Bp_Csr

CHAPTER 1 1.0 - INTRODUCTION 1.1 - Introduction Trade and commerce have evolved rapidly over the last fifty years. The forces of globalisation and free trade have dramatically changed the face of today’s corporate world. Issues of corporate accountability and business ethics are escalating in importance, not only for environmental and human rights campaigners but also for corporate managers, who recognise the growing correlation between responsible business operations and profitability and growth. Corporations are gaining an escalating influence in business and indeed world affairs, therefore their actions can have serious effects on many people, both inside and outside organisations. Issues of Corporate Social Responsibility, international business operations, environmental impacts and sustainability are areas in which corporations and Non-Governmental Organisations are showing increasing attention. These issues can be seen especially clearly within the oil industry, where there is the increasing realisation of the importance of stakeholder interest and environmental damage. This dissertation will detail BP and its policies on corporate responsibility and business ethics with regards to the construction and operation of its 1,737 km BakuTbilisi-Ceyhan (BTC) pipeline, which runs through the countries of Azerbaijan, Turkey and Georgia. The BTC pipeline will take oil from the Caspian Sea to the Mediterranean instead of using tanker transport along the Black Sea and the highly congested Bosporus, and will account for 20% of BP’s production growth until 2010. 1.2 - Aims and Objectives This dissertation will attempt to analyse BP’s ethical and moral principles, its corporate social responsibilities and the implications the company’s actions have had 1 on the stakeholders to the BTC pipeline. A detailed analysis of business ethics theory will be conducted in order to carry out an effective comparison between BP’s actions and theory written in the area. The stakeholders to the BTC pipeline will be identified and discussed with reference to their views and standings with regards to the pipeline and how BP’s corporate actions have implicated them. The identified stakeholder views, particularly those of BP and Non-Governmental Organisations such as Friends of the Earth will be compared and contrasted in order to establish a balanced picture of the discussed activities. An investigation into BP’s views and policies on the BTC project and the negative implications it has on the environment and surrounding communities will also be discussed. Chapter 2 of this dissertation will give an overall explanation of BP and the BTC pipeline, detailing the controversy associated with the project. This chapter attempts to provide the reader with adequate information to better understand the literature and analysis which will follow in chapters 3 and 5 respectively. In chapter 6, conclusions will be drawn based from the research findings detailed in the foregoing analysis. 1.3 - Research Methodology Information has been collected via primary and secondary research methods. Interviews conducted with BP were attempting to establish a meaningful insight on their ethical position regarding the BTC project. In order to maintain an air of objectivity, an interview was also conducted with one of the opposing figures to the BTC pipeline, the NGO, Friends of the Earth. Other data sources such as newspapers, journal articles, academic literature, company reports and magazines and credible websites have also been used. A detailed account of the research methodology used in this dissertation and the limitations encountered will be covered in chapter 4. 2 1.4 - Limitations The limitations encountered when researching and writing this dissertation included issues such as access to information, short time scales, dated theory, biased information and the difficultly in coming to meaningful conclusions. Although there was sufficient information on this topic from secondary sources, it was thought that performing primary research in the form of interviews would provide a more insightful look into the case. Problems were encountered here due to the sensitivity of the topic and because of this BP’s answers often lacked detail or relevance. It also had to be assumed that any information given from BP themselves would be very biased. This problem was overcome by interviewing Friends of the Earth, which balanced the overall viewpoint of the case. Accessing the appropriate professionals in these organisations was also a difficulty encountered when conducting primary research. The short time scale over which this dissertation was conducted has limited the amount of information, analysis and detail presented. Had more time been available, a better, more detailed understanding and analysis of the case could have been achieved, and therefore, more in-depth conclusions and recommendations reached. 1.5 – Summary The chapters which follow aim to examine in detail the ethical activities of BP with regards to the BTC pipeline and how their actions have affected various stakeholder groups. The extent to which this has been effectively carried out has been dependent on research methods, analysis on ethical literature and the ability to overcome problems such as access to information, short time scale and biased information etc. The conclusions reached in the final chapter encompass all aspects of the dissertation and assess the issues raised with reference to themes and theory. BP’s business activities and ethical policies have been scrutinised and compared to academic theory in order to reach meaningful conclusions. 3 CHAPTER 2 2.0 – CONTEXT AND BACKGROUND 2.1 - Background of Oil Industry World oil consumption rose by about 1.2 million barrels per day in 2005, after an increase of 2.6 million barrels per day in 2004. According to the International Energy Outlook 2006 (IEO2006), growth in world oil demand averages 1.4 percent per year over the 2003 to 2030 period, as the world continues to experience strong economic growth. Because oil is interchangeable and traded in world commodities markets, there is much uncertainty associated with projections of future patterns of oil trade; however, anticipated changes in the world’s oil trading patterns, particularly the shifting regional dependence of importing regions on producing regions, may have important geopolitical ramifications. (http://www.eia.doe.gov/oiaf/ieo/world.html accessed 01/10/06) 2.2 - BP BP is an international company, with operations in over 70 countries. Its key strengths are in oil and gas exploration and production; the refining, marketing and supply of petroleum products; and the manufacturing and marketing of chemicals. It supports all its businesses with high quality research and technology. The company also have a growing presence in gas and power and in solar power generation (http://www.bp.com/sectiongenericarticle.do'categoryId=14&contentId=2002063 accessed 16/10/06) BP is organised into three business segments, twenty two group functions and four regions. Their three operating business segments are Exploration and Production, which includes oil and natural gas exploration; Development and Production, together with related pipeline transportation and processing activities; and Refining and 4 Marketing, including oil supply and trading, and the manufacture and marketing of petroleum products. BP makes five-year and annual plans to execute their strategy in order to achieve three targets: • To underpin growth by a focus on performance, particularly on returns, investing at a rate appropriate for long-term growth • • To increase the dividend per share in light of their policy. To return to shareholders all free cash flows in excess of investment and dividend needs. (BP Annual Review, 2005) BP takes great steps to address issues of Corporate Social Responsibility and Sustainability and Development, especially in the areas of climate change, corporate governance, health and safety, work in developing countries and protection of the environment. “At the core of BP is an unshakeable commitment to integrity, honest dealing, treating everyone with respect and dignity, striving for mutual advantage and contributing to human progress.” (BP, Sustainability Report 2005, page 12) In relation to sustainable energy BP has launched a low-carbon energy business, BP Alternative Energy, aiming to invest $8 billion over 10 years in generating and marketing cleaner power from solar, wind, hydrogen and gas sources. The company has also developed a wide range of cleaner energy technologies and products, including work on capturing and storing CO2; and research projects in London and Beijing looking at future patterns of energy use in cities. (BP, Sustainability Report, 2005) 5 BP supports the Extractive Industries Transparency Initiative (EITI), which promotes greater disclosure of revenue flows from extractive industries to governments. Azerbaijan is one of the leading countries in implementing EITI, being one of the main countries through which BP’s Bajku-Tbilisi-Ceyhan (BTC) pipeline runs through. (BP Sustainability Report, 2005) 2.3 - The BTC Pipeline The Baku-Tbilisi-Ceyhan (BTC) pipeline opened officially on the 13th July 2006 and signifies the most important key to-date in unlocking the energy riches of the Caspian and bringing them to global markets. (Platts, Horizon Magazine, August 2006) The 1,737 km-long pipeline will have the capacity of 1 million barrels a day, with a cost of $3.2 per barrel. (http://news.bbc.co.uk/1/hi/world/europe/2263611.stm accessed on 06.08.06) The opening of the BTC pipeline has the potential to double BP’s production in Azerbaijan during 2006, and to account for 20% of the company’s production growth until 2010. (BP, Annual Review, 2005) BP’s Baku-Tbilisi-Ceyhan (BTC) pipeline will take oil from the Caspian Sea to the Mediterranean, through Azerbaijan, Turkey and Georgia, instead of using tanker transport along the Black Sea and the highly congested Bosporus. It will prevent 350 tanker cargos per year from shipping through this narrow waterway. (www.hydrocarbons-technology.com access 16/10/06) BTC Pipeline Route Map – (http://www.offshore.no/admin/ewebeditpro2/upload/btc_pipeline_map.gif) 6 The pipeline has been designed with an initial working life of approximately 40 years. It is protected against corrosion for its entire length and since security has been emphasised so seriously it will be subject to constant safety surveillance, patrols and CCTV observation in case of terrorist attack. The BTC pipeline project cost is an estimated $3.7 billion, with BP as operator leading a consortium including Chevron, AmeraddaHess, ConocoPhillips, Turkish Petroleum, Unocal, State Oil Company of Azerbaijan – Socar, among others. It has obtained the backing of a number of financial institutions, including public institutions like the International Finance Corporation (IFC), the European Bank of Reconstruction & Development (EBRD), and the Export Credit Guarantee Department (ECGD). According to Bikenm Ekberzade, reporting in BP’s global publication Horizon magazine, BP and its partners in the consortium that built and will operate the pipeline have delivered a multi-billion dollar facility that will meet 25% of new global oil demand over the next few years and establish the first industrial link between two seas – the Caspian and the Mediterranean. The pipeline is seen as a project of ‘geostrategic significance’ loosening Russia’s long-standing grip over oil exports from former Soviet republics, bypassing US foe Iran and easing western reliance on Middle East crude supplies. (Agence France Presse, in Horizon Magazine, August 2006) 2.4 - Controversy Surrounding the BTC Pipeline The BTC project has been subject to controversy even at its inception ten years ago. It has been an extraordinary construction challenge for BP and its contractors. Rising 2,800 metres in the Caucasus Mountains, pipe laying has encountered many logistical and political complications as the route passes through largely unmapped territory and a national park, provoking vehement protests from environmental groups such as Friends of the Earth and Green Peace. (Mortished, 2006) 7 When talking about the impacts of the pipeline, BP generally only raises ‘technical’ problems that it claims can be reduced through the company’s policies, techniques and technologies. At least some disturbance, however, is an unavoidable part of such a large project. The Baku-Ceyhan Campaign, who work to raise public awareness of the social problems, human rights abuse and environmental damage that are being caused by the Baku-Tbilisi-Ceyhan oil pipeline, state that the thousands of men and machines in the region have and will inevitably cause physical damage to roads, water systems and land, and social and economic damage to communities surrounding the BTC perimeter. The main concerns which the BTC pipeline campaigners have identified are the exacerbation of conflict and human rights violations, environmental damage, the operational safety of the pipeline whilst under construction and whilst active, and the issue of colonialism by BP. The Environmental Impact Assessment for the BTC pipeline considers the risk of a spill in the Gulf of Iskenderun. The risk assessment makes use of a number of scenarios for oil release. The maximum accidental release scenario considered is 10,000 tonnes but the facility is anticipated to be for 80,000 - 300,000 tonne tankers. Mediterranean monk seals are particular at risk in the shipping lanes, which will also cross sensitive turtle sites. The impacts of illegal tank washing, which is likely to take place offshore, have also not been considered. Oil spills are a very real worry for the BTC campaigners, as past events can illustrate. For example, in Alaska on the night of 24th of March 1989, the Exxon Valdez oil tanker ran aground spilling 258,000 barrels of crude oil and creating one the of worlds worst environmental disasters. (Source 06/08/06) – http://www.bakuceyhan.org.uk/more_info/bp_pipeline.htm accessed Another serious environmental concern is to do with the fact that Turkey lies in a major earthquake zone, and one of the most serious fault lines in Turkey runs directly from Sivas through Erzincan to Erzurum: exactly the route of the Baku-TbilisiCeyhan pipeline. At a conservative estimate (looking just at areas that are right on the 8 route and ignoring the very frequent earthquakes in places like Varto, Bingöl and Muş which are close enough to cause serious damage), there have been at least 17 major earthquakes since 1924 along the pipeline route. The BTC pipeline system will be in place for 40 years – making it almost inevitable that a major earthquake would seriously affect it at some point in its lifetime. (http://www.bakuceyhan.org.uk/more_info/.htm – accessed 10/10/06) The effects the pipeline and the oil it will transport throughout the world has implications on climate change also. Once in full production, the Baku-Tbilisi- Ceyhan (BTC) pipeline will transport 365 million barrels of oil. When burnt, this will produce 160 million tonnes of Carbon Dioxide (CO2) each year. This is: • • • equal to the pollution from every power station in the UK (163 million tonnes CO2) far more than the pollution from every car, truck, bus and train in the UK (125 million tonnes CO2) twice as much as heating every house in the UK (89 million tonnes CO2). The climate impact of this project will dwarf the combined impacts of all UK initiatives to combat climate change. The emissions from the oil and gas coming through the pipelines would be more than twice the emissions saved through the UK's 12.5% reduction under the Kyoto Protocol (73,000 tonnes CO2) and ten times more than the emissions saved through the UK's target of meeting 10% of electricity demand from renewable resources (wind, sun, water power) by 2010. (http://www.bakuceyhan.org.uk/more_info/climatechange.htm accessed 10/10/06) Another criticism of the BTC pipeline is that it passes through or near seven different conflict zones which campaigners say will encourage long-term political instability due to state-led militarization imposed to secure the pipeline system. It is argued that BP will become associated with human rights violations carried out by its associates and allies to protect the system. 