The total oil company

SECTION 1: BACKGROUND AND INTRODUCTION

The Total Oil Company (Total) is a French company born in 1924 initially known as Compagnie française des pétroles. In May 2003, after two mergers with PetroFina and Elf Aquitaine, the Group was named Total with a new visual identity and logo. Today, Total is one of France's largest corporations and the world's fifth largest oil refinery. They deal specifically in exploration, production, refining and distribution of oil and gas products. It is the producer of oil and gas in 30 countries with operations in more than 130 countries and exploration and production operations in more than 40 countries (such as Nigeria, Myanmar, Indonesia, Sudan and Canada). Total also engages in base and specialty chemicals . Total has presence in Europe, Africa, North and South America and Asia. (Total website)

The Saudi Arabian Oil Company, originally the California Arabian Standard Oil Company (CASOC) was established in May 1933 when CASOC granted oil concessions in Saudi Arabia. In 1980, essentially all of the companys assets were transferred to the government. In November 1988, the Saudi Arabian Oil Company was created by Royal Decree, and the company formally changed its name to Saudi Aramco. Today, the state-owned oil company of the Kingdom of Saudi Arabia, is an international petroleum enterprise and the tenth largest world leader in exploration and producing, refining, distribution, shipping and marketing of petroleum and gas. Their operations encompass the Kingdom of Saudi Arabia, including territorial waters in the Arabian Gulf and the Red Sea and distributes to other parts of the world. It has affiliates, joint ventures and subsidiaries in China, Egypt, Japan, Malaysia, Netherlands, Republic of Korea, Singapore, United Arab Emirates, United Kingdom and United States(Saudi Aramco website). Most of the oil its refined and distributed to Europe, US and Japan by Exxon Mobil, Chevron and Texaco ( Bruno, Karliner and Brotsky 1999)

Corporate Social Responsibility (CSR) is relatively difficult to define but many attempts have been made, most of which are built around the interrelationship between an organizations activities and its impact on and aspects of economic, environmental and social environments. Actually, Mallen Baker , Founding Director of Business Respect defined it as 'how companies manage the business processes to produce an overall positive impact on society'. Alternatively, the World Business Council for Sustainable Development defined it as 'the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large'

Over the past decade, there has been a controversy as to firstly, whether companies carry out their CSR at all and for those that do, whether the societies actually benefit from these initiatives. There are various schools of thought on this matter, the 'Stakeholders business model' is of the view that CSR is in favour from a business angle. 'There is a direct correlation between corporate social responsibility and financial performance' (Orlitzy,Schmidt and Rynes-2003) . Alternatively, the 'Shareholder business model' states that there is no need for multi-national companies to become more socially aware firstly because it is not part of their core business to do so. An advocate of this view, Milton Friedman (1970) stated; that 'there is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits." Again, the 'Stakeholder development model' states that CSR is good for development and the 'Critical development model' suggests otherwise. This report is aimed at conducting a critical analysis of the CSR of Total Oil company and Saudi Aramco (with emphasis on their oil production sectors only) by firstly identifying their stakeholders in Section 2, their approaches to CSR and initiatives in Section 3, classifying and a critical analysis of their CSR in Section 4 and Section 5 the findings, conclusion and recommendations.

SECTION 2: STAKEHOLDER IDENTIFICATION & RELATIONS

'Stakeholders are persons or groups that have or claim ownership rights or interest in a corporation and its activities, past, present or future (Clarkson 2005 pg 106). Various attempts have been made to classify and determine the potency of the stakeholders of an organization. Mitchell, Agle, and Wood (1997) developed the 'Stakeholder saliency model' which proposed that classes and saliency of stakeholders can be identified by their possession or attributed possession of certain attributes, specifically power (to influence the corporation), legitimacy( of stakeholder relationship with the firm) and urgency of the stakeholders claim on the firm). Alternatively, Kochan and Rubinstein (2000) suggested three criteria to identify the saliency of potential stakeholders specificallythe extent to which they contribute valuable resources to the enterprise,the extent to which they put these resources at riskand the power they have over the enterprise.

In view of the nature of the oil exploration business of Total and Saudi Aramco, this report adopts the Kochan and Rubinstein (2000) typology because oil extraction is from natural resources and the production, refining and distribution activities have effects on and are affected mostly by the environments and communities in which they operate. As a result, this report will focus on the environment and communities as their most salient (definitive) stakeholders and consider employees and government as relevant (latent) stakeholders.

