudan, but can be found in central CSR-reports as well.

When talking about their global operations, Sinopec says: “Giving back to the

community and motivating more people to do the same, Sinopec is moving forward

like a gigantic ship, carrying responsibility and philanthropy and spreading the spirit

of selflessness and dedication and sense of social responsibility as far and wide as it

can” (Sinopec, 2009, p. 84). It is difficult to accept this as little more than slogans and

PR-material. Total has a more sober approach to problematic issues and admits that

there are controversies. Still, the CSR-reports should be interpreted as sources of

information on how the companies would like to present themselves, rather than data

on the actual practices of the companies.

Still, there are voices from inside the companies that acknowledge that errors have

50 Statement regarding Lundin Petroleum’s role in Sudan 06.23.2010 http://www.lundin-petroleum.com/Documents/ot_corp_23-06-10_info_e.html 04.10.12

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been made. During an oil-conference in Malakal in August 2011 a representative from

Petrodar admitted that environmental mistakes and “bad things” had happened in the

past and talked about a “mess left by the North”. However, this example of self-

criticism is rare. By and large the oil companies attributed any complaints to over-

expectations by the local communities. When asked about the challenges to CSR in

Sudan, WNPOC answered: “Most of the challenges on managing this corporate

social responsibility is the expectation of the people. Over-expectation. Yeah, you see

the area is coming up from war and the government is not capable of doing anything.

So it is still depending on the oil companies” (interview).

When asked the same question, PETRONAS and Total’s answers were almost

identical:

“They welcome the program, but locally they want to ask for more. Dealing with the

expectations is a challenge. They have too high expectations” (interview

PETRONAS).

“There will be challenges. Population has been used to receive a lot. Expectations are

very high. Higher than what we will be able to provide” (interview Total). Because

the expectations were perceived as unrealistically high, the companies felt no moral

obligation to meet them.

In total, the companies seem pleased with their corporate social performance. They

publicly claim their actions have promoted peace and development in the country.

While aware of criticism, they generally attribute this to over-expectations and

mistrust due to the political situation between North and South.

5.3.2 Government of South Sudan (GOSS)

“All oil companies are crooks!”

Man at the Ministry of Energy and Mining in Juba.

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The Government of South Sudan (GOSS) has not been as impressed by the CSR-

practices as the companies themselves. Rather, the impression presented to me was

one of disappointment and failure. According to the CPA, North and South Sudan

should cooperate in the regulation of the oil industry. However, this part of the CPA

was not implemented properly, leaving GOSS with limited influence over the oil

industry. According to my informant at the Ministry of Energy and Mining (M.E.M.)

the magnitude of the CSR was ”very little”. He further complained that the local

aspect of the operating companies was ”very negligible” (interview). This was

explained by the strained relationship between the North and the South and the control

over the oil industry by the North.

He admitted that companies were having CSR-programs, but felt they were

inadequate: “But of course you know what they are giving here is health clinic, water

yard, you know... schools. In all the three consortia this is what they are doing as far

as the corporate social responsibility is concerned […] Some of them, you know, can

take one, two or three persons from the area, send them to the Universities, pay for

them, you know... This is the level of the CSR they are doing. It is not that much”

(interview). Another complaint was that the oil companies employed few South

Sudanese. As a result the transfer of technology was very limited (interview).

WNPOC was aware of the attitude of the GOSS regarding their CSR-practices and

said in interview: “So, all the time, South Sudan are accusing those of the North

Sudan: You are not sharing with us the information. In everything. Including the CSR.

And also saying more than this, that you are not doing the CSR.” However, he

attributed this to the bad relation between the North and the South

In 2007 Rich Machar, the vice-president of South Sudan visited the operations of

PETRONAS51 and commented afterwards: “I was not happy with what I saw. […]

The way they handled the water associated with the oil, the use of chemicals used in

exploration and the roads constructed blocking the flow of streams without bridges or

culverts is a concern. […] We also have concerns about community development. We

want it driven by state authorities, not what we saw, which were just incidents of

51 Probably referring to the operations of WNPOC

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charity.” After his visit Machar told PETRONAS they ”...would have to employ more

Southerners, fund an independent study on the environmental impact of its work,

change the way it handled community development and abandon the practice of using

central government troops for security.”52

This negative view of the oil industry has spread to areas of South Sudan where oil is

yet to be discovered. The Governor of Jonglei state, Brigadier General Philip Thon

Leek Deng, says in a statement on oil policy in Jonglei in 2007 that:

“…we want to avoid what had happened in Unity and Upper Nile States where oil

industry displaced hundreds of thousands of people, millions of trees were cut down,

all sorts of pits---flare pits, drilling pits, garbage pits, etc are left behind without

treatment or care; thousands of kilometres of roads are raised without bridges hence

distorting flow of water and cattle and wildlife movement routes and subsequently

resulting in the degradation of the local environment and impoverishment of the local

communities. Not only that, but whatever development, trainings and employments,

only benefited people from northern Sudan. Even what little social development

projects done so far in those oilfields, have been randomly, half heartedly and

shortsightedly done.”53

Many of the bad things the governor comments on happened during the war, but it is

clear that two years into the CPA things have not changed sufficiently to impress him.

To sum up the South Sudanese Government feel that the companies have failed their

economic responsibilities by not employing Southerners. They have also failed their

ethical responsibilities by polluting and using central forces for security, thereby

increasing the tension in the areas. Finally they have failed their philanthropic

responsibility by doing too little and conducting their projects in a random, half-

hearted manner.

5.3.3 The international civil society

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“Sudan’s oil industry is possibly the least socially responsible on earth.”

(ECOS, 2008, p. 36)

The international civil society, headed by various NGOs, has been even more critical

to the oil industry in Sudan. During my time in Juba the most common response when

international workers heard about the topic for my thesis was: “CSR? I didn’t think

that existed here.” The industry was thought to consist of irresponsible companies

that don’t care for the environment or the local population.

In 2008 the NGO ECOS published a report where it says: “Sudan’s oil industry is

possibly the least socially responsible on earth” (ECOS, 2008, p. 13). It goes on to

say that “Unfortunately, few if any of the country’s major players show any

awareness of their responsibilities, make no serious effort to build a social support

basis, and seem to bank on cozy relations with the ruling elite only” (ibid p. 36). This

report was written by IKV Pax Christi on behalf of the European Coalition on Oil in

Sudan (ECOS), an organisation established in 2001 that unites over 50 European

NGOs54. Their statement therefore represents the view of a large number of NGOs.

While the comprehensive 2008 report of ECOS covers a range of topics like

displacement, compensation, employment, environmental impact and transparency,

other NGO-reports have focused on specific topics like transparency (Global Witness,

2011), compensation for atrocities committed during the war (ECOS, 2010) or the

role of oil companies in the conflict in Darfur (Human Rights First, 2008). Common

for all of them is that they are highly critical to the actions of the oil companies.

When Petrochina, an arm of CNPC applied for entry to UN´s CSR-initiative, Global

Compact, in 2007, several NGO´s complained55. Petrochina were finally admitted in

2009 despite a complaint supported by over 80 civil society organizations from 25

different countries. They argued that Petrochina, through its relations with CNPC was

complicit in human rights abuses in Sudan and that they didn’t use their influence in

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Khartoum to stop the atrocities in Darfur.56

The view of the oil companies was shaped during the war, when oil companies were

linked to the atrocities committed by the regime in Khartoum. Still, even after the

signing of the CPA the situation was difficult for people in the oil producing areas.

Conflict erupted, pollution continued, oil security forces were sometimes violent,

compensation was not paid, the lack of transparency continued and community

development projects did not meet the needs of the local communities. The

international civil society therefore considers the companies to have failed their social

responsibility towards the people of South Sudan.

5.3.4 Local communities

“The land is occupied with companies that have no mercy nor value human dignity”

(Community of Maluth County, 2009)57

Local communities are not a homogenous group, but rather a collection of different

social and ethnic groups with different views. Their view on the oil industry differs

and the view presented here may not correspond with the view of all the communities

or their members. Fallet found in her study of the communities in WNPOC’s block

5A that knowledge of the oil industry was limited: “…very few knew anything

about oil-production, transportation of oil, and the use, value or the

appearance of oil. Only a handful knew the name of the company”

(Fallet, 2010, p. 52). Most of her respondents further insinuated that

they did not give the oil industry much thought (ibid). At the same

time they expressed concern about the effects of the oil industry:

“Most of the respondents suspected a link between the illnesses

that occurred in the area […] and the oil-production” (ibid p. 53).

This concern was also expressed to me. My informant “Peter” told me

about the situation in the oil producing area. He claimed nothing much changed with

56http://globalcompactcritics.blogspot.com/2009/09/global-compact-board-commends- cnpc-for.html 06.07.1257 Letter can be supplied on request

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the CPA. “People continue to die because of waste. Cattle drink water and get sick

while chemical waste is thrown anywhere” (interview). Environmental spills were

allegedly often not reported by the oil companies because there were no government

representatives in the area who could hold them accountable. When spills were

reported this was done when they were almost cleaned up. Although the companies

would sometimes compensate if a child or cattle dies, this was not seen as sufficient.

This shows that the companies fail in acting on their negative injunction duties.

“Peter” was also not impressed by the affirmative duties of the companies saying:

“now the contribution is not felt. They are coming like thieves and take value and run

away” (interview). This bad impression of the oil companies has spread to areas

without oil production. A member of the Jonglei Oil task force set up by Norwegian

People’s Aid said: ”Fortunately oil companies have not started working in Jonglei

State” (speach during oil conference in Malakal). This indicates that the critical view

of the activities of the companies is not exclusive to the affected areas.