9 Against this background of persistent conflict, Azerbaijan, Georgia and Turkey are heavily and increasingly militarised. Due to the unresolved conflict with Armenia, Azerbaijan still keeps strong armed forces, consuming an important share of its budget. Chinese and Russian support of Armenia has led Azerbaijan to seek military co-operation with the West and Islamic countries. In January 2003, the Oil and Gas Journal reported that Azerbaijan's Defence Minister Safar Abiyev told British government officials that Armenia's "aggressive policy" posed an "actual threat" to security in the region, including the BTC pipeline. Arms and hardware accumulated by Armenia pose a serious threat to the BTC pipeline that should be eliminated. Turkey has a substantial military capacity, military expenditure accounting for an enormous 5.6% of GDP. Many soldiers are deployed in Kurdish regions. As recently as May 2002, Turkish security forces, backed by warplanes and attack helicopters, attacked the Kurdish Tunceli region, which the BTC pipeline skirts. From 1987 until summer 2002, Tunceli remained under State of Emergency rule, which allowed regional governors to exercise quasi-martial law powers. Since the terrorist attacks in New York on 11th September 2001, Georgia and Azerbaijan have significantly increased their cooperation with the USA. Both countries immediately provided the USA with rights to fly over their territories for military operations. In March 2002, the US Defense Department pledged $4.4 million in military aid to Azerbaijan with the reported aims of countering terrorism, promoting stability in the Caucasus, and developing trade and transport corridors. In developing countries, the construction and operation of pipelines have often triggered further tensions, militarisation and conflicts on a local scale. Because of the international nature of the Baku-Tbilisi-Ceyhan project, potential conflicts might develop also on a regional scale, thus undermining the already weak stability of the region. (http://www.bakuceyhan.org.uk/ accessed 18/10/06) One might have expected that the legal basis for a private company’s development project in foreign countries would be a set of contracts. But not in the case of the 10 Baku-Tbilisi-Ceyhan pipeline. BP wanted something far more powerful in this case, and instead went for an international treaty. The project is governed by an InterGovernmental Agreement (IGA) between the governments of Azerbaijan, Georgia and Turkey, and by an individual Host Government Agreement (HGA) between each of the three governments and the BP-led consortium. These agreements have largely exempted BP and its partners from any laws in the three countries – present or future – which conflict with the company’s project plans. The agreements allow BP to demand compensation from the governments should any law (including environmental, social or human rights law) make the pipeline less profitable. The agreements have for these reasons been described by nongovernmental organisations (NGOS) as "colonialist". (http://www.bakuceyhan.org.uk.htm accessed 18/10/06) Friends of the Earth say the key issue over the BTC project is corporate accountability: "BP has made claims to be very socially responsible, yet questions over the pipeline's impacts on local communities still arise. That's why we're talking about corporate accountability in this case, making them legally answerable for their actions rather than being voluntarily responsible," says Friends of the Earth campaigner, Hannah Griffiths. (Gavin, 2003) The group accuses BP and the other BTC consortium members of signing agreements with Azerbaijan, Georgia and Turkey that exempt it from laws including environmental and labour that may affect its profits. It also says the needs of BP, such as its demand for water, will be put above those of local communities. Those communities may fail to benefit from the pipelines' profits, in part through corruption. (Gavin, 2003) Despite the numerous criticisms the BTC pipeline has received, it is argued that the project will bring several advantages to Turkey, Azerbaijan and Georgia. The three countries stand to earn substantial revenue through transit fees and royalties. BP says the major oil and gas fields and pipelines will provide revenues of more than $150bn 11 to Azerbaijan, Georgia and Turkey between 2005 and 2024. The European Bank for Reconstruction and Development has forecast that Azerbaijan's economy will grow by more than one fifth this year. Turkey says the pipeline could be the "Silk Road of the 21st century", and BP describes the Caspian as one of its major new profit centres. (http://www.guardian.co.uk/oil/story/0,,1492872,00.html accessed 16/10/06) The Georgian government sees the project as a necessity. Since the country gained independence from the Soviet Union in 1991, the economy collapsed, corruption and murder increased leaving the country fragmented and unsteady. Although the pipeline will not bring much money into Georgia in the short-term, it will encourage western investment and show to the rest of the world that Georgia is open for business. Georgia also believes that the pipeline has strategic benefits. Alexander Rondeli, head of the Georgian Foundation for Strategic and International Studies has said the pipeline is “a serious instrument of becoming less dependent on Russia.” (http://www.opendemocracy.net/democracy-caucasus/pipeline_2763.jsp) Keenly aware of the controversy the pipeline would cause, BP commissioned an Environmental and Social Impact Assessment (ESIA) for the BTC pipelines. A draft report issued last year refuted NGOs' suggestions that local communities would not see the benefits. It said Azerbaijan will derive substantial economic benefit through the generation of royalty and tax revenues, while Georgia and Turkey will derive important financial gains through transit fees. "These revenues, coupled with the indirect benefits associated with the purchase of local goods and services, employment and specific programmes designed to encourage the development of small and medium-sized enterprises, have the potential to contribute to economic stability and sustainable development within each country, as well as promote regional integration and interdependence." the BTC report said. (Gavin, 2003) According to BP’s global publication, Horizon, 22,000 people worked on the construction of the pipeline and hundreds of villages along the route benefited from 12 BP’s pledge to use around 70% local labour in the contractor’s workforce. BP claims that whilst this may have impacted productivity, it has also left a legacy of enhanced skills for some severely impoverished communities. In response to the local communities being affected by the pipeline BP made hundreds of commitments both to mitigate the impacts of the pipeline and to invest in local communities. The benefits included solar-powered computer rooms in schools to improved roads. (Horizon, August 2006) 2.5 - Conclusion The aim of this chapter has been to provide the reader with a broad understanding of BP and the particulars of the BTC pipeline. Further discussion of research findings regarding the BP and BTC project will continue in chapters 5 and 6 after the next chapters – the literature review and methodology. 13 CHAPTER 3 3.0 – LITERATURE REVIEW 3.1 - Introduction Ethics in business has been an issue for as long as trade and commerce have taken place. However, the study of the field is more of a recent phenomenon, starting from around 1920 onwards (De George, 1987) (Lovell, 2005). Corporations have an incredible influence in business and indeed world affairs, therefore their actions can have a serious effect on many people, both inside and outside organisations. With a great number of corporate scandals to choose from, Nestle, Enron and Nike, to name a few, the academic and literary contributions from the likes of Friedman, Carroll, Kaler, Elkington, De George, Fisher and Lovell, Crane and Matten and Freeman, to the field of business ethics is vast and an undeniable sign of the significance which it poses in today’s corporate world. Business ethics embraces many theoretical perspectives, which this literature review will attempt to convey. Starting with traditional ethical theories, around which almost all other business ethics perspectives can be related; an assessment will then be made on the literature relating to Corporate Social Responsibility (CSR) which will incorporate stakeholder theory and Corporate Social Performance (CSP). It will then move on to business ethics and the environment, with reference to theories of sustainability and the Triple Bottom Line. Finally, exploring thoroughly the academic work carried out in relation to the implications business ethics has in international business and globalisation. 3.2 - Traditional Ethical Theories There exists in business an overabundance of ethical dilemmas. The resolution of these dilemmas may be facilitated by taking a systematic approach applying one or more ethical frameworks to the issues. (http://nuinlink.napier.ac.uk) 14 When considering and applying business ethics to any situation or case, traditional ethical theories are crucial to how one judges a particular action to be moral or indeed ethical. Traditional ethical theories tend to offer a general rule or principle which can be applied to any given situation. For this reason they are based around absolutism or relativism. Richard De George suggests that ethical absolutes are based around the notion that eternal, universally applicable moral principles are used to judge right and wrong. They are objective qualities which can be rationally determined. (Crane and Matten, 2004) These theories are considerably well-defined and therefore are very useful tools when addressing ethical dilemmas. They can be differentiated into two groups: Nonconsequentialist theories and consequentialist theories. Consequentialist or ‘teleological’ theories are based around actions and outcomes. If the outcome is considered desirable then the action in question is morally right. Conversely, nonconsequentialist or ‘deontological’ theories are based around the underlying principles of the decision maker’s motivation. An action is considered ethical, regardless of the outcome because the motivation behind the action was considered moral. (Crane and Matten, 2004) The three main ethical theories are Utilitarianism based on consequences, Egoism, based on self-interest and Kantianism, based on rights and duties. These traditional ethical frameworks are fundamental in all surrounding theory regarding business ethics, therefore it is imperative to have a detailed understanding of each of the three theories. 3.2.1 - Utilitarianism Utilitarianism is a consequentialist theory and is linked to British philosophers and economists Jeremy Bentham (1748-1832), John Stuart Mill (1806-73) and David Hume (1711-1776). The basic principle of utilitarianism, sometimes referred to as the ‘greatest happiness principle’ states that an action is morally right when it brings about the’ greatest happiness to the greatest number’. Nothing is wrong which does this and nothing is right which fails to do it. (Kitson and Campbell, 1996) 15 An essential feature of utilitarianism is that it is committed to the maximisation of good and the minimisation of harm and evil. It states that society should produce the greatest possible balance of positive value for all persons affected. The means of this maximisation is efficiency, a goal which people in business find congenial because it equates higher profits and lower prices and is an essential part of the traditional business concept and practice. (Beauchamp and Bowie, 2001) One tool of the utilitarian approach is the cost-benefit analysis. It measures not only the direct costs and benefits to an organisation but also externalities. It is a form of project appraisal which seeks to identify and price costs and outputs of a project. If benefits outweigh the costs, then investment is sensible. (Fisher and Lovell, 2006) One main criticisms of the utilitarian theory is the vague definition of the term happiness. How can it be quantified, especially in an organisational context' Fisher and Lovell (2006), put forth that utilitarianism is a calculating approach to ethics. It assumes the quantity and quality of happiness can be weighed. Bentham (1982) identified the following features of happiness that ought to be considered when measuring it: • • • • • • • Intensity Duration Certainty Extent – the number of people affected Closeness – pleasure or pain now or deferred in time. Richness – will the act lead to further pleasure' Purity – is the pleasure pure or is it mixed with pain' (Fisher and Lovell, 2006) Even with these features which help to equate happiness into a measurable unit, it still remains a rather subjective notion. Crane and Matten (2004), argue that when using this theory one must think rather creatively and assessing such consequences as pleasure of pain might depend heavily on the subjective perspective of the person who 16 carries out the analysis. This can cause problems when applied to a business context. It could be assumed that maximising happiness is the same as maximising profit. It could indeed be argued that improving the profitability of a business will generate happiness for some, but applying the utilitarian principle properly one must consider the possibility that the increased profits have been at the expense of increased pain to other people. (Fisher and Lovell, 2006) This can be assessed by corporations rationally by applying the cost-benefit analysis, as discussed earlier. However, it still leaves us with the vague term of happiness, and its problems of quantification in this theory. Another criticism of utilitarianism, is that it is unconcerned with equity. “The trouble with utilitarianism is that maximising the sum of individual utilities is supremely unconcerned with the interpersonal distribution of that sum” (Sen quoted in Fisher and Lovell, 2006, pp130) How can future consequences be accurately forecasted' If people cannot make real predictions about the consequences of particular actions then it is hardly worth the bother of weighing and anticipating pleasures and pains. Crane and Matten (2006) also criticise this theory around the area of the distribution of utility. By assessing the greatest good for the greatest number, the interests of the minorities are overlooked. In the case of large MNCs, if profits do equate happiness in the majority, does that mean that the pain and suffering of a minority of children and those living in poverty is overlooked, as in the case of Nestle' Tyranny of the majority becomes an issue. Those in favour of the utilitarian perspective are aware of the problems such as subjectivity which has been discussed. This has led to a modification of the theory, into two differing perspectives. Act utilitarianism and rule utilitarianism. Beauchamp and Bowie (2001), suggest that an act utilitarian is someone who argues in all situations that one ought to perform the act that leads to the greatest good to the 17 greatest number. An act utilitarian would not hesitate to break a moral rule if it was to lead to the greatest good to the greatest number in a particular case. Kitson and Campbell (1996), defines act utilitarianism as “every action we choose which will, or which seems most likely to, bring about the maximum good for the maximum number of people.” (Page 23) According to Kitson and Campbell (1996), rule utilitarianism says that we should choose a set of rules following which, on average and overall, will produce the best consequences. It looks at the utility not of individual actions but at the rules by which we ordinarily guide those actions. Rule utilitarians place far more emphasis on the rules and look at classes of action and question whether or not an action produces more pleasure than pain for society in the long run. Crane and Matten (2004), argues that rule utilitarianism relieves us from examining right or wrong in every single situation and offers the possibility of establishing certain principles that we then can apply to all situations. Kitson and Campbell (1996) state that as a rule utilitarian one should follow rules which, if everyone followed them, would produce the best outcome. However, they also point out the obvious problem: what should you do if not everyone does follow those rules, so that you also know that your following them will not produce the best outcome. 