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Masood Lohar

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Business with strategic community ties
by Masood Lohar   
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Last edited: Thursday, December 29, 2005
Posted: Wednesday, July 06, 2005

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Daily Dawn-9th May 05

COMMUNITY relations have become a strategic imperative for corporations around the world. Whether it is an oil and gas company exploring and producing hydrocarbons in a country’s remotest parts or a consumer marketing entity sitting right in the heart of a mega-city, good community relations have acquired a strategic importance for not only industrial peace but also for business development.

The recent crisis in Sui also highlights the importance of strategic community relations. Without going into the merits of the conflicting claims of the Sui community and the company, we will just see how the scenario would have been if the sociologists were the face of the company instead of armed personnel. The intriguing thing is that company affairs ultimately become community – state imbroglio, much to the dismay of the nation.

Traditionally, a reservoir engineer’s job or a driller’s job was done by a professional engineer or a driller but if it was something dealing with communities, anyone was supposed to do it. Such functions, in most of companies were predominantly performed by engineers, general administrators or even retired army officers.

Sociologists have not been taken seriously until recently. The community relations has undergone a significant evolutionary process. Gone are the days when community relations was just a “diaries and calendar” or a “gun and gate” department. It has now become an interface between company and society. The mere “public relations” outfit in corporations has now risen to “corporate social responsibility” which has more scientific and strategic base and has a proactive trait.

Pakistan is one of those countries where regional disparities and wide gap between rich-ruling class and poor are dominating features of social dynamics. The oil and gas exploration and production (E&P) sector finds itself mostly in the remotest parts, characterized by poor communities and fragile environments.

Lack of government interest or resources to develop these areas and the rise of grass root activism tempt communities to associate expectations with the hydrocarbon exploration and production activities. Such conditions reflect on overall business environment especially in terms of security, law and order.

Why strategic community relations: Ranging from corporate ethics to proactive rather than reactive relations management, the reasons for good community relations are numerous.

Changing world: In a world which is connected, concerned and has many mouths and ears, things do not go unnoticed nor easily forgotten. Similarly, the share-market driven trend of business also calls for certain demonstration of corporate social responsibility which will provide universal acceptance to a company.

If anything goes wrong with the community relations of a company, even in a remotest part of an underdeveloped and God-forsaken country, the business can suffer in the other parts of the world. Then the globalization of justice is another element which highlights the importance of good community relations. One classic example is that of Texaco which has faced a $ 1.5 billion lawsuit in its country of origin, i.e., USA by 30,000 Ecuadorians. Texaco was accused of environmental disasters especially leaving 600 open-pit toxic sites.

The overt and hidden costs for security and winning smooth operation can be avoided if strategic community relations are part of the management considerations.

Another example is of the conflicts between oil companies and village communities in the Niger Delta, Nigeria which has lasted for several decades. However, the anti-Shell Petroleum Development Company (SPDC) protests by the Movement for the Survival of the Ogoni People (MOSOP) — which led to SPDC’s withdrawal from the Ogoni area in 1993 — has been the major source of international attention.

MOSOP has been campaigning for a greater share of oil revenue from the government, political self-determination as well as ownership of the oil beneath their land. It called for $6 billion in rent and royalties from SPDC and demanded compensation of $4 billion for environmental devastation which it claimed had poisoned the soil and rivers.

SPDC was also accused of collusion with the government in ‘the genocide of the Ogonis’ and assisting rivals in ethnic clashes. Later the world-known author and MOSOP leader, Ken Saro Wiwa and nine Ogoni activists were executed by the military regime of General Sani Abacha in 1995.

Shell returned in 1997 to Niger delta with a new philosophy. It started improving its community relations by substantially increasing community development budget and spending on income resources generation. Shell’s withdrawal and return in Niger Delta heralded a new phase in the E&P industry in which the concept of corporate social responsibility started taking a shape.

Grass-root activism and media: Being uneducated, unskilled and socially backward, the rural communities do not get chance of employment or business opportunities from the E & P companies. This leads to suspicion, mistrust and ultimately conflict, which result, into disturbances in smooth operation.

The democratization of media, as result of which a variety of cable TV channels, access to internet and e-mail even in the small towns and the print media, have brought every physical and intellectual corner of the country into lime light. In the true spirit of the world being a global village, the people have found many mouths and many ears from across the globe.

The grass-root activism and public awareness have compelled E&P companies to develop win-win strategies in order to cover as much as possible the community concerns and expectations. The win-win strategy devises community development plan and impacts employment policies, supply and procurement and contracts.

Social planning influencers: In view of the absence of specific international industry standards, comprehensively addressing socio-economic planning and management, the E&P sector shapes its policies in response to the following during a project life cycle:

Country-specific regulatory bodies (director general petroleum concession (DGPC); declaration by the UNO and the ILO; lending institutions requirements and standards (IFC, World Bank); and, the corporate company policies.

The oil and gas regulatory bodies in the third world are making their policies more and more community-friendly. In Pakistan, if we compare the petroleum concession agreements (PCA) signed 15 years back with new ones, the difference will seem to be phenomenal. The new PCAs not only obligate companies to substantially spend on the community development but also specifically talk about local employment and provision of business opportunities to local communities.

The ILO convention 169 calls governments to initiate new measures, regional plans and specific projects that could benfit indigenous people, and ensure for their participation.

The Social Accountability 8000 (SA8000) also emphasizes on the involvement by all stakeholders in the decision-making.

The IFC—the private sector development arm of the World Bank Group— is committed to financing only environmentally and socially sound projects. The Environment and Social Review Unit of IFC carefully assesses the socio-environmental impacts of any project before considering to fund.

Win-win strategy: In order to avoid getting caught in the internal conflicts between various groups, it is very important for any E&P company to integrate the social planning issue in the project life cycle. A win-win strategy believer company plans right from the stage of it’s entry into any country. Identification and contact with stakeholders and reflection of their issues and concerns in your policies is the fundamental ingredient for the health of any enterprise. It is, in fact, food for the soul of organization.

The following are the major ingredients of the win-win strategy:

Community-friendly organization— The first and most important ingredient of community-friendly organization is dedicated professional community relations (CR) team.
· The CR team should not only play a role of an interface between the company and community but also as a watch-dog to ensure that policies are community friendly
· The CR team will be the company’s face for the community and vice versa.
· Proper community management procedures and project-life community development plans
· Social impact assessment surveys before geological survey and exploration phase
· Baseline survey and development of social profile of the area of operation
· CR guidelines and community friendly knock-knock strategies for contractors or subcontractors. E&P sector often sublets most of its works to contractors and thus remains responsible to train and build their capacity for careful handling of social issues.

Stakeholder involvement: The involvement of stakeholders and public consultation takes a company from a position of confrontation, dependence and isolation to a position of mutually agreed and understood interdependence.

Strategic philanthropy: The indifferent and then “chequebook philanthropy approach” of spending on community is being replaced by “strategic philanthropy” or “participatory sustainable community development”. The donor-beneficiary partnership is now being replaced by multi-stakeholder partnership for sustainable community development.

The strategic philanthropy ensures that the company’s spending is just not for the sake of fulfilling the formalities or obligations of the regulatory bodies but a firm commitment to improve the quality of life of the communities through sustainable projects.


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