Three years after the CPA was implemented affected communities in Melut58 county

(Block 3 belonging to Petrodar) wrote a letter to GOSS president Salva Kiir

complaining about the practices of Petrodar containing a range of moral judgements.

Their main complaints were that the company did not consult local communities, that

the oil-wealth did not benefit the communities and that the oil company destroyed the

environment. For the local communities the oil-wealth did not mean improvement of

the economy. Rather the opposite had happened: “…our economy was basically build

on cattle rearing agriculture and fishing, but with the discovery of oil all our pastures

have been destroyed, where we exercise these activity. We have lost our wild animals

which have fled due to the oil exploration destroying the natural environment too”

(Community of Maluth County, 2009). Nor was there much benefits to the local

economy through job creation: “The companies operating in these areas have never

thought of giving job opportunities for the people of these areas” (ibid). Though they

admit that some have been able to find jobs with the oil companies, it was mainly on a

day-to-day basis. The communities were further aggrieved when they saw where the

staff came from: “The worst of this is that the classified staffs of these companies are

appointed from Khartoum, the evidence to this is the variation in their salaries,

entitlements”(ibid).

58 Spelling varies. Maluth, Malut and Meluth is also used.

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While companies felt that communities had too high expectations, my informant

refuted this. According to “Peter” this understanding was a result of dealing with

individuals instead of communities. High expectations were, in his understanding, the

result of companies dealing with individuals or smaller groups. Instead of consulting

the larger community and provide something that a lot of people would benefit from,

they consulted only parts of the community and provided services that only benefited

a few. The consequence was that the expectations of others were raised because they

also wanted the same services. However, the presence of high expectations among the

local communities was clearly demonstrated at the oil conference in Malakal, which

resulted in a number of resolutions. On CSR the resolution said: “There is a

corporate social responsibility in the area of education, health, roads and water that

the companies have to take into consideration” (concluding remarks oil conference

Malakal 2011). These are clearly areas that would normally be the responsibility of

the government, indicating that the attendants at the conference supported the view of

Wiig and Ramalho (2005) that companies should assume additional responsibility

when government is not capable.

“Peter” also attacked the companies for their lack of transparency: “If you are not

transparent, you are responsible for how the money is spent” (interview). Since the

companies were not being open on their payments to the government they were also

held responsible for any poor spending of it.

Hence, the local communities criticise the social performance of the oil companies in

many areas. They are seen to fail their economic responsibility by not providing

employment and not making sure revenue from the oil production reaches the

communities. They are further seen to fail their ethical responsibility by not being

transparent, by polluting and by not paying compensation. Finally the philanthropic

responsibility of the companies to donate to social services is seen as highly

insufficient.

5.4 Reasons for resentment

It is evident that there are some major discrepancies in the understanding of the

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success of the CSR-practices. I will now discuss why the CSR-performance of the oil

companies has caused such resentment among the stakeholders in South Sudan. I will

use the different dimensions of Carroll’s CSR-pyramid to frame the discussion.

5.4.1 The importance of the economic responsibilities

Apart from Total, all the companies have fulfilled their economic responsibilities by

contributing oil revenue to the governments in Khartoum and Juba as well as the local

government in the oil producing states. However, paying taxes is only part of their

economic responsibility. Another part is offering employment. In this area the

companies have not been able to meet the expectations of the communities.

Apart from the oil companies, the groups I have analysed in South Sudan do not

consider the political responsibility of oil companies as important. The reason for this

is that the stakeholders I have chosen focus on the impact in South Sudan, not the

impact in the home country of the international oil companies or the Government in

Khartoum. I think it is safe to say that people in South Sudan show little concern for

global oil supply or the supply difficulties of India and China. The lack of refineries in

South Sudan also causes price shocks on fuel despite being a large oil producer.

Political responsibilities are therefore viewed as irrelevant.

Regarding the economic responsibilities the oil industry has fewer positive effects on

a country. Oil companies acquire revenue both for themselves and for the host country

through taxes/production sharing agreements. The revenue that stays in the country

certainly provides the government the means to provide social services to the

population. However, as shown in chapter 2.4 on the resource curse, oil-revenue can

also have devastating effects on the economy and the political situation in a country.

In South Sudan the negative impacts through armed conflict, displacement and

pollution have historically outweighed the positive impact of increased revenue,

which is perceived as minimal.

There are also less spillover-effects from the oil industry than other industries. As a

capital-intensive industry, the oil industry creates fewer jobs than more labour-

intensive industries. This is further exacerbated by the fact that extraction often takes

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place in remote areas and specialists are often foreigners (Potter, et al., 2004). As we

have seen, this is what happened in the oil producing areas. Unskilled labour was in

short demand and skilled labour was brought in from abroad or from Khartoum. Nor

did the wealth in the oil industry spread to other industries in the area. While oil

companies often question the resource curse, local communities have experienced it

first hand in South Sudan and therefore do not value the economic responsibility of

companies to be profitable.

Finally, oil is a non-renewable resource. Any revenue gained from the extraction of

oil can only be gained once. Some have argued that consumption of oil revenue

should be seen not as consumption of income, but as consumption of capital

(Humphreys, Sachs, & Stieglitz, 2007, p. 8). This has serious implication for policy. If

the revenue is ill spent, the country’s capital stock diminishes and the oil is better left

in the ground. The social responsibility of external actors may even be to shy away

from the oil wealth. Humphreys, Sachs and Stieglitz argue that “If the orientation of a

government is such that there are likely to be few benefits to the people, then domestic

groups and the international community should provide no help for extraction” (ibid

p. 15). In other words, they should accept what Guldbrandsen and Moe (2005) calls

Macro CSR. This is what Talisman did when they left the country, and Total when

they withstood from activity, though they both also had other motives. As a

consequence oppressive regimes will attract the less responsible oil companies, as the

ones who are more concerned about their social impact will shy away. “Peter”

claimed companies should be held responsible for oil revenue if they were not

transparent, thus setting a condition for when companies should accept Macro CSR.

Unsurprisingly, none of the oil companies I talked to agreed.

For the Government of South Sudan, the oil revenue was vital for it to fulfil its

function. At the same time, they got a far smaller share of the oil revenue in the CPA-

period than what they expected to get after independence. The Government in

Khartoum thus had an economic incentive to pump as much oil as possible before

independence, while the government in Juba would get a larger share if the oil was

pumped after independence. Now both Sudan and South Sudan are left with an oil

production that is fast approaching decline and less future oil revenue to promote

development and cover previous damage. For the government of South Sudan the oil-

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revenue gained during the CPA-period was a mixed blessing, as it left them with less

oil upon independence. For these reasons, the economic responsibilities should be

viewed as less important in the oil industry than in other industries.

As we have seen in chapter 5.2.1, oil revenue has provided the Government of South

Sudan with vital funding. Some have also argued that it helped the peace process by

giving incentives for co-operation59. However, oil revenue has also fuelled the conflict

by increased military spending and by allowing North Sudan to continue military

operations in Darfur, further destabilizing the region. For the affected areas the oil

wealth has not materialized and the reactions of the local communities towards the oil

companies implies that they feel they would have been better off without it. While

profit in the oil industry has provided the Governments of both Juba and Khartoum

with the financial means to provide social services, this is not felt by the local

communities. When the industry is also unable to provide employment-opportunities,

the economic responsibility of the oil companies becomes irrelevant to the local

communities.

5.4.2 The importance of legal responsibilities

Some highlight the voluntary aspect of CSR and argue that CSR only consist of

measures that go beyond law and regulation. This position demands that there is a will

and a capability to enforce regulation. If no such will or capacity exists, obeying the

law becomes more or less voluntary. As shown in chapter 3.6 and 3.6.1, the legal

regulation of the oil industry in South Sudan during the CPA-period was weak at best.

This was especially true in regard to environmental and social regulation.

With weak regulation, civil society and the Government of South Sudan has not

considered legal compliance an important part of CSR. In some instances the focus on

legal compliance may even have had negative social consequences because it meant

companies were less transparent and accepted low environmental standards. Among

the international oil companies operating in South Sudan several focus on their legal

responsibilities in their CSR-policy and critique against oil companies are often met

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with references to compliance with laws and regulation. However, when the main

regulation documents, the contracts, are confidential, legal illiteracy is prevalent

among local communities and those who understand them perceive laws as weak,

compliance does not impress those affected by the oil industry.

5.4.3. The importance of ethical responsibilities

The major criticism from the local communities relate to the ethical responsibilities of

the oil companies regarding environmental protection, transparency and paying

compensation. The companies are seen as not taking responsibility for the negative

impact of the oil industry by not cleaning up pollution and not paying compensation.

Thus they fail their negative injunction duties, which according to Simon et al (1972),

and Lantos (2001, p. 16) is the most fundamental of a company’s social

responsibilities.

Compensation is a direct financial loss for the oil companies. Likewise, proper

environmental procedures and cleaning up pollution can be costly. Thus, at least in the

short term, these ethical responsibilities are in conflict with the economic

responsibility of the companies to be profitable. In the short term, the business case

for CSR has therefore not fitted reality in South Sudan. Faced with conflicting

interests companies seem to have prioritised their economic responsibility. This has

caused conflict because, while companies focus on laws and profit, their critics are

more concerned about their moral and the ethical part of their business.