3.2.2 - Egoism There are two main varieties of egoism: psychological egoism and ethical egoism. According to Beauchamp and Bowie (2001), these two variations can be defined in the following ways. “Psychological egoism is the view that everyone is always motivated to act in his or her perceived self-interest.” “Ethical Egoism is a theory stating that the only valid standard of conduct is the obligation to promote one’s well-being above everyone else’s.” (Beauchamp and Bowie, 2001, pp 14) 18 Whereas psychological egoism is a descriptive psychological theory about human motivation, ethical egoism is a normative theory about what people ought to do. Ethical Egoism is another of the teleological theories revolving around the concept of self-interest and striving to maximise long-term, not short term benefits. Egoism, according to Crane and Matten (2004) can be defined in the following way: “Following the theory of egoism an action is morally right if the decision-maker freely decides in order to pursue either their (short-term) desires or their (long-term) interests.” (Page 81) Adam Smith (1793), was one of the main contributors to egoism and argued that in the economic system, the pursuit of individual self-interest was acceptable because it produced a morally desirable outcome for society through the ‘invisible hand’ of the marketplace. (Crane and Matten, 2004) Enlightened egoism, or enlightened self-interest is another important aspect of this traditional theory, which should be mentioned due to its relevance to the activities of corporations and whether or not they behave ethically or morally. Enlightened egoism is when one performs an action which, on the surface, appears to be moral and selfless, but in actual fact is done for reasons of self-interest and under egoist behaviour. For example, corporations might invest in the social environment, such as supporting schools, in order to gain favour with consumers and government and not for purely moral reasons. (This notion links to Kantianism, which will be discussed later.) Egoists do not care about the welfare of others unless it affects their own welfare. Those who regard conventional morality as tinged with irrational sentiment and indefensible constraints on the individual, are the supporters of ethical egoism. It is not their view that one should always ignore the interests of others, but rather one should “consider the interests of others only when it suits one’s own interests.” (Beauchamp and Bowie, 2001, page 15) 19 The difficult question regarding ethical egoism is how far self-interest would cause individuals to give away some of their independence in order to accommodate others. Hobbes, who wrote in the seventeenth century, identified the key problem with ethical egoism and is quoted here from Fisher and Lovell (2006, page 123) “If two men desire the same thing, which nevertheless they cannot both enjoy, they become enemies; and in the way to their end, which is principally their own conservation, and sometimes their delectation only, endeavour to destroy, or subdue one another.” (Hobbes, n.d.: 81) This frame of reasoning is also seen in the writings of Beauchamp and Bowie (2001). They suggest that if ethical egoism were the prevailing theory of proper conduct in society, anarchy and chaos would result unless preventative measures were adopted. Conversely, Adam Smith argued that an egoist business practices consisting of “suitably restrained clash of competing individual interests” would ironically result in a utilitarian outcome, i.e. the largest number of benefits to the largest number of persons. (Beauchamp and Bowie, 2001) An important criticism of egoism is that it renders different approaches to life as being equivalent, when in reality, this simply is not the case. There becomes a gap between desire and what is in one’s own ultimate interests. Peoples’ desires differ enormously, and just as in utilitarian practices, one cannot measure happiness, so in egoist practices, desire and longing is also unquantifiable. Egoism based on interests therefore approaches the idea of objective value; that one way of acting is objectively better or ‘more ethical’ than another. (Crane and Matten, 2004) 3.2.3 - Kantianism Kantianism, a deontological theory revolves around the idea that actions must be guided by universalisable principles that apply irrespective of the consequences of the actions. For Kant, actions have moral worth only when they spring from recognition of duty and a choice to release it. The ‘duties’ to which Kant refers were a response to the questions, ‘what makes a moral act right'’ They were formulated around the 20 concept of the ‘categorical imperative’. The categorical imperative refers to principles which must be obeyed, with no exceptions. (Fisher and Lovell, 2006) The categorical imperative consists of three parts: Maxim 1 – Act only according to that maxim by which you can at the same time will that it should become a universal law. This maxim is concerned with the aspect of consistency. An action can only be considered morally right if everyone could follow the same underlying principle. Maxim 2 – Act so that you treat humanity, whether in your own person or in that of another, always as an end and never as a means only. Maxim two is concerned with human dignity. Humans deserve respect and dignity at all times, and this should not be ignored. Maxim 3 – Act only so that the will through its maxims could regard itself at the same time as universally lawgiving. This third maxim revolves around the notion of universality. This test tries to overcome the risk of subjectivity, which is inherent to utilitarianism, since it asks us to check whether other rational actors would endorse our judgement of a certain situation as well. (Crane and Matten, 2004,) According to Kant, these three maxims can be used as tests for every possible action. An action can be regarded as morally right if it satisfies all three maxims. In Kantian theory respect for the human being is said to be necessary – not just as an option or at one’s discretion. Kant’s principle finds motives for actions morally important, in that it expects persons to make the rights decisions for the right reasons. If people are honest only because they believe that honesty pays, their honesty is cheapened. This can be seen much of the time in corporations who carry out According to Kantian thinking, if a ‘enlightened egoism’ as discussed earlier. corporation does the right thing only when it is profitable or when it will result in 21 good publicity, its decision is not moral. An action has moral worth only if it is performed by an agent who possesses what Kant called, ‘good-will’. (Beauchamp and Bowie, 2001) There are some problems associated with Kantianism. Crane and Matten (2004), have written about the problem of complexity when trying to apply Kant’s categorical imperative to a single situation. His principle orientated philosophy requires a certain amount of abstraction which one could not take for granted in every case. Despite Kant’s contributions to moral philosophy, his theories have been criticised as narrow and inadequate to handle various problems in moral life. According to Beauchamp and Bowie (2001), he has no place for moral emotions or sentiments such as sympathy and caring and he has said enough about moral character or virtue except from his comments on the motive of obligation. Kantianism supplies obligations sufficiently strong enough to avoid a self-defeating attitude, but does so at the cost of being indeterminate in the face of complex and intricate real life situations. (Kitson and Campbell, 1996) Beauchamp and Bowie state that in today’s society almost no moral philosopher finds Kant’s system fully satisfactory. Considerable controversy persists as to whether Kantian theories are adequate to business situations and whether they have been more successful than utilitarian theories. Notwithstanding the above problems, Kant who argued for principle-based ethics did so out of a belief that there are certain principles upon which societies need to be based if they are to develop in positive ways. Non-consequentialists feel that principle-based ethics are particularly relevant in the present day. (Fisher and Lovell, 2006) All the traditional theories which have been examined so far provide helpful frameworks when discussing and seeking answers to ethical dilemmas. However, for these theories to be applied and understood properly, one must analyse other theories of business ethics, many of which are directly extended from or incorporate the 22 traditional frameworks. The first of these extended theories, CSR, is concerned with businesses and their responsibilities in society. 3.3 - Corporate Social Responsibility (CSR) Corporate Social Responsibility (CSR) is possibly the first concept that was employed to focus public debate on both the economic and non-economic impacts of corporate activities. CSR can be defined as “the integration of business operations and values whereby the interests of all stakeholders, including customers, employees, investors and the environment are reflected in the organisations policies and actions.” (Tyrrell, 2006, pp44) When analysing CSR, it is useful to look at the key features of a corporation and how they are regarded among society. This can then be used to assess whether an A organisation does have an ethical responsibility to its stakeholders or not. corporation can be explained by considering it as a separate entity to those who work for it and own it. It is defined in terms of legal status and ownership of assets. Even though they are owned and partially controlled by shareholders and managers, they still exist independently of them. Corporations are usually regarded as ‘artificial persons’ in the eyes of the law, which means they have certain rights and responsibilities in society. (Crane & Matten, 2004) Because of this rather ambiguous explanation of a corporation and its own individual standing in society it begs the question which has caused much debate over the years; why does a corporation have social responsibilities and what are they' This question is integrated into the shareholder/stakeholder debate, which looks at whether a company should exist and make decisions based on pleasing their shareholders and other financial investors, or whether a company should take into account every single one of its stakeholders, from employees to the environment and governments. The starting point for businesses is to establish who they consider their 23 stakeholders to be. Many companies may feel they have obligations to many stakeholders encompassing entire communities or alternatively businesses may simply regard shareholders as their main responsibility as many PLCs do. (Chryssides and Kaler, 1996) The shareholder perspective, which can be considered against corporate social responsibility, has been strongly argued in recent years by academics and scholars. Many (for example Friedman) see CSR as a deeply flawed concept, negating the very point of profit-making institutions. The main arguments against CSR are that profit maximisation and free choice should be the main objective of corporations; engaging in CSR results in competitive disadvantage costs and that there is a lack of requisite skills among businesses to engage in CSR. (Tyrrell, 2006, pp44). For those opposed to CSR the maximisation of profits is seen as the only social responsibility of businesses and business people. Providing employment, paying taxes and complying with all relevant legislation and regulation is seen as enough social responsibility. Milton Friedman is one of the main opposing academics to CSR. His stance is that corporate actions not directly related with the business incur added costs which consumers must bear of which reduce profits for shareholders. Friedman argues that neither shareholders nor consumers should be responsible for these costs and that they can decide for themselves which social needs they want to resource and to what extent. (Tyrrell, 2006) Friedman also argued that corporations are not human beings and can therefore not be expected to assume true moral responsibility for their actions. It is the human beings who set up the corporations who are individually responsible for its actions. Going back to the characteristics of corporations being individual entities but not moral entities in the same sense as individual human beings, one cannot expect corporations to adopt the same moral approach by which humans are expected to. For this reason, CSR can be a fairly ludicrous idea for many. 24 “Morality governs the actions of rational beings insofar as they affect other rational beings.” (De George, 1986, p97) Another main point of Friedman’s was that managers should not decide what is in society’s best interests. He believed that this was the job of government. Corporate managers are not trained in the area of social and ethical objectives and they are not democratically elected to do so. (Crane & Matten, 2004) The stakeholder perspective of CSR is far more in favour of the concept and is argued by academics such as Michael Porter, R. Edward Freeman and Henry Mintzberg. They see CSR as the very essence of civilised society and at the core of business strategy. In his paper, ‘A Stakeholder Theory of the Modern Corporation’ (1988) Freeman argues that each stakeholder group, whether it be suppliers, the community, employees or shareholders, has a right not to be treated as a means to an end (note the direct reference to Kant’s maxims), and therefore must participate in determining the future direction of the firm in which they have a stake. (Beauchamp and Bowie, 2001) According to Freeman, this broader view of responsibility towards multiple stakeholders assigns a new role to management. Management must take into account the rights and interests of all legitimate stakeholders. Whilst they still have an important responsibility to look after shareholders’ interests, managers must incorporate this with the competing interests of other stakeholders for the long-term survival of the corporation, rather than maximising the interests of just one group at a time. Freeman has argued in favour of stakeholder democracy where every corporation has a board of directors specifically assigned to giving stakeholders the opportunity to influence and control corporate decisions. (Crane and Matten, 2004) It has now become fairly widely accepted that businesses do need to acknowledge their responsibilities in society and plan and implement their strategies accordingly. However, it must be recognised that many businesses incorporate CSR in terms of 25 ‘enlightened self-interest’ which is when the corporation takes on social responsibilities to promote its own self-interest. (Crane and Matten, 2004) Organisations perceived as being socially responsible might be rewarded with extra and more satisfied customers and avoid the stigmatism of being irresponsible and resulting in possible boycotting of their products. For example, many people now boycott Nestle products after the company aggressively marketed its baby food resulting in deaths of many infants. (Chryssides and Kaler, 1996) Other ‘enlightened self-interest’ reasons for corporations to engage in CSR are to attract committed and loyal employees, ensure greater corporate independence from the government and to make a positive contribution to society and creating an improved, stable society to do business in the future. (R.Panwar et al, 2005) However, despite these supposedly selfish or ‘enlightened’ reasons for adopting CSR it is important to consider the moral arguments in favour of CSR. Corporations can cause social problems, therefore have the responsibility to solve these problems and prevent more from arising. Due to many corporations’ sheer power and size, they have a moral obligation to use their power for good. Also, corporations rely on the contribution of stakeholders in society, rather than just shareholders and therefore have a duty to take into account the interests of those stakeholders. “A stakeholder in an organisation is…any group or individual who can affect or is affected by the achievement of the organisations objectives.” (Crane & Matten, 2004, p50) Obligations to society, managerial processes, and social contracts are a few of the approaches that have been used to discuss CSR. However, the mainstream approach promotes that companies have responsibility to its stakeholders rather than to solely its shareholders. According to the World Business Council for Sustainable Development (WBCSD 2000), corporations have obligations to the following stakeholders: Owners and investors, employees, customers, business partners, suppliers, competitors, government regulators, non-governmental organisations and lastly, communities. (R.Panwar et al, 2006) 26 When looking at the nature of corporate responsibility and what it involves, Archie Carroll’s ‘Four-part model of corporate social responsibility’ can be a useful framework to use. Carroll believes CSR to be a multi-layered concept, divided into four aspects, economic, legal, ethical and philanthropic responsibilities. Carroll’s Four-part Model of CSR Philanthropic Responsibilities Ethical Responsibilities Legal Responsibilities Economic Responsibilities (http://www.waynevisser.com/csr_definition.htm, accessed, 13/10/2006) Economic responsibilities fall under the shareholder perspective of the CSR debate. Carroll suggests that companies must concentrate most of their efforts on providing shareholders the greatest return on their investments, provide customers high-quality products and to supply employees with safe, fairly paid jobs. This first layer of the model is required in all organisations. (Carroll and Buchholtz, 2006) The legal responsibilities of corporations are to abide by all laws and legislations put forth by governments. This is the second layer in the model and is also required in all organisations. (Carroll and Buchholtz, 2006) 27 The third layer, ethical responsibilities is when corporations do what is ethical and responsible, even when they are not forced to by the law. This layer consists of what is expected by society rather than simply required. The final layer, the philanthropic responsibility is for the company in question to be a good corporate citizen, improving the quality of life for employees, local communities and society in general. It may donate to charity, support local schools etc. Carroll suggests this level of CSR is desired in society but is not expected or required. (Carroll and Buchholtz, 2006) However, Carroll’s model does not categorise or quantify each part and it fails to take into account the conflicting parts. (Crane & Matten, 2004) For the past few decades, there has been a trend toward making the concern for social and ethical issues more pragmatic. It is possible to integrate some of the concerns into a model of what is called Corporate Social Performance (CSP). The performance focus is intended to suggest that what really matters is what companies are able to accomplish – the results or outcomes of their acceptance of social responsibility and an adoption of responsiveness philosophy. CSP attempts to classify companies on their societal performance. Carroll and Buchholtz (2006) developed a CSP model, a conceptual framework for CSP. Carroll’s CSP Model brings together the three major dimensions: 1. Social responsibility