Section 2.1 Communities and Environment

In today's rigorous business environment, companies have to acknowledge and manage the environmental and societal impacts of their operations and actively participate in the development of their host communities. "The Corporation should, therefore, not ignore the community's contribution... A positive relationship with the community will also provide the company with a positive reputation. However, to attain this positive standing in the community, the company must demonstrate it provides benefits such as wealth creation, employment growth, and other community support.' (De George 1990 as cited in Kuratko, Hornsby and Goldby 2007)

Oil companies such as Saudi Aramco and Total have to pay particular attention to the environments and communities in which they operate because their operations depend on their resources. They, therefore, have to ensure that they engage in environmentally friendly practices, conserve these environments, develop good relations with communities and aid in development for sustainability.

Saudi Aramco commits tremendous effort and resources to service the communities in which it operates, as well as Saudi Arabia as a whole. On the environmental front, the company closely monitors the effects of its operations on the ecological system and employs the latest environmental control technology. It also engages in recycling campaigns, create environmental awareness excetera. It has developed many schools and educational schemes and contributed to community programs and campaigns in the Kingdom. Finally, they utilize the services and purchase products of local manufacturers and vendors.(Saudi Aramco website)

Totals goal is to meet growing energy demand while lessening the impact of energy use on climate change. In that regard, they are developing new and alternative energies, and enhancing their own and customer energy efficiency by supporting Research and Development (R &D) programs. They contribute to the development of the communities by reserving jobs for host country nationals, providing training, transferring technology and expertise, and deploying community support initiatives. Since 2008, the Total Foundation has managed its community support and health, culture and environmental initiatives.( Total website)

Section 2.2 Employees

A company's employees are their greatest assets and its success is greatly affected by the attitude and conduct of their employees.Saudi Aramco is the single largest employer in the Kingdom aside from the government (employs more than 54,000 people from 66 different countries). Their wages and patronization of the local markets helps fuel the regional and national economy.'(Saudi Aramco website) They ensure that employees are constantly trained and health and safety at the workplace is a top priority. Also, Total employs over 97,000 employees across their 130 country network under good working conditions, train employees and also develops employee relations through dialogue between management and employees and are therefore able to take into account the diversity of local environments and address their issues.(Total website)

Section 2.3 Governments

Government of host countries (especially oil mine sites) are the most powerful and positive force for multinationals such as Saudi Aramco and Total as they will have to satisfy and abide by all their regulatory requirements to continue their operations. The Extractive Industries Transparency Initiative (EITI) was set up in 2002 and aims to strengthen the transparency of transactions between governments and companies in the oil, gas and mining industries in order to improve governance in resource-rich

countries. Total has been a committed member of this initiative since its inception (Total website). However, Saudi Aramco being, government owned, is fully controlled by the government (Saudi Aramco website)

SECTION 3: CSR APPROACHES & INITIATIVES

Satisfying the 'definitive' stakeholders as in the section above is vital for the sustainability of the companies. This section of the report aims to identify the specific approaches and initiatives the companies specifically in respect to the environment and the community

Section 3.1 Total CSR Approaches & Initiatives

For Total, 'being a responsible corporate citizen means demonstrating a professional discipline and unbending ethical conduct, upholding human rights and continuously striving to improve transparency, performance and impact management and reduction. These requirements are guided by listening to and dialoguing with all of their partners and host countries to meet their expectations.' (Total website). Its CSR focuses on education, public health, environment, safety, diversity and community development tailored to fit the local environment.

For the purpose of this report, table 3.1 below depicts Total's CSR approaches and instances of initiatives in respect to community and environment.