The ethical responsibility to be fair and transparent has not been fulfilled by

companies producing oil in South Sudan. Production figures, contracts and

environmental impact assessments have all been confidential. The producing

companies have also largely neglected to publish reports on their CSR-programs or

the impact of their operations. The lack of transparency has lead to accusations of

corruption and cheating. The Government in Khartoum regulated confidentiality, thus

making it a legal responsibility to not be transparent. However, according to the other

stakeholders this should not trump their ethical responsibility to be transparent.

5.4.4 The importance of philanthropic responsibilities

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Lantos (2002) separate between ethical, strategic and altruistic CSR. Ethical CSR

corresponds with the economic, legal and ethical responsibilities of a company.

Strategic CSR refers to philanthropic responsibility that will in some way also benefit

the company, as opposed to altruistic CSR that refers to philanthropic projects that

only benefit others and not the company (Lantos, 2002).

The companies give quite similar reasons for engaging in community development-

projects. In interview the informant at WNPOC said the goal of the CSR-policy

should be to have “…good relation with local authorities and communities so it can

also do its business in a safely environmental way” (interview). In their donation

policy WNPOC is said to give donations “…in order to discharge part of corporate

social responsibility and to promote goodwill among the host community”

(WNPOC, 2009). This shows that WNPOC are conducting community

development projects to improve relations with communities so that they can

operate their business more effectively. The same attitude is found at Petrodar:

”Petrodar is committed to undertake its social responsibility by developing a healthy,

harmonious and safe working environment in the operation areas that will lead to

create a good neighbourhood with the local communities and will also allow for

smooth operation. At end, this will facilitate achieving the company goals both at

the company and national levels (my emphasis).”24 Believing firmly in the win-win

nature of CSR, Total also state that their CSR-projects are conducted to aid the

business part of their operations, saying, “When we do things, there is a reason”

(interview). The reasons mentioned were increased security and showing the

Government that although they did not produce oil they were doing good, which

would give the government a reason to keep their contract. Judging from these

statements it seems that the oil companies all conduct community development

projects at least partly out of self-interest. While it is sometimes hard to determine if

something is altruistic or strategic CSR, the admittance by the companies to have

strategic reasons for their community development projects show that the companies

have engaged in strategic CSR and avoided altruistic CSR. This indicates that the oil

companies support the neoliberal argument of Lantos (2002) who claim that altruistic

CSR is immoral because it harms shareholders, and should therefore not be part of a

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CSR-policy.

According to ECOS the CSR-failure of the oil companies is because “…the

companies are reacting to a situation. The CSR is not coming from the companies”

(interview). Because the companies have their own interest in mind and not the

interests of the local communities they have not focused on the needs of the local

communities. The result has been community development projects that are not purely

need-based but also based on whether the project would aid operations. Sometimes

this has also lead to benefits for the local population, but as we have seen, critics

argue that the projects are random, too small and half-heartedly done.

Simon et al (1972) argue that companies have a moral responsibility to assist the

communities in which they operate. According to Simon et al (ibid) companies should

also have engaged in altruistic CSR in South Sudan because of the massive needs in

the oil producing areas and the lack of others who are willing and able to assist. This

way of thinking was shared by ECOS who said: “Companies are right to say it is not

their job to create schools and hospitals, but they are making a lot of money and have

a moral obligation to help” (interview). So, while the oil companies see CSR as a

business strategy, critics feel it should be a moral obligation.

On paper Total seem to be willing to also engage in altruistic CSR. Most of Total’s

production is located in emerging economies, which often have significant basic

needs. Total say that their “...commitment is strengthened by the fact that most of our

production is located in emerging economies, which often have significant basic

needs.”3 By saying that their commitment is stronger when the needs are larger they

follow Simon et al (1972) who claim that responsibilities increase based on need.

Total wants to contribute ”Without taking the place of our host countries’

governments”3, but seem to be willing to do more when governments are less capable.

However, in South Sudan they admit that their CSR-efforts have been strategic. The

unwillingness of companies to engage in altruistic CSR and only focusing on strategic

CSR has caused resentment among stakeholders who feel the companies have a moral

obligation to assist them.

To sum up, the discrepancies between the view of the oil companies and the other

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groups can be explained by the companies focusing on areas of CSR that did not

correspond with what the other stakeholders considered the most important part of the

companies’ social responsibility. The companies have focused on their economic,

political, legal and strategic philanthropic responsibilities but have neglected a large

part of their ethical responsibility and refused to engage in what Lantos (2002) calls

altruistic CSR. Whenever there has been a conflict of interest between the interests of

the companies and the interests of the local communities the companies have tended

to protect their own interests. In other words, where ethics and business has collided,

the oil companies have tended to choose business.

6 Explaining social performance

I will now turn to different theories that help explain the social performance of the oil

companies in South Sudan during the CPA-period. First I will analyse the CSR-

practices in the light of institutional theory before I turn to stakeholder theory.

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6.1 A lacking culture of CSR in the Sudanese oil industry

Institutional theory predicts that companies within a defined business environment

will develop similar strategies and practices (Frynas, 2010, p. 16) because they face

similar expectations. The fact that most international oil companies have sophisticated

CSR-policies is in itself a strong indicator that there is a culture for CSR in the oil

industry. However, as shown in chapter 5.1.3-5.1.5, there is no common CSR-policy

among the JOCs in South Sudan. Despite this chapter 5.2.1-5.2.6 shows that their

actions are similar. This indicates that common practices have developed in South

Sudan, although unfortunately the common social practices have been unsatisfactory.

Institutional theory states that companies engage in CSR because there exists a culture

of ethics in an industry or a country that companies conform to. In order to understand

why the companies have failed in their CSR-efforts I have analyzed the CSR-culture

in South Sudan in the given time period. Five important factors have been identified

that influence the CSR-culture in South Sudan: 1. The legacy of the civil war. 2.

Weak legal framework and no will to enforce it. 3. The influence of the Government

of Sudan in the oil industry. 4. The prevalence of national oil companies with a

limited culture on CSR. 5. The organization of the oil industry in JOCs.

6.1.1 The legacy of the civil war

During the civil war the oil producing areas were considered enemy territory by the

regime in Khartoum. Reports show that the oil companies treated Southerners and

Northerners differently during the civil war. Not only were almost exclusively

Northerners employed by the companies, they also handled compensation and CSR-

projects differently so that they benefited Northerners more than Southerners.

Investigation from Human Right Watch about the situation before the CPA says:

“Contrast the treatment that southern Sudanese agro-pastoralists living in oil areas

received to the treatment that GNPOC and the government provided for northern

Sudanese living along the pipeline. The latter had the benefit of an environmental

assessment (including the human environment) and compensation in cash, for

instance, when they were moved to a safe (two kilometers) distance from the pipeline.

Whether or not these payments were adequate, they did at least constitute an attempt

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to mitigate the possible adverse effects of oil development. Southerners, as described

above and in many other reports on the subject, received no environmental

assessment and no compensation. Instead, they were moved by military force off their

land, their houses and communities were destroyed, their grain and livestock stolen,

and some family members lost, killed, or injured” (Human Rights Watch, 2003, p.

521).

My informant “Peter” complained about the same attitude even after the CPA was

signed, sighing: “…in the North social obligations are met. Why are we treated

differently?” (interview). He further claimed that the poor behaviour of the companies

was influenced by the way they got their contracts. Before the CPA local communities

were never consulted and civilians were chased away. Even after the peace this

attitude continued. Companies operating in South Sudan thus learned that they were

not obliged to care about the local population in oil producing areas. Instead of a

culture of ethics, a culture of negligence and abuse was allowed to continue. The

prevalence of Northerners in the oil industry also meant that the ties between the

companies and northern Sudan grew stronger. Not surprisingly northern Sudan

preferred that companies spent resources on their own population instead of on their

enemy in the south. Many in South Sudan have not forgotten this and complain that

they are still not treated the same way as people in the North.

In addition contracts and the “rules of the game” were negotiated during the civil war.

Ethics were not of the primary concern and have left a regulatory system absent of

proper monitoring and unable to secure ethical behaviour by the companies. Evidently

the legacy of the civil war has influenced the culture of CSR in South Sudan

negatively.

6.1.2 Weak legal framework and no will to enforce it

According to Dimaggio and Powell (1983) companies can act similarly due to

coercive isomorphism. Coercive isomorphism results from “…pressures exerted upon

organizations by other organizations upon which they are dependent and by cultural

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expectation in the society within which organizations function” (ibid p. 150). The

legal framework is an important part of this pressure.

As shown the legal framework regulating the oil industry was weak in Sudan during

the CPA60. Still, the government had sufficient laws in place to hold the companies

accountable if they wanted. Despite this there were few, if any instances of the

companies being held legally accountable for breaching laws or regulations. Some

therefore argue that the problem has not been lack of regulation, but lack of

enforcement. While some of the oil companies said that there was no need to enforce

regulation on the oil companies because they worked “proactively”, other

stakeholders felt that there was both a lack of will and capacity to enforce the

regulation. ECOS explained this, saying: “As long as Khartoum was in charge, the

companies knew that Khartoum wouldn’t force them to adhere to regulations”

(interview). My informant “Peter” claimed that the lack of enforcement exacerbated

the negative actions of the companies: “Companies saw that they had protection.

People talked, but nobody listened, this meant that companies did not have to listen”

(interview).