categories – economic, legal ethical and discretionary (philanthropic) 2. Philosophy (or mode) of social responsiveness – e.g. reaction, defence, accommodation and proaction) 3. Social (or stakeholder) issues involved – consumers, environment, employees etc) Carroll intended this model to be used as a conceptual aid to perceiving the distinction among the concepts of CSR that have appeared in literature. It helps to systematise the important concepts that must be taught and understood in an effort to clarify the CSR concept. (Carroll and Buchholtz, 2006) 28 There have been variations and extensions to the CSP model. For the purposes of comparison, let us now look at a model of CSP presented by Donna Wood (1991). Following her model, CSP can be observed as the principles of CSR, the processes of social responsiveness and the outcomes of corporate behaviour. These outcomes are detailed in three areas: • Social policies – explicit corporate social policies stating the company’s values, beliefs and goals with regard to its social environment. • Social programmes – specific social programmes of activities, measures and instruments implemented to achieve social policies. • Social impacts – social impacts can be traced by looking at concrete changes the corporation has achieved through the programmes implemented in any period. This is the most difficult to achieve, since much data on social impacts is ‘soft’ and difficult to quantify. The specific impact of the corporation cannot be easily isolated from other factors. (Crane and Matten, 2004) 3.4 - Business Ethics in the Environment Whilst CSR and the stakeholder theory addresses the differing needs of stakeholders and the increased importance of businesses recognising their social responsibilities, the next logical step in analysing business ethics is to look at corporations and the impact they have on the environment in which they operate. The blame for the deterioration of the environment frequently falls on businesses. With the development of industrialisation, corporations play a major role in contributing the natural environmental pollution and depletion. These issues are becoming increasingly more stressed upon in societies around the world and now 29 MNC’s must take into account their activities and the effect they have on the environment. Examples of some of these said issues are as follows: • • • • • • • • Ozone depletion Global warming Solid and hazardous wastes Fresh water quantity and quality Degradation of marine environments Deforestation Land degradation Endangerment of biological diversity (Carroll and Buchholtz, 2006) A great deal of ambiguity surrounds the area of human environmental sensitivity. Humans must consume at least some plants and water to survive. If humans and their organisations need to pollute and destroy at least some of nature for their survival, what is the relative level of degradation that is ethical' Are humans of the highest value in the universe' In answering this question one encounters two conflicting views. The homocentric view and the biocentric view. The homocentric view implies that any human actions affecting the natural environment would be judged on the basis of whether they had favourable or unfavourable consequences for human beings. In this view non-human beings are valuable and need to be protected only if valued by human beings. The biocentric view states that ethical decisions on matters affecting the natural environment must take into account the respect to nature. The moral obligation of humans is to protect from harm non-human beings because they have intrinsic value. (http://nuinlink.napier.ac.uk) The moral principle of utilitarianism, the greatest good to the greatest number, could be expanded into environmental ethics. It would imply that the greatest good should 30 be done for the greatest number of species and ecosystems. Kantianism would suggest treating other species and ecosystems as we as humans would like to be treated. (Carroll and Buchholtz, 2006) Conversely, ethical egoism, linked to the homocentric perspective would advocate that humans and corporations should do what is best to their own self-interests, regardless of environmental impacts. 3.5 - Sustainability and The Triple Bottom Line (TBL) The term sustainability was initially used in the context of social and economic activities and the depletion of environmental resources. One of the earliest definitions of sustainability came from the United Nations Brundtland Commission (1987), which referred to sustainability as: “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” (Fisher and Lovell, 2006, pp338) The phrase Triple Bottom Line has been attributed to John Elkington. The concept seeks to encapsulate for business the three key points of sustainability – economic, social and environmental. Corporate sustainability is the goal of the triple-bottom-line and the goal of sustainability is to create long-term shareholder value by taking advantage of opportunities and managing risks related to economic, environmental and social developments. To help achieve these goals, the Dow Jones Sustainability Indexes were created to monitor and assess the sustainability of corporations. (Carroll and Buchholtz, 2006) Environmental perspectives – The basic principles in the environmental perspective concern effective management of physical resources so that they are conserved for the future. Economic perspectives – The economic perspective on sustainability initially emerged from economic growth models that assessed the limits imposed by the carrying capacity of the earth. The recognition that continued growth in population, 31 industrial activity, resource use and pollution could mean that standards of living would eventually decline, therefore leading to acknowledgment that future generations needed to be considered. Social Perspectives – The social perspectives remain relatively new in their development. It is concerned with the impact of business activities on indigenous communities in less developed countries and regions. The key issue in the social perspective on sustainability is that of social justice. (Crane and Matten, 2004) Fisher and Lovell have criticised the concept of the Triple Bottom Line with reference to its levels of practicality. “The triple bottom line encompasses economic, social and environmental concerns, but its operation has remained problematic.” (Fisher and Lovell, 2006, page 371). Fisher and Lovell also criticise the TBL concept in that it makes no judgement on whether the weightings put on the three aspects should be equal and, if not, which one carries the most importance. Issues of an ethical nature, whether they are questionable marketing techniques or industrial pollution, require consideration of a diverse and complex range of concerns. However, according the Crane and Matten, achieving genuine sustainability in any of the three areas is perhaps expecting too much at the present time. However, with the notion of sustainability widely promoted by governments, businesses, NGOs and academia, it is clearly vital that we understand its full implications and evaluate business ethics practices at least according to their potential to contribute to sustainability. As Elkington (1999) suggests, the TBL is less about establishing accounting techniques and performance metrics for achievements in the three dimensions and more about revolutionising the way that companies think about their business. (Crane and Matten, 2004) 32 3.6 - Business Ethics in International Business Discussion and understanding of businesses and their operations in an environmental context can be extended by considering their organisational standings in an international setting. Trade, production and indeed ethical behaviour become more complex when carried out across different nations and cultures. Many of the ethical issues and dilemmas in international business are rooted in the fact that political systems, law, economic development and culture vary significantly from nation to nation. For these reasons, what is considered to be moral in one nation may be considered unethical in others. (Hill, 2007) The expanded marketplace as we know it today has been termed by Peter Drucker as the transnational economy. The complexity introduced by the transnational economy is seen clearly in cases in which ethical issues arise. Business ethics is a difficult concept for organisations to grasp in one culture; once we bring two or more cultures into consideration it becomes extremely complex. (Carroll and Buchholtz, 2006) When discussing international business ethics, it is important to understand the term globalisation, its trends and its implications on organisations operating on an international scale. Carroll and Buchholtz (2006), define globalisation as: “…global economic integration of many formerly national economies into one global economy.” (page 293) Crane and Matten (2004), suggest that globalisation is a contested term among academics. For instance, Scholte (2000: 46-61) characterises globalisation as deterritorialisation, suggesting that globalisation can be defined in the following way: “Globalisation is the progressive eroding of the relevance of territorial bases for social, economic, and political activities, processes and relations.” Matten, 2006, page 16) (Crane and 33 However one defines globalisation, its relevance in the field of business ethics is inimitable. Bribery, extortion and the issue of facilitating payments remain common problems. Often firms can be accused of exploitation when they try to take advantage of lower cost structures, in the form of lower wages or lower taxes. There is a wide variety of opinion on what is considered acceptable conduct in international business and whether or not there are any universal norms for ethical business practice. When conducting business abroad an international company must decide whether it will adopt a ‘when in Rome, do as the Romans do’ approach to their actions, otherwise known as ethical relativism; or alternatively whether their actions are based around ‘moral absolutes’, or ethnocentricism. (Chryssides and Kaler, 1996) Ethical relativism, according to Beauchamp and Bowie (2001), asserts that whatever a country says is right or wrong for a country, really is right or wrong for that country. It implies that ethical practices differ among cultures; that, as a matter of fact, what is considered right in one culture could be considered wrong in another. If a company were to ask themselves the question, ‘Is it morally right to pay a bribe to gain business'’, the ethical relativist perspective would answer the question by examining the moral norms and practices of the country in question. Ethical relativism is challenged by the ethnocentricism or the moral absolutes approach to international business ethics, which has direct links to Kantian arguments. There are universal values or moral norms that should be followed by all multinationals in whatever country they are operating. Beauchamp and Bowie suggest that the task of the manager in an international firm is avoiding a relativism that would trap the firm in violations of legitimate universal norms. Lord Browne, CEO of BP sums up this suggestion in an unambiguous principle: “Companies must obey the law in every jurisdiction in which we operate and if we find the law unacceptable and at odds with our own values we shouldn’t be operating in that jurisdiction.” (Fisher and Lovell, 2006, Page 480) Organisations wishing to apply an ethical criterion to their international business activities could adopt the ‘test’ put forth by Sir Adrian Cadbury, chairman of the UK34 based multinational Cadbury-Schweppes. His rule of thumb is to question whether or not the company would be embarrassed to have its actions mentioned in a newspaper. In this test lies a belief in the value of openness as a criterion for ethical judgement. “Openness and ethics go together…actions are unethical if they will not stand scrutiny.” (Sorrell and Hendry, page 218, 1998) Another approach, proposed by the philosopher Tom Donaldson, is an ethical algorithm, in two stages. Type 1 Conflicts – The moral reasons underlying the host country’s view that the practice is permissible refer to the host country’s relative level of economic development. In other words, an ethical dilemma can be resolved by reference to the host county’s level of economic development, comparing moral standards of a country to its economy. This is a very useful tool for organisations. Practice may be judged to be a ‘cost’ of economic growth. Type 2 Conflicts – The moral reasons underlying the host county’s view that the practice is permissible are independent of the host country’s relative level of economic development. This is stating that, being independent of the host country’s economic starus may be resolved by a judgement of whether the practice is necessary to do business there, so long as it violates no fundamental human rights. Type 2 is no where near as useful, as it is far too subjective and no definition of human rights can be stated. (Sorrell and Hendry, 1998) Whatever approach international businesses take to their activities, Sorrell and Hendry urge them to exercise ‘power with responsibility’. This is an increasingly critical issue for the international business manager given the rapidly expanding process of globalisation. 35 3.6.1 - Integrative Social Contract Theory (ISCT) Social contract theory is a concept used to denote an implicit agreement within a state regarding the rights and responsibilities, or more generally a similar concord between a group and its members, or between individuals. All members within a society are assumed to agree to the terms of the social contract by their choice to stay within the society without violating the contract; such a violation would signify a problematic attempt to return to the state of nature. (http://en.wikipedia.org/wiki/Social_contract 07.10.2006) The concept of a social contract is an important one in moral theory, with natural applications to business ethics. It is an interesting concept which can be traced back to Plato and Aristotle but more recently to Hobbes (1968), Locke (1952) and Rousseau (1013). (Fisher and Lovell, 2006) According to Fisher and Lovell, the articulation of the social contract is found in the argument that corporations have to earn and maintain a ‘license to operate’. The license to operate reflects a commitment to more than economic imperatives. Donaldson and Dunfree have taken the social contract idea and developed a distinctive approach that they call the Integrative Social Contract Theory. It is an approach to navigate cross-national cultural differences. ISCT revolves around four norms: Hypernorms, Consistent norms, Moral free space and Illegitimate norms. Please see the following page for ISCT diagram and explanation. 36 Moral Free Space Consistent Norms Hypernorms Illegitimate Norms Integrative Social Contract Theory (ISCT) Hypernorms: These are transcultural values which include, for example, fundamental human rights or basic values common to most religions. These values by definition are acceptable to all cultures and all organisations. Consistent Norms: These values are more culturally specific than the hypernorms. Donaldson and Dunfree use the example of corporate mission statements as consistent norms. Moral Free Space: Here, one finds norms that are inconsistent with at least some other legitimate norms existing in other economic cultures. These are strongly held cultural beliefs in particular countries and could be in mild tension with hypernorms. Illegitimate Norms: These are norms that are incompatible with hypernorms. Carroll and Buchholtz cite the example of the practice of exposing workers to unacceptable levels of carcinogens as an illegitimate norm. (Carroll and Buchholtz, 2006) 37 ISCT uses the principles of moral free space and adherence to hyper-norms as a balanced approach to navigating global international waters. While honouring hypernorms, companies do not have to simply adopt a ‘do in Rome as the Romans do’ philosophy, but they do need to be sensitive to the transcultural value implications of their actions. In turn, the concept of moral free space makes them cautious of the need to attempt to understand the local host country culture before making judgement. The resulting judgement being, most likely that moral tension will be an everyday part of doing business internationally. (Carroll and Buchholtz, 2006) Fisher and Lovell state that ISCT attempts to hold on to both the integrity of universalisable norms, but avoiding the inflexibility of non-consequentialist stances. Donaldson and Dunfree point out that ISCT is not a framework, let alone an approach which can be employed unthinkingly. It is not a decision-making tool, as the type of ethical situations corporations are faced with are often too complex; but a framework for aiding discussion and debate. ISCT does however provide a set of concepts that may help parties to a decision, whilst taking into account the different issues associated with international business. (Fisher and Lovell, 2006) 3.7 - Summary and Themes The use and assessment of academic literature in this chapter has highlighted the importance for business ethics and the motivations for corporate social responsibility with in today’s business environment. When analysing BP’s actions in relation to the BTC pipeline, areas of theory and literature such as the traditional frameworks, corporate social responsibility, ethics in international business and environmental ethics are especially relevant. Examining BP’s obligations to its stakeholders, and comparing and contrasting its practice to the previous theoretical discussions on stakeholder theory will also assist us in deciphering the moral and ethical implications of the company’s actions in Azerbaijan, Turkey and Georgia. 