Section 3.2 Saudi Aramco's CSR Approaches & Initiatives

Saudi Aramco commits tremendous effort and resources to service the communities in which it operates, as well as Saudi Arabia as a whole. Concern for the environment and community are basic responsibilities and a long-standing company commitment. In this regard, all of their initiatives are centered in Saudi Arabia. Table 3.2 below depicts their CSR Approach and some initiatives:

Section 3.3 Differences between CSR Approaches and Initiatives

The main difference identified between Total and Saudi Aramco's CSR is in the scope. Total operates in oil mines in different parts of the world such as Burma, Indonesia, Myanmar and so on. Their CSR initiatives are therefore, somewhat decentralized in these host countries and depend on the needs of each country. Alternatively, Saudi Aramco operates in oil mines in Saudi Arabia and as such their initiatives are concentrated in that region.'Unlike the European corporate model which puts the focus upon "giving something back" in return for co-operation (a sound commercial investment), the Aramco model relies upon the stewardship, teamwork, and values inherent in its working culture to promote benefits for all.'(International Dialogue Foundation 2004)

SECTION 4: CLASSIFICATION OF APPROACHES

In view of table 3.1 and 3.2 above, the companies appear to have various CSR approaches. The main issue, however, is whether the communities actually benefit from these initiatives? With the various CSR viewpoints outlined in Section 2 of this report in mind, this section will make use of the 'Heuristic device' initially introduced by Ponte et al (2009) which classifies CSR for development into four different categories specifically 'engaged CSR ' (activities that have a direct impact on company operations),'disengaged CSR' (corporate philanthropy or charity), 'Proximate CSR'( takes place within the corporation itself and the impact on the environment in the location of its operations) and 'Distant CSR' )activities that address problems of communities where the company, its suppliers or stakeholders are not present.) and consequently analyse the approaches. Table 4.1 below shows the classification using this typology.

Table 4.1 illustrates that all the approaches for both companies are proximate because they are related to their operations and host communities. However, both companies have a mix of engaged and disengaged initiatives as some initiatives are directly targeted to their operations (engaged) and others not affecting their operations but for the benefit of society (disengaged).

4.1 ANALYSIS OF APPROACHES

A critical analysis of the two companies CSR initiatives reveals that their initiatives are ultimately 'Good for the business and bad for the society'. The reason for this point of view is that, these initiatives are good for the business in the sense that it provides them with economic competitiveness, sustainability , assist reputation and build employment skills( Balabanis et al , 1998) and bad for the society because they are being used to distract the public from harmful effects of their core operations. Oil exploration and refining is in itself hazardous to the environment and people living in its surrounding areas. Obviously, Total has made efforts to be socially responsible in its host countries and Saudi Aramco has done likewise. The controversy, however, is are their operations doing the communities more harm than good? Evidence from Table 4.1 reveals that Total has been accused of using an unsafe ship 'The Erika' to ship oil in 1999, resulting in a massive oil spill in Europe, polluting the sea and killing a large number of sea birds. Saudi Aramco has also been accused of being the largest culprit accounting for 7% of global emissions (Bruno, Karliner and Brotsky 1999). Furthermore, due to the fact that it is a state owned company(by the Royal family) the distribution of the wealth in the country is unequal as the royals own 55% of the stock market (The Economist 2006), the private sector is limited and therefore the average standard of living of the Saudi is relatively low - 'For all the kingdom's wealth, even the oil windfall of the past few years has raised its income per person only from the level of Mexico to that of Argentina.' (Economist 2006). These instances, just to mention a few, are some of the negative effects of their operations on the communities regardless of their initiatives.

SECTION 5: CONCLUSION & RECOMMENDATIONS

On the basis of evidence provided, both Total and Saudi Aramco are indeed engaging in a reasonable amount of CSR that foster development to an extent but inadequate because of negative press. For instance Total ranked 27 in the Ethical awards (as in table 4.1) and Saudi Aramco commended by government( Saudi Aramco.com), which is good for their business reputations. Nevertheless, these initiatives are used to conceal the hazardous effects to the environment and members of the communities in which they operate. In conclusion, despite their efforts, their CSR initiatives are ultimately 'Good for the business and Bad for the society'

The major future CSR challenges for both companies are to develop more environmentally friendly methods and new energy solutions, combating climate change, transparency and more active participation in the development of the host communities to improve the standard of living in these communities. With regards to Saudi Aramco's monarchy 'Mr Qasim suggests that the Kingdom's best chance for future stability lies with shifting assets from the state to the public to change the underlying imbalance of power. As stakeholders rather than dependents, ordinary Saudis would be wary of taking risks, but would also be better placed to bargain for a stronger political voice.' (The Economist 2006). If they are able to rise up to these challenges, their business success will be guaranteed

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