My informant at M.E.M. also complained that the government in Khartoum had not

enforced laws regulating the industry: “You know, it is the regulator on behalf of the

Government, like for example the minister of petroleum and the exploration

petroleum authority to actually enforce strict measures on these companies. I was

meant to believe that maybe because the operation is in the South and it is not in the

North and that’s why that government decided to give a lot of incentives to the oil

companies to do what they like” (interview). The impression of my informant at the

M.E.M. in Juba was one of companies free to act irresponsibly without being held

accountable.

For Petrodar, a company who focuses strongly on its legal responsibilities in its CSR-

policy, the lack of a legal framework has hampered their social performance. The

representative from Petrodar who admitted to former mistakes at the oil conference in

Malakal claimed it was now the responsibility of the Government of South Sudan to

correct these mistakes. He further complained that there was a lack of environmental

60 See chapter 3.6 and 3.6.1

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regulation saying: “When rules and regulations are in place we will cooperate on all

issues, also environmental.” The representative claimed that criticism should be

directed towards Juba or Khartoum and not the oil companies, as they could not do

much without a legal framework.

Several oil companies expressed that demands and complaints from the government

was rare. When asked what the government could do to make CSR work better,

PETRONAS answered that they expected the government to not impose “challenging

bureaucracy” on the companies. PETRONAS argued that there was no need for this,

as the “…the government is clear on what they expect. They don’t ask, but we do it

proactively. They are not making demands” (interview, my emphasis). On the

question on what it was like having to relate to both North and South during the CPA-

period, PETRONAS answered that they have tried to spread their CSR-programs

around the country, but that “there is not much interference from the Government”

(interview). Having seen the flaws in the CSR-practices of the companies, these

statements leave a picture of a Government that was uninterested in holding the

companies accountable. However, there were areas where the Government enforced

regulation. This was related to confidentiality, production reports and payments. The

economic and political responsibility of the companies was monitored and companies

were held accountable. At the same time the Government in Khartoum also

discouraged companies from acting in a transparent way. While it is uncertain

whether all the companies wanted more transparency, the Government in Khartoum

prevented this. Production data was kept confidential, as well as contracts and

environmental impact assessments. While the lack of enforcement means that there

was less formal pressure to create standards in the fields of environmental protection,

compensation and dealing with local communities, there was more pressure to

increase production, profit and limit transparency. Through the process of coercive

isomorphism this has created a culture focused on the economic and political

responsibilities of companies and a culture of limited transparency.

While regulations can be seen as important for the forming of a culture for CSR by

facilitating coercive isomorphism, Michael (2006) argues that a focus on rules and

regulation may be counter to developing ethical behaviour. In the conclusion of an

article on rules and ethics in CSR he writes:

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“Ethical recognition is harder because rules, by nature, discourage

us from making choices; moral reasoning is impeded because rules

fail to stimulate us to higher, post-conventional cognitive levels;

moral resoluteness is weakened as external rules become – and are

seen as – a greater motivator of conduct than our intrinsic values;

and acting ethically is rendered more difficult because following

rules is often simply less complex than considering and applying

ethical principles” (Michael, 2006, p. 32).

The oil industry in South Sudan lends little support to Michael’s

claim that deregulation has positive effects on CSR. In the case of

South Sudan there was plenty of scope for acting ethically and yet

the weak regulatory framework did not spawn “moral resoluteness”.

Lack of rules thus clearly does not cause companies to act ethically

in itself. The situation in South Sudan still confirms Michael’s (2006)

point that following rules is less complex than considering and

applying ethical principles. But weakening of moral resoluteness is

not caused by the laws and regulations, but rather by companies

who focus more on their legal than their ethical responsibilities.

Regardless of the legal framework this will lead to a weakening of

moral resoluteness. Proper laws thus seem important to protect

society from the negative impact of business, not to promote “moral

reasoning” among companies.

The lack of proper regulation and the lack of will to enforce the laws in place did not

condition the social practice of the companies. Rather the companies were free to act

on their social responsibilities. However, the legal situation still shaped the CSR-

activities in South Sudan because it made coercive isomorphism less likely in areas

important to the local communities and the government of South Sudan, while

opening for a culture focused on profit, production and secrecy.

6.1.3 The influence of the Government of Sudan in the oil industry

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As well as being the national government, the regime in Khartoum also controlled

local government in some of the border areas through governors from the ruling party.

During the civil war, the regime proved that it held little concern for the well being of

the people of South Sudan. Even after the signing of the CPA the atmosphere between

president Omar Bashir and the people of South Sudan was tense.

The Government in Khartoum had influence over the oil industry in various ways.

Firstly they controlled the legal framework and were the contractual partner of the oil

companies. As the regulator of the industry they approved what cost the oil companies

could deduct as cost oil. This included expenses for CSR-activities and compensation

payments. According to Total, it was harder to get approval for CSR-projects that

only benefited people in South Sudan (interview). Total further claimed to have

conducted some projects even though they were not approved as deductible expenses,

so this did not prevent the companies from conducting the projects. It does however

show that the Government in Khartoum discouraged initiatives that only benefited

South Sudan. This is a continuation of the arrangements during the civil war, when oil

companies treated Northerners better than Southerners. By not accepting deduction

request, the Government in Khartoum pressured companies to not consider the needs

of Southerners. Through the process of coercive isomorphism a culture emerged

where companies were taught to prioritise the needs of Northerners.

The Sudanese national oil company Sudapet holds shares in all oil blocks in Sudan.

As we have seen, the Government in Khartoum did nothing to encourage measures to

better the situation of people in the oil-affected areas. As a shareholder in all the oil

blocks, Sudapet had the possibility to promote the policy of Khartoum within the

companies. None of the companies I spoke to had any examples of this, but it was a

concern among local Sudanese in Juba.

Companies claimed to be a-political, but were nevertheless closely tied to the

Government in Khartoum. This is not surprising. To maintain in business, oil

companies have to secure contracts and drilling rights. It is therefore natural for them

to try to have good relations with the government who awards them contracts.

However, the influence of the regime in Khartoum over the oil industry in South

Sudan has not helped to create a commitment to CSR. Rather it has led to

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continuation of the different treatment of Southerners and Northerners. By linking the

companies to an abusive regime in Khartoum the companies have been influenced by

a culture of unethical behaviour.

6.1.4 The prevalence of national companies with a limited culture of CSR

While commercial oil companies see it as their fundamental responsibility to be

profitable, national oil companies sometimes have other priorities. Being

compromised of mainly national companies, the oil industry in South Sudan is also a

place where foreign powers exert their foreign policy. Since oil companies deal with a

strategic resource that is fundamental to the growth of their home countries, political

decisions form part of their strategy. This is not to say that commercial oil companies

are not engaged in national strategies, but rather that this is even more evident among

national oil companies. India and China are both countries with a growing energy

demand. As shown in chapter 5.1.1 the national ownership has made the political

responsibility of the national oil companies their main priority.

According to DiMaggio and Powell (1983) another process that creates similar

behaviour among companies is mimetic isomorphism where “…organizations tend to

model themselves after similar organizations in their field that they perceive to be

more legitimate or successful” (DiMaggio & Powell, 1983, p. 152). The most

successful company in Sudan in terms of production and getting contracts is CNPC

followed by PETRONAS. Therefore, the process of mimetic isomorphism implies

that companies in Sudan would copy the way CNPC operates. This study has not

uncovered whether this has happened. However, in the case of South Sudan the

process of mimetic isomorphism does not have the potential to create a positive CSR-

culture, because the most successful company, CNPC, has aligned itself closely with

the regime in Khartoum at the expense of local communities in the oil producing

areas. With the most successful companies in terms of production and contracts being

close allies with the Government in Khartoum and having a weak focus on their

ethical responsibilities any result of mimetic isomorphism would lead to poor CSR-

practices.

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For the national companies, especially CNPC and ONGC, their political responsibility

of securing oil supply has been more important than their ethical responsibilities

towards the local population. The trumping of political concerns over ethical

decisions is evident in Sudan. In 2008 ONGC spokesperson M. Selva Panadin was

faced with concern about ONGC’s operations in Sudan and the human rights

situation. Panadin said the company acknowledged the dilemma, but added:

“However, we are a 74% state-owned company and a purely commercial entity. It is

not really in our hands, we follow the directions given by the Indian government”.61

To secure their contracts and gain new ones they have become an ally of the regime in

Khartoum and withstood from criticism of its actions. China has gone even further by

supplying the regime with arms and supporting it in the UN security counsel. Their

focus on keeping the contracts and securing the oil supply has thus prevented them

from meeting their ethical responsibility.

A third process that causes similarities in the CSR-policy and performance is

normative isomorphism (DiMaggio & Powell, 1983). Normative isomorphism is the

result of professionalization and workers getting shared norms through education and

training institutions. While China, India and Malaysia all have national CSR-

guidelines; their involvement in CSR is fairly recent. Their CSR-policies are

immature and they have limited experience in implementing them. While CSR-

training is now conducted in all major oil companies, this has not been part of the

education of staff except for the last years. The knowledge of CSR is therefore limited

and highly unevenly distributed among companies and employees.

Little is known about the various minor companies that have been involved in the oil

industry in South Sudan. Companies like Ascom, Star Petroleum, Hemla Energy,

White Nile Ltd, and Tri-Ocean Energy all had very limited experience with oil

extraction in Africa when they entered the country. While some of them had CSR-

policies, this does not necessarily lead to a culture of CSR-practices in the field. The

minor companies had no experience in implementing CSR-policies in a context

similar to the one in South Sudan and the potential for normative isomorphism to take

place was therefore more limited.