38 CHAPTER 4 4.0 - METHODOLOGY 4.1 - Introduction The purpose of this chapter is to analyse and explain the importance of business research and data collection, the different types of data collection methods available and their validity and reliability. It will also describe the different methods used for this dissertation and the limitations and advantages encountered for each method. Saunders et al (2003) suggest that research has a number of characteristics: • • • Data collected systematically Data interpreted systematically Clear purpose: to find things out. Therefore they define research as “something that people undertake to find out things in a systematic way, thereby increasing their knowledge.” (Saunders et al, 2003, pp3) Research must be organised and provide in a logical and coherent route to a reliable outcome and must be conducted systematically using appropriate methods to collect and analyse the data. Research must address a specific problem in order to set a definable objective for the research activity. (Collis and Hussey, 2003) 4.2 - Data Collection Methods When conducting any research, there will be a combination of qualitative and quantitative inputs to data generating activities. The balance of these will depend on individual analytical requirements and the overall purpose and objectives of the research. 39 Quantitative data can range from simple counts such as frequency of occurrences to more complex data such as test scores or prices. To be useful this data needs to be analysed and interpreted. Qualitative data is associated with more ambiguous and elastic concepts and are characterised by their richness and fullness based on the opportunity to explore a subject in as real a manner as possible. (Saunders et al, 2003) A contrast can thus be made between the ‘thin’ abstraction that results from quantitative data collection and the ‘thick’ description associated with qualitative data. (Dey, 1993; Robson, 2002) (Saunders et al, 2003) Quantitative and qualitative approaches to data collection present a mixture of advantages and disadvantages. One of the main advantages of the quantitative approach to data collection is the relative ease and speed with which the research can be conducted. However, this advantage can be offset by the issues of errors in measurement and quantification and the danger of reductionism. This could result in a loss of contextual implications and contribute to a narrower interpretation of information. Qualitative data collection methods can be expensive and time consuming but it can be argued that qualitative data in business research provides a more ‘real’ basis for analysis. (Collis and Hussey, 2003) 4.3 - Secondary Data Secondary data includes both raw data and published summaries and can provide a useful source from which to answer a research question. Examples of secondary data include broadsheet newspapers, governmental surveys and published official statistics covering social, demographic and economic topics. Secondary data has the advantage of being simpler and quicker to gather than primary research and saves on resources. It is also unobtrusive and can be helpful in identifying unforeseen discoveries. However, problems can be encountered when 40 trying to access valuable information and there can be no real control over data quality. It must be remembered that secondary data will have been collected for a specific purpose, one which differs from the data collectors own objectives, therefore the data may be inappropriate. This problem can be overcome by combining secondary and primary data in order to gain a more reliable insight into the subject area in question. (Saunders et al, 2003) Secondary data collected for the purposes of this dissertation proved to be very useful. Data collected included corporate publications, annual reports, newspaper articles, journal articles as well as the extensive use of online information. This information provided a sound basis on which to write the dissertation, although as mentioned above, there was the problem of pre-collected data not conforming to the specific objectives set out; therefore primary research also had to be conducted to more specifically answer the questions which were initially posed. 4.4 - Primary Data The primary data collected for the purposes of this dissertation was in the form of semi-structured, in-depth interviews. These interviews were carried out with both BP and Friends of the Earth and provided more detailed and relevant information which built upon secondary research previously carried out. The information gathered from each contrasting interview also provided a useful comparison and a more objective angle from which to analyse and interpret the data. “An interview is a purposeful discussion between two or more people…the use of interviews can help gather valid and reliable data that is relevant to research questions and objectives.” (Saunders et al, 2003, pp 245) The interviews with BP and Friends of the Earth were performed face-to-face and over the telephone respectively. They provided a more in-depth and comprehensive method of gathering information and a better understanding of the research project. In semi-structured interviews, the researcher will have a list of themes and questions to be covered. Some questions may be omitted in particular interviews given the 41 specific organisational context that is encountered in relation to the research topic. (Easterby-Smith et al, 2002) Rough questions and themes, devised from previous research and the literature review, were used as a guide for each interview, but as each interview progressed, especially with regards BP, slight alterations and changes were made to the interviews structure, in order to better establish an open picture. 4.5 - Limitations Although the interviews conducted with BP and Friend of the Earth did provide very useful insights into the subject area, limitations were encountered in areas such as the types of interviews conducted, interview availability and the reliability and relevance of answers given. Arranging an interview with Friends of the Earth proved to be more complicated than arranging an interview BP. This was partly due to the fact that a contact was already established with BP and that an interview had been arranged well in advance. Friends of the Earth were difficult to contact. It took many days of correspondence to get the organisation to commit to an interview and it had to be in the form of a telephone interview, which was less insightful. Saunders et al (2003) suggest that telephone interviews although offering certain advantages such as speed, access and lower costs, can present limitations. Conducting qualitative interviews over the telephone may lead to issues of (reduced) reliability, where participants are less willing to engage in exploratory discussion. There is also the issue of recording the data collected via a telephone interview. This became apparent when interviewing Friends of the Earth. There was not the option of recording the conversation like in the case of BP, which resulted in fast-paced notetaking which proved to be less accurate. Another limitation encountered when conducting primary research for this dissertation in the form of interviews was the reliability and relevance of the answers given to questions asked. One aspect of this problem was the lack of detailed 42 knowledge interviewees had on the subject area, i.e. the BTC pipeline. Although their answers did provide broader knowledge of the area, problems of their individual knowledge on certain questions meant that not enough information was given and in some cases, the questions were not answered at all. Semi-structured interviews also resulted in a lack of focus to the questions asked. In each interview, both with BP and Friends of the Earth, answers to questions asked occasionally drifted off the subject area, which required redirection or re-phrasing of the question. 4.6 - Conclusion This chapter has highlighted the different methods, limitations and advantages of data collection, whether it is quantitative or qualitative data via secondary or primary research methods. Emphasis is made on the importance of properly defining appropriate research questions/objectives in order to gain relevant data. Discussions over the research techniques carried out for this dissertation have detailed the different types of secondary data collected, its reliability and relevance to the project and the primary research conducted and its limitations, to build on existing knowledge of the subject area. 43 CHAPTER 5 5.0 - ANALYSIS 5.1 - Introduction In this chapter, presentation and analysis of research findings with regards to BP, the BTC pipeline and Friends of the Earth’s perspective will be discussed. In order to analyse the information collected, comparisons will be made between the academic theories (detailed in chapter 3) and how BP’s actions have differed in practice. This will provide an insight into the ethical behaviour and actions of BP with regards to the BTC pipeline. This chapter will be split up into ‘themes’, which have occurred throughout the dissertation. The broad themes of Corporate Social Responsibility, Stakeholder/Shareholder debate, Environmental Impacts, Sustainability, and International Business Ethics and Traditional Ethical Theories will be discussed. 44 5.2 - What are BP’s Corporate Social Responsibility Policies' Questions were asked to BP and Friends of the Earth regarding their viewpoints and policies on Corporate Social Responsibilities, the purpose of which was to assess the extent to which CSR is an important activity when conducting business operations. BP refers to CSR as simply Social Responsibility, the break down of which is summarised in the following model: Figure 1 - BP's Social Responsibility Model BP Sustainability Report 2005 BP believe that being socially responsible in business is all to do with being a ‘progressive operator’. They claim that this is what makes them different to other companies. This concept of operating progressively has gradually come about throughout the past decade after amalgamating with other organisations, such as Castro and Amoco. As a part of this amalgamation, many company cultures were brought together under the BP brand, and BP made a clear internal statement about what their four values were. These four values are Green, Performance, Innovation and lastly, a very important value to BP was about being a Progressive company. This value was based around the concept of being a first mover, in all area of its business. An example given was BP’s plans to build a Hydrogen Fuel Power station 45 North of Aberdeen. Although this is a business decision on BP’s part, it is based around the notion of being a first mover in Hydrogen Power, even though many economic and tax implications suggest that the project could be unprofitable, at least in the early years of its construction. This idea of being a ‘progressive operator’ is also reflected in BP’s Social Responsibility operations. BP believe that operating responsibly is about improving performance in what they control, from safety to impact assessment and procurement. At its most fundamental level, BP’s policy on Social Responsibility is about obeying the law. But they believe that by making their business activities more responsible they must constantly review and improve their processes, accepting accountability and learning lessons. For example, in 2005 BP issued a code of conduct to every employee designed to ensure that all employees comply with legal requirements and BP’s own moral standards. When it came the construction of the BTC pipeline, BP recognised that it had a social responsibility to the many land owners who resided on the land that BP wished to build across. BP wanted to go beyond complying with the law and giving them normal compensation, and invested in education projects, development and the longterm infrastructure of the communities affected. BP claim that they make a significant positive difference to the countries which they build through. Friends of the Earth’s views on BP and other oil companies’ policies of CSR were extremely unequivocal. “We believe that behind the public face of corporations democracy is eroded – companies often have more power than governments and threaten to move their business to get what they want. Environments are destroyed and human rights are abused – people have no say on changes affecting their lives. Communities can be thrown off their land or forced to live next to leaking oil pipes.” Friends of the Earth believe that the economic growth of corporations comes before people and the planet, that they have too much power and too little incentive to care about communities and the environment. They claim that companies like BP are 46 failing in the area of CSR because it ignores the real problems and because it is voluntary, does not address the core issues. Friends of the Earth believe the way around these problems is by governments having tighter control over corporations. For example, Friends of the Earth are currently calling on the UK government to enact laws that will ensure making profits is done so within the context of businesses’ responsibilities to their stakeholders and their obligation to ensure their businesses are sustainable long term. When analysing BP’s policies on CSR and comparing it to that of academic literature on the subject area, Carroll’s Four-Part Model of CSR provides a useful starting point to assess and evaluate the findings. It is debatable whether BP’s policies on CSR, generally speaking and also relating specifically to their actions with regards to the BTC pipeline are fulfilling all four parts of Carroll’s CSR model. BP certainly maintain their economic responsibilities, i.e. providing their shareholders with the greatest return on their investments. BP would claim that they also fulfil all their legal responsibilities, abiding by all laws and legislations put forth by governments. However, Friends of the Earth’s viewpoint is that BP does not even satisfy this, the second part of Carroll’s CSR model, after the company violated Georgian legislation after constructing in an ecologically vulnerable part of the country without appropriate certification. The third layer of the model, ethical responsibilities, relates to when corporations do what is ethical and responsible, even when they are not forced to by the law. From the research conducted on BP regarding CSR, ethical responsibilities do appear to have been met. BP have stated clearly that they are a progressive company with regards to social responsibility and go above and beyond what the law requires of them, for example, doing more for local communities surrounding the pipeline than simply providing basic compensation. Again, however, Friends of the Earth acutely disagree and suggest that BP and other corporations like BP are not fulfilling their ethical responsibilities and ignoring the real issues of Corporate Social Responsibility. 47 The question of whether or not BP fulfil their philanthropic responsibilities remains rather ambiguous. Although BP’s social responsibility initiatives are on a large scale, one cannot immediately assume that BP’s CSR policies improve the quality of life for employees, local communities and society in general, as the philanthropic layer of the model would suggest. Although BP has done and still does do a lot for communities surrounding the pipeline, this has only been done in a response to damage the company has caused initially and one might wonder whether these so-called socially responsible actions were done for genuine reasons or due to ‘enlightened egoism’, when a company adopts CSR only to promote its own self-interest. Or in this case, to keep on the good side of national governments, investors and NGOs, and ensure the smooth construction, operation and profit making potential of the pipeline. The research conducted regarding BP’s CSR policies has shown that the company place a great deal of importance on socially responsible business actions. This conclusion is indeed mirrored when looking at their socially responsive actions in Azerbaijan, Turkey and Georgia, for example instigating community projects and providing adequate compensation to land owners around the perimeter of the pipeline. This account on its own, could suggest a utilitarian approach to how BP acted regarding the BTC project. However, when taking into account Friends of the Earth’s viewpoint, and integrating academic theory on CSR, the portrayal of BP’s actions can be seen more in an egoist light. Based on Carroll’s Four-Part CSR model, the question of whether BP fulfilled even its legal responsibilities is not even definitive, if taking the viewpoint of Friends of the Earth. And as previously mentioned, the CSR policies BP attempted to integrate into the region of the BTC pipeline are most likely out of concerns for reputation – enlightened egoism – rather than purely for moral and ethical reasons. This point can be expanded on and analysed further, by identifying the stakeholders with regards to the BTC pipeline and assessing the importance and weightings of these stakeholders to BP. This will be discussed in the next section of this chapter. 