CORPORATE SOCIAL RESPONSIBILITY PERFORMANCE A STUDY OF SHELL PETROLEUM DEVELOPMENT COMPANY LIMITED (SPDC) IN SELECTED AREAS OF OPERATION (SOKU OIL FIELD)

ABSTRACT

This research proposal attempts to critically appraise the corporate social responsibility performance of Shell Petroleum Development Company (SPDC) Limited in the Soku Oil Field.  The desire to carry out the research came as a result of current developments in the oil industry especially as it relates to conflicts between host communities and oil prospective companies. In order to adequately address the topic both secondary and primary sources of data were used. Furthermore, research questions were advanced. This is followed by research hypotheses.  Also, some questionnaires were distributed to key operators in the area of study.   These questionnaires were retrieved, collated and analysed along with secondary data to arrive at  an acceptable body of  knowledge that will assist in reducing conflict and this, it is hoped will usher in harmony and progress in oil bearing communities.  This will translate to higher profit for the oil companies, higher revenue to the Federal Government and development to the host communities. Our findings reveal that non- performance of social responsibility in the area of operation result to conflicts between oil companies and host communities.   Conflicts lead to low production loss of profit, loss of personnel, loss of time for the oil companies on one hand while the communities also suffer from pollution that result from such conflicts and their citizens.  Host communities feel that they are not adequately compensated for the effect of pollution they suffer from due to negligence and lack of care by the  SPDC. Based on  our  findings we recommend that host communities should be adequately compensated in terms of siting of development programmes, such as health care centre, award of scholarships, employment, sand filling among others.

CHAPTER ONE

INTRODUCTION

1.1    BACKGROUND OF THE STUDY

It is traditionally believed that behind the establishment of any business concern is the profit motive. It is the intention to recoup any fund committed or invested in any business that keeps the enterprenuer to  be  motivated in  entrepreneurial capability.   This traditional view of business orientation was succinctly put by the father of modern economics, Adam Smith, (1776) when he declared that “It is not out of the benevolence of the butcher that we eat meat but out of his desire to make profit”. Kotler (1988) while agreeing with Adam Smith submitted that if enterprenuers (individual or Corporate) are not motivated by the primary motive of making profit, enterprenual skill will die and society may not move forward.

Overtime, management scholars, researchers and some welfare economist have submitted that the primary objective of a business concern need not be profit only but that business should be made to relate with their environment and be seen to

be responsive to compensate environmental exploration. The idea of exploitation by business organisations is fast becoming unpopular as communities are becoming   conscious of their rights.   The idea became more prominent in the late 40s when oil exploration activities led to a great pollution in United State of America.   Management Scholars and Welfare Economists carried out researches, conferences and submitted that while profit is still a central theme of business concern, business organisation need to be socially responsive  to  their  environment to  create  harmony and  thereby making room for more profit and continuity.

Thus, Druker (1956), formally propounded the concept of social responsibility in business.  He argued that any business that is not socially alive to its environment is bound to experience conflict, lower profit, and is not expected to live long.  This explanation stems from the  likely negative reaction of  the host community in which the business organisation operates.  Rostow (1958) while agreeing with Drucker opined that the welfare of the host community should be very important. He

equated the relationship as being “mutual” where one depend on the other.  Rostow’s work on “tax” further gave credence to the issue of social responsibility as he argued for compensation to production process which interfere with community life.

In  the  U.S.A  and  Britain  increased individual  and  societal consciousness had made many companies to include programmes such as “Social Audit”, “Social Action Report”, “Social Balance Sheet”in their annual reports.   Also independent environmental bodies and the media are becoming restive of the negative impacts of the production process on the environment.

The issue of Social Responsibility and Corporate performance in the modern era has even become explosive as enlightenment bring in awareness of the people’s rights in oil producing areas. Shell Petroleum Development Company of Nigeria Limited (SPDC) is by far the biggest oil prospecting and operating company in Nigeria. It activities started in 1937.  Oil Consortium owned by the Royal Dutch Shell and British Petroleum was given in November, 1938 oil Exploration Licence (OEL) covering all of Nigeria.  The outbreak of World War II

necessitated the suspension of prospecting activities which were not resumed until 1946.   Following geological and geophysical tests, Shell British Petroleum (then) in 1957 reduced its concession area from 925,380 square kilometers to only 103,648 square kilometers in the Niger Delta which indicated the greatest promise for Crude Oil find.  According to Amu (1983) after many years of search and an initial investment of over N30 million commercial discovery of petroleum was recorded at Olobiri (in the present Bayelsa State) in

1956.  In 1958, Shell started oil production and exported from Olobiri field at a rate of 5100 barrels per day thereby ushering Nigeria into the international oil stage. Since then, oil has been the predominant source of revenue, energy, and raw material to the entire economy. According to Pearson Scott (1970) “Oil is money, power, energy” without it industrial civilisation and scientific discoveries may never rotate.  Shell Petroleum Development Company (SPDC) since 1956 had discovered several oil fields in the Soku Oil field, Ekulema oil field etc.