61 http://www.livemint.com/2008/06/29235254/ONGC8217s-Sudan-deals-come.html 08.05.12

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While we have seen that the regulatory framework was weak, Total expressed that the

issue was not so much a lack of regulation, but a lack of responsible companies,

saying: “You don’t necessarily need to control everything provided you have

companies that have their own standards… In a new country, the main thing would be

to have responsible companies like Exxon and Total. Then you don’t need to

supervise each and every move” (interview). While this may be interpreted as a sign

that Total uses CSR as a deregulatory argument, it also shows that Total considers the

other companies in South Sudan as less responsible. Total has a better track-record in

South Sudan, but it is hard to tell whether they would have behaved differently if they

had discovered oil during the civil war, like the oil producing companies. Still,

evidence suggests that Total has better practices of managing its impact, which

supports the argument that the composition of oil companies operating in South Sudan

is poorly suited to create a culture of good CSR.

6.1.5 The organisation of the oil industry in JOCs.

In South Sudan, all the oil-producing fields are operated by Joint operational

companies (JOCs). The JOCs are organized as separate companies, which means that

they have their own CSR-policy and projects. Total is organised differently and act as

the operating company, though so far not producing, without establishing an

independent JOC. The organization of the oil sector in JOCs means that there are links

between all the companies in the different JOCs, though companies said the

interaction was limited in the field of CSR. The prevalence and continuous

development of sophisticated CSR-policies among the international oil companies

shows that there exists a culture for CSR in the global oil industry. However, as

shown, the CSR-policies of the JOCs are less sophisticated and cover fewer areas,

indicating that this culture is not as strong within South Sudan. A reason for this is

found in the organization of the oil industry in South Sudan. This organization of the

industry in JOCs means that the JOCs have to apply to the shareholders (the

international oil companies) for funding of their CSR-projects. The international oil

companies, as shareholders, have to approve of the budgets, but are not involved in

minor projects. This has made the shareholder companies less engaged in the CSR-

practices of the JOCs.

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When asked what responsibility the company had towards the local population,

PETRONAS said “this is also JOCs responsibility” (interview). On a study of CSR

among the oil companies in South Sudan, Integrity Research also found that:

“Company respondents stated that they felt responsibility for community issues lay

with the JOC. Two respondents felt that their JOC could do more to coordinate CSR

at the national level” (Ives & Buchner, 2011, p. 20). This is consistent with my

findings. WNPOC expressed that shareholders should be more involved in CSR and

that at the moment they were not fully committed to it. When asked what the

Government could do to help CSR work better, WNPOC answered: “[they] should

ask the shareholders to fully commit to this CSR in their oil areas, the oil exploration

area and that’s at least to give more funds on this” (interview). My informant at

WNPOC further blamed the lack of funding on the rules of cost recovery indicating

that the shareholders were reluctant to spend money on CSR unless it was all

recoverable as cost oil. When asked why he thought JOCs felt stronger about CSR

than international oil companies, the informant at WNPOC answered: “Because these

are the people in contact with the environment, with the community, with the

government. Shareholders are there, -they´re just paying money and waiting for their

share” (interview). Even though the international oil companies have more

sophisticated CSR-policies, the impression given is that they distance themselves

from their social responsibility and are reluctant to spend the necessary money on

CSR.

As seen in chapter 5.1.3-5.1.5, the major shareholders seem to have the biggest

influence on the CSR-policy of the JOCs. This way of organizing CSR-work raises

questions on where one should assign responsibility. By separating themselves from

the extraction, the international oil companies, with the exception of Total, have also

tried to separate themselves from the negative injunction duties involved with it.

Instead they only engage in projects that relate to the positive impact of the

companies. Generally speaking, efforts by the international oil companies have

focused on Juba and Khartoum and been of philanthropic nature as well as larger

infrastructure-projects that require extra funding. As shown in chapter 5.4.4 this

should be seen as strategic CSR, as it is generally done for the benefit of the

companies. Roads and infrastructure are also important for the development and has

provided farmers with access to market, education and health services. This has also

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been among the demands of the local communities (ECOS, 2011, p. 16). However,

some projects have also had adverse effect on the local communities with roads

blocking the waterways and causing floods in the rainy season.

This separation between international oil companies and JOCs is artificial, as the

JOCs are full of staff from the different international oil companies. Even in Juba it

can be hard to separate the JOCs from their operating companies.

WNPOC have offices on the second floor of PETRONAS’ office and

GNPOC and CNPC have offices in the same compound. So, while it

seems like responsibility is fragmented in a consortia with more companies than when

the company is operating on its own, other stakeholders do not view it this way. Local

communities in the oil areas generally don’t differentiate between

the JOC and their leading shareholder. In block 5A, Fallet found that

out of 40 informants, “Only a handful knew the name of the

company. One said WNPOC, the others said PETRONAS” (Fallet, 2010,

p. 52). So even though PETRONAS say that operations in the field and

dealing with the local communities are the responsibility of the JOCs,

they are still the ones being held responsible by other stakeholders.

By giving the JOCs responsibility for the implementation of the CSR-policy, the

international oil companies have tried to release themselves from their social

responsibilities. The JOCs, on their hand, are dependent on budgets and approval from

their shareholders. As a result the companies responsible for CSR are dependent on

the cooperation of their shareholders. This has created a situation where the ones with

real decision-making power (the international oil companies) are less involved in the

CSR thus restricting the possibility for a CSR-culture to evolve.

To conclude there is little evidence of any culture of CSR in the Sudanese oil

industry. Rather there has been a culture of lacking ethics causing companies to lower

their standards when operating in the country. I have identified five conditions that

have influenced the CSR-culture in South Sudan in a negative way. While there are

probably more conditions that affect the CSR-culture and not all of the mentioned

conditions influence all companies similarly, the conditions discussed have all

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contributed to create a culture where the ethical responsibilities of companies are

neglected.

6.2 CSR in a world of powerless stakeholders

Institutional theory helps explain why the CSR-performances of the international oil

companies have been relatively similar. However, it does not sufficiently explain why

the companies have fulfilled some responsibilities and neglected others. In order to

make sense of the companies’ priorities I have turned to stakeholder theory.

Stakeholder theory focuses on the role of management and sees the engagement of

business in CSR as a result of external pressure by various stakeholders.

I have used the concepts of Power, Urgency and Legitimacy developed by Mitchel et

al (1997) to classify the different stakeholders and explain their importance for the oil

companies. The analysis reveals that the CSR-activities of the companies were shaped

by stakeholders with power over the companies. The ability of stakeholders to hold

the companies accountable thus strongly influenced the CSR-activities of the oil

industry in South Sudan. The analysis shows that:

1. Local communities lacked power and/or legitimacy

2. Government of South Sudan lacked power and urgency

3. Government in Khartoum had power, legitimacy and sometimes urgency

4. Owners of the oil companies had power, legitimacy and sometimes urgency

6.2.1 Civil Society as demanding, dependent and dangerous stakeholders

“We shout, but nobody is listening.”

“Peter”

As already discussed, it was hard for the local communities to enforce change in the

CSR-activities of the companies because of inadequate legal framework and lack of

enforcement by the authorities. However, stakeholders can also force companies to

change their behaviour through informal pressure.

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In the CPA-period the local communities and oil companies were kept separate62. This

made it hard for the local communities to hold companies accountable for their

actions. According to Nyok (2010) “It is not possible to talk of any

established links between local communities and oil companies.

When there is a chance for community representatives to meet with

the company, only high level personnel from the north are allowed

to meet with them, and no company experts are allowed to meet

with local people” (Nyok, 2010, p. 17). The representatives I talked to from the

local communities in the oil producing states also complained that they had no access

to the oil companies. When local community members approached the companies

with concerns, common responses from the companies were to say: “I am not the

right person to talk to, go to Khartoum!” or “Don’t talk to the company, talk to the

government” (interview “Peter”). While the Government in Juba may have been in

reach for some among the local communities, the Government or the companies’

headquarters in Khartoum were inaccessible.

A common complaint among both NGOs and the local community was that the local

communities were not consulted before companies made decisions. WNPOC claimed

they had a system to assess the needs and wants of the local communities, but this was

limited to decisions about their community development projects and primarily

directed at the state authorities in the oil producing areas (interview). By not dealing

directly with the communities, the companies further blocks the influence of local

communities on the companies’ operations.

The complicated accountability-relations between the different stakeholders became

evident when WNPOC explained how complaints from communities reached the oil

company. Communities had no direct access to the companies. First they had to

approach the local government who took the matter to the central Government of

South Sudan (GOSS). GOSS could not go directly to the companies either, but had to

take the complaint to the corresponding minister in Khartoum who would then

approach the companies (interview WNPOC). In some instances the JOCs would then

62 Total has a different approach than the other companies. They have liaison-officers that handle contact with local communities and encourage people to come and voice their concerns.

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bring on the complaints to their shareholders. Needless to say, the complaints often

got lost or were discarded along the way. We can therefore conclude that the local

communities in general lacked power to influence the companies whether through

legal prosecution or social pressure.

While local communities affected by the oil industry lacked power, they possessed

urgency in the sense that they had desperate needs and claims towards the companies.