48 5.3 - Who Do BP Identify as the Main Stakeholders with Regards to the BakuCeyhan Project and What Importance are Placed on These Stakeholders' Questions were asked to both BP and Friends of the Earth to try to establish the importance they place on their stakeholders. The answers and information given can then be compared and contrasted with stakeholder theory discussed in the literature review, to try to ascertain BP’s motives with regards to BTC pipeline and whether they were driven to ultimately increase profitability for shareholders, or to satisfy all other stakeholder needs. BP identified their core stakeholders to be the governments of the three countries the pipeline passes through, as they can direct the company as to who are important stakeholders to take into consideration. They also identify Non-Governmental Organisations (NGOs) such as Friends of the Earth and Greenpeace as important stakeholders. BP believe in engaging with all these organisations or any stakeholder who has an interest in the company and stress the importance of not reverting to any kind of colonial power. BP acknowledges that their shareholders are of ultimate importance: “…yes, ultimately we are in business to satisfy our shareholders and generate profits.” BP recognise that there are often conflicting opinions between their shareholders and other stakeholders. They try to argue the case to their shareholders that there is a need to go beyond simply satisfying shareholder concerns. And indeed often the most influential shareholders do understand the importance of BP’s reputation and the need to consider all other stakeholders. Friends of the Earth, identified themselves and other NGOs who have real concerns for the people, places and the environment affected as important stakeholders with regards to the BTC pipeline. They also identified the surrounding communities in Turkey, Azerbaijan and Georgia as major stakeholders as well as the environment and governments. 49 Friends of the Earth believe that BP’s priority in relation to the BTC pipeline is to make the project as profitable as possible, above the needs of local stakeholders. They state the example of BP violating Georgian National Law, when it failed to obtain appropriate certification to construct in the ecologically vulnerable region of Borjomi, which contains a national park. Friends of the Earth believe that this illustrates BP’s acceptance to violate laws which are counteractive to their schedule and profit making objectives. When analysing BP’s views on their stakeholders and comparing these views to stakeholder theory it can be seen BP experience many of the implications of the stakeholder/shareholder debate. BP claim that they are interested in all stakeholder needs and that there is great importance in considering not only investors but also their employees, governments and communities affected by the BTC pipeline. However, Friends of the Earth argue that BP have no real concern for their stakeholder’s interests and are simply trying to make as much profit as possible from the project to satisfy their shareholder needs. Friends of the Earth’s viewpoint on BP’s non-commitment to their stakeholders would suggest that they believe BP are acting according to Milton Friedman’s view that corporate actions not directly related with the business incur added costs and reduce profit for shareholders. Friedman argues that neither shareholders nor consumers should be responsible for these costs; that they can decide for themselves which social needs they want to resource and to what extent. BP’s actions suggest that, although they are ultimately in business to make profits and satisfy their shareholder’s interests, they also take a very serious standpoint on all the stakeholders which have been and will be affected by the BTC pipeline. Theoretically speaking this perspective of stakeholder theory is far more in favour of CSR, argued by the likes of Porter, Freeman and Mintzberg. BP believes in not treating any of their stakeholders, whether they are communities, government or the environment, as a means to an end. This is mirrored in Freeman’s 50 argument that corporations must actively participate in maximising stakeholder interest. Freeman argued that whilst corporations do have an important responsibility to look after shareholders’ interests (which BP do freely admit), managers must incorporate this with the competing interests of other stakeholders for the long-term survival of the corporations. However, despite BP’s commitment to the pipeline’s local stakeholders, it does not necessarily follow that they have acted in a Kantian manner, as Freeman’s theory would suggest. Had BP’s actions integrated the Kantian perspective, would the company have proceeded with such a controversial and dangerous project in the first place' The construction and operation of the BTC pipeline has already caused a large amount of disruption to the communities and the environment surrounding it, and if predictions from campaigners are to be believed, many more problems will occur in future years. BP was well aware of these problems, even from the projects inception ten years ago, but continued regardless of the negative impacts its actions would have on the stakeholders of the project. Though BP do maintain that the BTC pipeline will bring benefits to the three countries it passes through, by encouraging economic prosperity, which will outweigh the negative impacts. Perhaps BP’s actions were attempting to satisfy all stakeholders – a compromise between many – as the utilitarian perspective of ethics would articulate. Again, the motives behind BP’s positive actions towards affected stakeholders can be questioned. The issue of enlightened self-interest may indeed be relevant in this case. From the research conducted in this field of business ethics, it can be seen that Freidman and Freeman’s contrasting theories on stakeholder importance are especially pertinent in this case. The debate over whether businesses should simply adhere to shareholder expectations or take into account all stakeholder groups is one which BP openly admits applies to them. BP have addressed this issue, they believe, by encouraging investors to acknowledge the importance of other stakeholders in establishing the company’s brand image and reputation and also by establishing good relationships in the communities in which they operate. They believe that this will result in them being more likely welcomed back for lucrative future projects. However, Friends of the Earth see this as insufficient in addressing stakeholder needs 51 and believe BP are operating in an egoist manner in order to meet their own profitable objectives especially in relation to the Baku-Ceyhan project. Indeed, it does not seem as though BP’s actions towards its stakeholders in this case are nearly enough and the question of whether these actions are out of genuine care and responsibility is a valid one. 52 5.4 - What is BP’s Response to the Environmental Impacts of the BTC Pipeline' Research conducted in the area of environmental ethics aimed to uncover the extent of the impacts the construction and operation of the BTC pipeline had on the environment, and how BP acted in accordance with these issues. The Environmental Impact Assessment for the BTC pipeline considers the risk of a spill in the Gulf of Iskenderun. The risk assessment makes use of a number of scenarios for oil release. The maximum accidental release scenario considered is 10,000 tonnes but the facility is anticipated to be for 80,000 - 300,000 tonne tankers. Mediterranean monk seals are particular at risk in the shipping lanes, which will also cross sensitive turtle sites. Another serious environmental concern is to do with the fact that Turkey lies in a major earthquake zone, and one of the most serious fault lines in Turkey runs directly from Sivas through Erzincan to Erzurum: exactly the route of the Baku-TbilisiCeyhan pipeline. At a conservative estimate (looking just at areas that are right on the route and ignoring the very frequent earthquakes in places like Varto, Bingöl and Muş which are close enough to cause serious damage), there have been at least 17 major earthquakes since 1924 along the pipeline route. The BTC pipeline system will be in place for 40 years – making it almost inevitable that a major earthquake would seriously affect it at some point in its lifetime. (http://www.bakuceyhan.org.uk/more_info/.htm – accessed 10/10/06) The effects the pipeline and the oil it will transport throughout the world has implications on climate change also. Once in full production, the Baku-Tbilisi- Ceyhan (BTC) pipeline will transport 365 million barrels of oil When interviewed, BP stated that there were difficulties in trying to address these issues, especially specifically relating to the BTC pipeline. The likes of Friends of the Earth and BP have fundamental disagreements in terms of energy usage and policy. BP state that the world needs energy and that it is impractical to expect the use and exploration of hydrocarbons to stop. However, BP claim that they do take pollution 53 and climate change issues seriously and are always progressive with new forms of energy and are attempting move gradually towards lower carbon energy sources. Friends of the Earth believe that BP have a disregard for the environment and climate change, stating that BP are acting unethically by ignoring environmental standards which impose on the profitable operation of the pipeline. Friends of the Earth are concerned that if the pipeline leaks, it will cause an ecological catastrophe, causing extensive damage all over the Caspian region, affecting wildlife and communities. The BTC pipeline has environmental implications which include many ethical issues now discussed in this area of theory and literature. For example, global warming, fresh water quantity and quality, degradation of marine environments, land degradation and endangerment of biological diversity, What is difficult to ascertain in a case such as this is what relative level of degradation is considered ethical' As BP stated, the world (humans) need energy and currently the most common source of energy, oil, happens to have severe negative implications to the environment and climate change. Should the needs of humans outweigh the damaging effects our energy usages have on the environment' From the perspective of BP, the answer is quite simply, yes. Humans are of higher importance than of the environment, after all, BP is an oil company and any other answer would contradict their business activities. This implies that BP takes a homocentric perspective on the environmental impacts of the BTC pipeline. BP only have concerns about environmental issues if potential damage would harm humans – these are the issues that they try to address. In this view non-human beings are valuable and need to be protected only if valued by human beings. Conversely, Friends of the Earth take a biocentric viewpoint which implies that consideration must be taken of all forms of life. They believe the moral obligation of humans is to protect from harm non-human entities because they have intrinsic value. For this reason Friends of the Earth believe that BP have acted in an ethically egoist manner, by behaving in a way which is best suited to their own-self interests, regardless of environmental impacts. Had BP acted by the moral principle of 54 Kantianism, they would have treated other species and ecosystems as humans would like to be treated. BP response to the environmental impacts of the BTC pipeline have been analysed and discussed. Directly linking to this discussion are BP’s policies on sustainability and the Triple Bottom Line, which will be discussed thoroughly in the next section of this chapter. 55 5.5 - What are BP’s Policies on Sustainability and the Triple Bottom Line' When researching BP’s standpoint on sustainability and the Triple Bottom Line, focus was placed on the importance they placed on their economic, social and environmental responsibilities and their view on sustainability. Again, Friends of the Earth’s perspective on these issues was also determined, in order to gain an objective overall viewpoint. Corporate sustainability is the goal of the triple-bottom-line and the goal of sustainability is to create long-term shareholder value by taking advantage of opportunities and managing risks related to economic, environmental and social developments. There is becoming a common opinion that societies and corporations must develop in a way which meets current needs without compromising the ability of future generation to their needs. There is an ever-growing perception, one which BP recognise, that environmentally friendly policies can be positive for businesses, in avoiding scrutiny companies can attract like-minded customers and thus boost profits. The Triple Bottom Line principle represents the view that business does not have just one single goal. In addition to adding economic value business has an extended goal set which necessitates adding social and environmental value. BP recognise that economic growth, social progress, population growth and human well-being are all dependent on access to tomorrow’s energy. In response to this, BP is investing to offer alternatives energy sources with low-carbon emissions. In 2005, BP announced its plans to invest $8 billion in a new business called BP Alternative Energy, which aims to extend their capabilities in solar, wind power, hydrogen power and gas-fired power generation. When interviewed, BP stated that the key to achieving sustainability and the triple bottom line was in engaging their stakeholders. They claim that there needs to be a strong engagement strategy when trying to understand the quite often conflicting needs and priorities of stakeholders. In trying to satisfy their economic, social and 56 environmental responsibilities BP claim that there is “no magic formula” but through a strategy of reconciliation BP can try to prioritise these responsibilities in a way which will allow them to walk away from a project with a good reputation. BP hold a lot of importance on their reputation and in the prevention of bad publicity, and for this reason, again, possibly an enlightened egoist reason, they do all they can to maximise their economic, social and environmental responsibilities. Friends of the Earth are committed to campaigning for corporations to take their social and environmental responsibilities more seriously. They believe that economic prosperity for large corporations should not be at the expense of damage to the environment and disregard for human rights. Linking to the ethical perspective of Kantianism, Friends of the Earth state: “If rules, consistency and transparency are good enough for the financial side of a business, then they are good enough for the non-financial areas, such as the social and environmental impacts of businesses.” One of the main problems associated with the Triple Bottom Line in academic literature is that the lack of equal weighting on each of the three responsibilities, economic, social and environmental. This is can be seen in practice from Friends of the Earth’s perspective on the matter and through BP’s slightly indefinite attitude on this area. Friends of the Earth believe that to overcome this problem, governments should be enforcing legislation which makes each one of the responsibilities more clear and a compulsory action for all businesses to take. However, as John Elkington, one of the main contributors to the theory of the Triple Bottom Line suggests, the TBL is less about establishing accounting techniques and performance metrics for achievements in the three dimensions and more about revolutionising the way that companies think about their business. BP certainly do have an awareness of their responsibilities, and how these responsibilities can interlink and ultimately result in profitability, growth and good reputation. 