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BP Addresses Macro-level CSR Challenges in Azerbaijan

In Azerbaijan, BP has managed to promote oil revenue transparency and runs investment programmes for community and regional development that could provide models for extractive industries around the world. These are some of the conclusions of an independent study carried out by Fridtjof Nansen Institute researchers.

Oil-rich countries with unstable and undemocratic governments often suffer from the 'resource curse', with huge increase in state income leading to negative social development and often violent conflict. To counter such effects, oil companies are increasingly expected to move the focus of their corporate social responsibility (CSR) activities from the micro-level – such as for instance the building of individual schools or health clinics – towards macro-level contributions to the social and economic development of the regions where they operate. This however makes it necessary to address sensitive issues such as corruption, lack of transparency, oil revenue spending and social inequality, which many companies are reluctant to do, fearing to upset their host governments.

BP is widely regarded as a global leader in the CSR field and the company has, at least rhetorically, acknowledged its obligation to counter the resource curse in countries where it is active. In Azerbaijan, BP is the leading foreign company, operating the country's largest oil and gas fields. With Azerbaijan clearly displaying some of the features of the resource curse, BP sees it as a critical test case for carrying out its wider macro-level CSR agenda. Has BP succeeded in this?

The authors of the study – FNI Senior researchers Lars H. Gulbrandsen and Arild Moe – find that BP has indeed done efforts to address some of the macro-level CSR challenges in Azerbaijan. "BP has done a lot to promote oil revenue transparency in Azerbaijan. Firstly through its unprecedented move to make public the size of its signature bonus payments, and secondly through its active role in getting Azerbaijan to become the first country to join the Tony Blair-initiated Extractive Industries Transparency Initiative," explains Gulbrandsen.

"BP has also managed to design investment programmes for community and regional development that could provide models for extractive industries around the world. These programmes are unique because they unite all the oil companies in the joint ventures headed by BP. By linking the programmes directly and formally to the business consortia and the production sharing agreements (PSAs) under which they operate, BP manages to share the costs and political risks of CSR activities with the other oil companies, and also ensures a more stable and long-term CSR commitment," adds co-author Moe.

All is however not well. There are still few control mechanisms on oil revenue SPENDING in Azerbaijan, and corruption remains rampant. The study also finds that BP's actual engagement with the government on solutions to fundamental development problems falls short of the company's bold rhetoric on many accounts. The company seems careful to avoid upsetting the authorities, even though the government's macroeconomic policies and lack of commitment to develop democratic institutions threaten to undermine all CSR efforts.

In spite of such shortcomings, the authors' conclusion regarding BP's macro-level efforts in Azerbaijan, remains mainly positive.

"We found that BP not only in terms of rhetoric but also with regard to CSR activities goes over and beyond most other oil companies in addressing macro-level issues. The BP case in Azerbaijan shows that it is possible for companies to address macro-level issues aimed at countering the effects of the resource curse. That said, more field research is needed to evaluate the actual impact of such macro-level CSR activities," Gulbrandsen ends.

Claes Lykke Ragner | alfa
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