Their claims therefore called for immediate attention. However, claims concerning the

philanthropic responsibilities to provide services were not considered legitimate by

the companies who saw them as a result of unrealistic expectations or political

conflict between northern and southern Sudan. They therefore denied the local

communities legitimacy. Other claims of the local communities concerning breach of

laws, pollution or payment of compensation were considered legitimate by companies

who also acknowledged legal and ethical obligations. Thus the local communities

were sometimes seen as possessing legitimacy, while other times not. Mitchel et al

(1997) names stakeholders that possess urgency but lacks power and legitimacy

demanding stakeholders. A demanding stakeholder may be bothersome, but is not

seen as a threat by companies. Hence their claims are not prioritised. Stakeholders

who possess urgency and legitimacy are called dependent stakeholders (ibid). A

dependent stakeholder has legitimate claims, but is dependent on others for the power

to carry out its will.

The international civil society also possessed urgency in their claims towards the oil

companies. However, they had no power to make the companies change their

practices and the Asian oil producing companies did not consider their claims

legitimate. As demanding stakeholders they were not listened to. An exception was

western companies like Total that recognise the role of NGOs and thus grant their

claims legitimacy. By possessing both urgency and legitimacy NGOs became

dependent stakeholders towards Total. As dependent stakeholder NGOs are

dependent on others with power or voluntary action of companies to meet their

claims. At Total, who works closely with NGOs (interview Total) they have

voluntarily taken the view of NGOs into consideration. At Talisman who changed

their CSR-policy and finally left the country before the CPA was signed, NGOs

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depended on the support of the shareholders of the company who possessed power to

enforce change.

When local communities were unable to take claims directly to the companies some

sought alternative ways to make their claims heard. Nyok (2010) has done a study of

business’ responsibility to respect human rights in GNPOC’s operational area and

writes:

“Armed people from the Arab nomads and the southern Sudanese

soldiers carry a large number of fire arms which allows them to

commit offences, knowing that they are out of reach of the law, as

there is no existence of police, or because they are ready to fight

against anybody who opposes their behavior. Random killings and

the looting of belongings are examples of normal incidents that

occur throughout the oil zone, which has resulted in a repeated

practice of oil companies paying nomads when they ask for

compensations” (Nyok, 2010, p. 9).

This situation is confirmed in a wiki-leaked report form the American embassy in

Khartoum from 2009. In it the southern Minister of Energy and Mining is referred to

as saying that local officials “…routinely put up bureaucratic and physical barriers

(e.g. road closures) in disputes with oil companies over compensation”63. This clearly

shows that some civilians, soldiers and officials have all resorted to violence to hold

oil companies accountable.

While Nyok’s description of the situation implies that the claims for

compensation were not considered legitimate by the companies,

Nyok links the aggression towards the companies to the inability to

approach the companies and the CSR-failures concerning

employment: “The large military presence and the tight security

system make it almost impossible for community members to have

access to companies. Thus, the nomads and militias who come from

63 http://www.cablegatesearch.net/cable.php?id=09KHARTOUM763 05.12.12

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nearby towns on the northern border side to seek seasonal

employment, believe there is justification in constructing road

blocks, firing at company vehicles, and killing or abducting company

staff, as a way to show discontent” (ibid p. 10).

According to WNPOC such initiatives were often successful: “… sometime they held

up the facilities. For example, they can take up, they can say okay: this thing is

damaging us and you are not compensating us, or you are delaying the compensation.

They will capture maybe a machine, yeah, a seismic machine or whatever it is. Just a

sort of prisoner. But when they get their money, I think that they will leave it”

(interview).

By taking up arms local officials and local community acquire power. By possessing

both urgency and power these groups become what Mitchel et al (1997) calls

dangerous stakeholders who the companies are more likely to pay attention too. This

happened in South Sudan where companies often met their demands.

The attacks and roadblocks are carried out by certain segments of the population,

most notably Arab nomads and southern militia. Such disturbances to production

inflict a cost on both companies and government and the amounts are substantial: “In

2008, GNPOC reported to GOSS and GONU64 that local disturbances had resulted in

production stoppage at the cost of US$ 10.7 million in the first half of that year, more

than twice the amount GNPOC claimed to spend on community programs in 2010”

(ECOS, 2010, p. 20). Whatever the justification for the attacks, they show that

companies will listen to dangerous stakeholders who are able to put force behind their

demands. Along with the financial cost, the attacks have further strengthened the

security-measures around the oil companies. Ever since oil exploration began during

the civil war, companies have been under the protection of government and private

security forces. This protection, while often necessary to secure oil operations, has

served to alienate the local communities and makes it hard for the local communities

to approach companies. The attacks and roadblocks should be viewed as a last resort

to hold companies accountable. Unfortunately the result has been that only the

concerns of individual groups are met. Other groups have not shown the same, armed 64 Government of National Unity in Khartoum

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aggression against companies and have experienced that they are not listened to.

During the CPA-period local communities had no legal way to hold companies

accountable and therefore possessed little power towards the oil companies. The only

effective way to acquire power was through civil disobedience and armed aggression.

While this was effective it only concerned individual groups. For the remaining

population their access to the companies was further restrained through increased

security.

6.2.2 Government of South Sudan (GOSS) as a discretionary stakeholder

“There is no obligation to listen to South Sudan.”

Interview M.E.M.

Under the CPA, oil companies in South Sudan had to relate to both the Government

of National Unity and the Government of South Sudan (GOSS). While the oil industry

was managed from the north and companies maintained offices in Khartoum all the

way up until independence, this meant that both Government of National Unity and

GOSS possessed legitimacy, as their status meant claims were considered legitimate

by oil companies.

Even if GOSS wanted to hold the companies accountable, they expressed that the

companies were not willing to listen because their contractual agreement was with the

north: “So, the oil companies, of course, these international companies that are

having responsibilities over the document that they have signed, the contract. There is

no obligation to listen to South Sudan” (interview M.E.M.).

According to my informant “Peter” there were instances when the authorities tried to

hold the companies accountable. However, because of missing regulations oil

companies challenged the Ministry back when they complained, saying: “where are

the benchmark that we have broken?” (interview). Without a proper legal framework,

the Ministry was unable to hold the companies accountable.

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This was also experienced in Upper Nile State where the local authorities set up an oil

commission, but this commission was not given access to the oil fields. Upper Nile

Oil Commission complained that when they approached the oil companies, the oil

companies alerted the Ministry who complained to the Upper Nile Oil Commission

and told them to back down65. Without access to the oilfields, local authorities were

unable to monitor and hold companies accountable. Through their alliance with the

Government in Khartoum, companies were protected from scrutiny by local

authorities.

WNPOC describes a situation were GOSS could not go directly to the companies to

present complaints. Instead they had to go to the corresponding minister in Khartoum,

who was in control of the oil companies: “They never complain to the oil … because

at the end these oil company is being controlled by the Government” (interview). This

relation is confirmed by Moro (2009) and Nyok (2010) who claim that the

Government of South Sudan “has no power over the oil companies” (Nyok, 2010, p.

13). Thus, while GOSS possessed the attribute of legitimacy they generally lacked the

attribute of power.

Even so, GOSS possessed power in some areas. During the CPA-period GOSS was

entitled to negotiate new oil contracts in South Sudan. This happened on three

occasions, all with smaller companies with limited experience66. During the

negotiations there are no signs that GOSS enforced stricter rules and regulations on

the companies, but rather that the contractual terms were highly beneficial for the

companies67. International Crisis Group express concern on how these contracts were

negotiated and the effect they could have on the CPA:“It is difficult to tell if the White

Nile fiasco is a case of nascent corruption among a few or a symptom of inefficiency

and lack of governance structures. It is likely a mix of each that at least demonstrates

how the SPLM's lack of transparency can potentially ruin the CPA” (International

Crisis Group, 2005). Whether through ignorance, negligence or abuse the new

65 Personal communication with member of Upper Nile Oil Commission. 66 One contract signed with Ascom of Moldova, one with White Nile Ltd of U.K and one with Star Petroleum of Luxembourg and Hemla of Norway.67 http://www.expansion.com/2010/08/15/empresas/energia/1281898326.html?a=f1a73b33c04e3d1c3e8eab6d1cc5273c&t=1336590930 18.03.12 (CEO of Star Petroleum quoted saying the contractual terms are impossible to improve)

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contracts did not contain any new ways of holding the oil industry accountable. This

indicates that GOSS did not prioritize CSR in dealing with oil companies.

As we have seen, as dependent stakeholders local communities were dependent on

other stakeholders to carry out their will. Since communities were prevented from

talking to the oil companies directly, they often approached the government of South

Sudan (GOSS) to seek assistance. Communication with Juba is hampered by unstable

cell phone and Internet reception, and the long distances and poor infrastructure meant

that Government was more commonly approached on the local level (Nyok, 2010, p.

17). However, communities who approached GOSS with their complaints were often

disappointed.

While the ability of GOSS to hold the companies accountable was restricted some

also felt that GOSS was not doing enough. “Peter” expressed that GOSS had to weigh

the concerns of the communities against the risk of increased tension with the North:

“SPLM did not want to rock the boat and spoil the peace agreement. As a result

people in the area suffered” (interview). GOSS was also dependent on revenue from

the oil operations. My informant at the M.E.M. said that the GOSS had an economic

incentive to not halt the operation of the oil companies, because any cost inflicted on

the companies due to halts in operation would be deducted as cost oil:

“And like I told you if for one reason or the other the South Sudan decided to stop the

oil companies operation it will result into paying standby charges. It will not

immediately pay it, but of course from the profit oil, you know, the company will

calculate and add into to cost oil. So this would be recoverable cost. So there is no

point to stop companies maliciously like that” (interview M.E.M.).