57 5.6 - What are BP’s Policies on their International Ethical Responsibilities' BP were questioned on their international operations, the accusations that its presence in Azerbaijan, Turkey and Georgia were exacerbating conflict and the issue of signing inter-governmental agreements with the three host governments which many say are giving BP colonialist power. The aim was to establish the effects BP’s presence had in the three countries the BTC pipeline runs through and understand BP’s moral actions when working internationally. Discussion and understanding of businesses and their operations in an environmental context can be extended by considering their organisational standings in an international setting. Trade, production and indeed ethical behaviour become more complex when carried out across different nations and cultures. Many of the ethical issues and dilemmas in international business are rooted in the fact that political systems, law, economic development and culture vary significantly from nation to nation. For these reasons, what is considered to be moral in one nation may be considered unethical in others. (Hill, 2007) The BTC pipeline passes through or near seven different conflict zones, and campaigners like Friends of the Earth are concerned about the long-term political instability due to the state-led militarization imposed to secure the pipeline system. Friends of the Earth argue that BP will become associated with human rights violations carried out by its associates and allies to protect the system. In developing countries the construction and operations of pipelines have often triggered further tensions and conflicts on a local scale, and Friends of the Earth have major concerns about the BTC project in this respect, and it undermining the already weak stability of the region. BP claims that companies like themselves are always big targets when discussing these types of issues. With regards to the BTC pipeline, they do admit that the project of this nature can cause regional conflicts, which is difficult to control. BP quite often 58 have to deal with terrorism and host governments who have far more resources at their disposal. Friends of the Earth have stated that there is already evidence that some groups may be disposed to sabotage the pipelines system. If these fears are realised, the human toll could be devastating. Attacks are already being reported, in January 2003, the BakuSupsa early oil pipeline in Georgia was sabotaged, leading to a significant oil spill (60 tons of oil was spilt). Friends of the Earth also have concerns about BP exerting too much control in Azerbaijan, Turkey and Georgia. They state that BP wield far too much power over these countries, undermining democracy and reducing governmental power. In the case of BTC the inter-governmental agreements signed actually exempt the BP consortium from laws affecting human rights and environmental laws. The IGA requires a commitment from each host country to support the project ensuring freedom of oil transit and granting land rights to the project. This will and has caused many landowners around the pipeline to lose their land without gaining adequate compensation. Other provisions in the IGA include unlimited access to water, regardless of the needs of local communities, and exemption from liability in the event of an oil spill or any other harm caused by the pipeline consortium. When questioned on this point BP stated that they were not trying to control local legislation but trying to address the differences between the three countries varying laws, and making them more centralised in order to simplify operations. In order to evaluate BP’s actions with regards to exacerbation of conflict and colonialism, one can apply the ethical criterion put forth by Sir Adrian Cadbury – The Cadbury’s Openness Test. His rule of thumb is to question whether or not the company would be embarrassed to have its actions mentioned in a newspaper. In this test lies a belief that the value of openness is a criterion for ethical judgement. Whether BP would be happy to have its name and reputation linked to conflict and the over-powering of governments is a question only they themselves can answer. However, given the importance BP places on reputation and good publicity, one could make the assumption that they would fail this openness test. 59 Applying Donaldson’s ethical algorithm, the ethical dilemma can be resolved by reference to the host country’s level of economic development, comparing moral standards of a country to its economy. Certain actions which would be deemed as unethical in the developed world might be acceptable in certain less developed social and economic circumstances. If BP were to use this algorithm as justification for their alleged actions, they may indeed find themselves in a paradoxical situation. Although the economic levels of Azerbaijan, Georgia and Turkey are substantially less than Britain or the United States, BP claims that the BTC pipeline will bring economic and social prosperity to the countries the pipeline passes through, therefore surely their moral standards will increase too, according to Donaldson’s theory. Whether or not BP’s actions in Azerbaijan, Georgia and Turkey were based around the moral norms of these host countries or whether BP’s home country standards were applied to the situation can be answered by applying either ethical relativism or ethnocentricism to their actions. Ethical relativism would evaluate the issues from the perspective of the ethical ‘standards’ of the host country whereas ethnocentricism would require the application of home country ‘standards’ on the basis that ethics are absolute. Ethical relativism asserts that whatever a country says is right or wrong for a country, really is right or wrong for that country. It implies that ethical practices differ among cultures; that, as a matter of fact, what is considered right in one culture could be considered wrong in another. If a company were to ask themselves the question, ‘Is it morally right to pay a bribe to gain business'’ the ethical relativist perspective would answer the question by examining the moral norms and practices of the country in question. Ethical relativism is challenged by the ethnocentricism or the moral absolutes approach to international business ethics, which has direct links to Kantian arguments. There are universal values or moral norms that should be followed by all multinationals in whatever country they are operating. 60 BP’s overall company policies on this matter imply that it behaves according to ethnocentricism. Their business operations around the world are carried out according to a certain set of morals and values. They state that: “A company with aspirations to succeed in the long term must have universal standards of individual and collective behaviour that are applied in every activity everywhere around the world.” On a general scale, BP enforce and communicate these ‘universal standards’ via a code of conduct, launched in 2005, to ensure all employees comply with legal requirements and BP’s own standards. The code includes issues such as bribery and corruption, dealing with governments, community engagement and political activity. However, interestingly, what became apparent when researching BP’s ethical behaviour, was how these said ‘universal standards’ were often referred to generally speaking, but how no specific details on these standards could ever be deciphered. This provokes thought on how these apparently integral universal ethical standards and requirements could ever be communicated effectively to employees in order for them to be actively carried out. The Integrative Social Contract Theory (ISCT) discussed previously in the literature review is a theory which is applicable to BP’s international operations in Azerbaijan, Turkey and Georgia. ISCT uses the principles of moral free space and adherence to hyper-norms as a balanced approach to navigating global international waters. ISCT attempts to hold on to both the integrity of universalisable norms, but avoiding the inflexibility of nonconsequentialist stances. While honouring hypernorms, companies like BP do not have to simply adopt a ‘do in Rome as the Romans do’ philosophy, but they do need to be sensitive to the transcultural value implications of their actions. Have BP done this' If so, the concept of moral free space would have made them cautious of the three local 61 country’s culture and morals before making judgement on whether to build and indeed how to conduct their operations most ethically. But as the Integrative Social Contract Theory states, the resulting said judgements usually encompass the realisation that moral tension will be an everyday part of doing business internationally, as BP quite aptly recognises. 62 5.7 - BP’s Overall Ethical Behaviour in Relation to the BTC pipeline (Traditional Ethical Theories) When assessing BP’s overall ethical behaviour in relation to the BTC pipeline, the findings proved themselves to be fairly unequivocal from Friends of the Earth’s perspective. BP, however, proved slightly more complex to analyse. One main point from the research findings which continually reappeared was how BP – the progressive operator’s written and stated policies on its ethical operations differed to its practice. BP’s seemed less concerned about the welfare of its stakeholders in Azerbaijan, Turkey and Georgia and more worried about the damage to its reputation should these stakeholders be ignored. However, it must be acknowledged that BP’s presence in the three countries has provided the regions with some benefits. These benefits have mainly been economical, but they are benefits nonetheless. BP have also claimed to have gone out of their way to help the communities surrounding the pipeline. Looking solely at the traditional ethical theories, one can come to three separate conclusions when evaluating BP’s decisions regarding the BTC pipeline. But only one is truly applicable to BP: • Ethical egoism would require BP to act in accordance with the long-term (financial) interests of the company. • Utilitatrianism would require a comparison of the overall consequences of build/operating or not building/operating the pipeline. • Kantianism would examine BP’s duty to respect the rights of the other stakeholders. From these simplified explanations of the different ethical perspectives applicable to BP and the BTC pipeline, one can see, also taking into account the previous analysis under the different themes, that BP are almost certainly acting in a way which reflects ethical egoism. BP are clearly in the pursuit of their own self-interest. Academics 63 such as Adam Smith (1793) would argue that in the economic system, the pursuit of individual self-interest is acceptable because it produces morally desirable outcomes for society through the ‘invisible hand’ of the marketplace. Kantian supporters, like Friends of the Earth, would argue that this ‘invisible hand’ of the marketplace is morally insufficient. BP’s duty should be to respect the rights of the stakeholders of the BTC pipeline, regardless of the financial outcomes of their own. The objective of the research undertaken regarding BP was to establish whether or not the company’s actions were ethical in relation to previous analysis on the academic literature in the field. With Friends of the Earth’s viewpoint on the BTC project also researched to provide basis for comparison, many issues were addressed and analysed. The main themes, which formed the basis of the research and the analysis of the information collected, were CSR, Stakeholder Theory, Environmental Ethics, Sustainability and International Business Ethics. These themes also incorporated the traditional ethical theories which are vital when assessing BP’s actions. 64 CHAPTER 6 6.0 - CONCLUSIONS The preceding sections of this dissertation have encompassed many ideas and themes relating to BP’s ethical actions in Azerbaijan, Turkey and Georgia. There have been critical discussions regarding the academic literature in the field of business ethics and primary and secondary research has been conducted in order to gain a meaningful insight into the activities of BP in relation to this case. The aim of the research was to fully understand the Baku-Tbilisi-Ceyhan (BTC) project from an ethical perspective, in order to evaluate and analyse BP’s actions when comparing them to literature and theory. To gain wider and more objective research results, interviews were conducted with both BP and Friends of the Earth. The broad themes of CSR, Stakeholder Theory, Environmental Ethics and International Business Ethics were carried through the foregoing chapters and have provided the basis around which the research was collected and analysis and conclusions were drawn. The case of BP’s BTC pipeline has presented major debate and controversy including issues such as exacerbation of conflict, environmental damage and climate change, impacts on communities surrounding the perimeter of the pipeline and colonialism. However BP and its consortium have always maintained that not only have they gone over and above the their corporate responsibilities to take care of the local stakeholders of the project, and will continue to do so during the life-span of the pipeline, but have claimed that their presence in the three countries has and will continue to provide economic and political benefits to the Caspian region. These issues have been researched and analysed in detail, to try to ascertain whether BP’s actions were as unethical as the campaigners against the project have previously suggested. In order to effectively come to appropriate judgements on these issues, research and critical discussion was carried out into literature and theory already published in the 65 area of business ethics. The areas of literature which were most appropriate and which were discussed in-depth were, Traditional Ethical Theories, Corporate Social Responsibility (CSR), Stakeholder Theory, Environmental Ethics, Sustainability and the Triple Bottom Line (TBL), International Business Ethics and the Integrative Social Contract Theory (ISCT). The main academic contributors to these theoretical fields include Freidman, Freeman, Porter, Elkington, Kaler, De George, and Carroll among many others. These theories and theorists have greatly helped in interpreting BP’s ethical actions and their obligations to their stakeholders. Comparing and contrasting theory to practice has assisted greatly in deciphering the moral and ethical implications of the company’s actions in Azerbaijan, Turkey and Georgia. The overall analysis from the research findings has shown BP in varying lights. Their ethical and moral policies regarding their business conduct throughout the world are indeed very explicit and suggest they place a great deal of importance on the issues of stakeholder welfare, climate change, sustainability and their international business operations. BP’s establishment of community projects and compensation for the people situated on or near the pipeline’s route has indeed been commendable, however, this is only the case when one has only BP’s version of events to base judgement on. Certainly, these actions, listed on their own, would suggest BP acted in a utilitarian manner, taking into account all of its stakeholders and acting in accordance to all of their needs. This is only one side of the story however, and as the previous chapters illustrate, BP have been implicated in several serious allegations from the likes of Friends of Earth, which, when analysed cast BP in a very different light. For example, the research conducted regarding BP’s CSR policies has generally implied that the company place a great deal of importance on socially responsible business activities. This conclusion is indeed mirrored when looking at their socially responsive actions in Azerbaijan, Turkey and Georgia. This account on its own, could suggest a utilitarian approach to BP’s actions regarding the BTC project. However, when taking into account Friends of the Earth’s viewpoint, and integrating academic theory on CSR, the portrayal of BP’s actions can be seen more in an egoist light. 66 The concept of enlightened egoism is one which reoccurs throughout the analysis of BP’s ethical actions, both with regards to the BTC project and the company’s general policies of ethical business operations. The link between social responsibility, corporate reputation and profitability is one initially recognised, in part at least, by Freeman. It is therefore fair to conclude that had BP’s own motives for claiming to adopt socially responsible business operations were based on the underlying belief that it would benefit their overall business performance. The reasons for which BP claim to adopt CSR, whether it be for the genuine care of their stakeholders or due to the realisation of the importance of reputation, could by many be considered irrelevant. If businesses recognise the importance of satisfying non-financial stakeholders, why should it matter if the motives for these actions are based on furthering their own economic performance' Stakeholders are being acknowledged, even though not for, perhaps, entirely genuine reasons. The problems arising out of this question do present serious issues though. Of course, if BP are simply trying to keep up this pretence of social responsibility, then one can quite understandably come to the conclusion that these responsibilities are not being fulfilled to the best of their abilities. Indeed, their actions and the problems BP have caused in relation to the BTC pipeline are evidence of this enough. At the expense of community and employee safety, the environment and governmental liberty, BP have ploughed ahead with this project, due to its lucrative potential. International business activities complicate BP’s ethical actions even further, as the company is well aware. BP claim to operate to a set of universal moral standards, i.e. ethnocentricism. What became apparent when researching BP’s ethical behaviour was how these said ‘universal standards’ were often referred to generally speaking, but how no specific details on these standards could ever be deciphered. This provokes thought on how these apparently integral universal ethical standards and requirements could ever be communicated effectively to employees in order for them to be actively carried out. BP’s genuineness and sincerity with regards to its stakeholders, is called into question once again. 