Due to the nature of oil exploratory activities, a lot of environmental degration may have been experienced in their areas of operation.  Also with frequent clashes with host communities which threaten their very survival, it is very pertinent to study how Shell Petroleum Development Company (SPDC) is socially responsive to their host communities in terms of air, water, noise and land pollution, human rehabilitation, health care, economic empowerment and post exploratory activities in its areas of operation. The proper handling of the Corporation’s Social responsibility will for a long time determine their profit, reduce conflict and wastages and build good will.

1.2    STATEMENT OF THE PROBLEM

Business organisations are economic agents which have certain objectives to achieve.   Primary among them is profit. Achieving this primary goal will require the provision of an enabling environment for managers to combine money, machine, material and man (factors of production) in the production process efficiently for a given output level.

The Petroleum Industry is no doubt a capital-intensive one. Consequently, it requires a lot of capital and technical know-how which are scarce in our environment.   Foreign private companies which have the know-how and the capital and are ready to commit them expect a reasonable level of return on their investment so as to cover cost of production and serve as an incentive for being in business.

Of  recent, there have been a rapid increase in the public awareness of the consequences of exploratory activities of oil companies especially on environmental degradation.   This has resulted  into  several  demands  on  oil  companies by  oil  bearing communities for compensation in terms of execution of developmental projects. Meeting these “legion” of requests will imply a serious cut on profit.  Inability and or refusal by oil companies to meet these request had often led to serious conflicts resulting in loss of life, property, stoppage of work by the oil company, reduction on profit etc.

The recent Ogoni crisis which led to the stoppage of oil production in the area which as the capacity of providing

350,000 barrels of oil per day, loss of lives and property is a case in point. Also, the face-off in 1995 and 1996 between Sokin Youths and Shell Petroleum Development Company (SPDC) in the Soku oil field is yet another classic example.

The Federal Government in its response to the spats of conflicts between oil companies and their host communities had requested oil companies to be socially responsive while oil bearing communities were asked to be prudient in their request. The concern of the Federal Government is not far fetched because of the role of oil in the Nigerian economy.  According to Lolomari (1980) Crude  Oil account for over 70% of the nation’s revenue.  Panter-Brick (1978) had posited earlier that “Oil is money, power, life and death in Nigeria. It had provided the revenue, raw materials, energy etc needed for the country’s industrial development”.

The frequent clashes of oil companies and their host communities seem to have the capacity of frustrating federal government’s objectives of developing the economy through loss of revenue. This possess a serious problem for both economic

analyst and industry watchers.

Managing the conflicts will imply that the oil companies should be responsive socially to their host communities by designing programmes that would mitigate the adverse impact of their operation on  the  immediate environment.    At  the  same  time,  oil  bearing communities should realise the extent to which they can present requests.  Tackling these conflicting situations is no doubt an easy exercise. it is like the case of the “cat and rat”.

It is therefore our intended objective to adequately harmonise these conflicts by providing meaningful solutions that will be beneficial to all the stake-holders in the conflicts ie federal government, the oil companies and the host communities with a view of proferring lasting solutions that will address the problem of social responsibility performance.

1.3    OBJECTIVE OF THE STUDY

The role of social responsibility in corporate performance cannot be over-emphasized. It is an indisputable fact that from

the problem statement, we recognise that business organisations require an articulated corporate social responsibility in the course of their operation for survival.  In the light of the above, our objective in this research include.

a)To critically examine social responsibility performance by Shell Petroleum Development Company (SPDC) in their area of operation (Soku Oil Fields)

b)To evaluate the usefulness and adequacy of existing methods/techniques of social responsibility performance of Shell Petroleum Development Company in the Soku Oil Field.

c)To identify major shortcomings and assess the impact of non- performance of social responsibility by Shell Petroleum Development Company in their area of operation.

d)To suggest measures aimed at achieving optimal social responsibility performance by Shell Petroleum Development Company in the Soku Oil field that will ensure a smooth and uninterrupted oil operations.