A similar understanding was conveyed by WNPOC who said that GOSS silently

accepted the behaviour of the companies while they waited for independence and the

control of the sector. “Because they knew at the time. And all the time they will have a

different country. Most of them they are: wait, wait, lets agree, lets wait till we have

our source of the information or the facilities” (interview WNPOC). While the

reasons are understandable, this meant that GOSS also lacked the attribute of

urgency.

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Possessing legitimacy, but lacking power and urgency, makes GOSS what Mitchel et

al (1997) calls a discretionary stakeholder. According to Michel et al “there is

absolutely no pressure on managers to engage in an active relationship with such a

stakeholder” (1997, p. 875). While this may have been true in other settings, the oil

companies in Sudan during the CPA-period had to consider that South Sudan would

become a separate state with power towards the companies. At the ministry in Juba

they commented on the relationship between GOSS and the oil companies during the

CPA-period saying:“I can not say it is very bad or it is very good. But the

relationship is like I told you; it is guided by the exploration. They check our

concerns. You know, it is just like… They are very aware of the […] light at the end of

the tunnel. And they don’t want to tarnish their relationship with us as well as with

the North” (interview). Still, based on their actions, the companies do not seem to

have considered GOSS an important stakeholder and the concerns of GOSS have not

been acted upon sufficiently.

6.2.3 Government of National Unity as dominant and definitive stakeholder

“There is not much interference from the government.”

PETRONAS

As we have seen the Government of National Unity in Khartoum possessed

legitimacy towards the oil companies because of their status as the owner of the

contracts, the regulator and the partner of the oil companies. They further possessed

power because they could hold companies accountable. As we have seen they made

few claims regarding the environmental and social part of the oil-operations. In these

fields the Government of National Unity can therefore be said to lack urgency.

However, we have also seen that they have been more concerned with the production

and profitability of the industry (see chapter 6.1.2). In these areas the Government in

Khartoum can therefore be said to possess urgency.

When a stakeholder possesses both legitimacy and power, but lacks urgency Mitchell

et al (1997) calls it a dominant stakeholder. Because a dominant stakeholder has

power to enforce its claims they are a priority for management (ibid). When a

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stakeholder possesses all three attributes Mitchell et al (1997) calls it a definitive

stakeholder, which is the most important for companies. The government in

Khartoum has been both a dominant and a definitive stakeholder to the oil companies

in South Sudan. Their claims, and securing a good relationship with the Government

in Khartoum has therefore been important for the management of the oil companies.

As the Government of National Unity has been mainly concerned with the production

and profitability of the industry, this has lead to a focus on the economic and political

responsibilities of oil companies in South Sudan.

6.2.4 Owners as dominant and definitive stakeholders

The owners of the oil companies possess legitimacy as the rightful owners of the

companies. They further possess power because they decide internal rules and can

sanction unwanted behaviour within the firm. Whether they also possess the attribute

of urgency depends on the area. For instance, Total`s shareholders has shown little

urgency (at least publicly) in pushing for exploration and production, while the

Chinese and Indian Governments have shown more urgency in securing oil supply.

Like the Government in Khartoum, the owners of the oil companies should therefore

also been seen as either dominant or definitive stakeholders. When they have urgency

in their claims they are definitive stakeholders, while they are dominant stakeholders

when they do not possess urgency. Both categories are important for managers

because they have power to bring about the outcomes they desire. As such, their

opinions are of major concern for the oil companies in South Sudan. For the owners

of the oil companies, whether they are shareholders seeking a return on their

investment or state governments with geostrategic interests, their main concern is

production and profit. This has lead the oil companies to focus on their economic and

political responsibilities at the expense of their ethical responsibilities. The exception

of Total can be explained by it being based in a part of the world where bad publicity

is considered more damaging.

Table 3 shows the different groups of stakeholders, their attributes and their

categorization as according to Mitchell et al’s (1997) system of stakeholder

classification.

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Table 3

Categorisation of stakeholders based on attributes

Group Legitimacy Urgency Power Type of stakeholder

Local

communities

No

Yes

No

Yes

Yes

Yes

No

No

Yes

Demanding

Dependent

Dangerous

GOSS Yes No No Discretionary

Government

in Khartoum

Yes

Yes

No

Yes

Yes

Yes

Dominant

Definitive

Owners Yes

Yes

No

Yes

Yes

Yes

Dominant

Definitive

As we have seen the oil companies have been concerned with stakeholders with

power, namely violent communities, the Government in Khartoum and the owners of

the companies. As a result companies have stayed away from what Lantos (2002)

calls altruistic CSR and focus on strategic CSR in their community development

projects. Managers in the South Sudanese oil companies have further focused on their

economic and political responsibilities at the expense of their ethical responsibilities.

Those stakeholders who have been concerned with the ethical responsibilities of the

oil companies have generally not had any power over the companies. Hence their

claims and interests have not been considered important.

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7. Conclusion

This study has examined the case of CSR in the South Sudanese oil industry from

2005-2011. The first research objective addresses how the CSR-policy of the

international oil companies in South Sudan was reflected in their CSR-practice in the

CPA-period, and how the Government and civil society in South Sudan assessed their

actions.

Using the dimensions of Carroll’s CSR-pyramid I have analysed both the CSR-

policies and CSR-practices of the oil companies operating in the CPA-period. Carroll

proposes that CSR consist of four dimensions: economic responsibilities, legal

responsibilities, ethical responsibilities and philanthropic responsibilities. In addition I

introduced the concept of political responsibilities, i.e. the responsibility to secure oil

supply in my analysis. My findings show that all the international oil companies have

sophisticated and broad CSR-policies. This shows that CSR is widely accepted in the

international oil industry. However, among the Joint Operating Companies (JOCs) in

South Sudan, the CSR-policies are more diverse and far less sophisticated. The

Chinese-led JOCs focus strongly on the economic, political and legal responsibilities,

while Malaysian-led WNPOC focus more on their ethical and philanthropic

responsibilities. Even so, apart from a better community development program at

WNPOC, the CSR-practices have been relatively similar among the oil producing

JOCs.

The analysis of the CSR-practices show that oil producing companies have fulfilled

their economic responsibility of being profitable and providing employment, although

North Sudan has benefitted far more than South Sudan. The companies have also

fulfilled their political responsibility to secure oil supply towards both Sudan and their

home nations. All companies have further been involved in community development

programs meeting their philanthropic responsibility, but these have been motivated by

legal requirements in the oil contracts and strategic interests of the oil companies. As

a consequence programs are conducted without consulting the local communities and

often do not meet the needs of the intended recipients. Finally companies have failed

their ethical responsibility by causing widespread pollution, denying compensation for

harm caused and acting in a non-transparent way.

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The oil producing companies believe firmly in the neoliberal argument that their

profit is good for society and portray their CSR-practices in South Sudan as a success.

This view is not shared by the international civil society, communities in the oil

producing areas or the Government of South Sudan. On the contrary they find the

CSR-practices of the oil companies severely lacking both in content and level of

implementation and judge the practices as immoral. The level of discontent among

local communities varies from ignorance to hatred that has resulted in armed attacks

on the oil installations.

The reactions of the international civil society and local communities show that they

consider the ethical responsibility to not cause harm, i.e. their negative injunction

duties, more important than the economic, political, legal or philanthropic

responsibilities of the oil companies. In this regard they support the claim by Simon et

al (1972) that the negative injunction duties is a moral minimum by which persons

and business are bound. While the oil industry treat CSR as a business-strategy, the

local communities are more concerned with the moral aspect of CSR. In their view the

oil companies have a moral obligation both to help them and limit the negative

impacts connected to their core activities.

My second research objective has been to explain the CSR-practice

of the companies by looking at conditions that influence how they

practice CSR. Using institutional theory and stakeholder theory as

starting points I have investigated how the organization of the oil

industry and the ability of various stakeholders to hold the

companies accountable can explain the social performance of the

companies.

My findings show that the CSR-performance in South Sudan can partly be explained

by a lack of a CSR-culture. Between 2005 and 2011 there was no culture of ethics in

the industry that the companies had to comply with to be accepted. In this study I have

identified five conditions that have prevented a CSR-culture from forming in South

Sudan: 1. The legacy of the civil war. 2. A weak legal framework and no will to

enforce it. 3. The influence of the Government of Sudan in the oil industry. 4. The

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prevalence of national oil companies with a limited culture on CSR. 5. The

organization of the oil industry in JOCs. Together, these conditions have created an

atmosphere where harmful activities were tolerated by the industry and the

Government in Khartoum. While local communities and NGOs protested, this was not

where companies turned for approval of their practices. There is further no evidence

of companies imitating competitors that were behaving more ethically, but rather that

the most successful companies were successful despite irresponsible actions. In the

sense that there has been any isomorphism towards a common culture of CSR in

South Sudan, it has been a move in the wrong direction. The analysis shows that if a

certain CSR-culture existed in South Sudan, it was a culture of poor CSR.

This study has further showed that managers in the oil industry are

mainly concerned with the claims of stakeholders who have power

over the oil companies. In South Sudan this has been the

Government in Khartoum, the owners of the oil companies and

violent groups from the local communities. Groups who were unable

to hold companies accountable received far less attention.