67 Issues of climate change, pollution and environmental damage have also been discussed and analysed. By the very nature of BP’s business – oil – the company must take a homocentric perspective. Oil is known to be a damaging substance to the environment, and although, as BP point out, it is the energy source which the world currently relies on most, that does not immediately imply that BP had to ignore the specific environmental concerns regarding the BTC pipeline, put forth by Friends of the Earth. The general conclusion reached after the research and analysis of this dissertation regarding BP’s ethical actions in relation to its BTC pipeline was that the company have acted in an ethically egoist manner. BP are clearly in the pursuit of their own self-interest. Academics such as Adam Smith (1793) would argue that in the economic system, the pursuit of individual self-interest is acceptable because it produces morally desirable outcomes for society through the ‘invisible hand’ of the marketplace. Kantian supporters, like Friends of the Earth, would argue that this ‘invisible hand’ of the marketplace is morally insufficient. BP’s duty should be to respect the rights of the stakeholders of the BTC pipeline, regardless of the financial outcomes of their own. However, it must be acknowledged that BP are not entirely ignorant towards their corporate social responsibilities and their stakeholder welfare. A great deal of effort goes into BP’s policies on ethical business operations, and they have instigated projects in the Caspian region where they operate the pipeline to benefit communities. But as suggested earlier, these policies would appear to be, after closer inspection, created out of ‘enlightened egoism’, and not done out of genuine care for the welfare of their stakeholders. Friends of the Earth believe that the economic growth of corporations comes before people and the planet, that they have too much power and too little incentive to care about communities and the environment. They claim that companies like BP are failing in the area of CSR because it ignores the real problems and because it is voluntary, does not address the core issues. 68 Friends of the Earth suggest the way around these problems is by governments having tighter control over corporations. For example, Friends of the Earth are currently calling on the UK government to enact laws that will ensure making profits is done so within the context of businesses’ responsibilities to their stakeholders and their obligation to ensure their businesses are sustainable long term. Whether or not this will happen and whether this is the answer in ensuring corporations take their socially responsible actions more seriously remains to be seen. But what is apparent is the growing importance of corporation’s ethical business operations, not only for their own self-interest and reputation, but for the good of the stakeholders they are affecting. Globalization has encouraged Multi-National Corporations to shift production, marketing and in BP’s case, oil excavation, to areas of the world which are significantly less developed than host-company nations. Corporations are now exerting far too much power over governments who are perhaps so keen to advance their economic prospects that they may very well allow themselves to be over-powered, even at the expense of their own country’s precious environment and communities. It is vital that BP establish a clear understanding regarding the impact of their global business operations. As stated in previous chapters, companies like BP do not have to simply adopt a ‘do in Rome as the Romans do’ philosophy, but they do need to be sensitive to the transcultural value implications of their actions. For BP to continue its current ethically egoist business operations, they risk losing face in the future from emerging countries and communities, to whom they have ignored their moral responsibilities. This could ultimately have negative impacts on BP, financially speaking and may indeed damage its valuable brand and reputation. 69 REFERENCES BP Annual Review, 2005 BP Horizon Magazine, August 2006 BP Sustainability Report, 2005 Beauchamp, Tom L. and Bowie, Norman E. (2001) “Ethical Theory and Business”, Prentice Hall, 7th Edition Boatright, John R (1993) “Ethics and the Conduct of Business” Prentice Hall, 1st Edition Bradburn, Roger (2001) “Understanding Business Ethics”, Continuum, London, First Edition Bulkin, Bernard. J, Spring 2003 “BP=Bring Profits: In a Socially Responsible Way”, Journal of Business, Vol 18, Iss 1; Pg 7 Carroll, Archie B. (1979). “A three dimensional model of corporate social performance”. 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We are all about being a progressive operator – that’s what makes us different from other companies. We concentrate on enterprise, environment and education, governance and energy. The whole thing about being a progressive company is important to us. BP has actually doubled in size in the last ten years – we’ve grown very quickly. We’re an amalgam although its always been BP of Amoco, Castro etc. A lot of companies and cultures brought together under the BP brand. As part of that we made it a very clear statement internally about what our four key values were. Those were: green, performance, innovation and a real strong one was about being progressive which is about being first mover, being ahead of the game. For example, BP are planning to build Hydrogen Fuel Power station North of Aberdeen, which is obviously a business decision, although the economics have not been proven at all but we believe that we want to be a first mover in whole Hydrogen power area so we’re taking that first step even though the whole tax regime will have to be changed in order to make us profitable. We believe in staying ahead of the game. When it comes to corporate responsibility we like to be progressive there as well and things like the BTC pipeline and the number of private land owners over the land that we wanted to build across. So we wanted to go beyond complying with the law and giving them normal compensation. Going beyond investment, development and long-term infrastructure, community and education projects. Making a significant difference to the countries we built through. 2. With regards to the BTC pipeline, who do you consider your main stakeholders to be' How do you weigh the importance of these stakeholders' With any project we have to identify stakeholders who can help identify stakeholders. The obvious first stakeholder, especially with a project like the BTC pipeline, is the governments of the countries we are working in. Local compliance, local governments. But these are very good starting points as they can tell you what groups we’ll encounter on the route the pipeline takes. Starting with the core stakeholders, firstly the legal ones who can point us in the right direction of other stakeholder groups. Then of course there are the NGOs, the international NGO’s who always take an interest in a project of this scale. But ultimately, governments are the core stakeholders, then from them we can gain a larger picture. 3. You mention NGO’s – how do you deal with their issues' It depends on the NGO. The spectrum is vast – RSPB in this country to Greenpeace who are very different. We believe in engaging with all these organisations – there is no one we wouldn’t speak to unless they are involved with illegal activities. The whole concept our stakeholders is that they have an interest in our company and our actions and we believe we should speak to them. I think there always have to be a certain amount of prioritisation and we’ve got various models we use which measure 73 interest based around their influence and their interest. We try and have a process in prioritising our stakeholders – including NGO’s. But again, speaking to governments can really help in that process. Its good to take on local people to work on the projects themselves. Particularly in our area, external affairs, we would look to employ either staff in local communities or local agencies to work on projects. Its very important we don’t revert to a kind of colonial power with these projects. 4. When you talk of employing local workers – do you have a certain quota you generally work towards' I don’t think we have a global policy on quotas but what you might find that a country may have a quota and local laws may require companies to employ a certain amount of local workers. We would comply with the law. It is in our interests as well to develop the skills of local workers, not only for the construction of the pipeline and also the maintenance of it. There is no point in sending our people in this part of the world when we can develop the skills of those in the countries we’re operating in. So there is a kind of mutual self-interest. Mutual self-interest is a good reason to be corporately responsible. 5. Shareholder Importance' You have to decide how you define the shareholders. The traditional shareholders are those who invest in BP, then you have the partners in the pipeline (we’re only a 30% shareholder in the BTC pipeline) who have a share in the project. But yes, ultimately we are in business to satisfy our shareholders. In some companies, not so much BP there has been tension between shareholders and stakeholders. BP are probably prepared to argue the case to shareholders that we need to go beyond just satisfying their concerns. Obviously some shareholders, particularly individual shareholders of the older variety with a more traditional outlook don’t believe in this new concept of CSR. The most influential shareholders tend to be large institutional investors and they themselves are business people and understand that there are important reputations which are worth considering. Its not usually too difficult to come to a balance between shareholders and other stakeholders. The interesting point is that now NGO’s such as Greenpeace and Friends of the Earth have started buying shares in companies so they can actually maintain an element of control. 6. How does BP weigh up the importance of its economic, social and environmental responsibilities especially with regards to the BTC pipeline' I think that’s where you come back to the stakeholders again – its all about engaging the stakeholders. There is no easy formula, particulary if you take a project like the BTC, which is very complex, involving three countries, numerous different shareholders. There really does need to be a very strong engagement strategy to be able to understand quite often conflicting priorities of different stakeholders. Its just a case of working out what is the best solution all round, to suit as many people as possible. There’s no magic formula and it takes a lot of hard work and communication. It’s about reconciling all the different priorities of different 74 stakeholders. Reconciling and then trying to do something even better, to meet their needs. If this is done, BP can go away from a project, with everyone thinking, what a great company and we’ll more likely to be welcomed back if there is another project. Creating credits – a bank of good will. In today’s 24 hour global media you have to do a good job to prevent bad publicity. We currently have a lot of problems in the United States in Alaska with bad publicity, so we’re suffering there. That’s why we like the concept of a bank of good will, because we’re doing good jobs in other areas of the world – like the BTC, where people have a reasonably high respect for BP. So if things do go wrong, and they can, we can draw from that bank of good will. 7. How does BP respond to the accusation that the BTC pipeline is ultimately contributing to climate change and pollution' It can be quite difficult sometimes to address, because we are talking about fundamental disagreements in terms of energy usage and policy. I have dealt with Greenpeace in the past and I recognise they play a very useful role but ultimately, they are saying that exploration for hydrocarbons should stop. The problem is, the world needs energy and it is very impractical to expect the use and exploration of hydrocarbons to stop. But that can make it very difficult to deal with these types of accusations from NGO’s. What we do instead is look into alternative energy resources, e.g. the Hydrogen Power station in Aberdeen – alternative energy, new technology, which will result in 95% carbon free fuel. So we have to try to remind NGO’s and stakeholders that we do take pollution and climate change issues seriously so we’re trying to provide the energy that the world needs at the same time trying to be progressive with new forms of energy and move gradually to lower carbon energy sources. 8. How does BP respond to the accusation that its presence in Azerbaijan, Georgia and Turkey is exacerbating conflict' I can only really talk generally on this topic. I think companies like BP are big targets, and the nature of the project create big issues, and when you get into the area of regional conflicts it can be difficult. A lot of frustration comes from certain parties and we can become big targets. Obviously Shell have had big problems in Nigeria because of historical conflict between tribes and the government of Nigeria. It can be a very difficult thing to handle. Quite often a private organisations are having to deal with terrorism and host governments, who have far more resources at their disposal, therefore we can become soft targets. 9. Is there anywhere in the world BP wouldn’t go' Our first priority is the safety of our people – that’s an over riding concern with anywhere we go. We always conduct thorough assessments of safety and then of course the environmental impact. There are certain places BP would not go because the risk to the environment is simply to great – for example, the Antarctic, which you’re not allowed to drill in anyway. So yes there are circumstances which would prevent us from going. For example Iraq, there is nothing actually stopping us from going there, but at this stage BP feel it is too dangerous. 75 10. When working internationally, does BP work to its own moral and cultural standards or does it alter them to meet those of the host country' Does it operate with a set of universal morals' Well, it’s a bit of both really. Every BP employee was sent a Code of Conduct document which includes ethical considerations ranging from safety to corruption and bribery and basically sets out the behaviour expected and required of all BP employees. It’s a very serious thing if you break the code of conduct, you’re out. So its very important we have these global moral standards that everyone must follow. But then of course you do have international cultural and moral differences and occasionally you will have times when the code of conduct will conflict with local customs. But the code of conduct will always over-ride local traditions. Even to the extent that we may choose not to operate in a country where its local customs severely contradict our Code of Conduct. Because that Code of Conduct has been worked out over a long period of time, which basically sets standards to which we work to. 11. BP signed an inter-governmental Agreement with the three countries governments, (Azerbaijan, Georgia and Turkey) exempting them from laws (including human rights and environmental) which could make the pipeline less profitable. Many see this as colonial on BP’s part – how do you respond to this' I would be surprised if we were trying to control local laws. There is the issue of trying to address the differences between the three countries different laws, and making them more centralised to simplify operations. But it is something I have very little knowledge on. 12. Obviously, there will be many economic, social benefits to the countries which the BTC pipeline runs through. Do you think one country will benefit more than the others' The obvious one is Azerbaijan because that is where the oil is coming from but all three countries will undoubtedly benefit enormously. Not only for economic reasons but due to all the projects which BP has dedicated to the communities. 76 APPENDIX B Friends of the Earth Interview Questions – Telephone Interview 1. What are your views on BP’s and other oil company’s policies on CSR' Are these policies sufficient' What do you think they should be doing' 2. Do you believe the BTC pipeline was developed by the BP consortium with the well being and long-term interest/benefits of every stakeholder in mind' Or do you believe it was a project devised only to generate profit' 3. Who do you consider the main stakeholders to be with regards to the BTC' 5. How do you believe companies like BP should weigh up their economic, social and environmental responsibilities' 6. With regards to the BTC pipeline, how do you believe BP is contributing to climate change, pollution and environmental damage' 7. What is Friends of the Earth’s standpoint on BP and the BTC’s association with human rights violations and exacerbating conflict etc' 8. Do Friends of the Earth acknowledge that the BTC pipeline will benefit the three countries in some way' 9. BP and inter-governmental agreement' BP and the issue of colonialism' 10. What actions do Friends of the Earth believe BP should now take with regards to the BTC pipeline operation' 11. When operating internationally, does Friends of the Earth believe that businesses should operate in accordance to the host country’s values and morals or adopt a more universal moral approach' 77