1.4.1          RESEARCH QUESTIONS

In order to properly articulate the study and to address the problems earlier stated, the study will be guided by the following research questions.

a)Is social responsibility necessary in organizational performance?

b)Does  the  performance  of  social  responsibility  by  corporate organisations reduce external conflicts?

c)Is Shell Petroleum Development Company socially responsive to its area of operation?

d)Are the current methods/techniques of social responsive activities carried out by Shell Petroleum Development Company sufficient or needs improvement in the area of operation?

e)Is   corporate   social   responsibility   a   worthwhile   venture   for organizational longevity and improve profit and performance? We  shall  attempt to  provide satisfactory answers to these

questions.

1.4.2          RESEARCH HYPOTHESES

The place of research hypotheses in empirical studies serves as a concrete evidence for the genuiness and usefulness of findings. Consequently, in order to make the study meaningful, the following NULL hypotheses would be advanced to enhance the study.

Ho  1:Social responsibility performance of Shell Petroleum Development Company Limited reduces conflict in their area of operation.

Ho   2:Current  socially responsive activities  are  sufficient  for  host communities.

Ho  3:Non performance of social responsibility does not have any impact on Shell Petroleum Development Company operations.

1.5    SIGNIFICANCE OF THE STUDY

Social responsibility is now assuming greater dimension and prominence in the scheme of affairs in several organisations primarily due to increased awareness and general sensitivity to

the  negative  impact  on  the  host  communities in  the  production process.   In most cases, the question of social responsibility by organisations and communities alike is an unwritten social contract to co-exist in all mutual respect.  It is a case of “Scratch my back and I scratch yours”.  The extent to which organisations carry out pollution and other environmental degradation in the area of operation determines the level of harmony and mutual co-existence of the organisation and the community.

If organisation see the provision of compensatory schemes for host communities as a cut on profitability, then it is likely to be in sensitive and may incure the wrath of the community members. This will set an unhealthy and unconducive environment for business activities.  The overall effect is negative to both the community and the company.

Recent spat of conflicts between oil prospecting companies (including Shell Petroleum Development Company) and their host communities has  led  to  the  closure of  oil  prospecting activities, vandalization of assets, loss of employment, loss of life etc.

Currently over 70% of the country’s revenue comes from oil, Amu (1983). Revenue derived from oil production may be affected if very urgent steps are not taken to find solution to arrest the conflicts. Shell Petroleum Development Company has closed down its operations in the Ogoni areas which produces over 350,000 barrels of oil per day. There is the tendency of the crisis spreading to other oil bearing communities.

From the foregoing, it becomes very timely and significant to carry out a study on the performance of oil companies and their responsibilities in their areas of operation.

1.6    LIMITATION OF THE STUDY

The execution of this research was not without problems.  It is evident to observe without proof that, it has been particularly constrained by unacessibility to some relevant data for analyses as some of the data is classified as “Confidential”.   Also there are problem of time and financial constraints.  These, no doubt may set some limit to the analyses carried out.

It must be noted that the essence of the work is to highlight the institutions critically and also provide a useful appraisal of the corporate social responsibility so that at the end, a sound body of knowledge that would be useful to providing solution for conflict-free operation of Shell Petroleum Development Company in their areas of operation must have been amassed.   Therefore, this study is not conclusive in itself but may serve as a starting point for further research.

1.7    SCOPE AND COVERAGE OF THE STUDY

The study will not be too general but will critically limit itself to the operation of Shell Petroleum Development Company Limited in the selected areas of operation especially the Soku Oil Fields.  The focus of the study therefore, will be that of assessing the corporate social responsibility performance of Shell Petroleum Development Company in the areas of operation even though attempts will be made occasionally to have an overview of Shell Petroleum Development Company’s activities in general.

1.8             ORGANISATION OF THE STUDY

For purpose of clarity, consistency and orderliness, the research work is divided into five chapters. Chapter one discuss the introduction of  the  topic. It  also contain objectives of  the study, research questions, hypotheses, significance of the study, scope and limitations.  In chapter two, we carried out a review of some relevant literatures that are related to the topic under study.  This will broaden our knowledge and also serve as a background for a theoritical framework to enable us grasp the area of the study. Chapter three discusses the basic methodology and research design adopted in carrying out the work.  It also disclosed the data sources, techniques of  data analysis and precautions taken.   In chapter  four,  the  research  findings  were  discussed using  some statistical tools for analysis.   Finally, the work ends with the fifth chapter were  summary and conclusion were drawn.  The chapter ends with some recommendations.

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