The general conclusion in this study is that international oil

companies in South Sudan during the CPA-period treated CSR as a

business strategy and not a moral obligation. As a result they have

focused on areas that they considered being both good for business

and society. In South Sudan this has meant focusing on their

economic and political responsibility to increase production and

profit, as well as aligning themselves with a dubious regime that

were responsible for the oil contracts. This has exacerbated the

negative impact and reduced the positive impact of the oil industry.

The local communities, the international civil society and the

Government of South Sudan have all interpreted CSR as an ethical

obligation. However, the actions of the international oil companies

reveal that for the oil industry, CSR and ethics have been just other

words for business.

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This study has further unveiled mechanisms and causal powers that

shaped the oil industry in South Sudan. First, this study shows that

oppressive regimes encourage companies who have less concern for

how the local communities are treated in their area of operations

and how the oil revenue they produce is spent. As noted by

Humphreys et al (2007) the responsible action by companies, is to not aid oil

production if the revenue does not benefit the population. However, assuming Macro

CSR in this way is not a viable option for the oil industry. While other industries are

free to locate anywhere, oil companies are bound by the location of the resources.

With a large share of the worlds oil reserves located in non-

democratic countries, it is hard for companies to boycott such

countries. The distribution of oil resources thereby lead to a race to

the bottom where the companies willing to cooperate with

oppressive regimes enjoy the most success. This is not to say that

the least responsible oil companies are the most successful. Many

other factors influence the success of a company. It does however

show that oppressive regimes have the causal power to encourage

and reward irresponsible companies.

Another important mechanism is that weak regulation of the oil

industry leads to weak CSR. Contrary to neoliberal arguments, weak

regulation does not cause oil companies to self-regulate or develop

moral resoluteness. Instead weak regulation hinders CSR in two

ways: by obstructing coercive isomorphism, thus hindering a culture

for CSR to develop and by stripping stakeholders of the power to

hold companies legally accountable. As shown in this study, the CSR

practices of oil companies are shaped by powerful stakeholders and

the culture in which they operate. Weak regulation creates a big

scope of action for the oil companies, but when given this scope of

action they no longer consider the claims of the local population as

important because they no longer have the power to hold the

companies accountable. Again, this is not to say that weak

regulation will always lead to weak CSR. A range of other factors,

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such as pressure by external stakeholders, shareholder awareness,

company standards and the awareness among oil workers also

influence the CSR-practices of companies. However, I have shown

that weak regulation affect negatively on the CSR-culture and strips

stakeholders of the power to hold companies accountable, which in

turn weakens CSR. Thus, one must conclude that weak regulation

has the causal power to weaken CSR.

Finally, this study shows that lack of transparency lead to weak CSR.

Since the lack of transparency hinders accountability it also strips

stakeholders of power. Without power to affect the oil companies,

companies will pay less attention to their concerns. A transparent oil

industry facilitates accountability and together transparency and

accountability is important to counter the effects of the resource

curse.

7.1 Implications for policy

The findings in this study may not be surprising. Oil companies are

commercial entities with commercial interest and should be

expected to act accordingly. However, the potentially harmful

nature of the industry and its impact on society causes challenges.

To paraphrase Peter Maass (Maass, 2010, p. 126), the problem is not that the oil

industry is more unethical than other industries, the problem is that it has to be better

because of the environment in which it often operates and the huge negative impacts

of its operations. In South Sudan the oil industry has not been able to live up to this

requirement.

There is currently consensus that two factors are important to overcome the resource

curse: transparency and accountability. In South Sudan the adoption of CSR-policies

by oil companies has lead to neither. In order to limit the negative impact of the oil

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industry and make sure the oil wealth benefits the whole nation other measures are

necessary.

If the oil companies are serious about their claim to care about the environment and

the communities in the vicinity of their operations there are several changes they

should make. First of all, the oil companies should be more concerned with the ethical

responsibilities connected to their core operations, most notable the responsibility to

not cause harm. The oil companies should also be transparent and open about all parts

of their operation to limit the risk of corruption and improve accountability. This

includes making their contracts public and publish production figures and what they

pay the government. And perhaps most importantly, if the companies want to be

considered as responsible, they should stop lobbying for deregulation that hinders

accountability and transparency.

Since it is unlikely that all companies will do this voluntarily, the Government of

South Sudan holds a key position in making sure the industry is transparent and the

companies are held accountable. GOSS should aid transparency by publishing

contracts, production figures and the payments they receive from the oil industry and

require that companies do the same. In the parliament-discussions over the new

petroleum-bill, the controversies revolved around questions of transparency. This

study shows that lack of transparency on both contracts and payments has made it

harder for civil society to hold companies accountable and opened up for corruption

and cheating.

GOSS should also strive to enforce regulation and hold the companies accountable for

past wrongdoings. In order to heal the relationship between the oil companies and

local communities, compensation has to be paid and practices changed. Companies

should also be obliged to listen to the concerns of local communities and act on them.

After independence GOSS possess both legitimacy and power. What is needed now is

urgency. The development of a strong petroleum policy and proper monitoring of the

industry are important steps in the right direction, as it has the potential to create a

culture for good CSR-practices as well as giving local communities and GOSS the

ability to hold companies legally accountable. However, it is futile if the new

Government in South Sudan is unwilling to enforce regulation.

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The international civil society has focused much of their criticism on the oil

companies and the regime in Khartoum. However, without power to influence their

actions, their claims have not been considered important. Western NGOs will

probably be most likely to influence decisions by western oil companies since they are

more vulnerable to bad press at home. Engaging shareholders of western companies

can therefore be a viable way to change their practices. The Asian oil companies are

less likely to pay attention to western NGOs and should therefore be approached

differently. A promising approach would be to work with the affected communities

and lobby the Government in South Sudan to make sure they use their power to

protect the interests of the local population and the environment. NGOs further play

an important role in providing local communities with the tools and knowledge to

supervise the oil industry and claim their rights.

Finally the local communities and civil society in South Sudan should engage in oil

politics and demand better CSR-practices. By organising themselves and present their

claims in unison, they have a better chance of achieving legitimacy in the eyes of the

oil companies and Government. If they receive access to the justice-system and proper

laws are in place they might be able to hold the companies accountable directly.

However, experience from other court-cases around the globe show that companies

invest heavily in winning such trials and often succeed due to their experience and

resources. A better way would be to work through the political system and ally with

the Government who holds more power over the companies. If GOSS does not act on

the claims of local communities they can in principle hold the Government

accountable through elections.

Ideally building of roads, hospitals and schools should be the responsibility of the

Government, not the oil companies. In a democracy the local population can hold the

authorities accountable through election if they fail this responsibility. It is far harder

to hold commercial companies accountable for projects that do not meet their needs.

However, because of the weak South Sudanese state, companies have a moral

obligation to assist the Government in providing the necessary services in the oil

producing areas.

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In the end, the local communities who are negatively affected by the oil operations are

dependent on someone with power over the oil companies to act on their behalf,

namely GOSS or the owners of the oil companies. Oil companies have been

supportive in rhetoric, but abusive in action. Hence, the hopes of the local

communities are pinned to the new Government of South Sudan. Hopefully, they will

be able to live up to these hopes.

7.2 Theoretical implications and suggestions for further research

In the academic context I hope that my findings will be interesting for researchers

who work on why and how companies engage in CSR. My findings confirm both

institutional theory and stakeholder theory and show that these theories are helpful in

explaining why and how oil companies engage in CSR.

This study further demonstrates that CSR in the South Sudanese oil industry is treated

as a business strategy to increase production and profit. My findings are contrary to

the neoliberal argument that the social impact of business is best solved through

market mechanisms. Rather, this study shows that there is not always harmony

between the interests of business and society. Oil companies in South Sudan stress the

business case for CSR, claiming it is in their own interest to manage their social and

environmental impacts properly. This may be true in some instances, but in South

Sudan commercial decisions have meant the companies have neglected what the local

communities consider to be their primary responsibilities. While unethical practices

may be bad for profit in the long run, it is not given that companies will sacrifice

short-term profit for a bigger, but more uncertain profit in the future. The findings

from this study show that voluntary CSR is not a solution to ensure that the oil

industry benefits the local communities. Nor does engagement in voluntary CSR-

initiatives like the UN Global Compact guarantee improved CSR-practices. While

companies should be encouraged to incorporate socially responsible practices, market

mechanisms are not suited to this task. Consumers have little knowledge about where

their petrol comes from and have few abilities to sanction unethical oil companies.

CSR may hence be a good strategy for business that wants to capitalize on ethical

behavior, but it is a poor solution to protect society against the negative impact of

business. It should therefore not be used as an argument against regulation.

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This study further highlights the importance of context in discussing CSR. The social

responsibility of companies varies according to the context. Universal models like

Carroll´s CSR-pyramid are useful for discussion purposes but provide little

information on CSR in different settings. As for the case of the oil industry the

economic responsibility to be profitable should not be considered as the most

fundamental, because the wealth is extracted more than created. My findings further

suggest that the ethical responsibilities to not cause harm, what Simon et al (1972)

calls a moral minimum, should be the most fundamental part of CSR.

Further research is needed to get a fuller picture of CSR in the South Sudanese oil

industry. I agree with those who focus the research more on the impact of business

and less on the rhetoric used when assessing companies, as this may not correspond

with their actions in the field. The new situation following independence provides an

opportunity to study if and how the CSR-strategies and actions of the companies

change when accountability-relations change. Another interesting point would be the

success of the new country to hold companies legally responsible through their new

petroleum law. Further research is also needed to analyze the success of programs set

up by civil society to build relations with companies and hold them accountable.

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