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CORPORATE SOCIAL RESPONSIBILITIES OF SHELL PETROLEUM DEVELOPMENT COMPANY (SPDC) AND NIGERIA AGIP OIL COMPANY (NOAC) FOR SUSTAINABLE COMMUNITY DEVELOPMENT IN RIVERS STATE.

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CHAPTER ONE

 

INTRODUCTION

Background to the Study

Corporate social responsibility (CSR) also called corporate citizenship, is a concept whereby organizations consider the interest of society by taking responsibility for the impact of their activities on customers, employees, shareholders communities as well as the environment. Corporate social responsibility goes beyond statutory obligation to comply with legislation but voluntarily taking further steps to improve the quality of life for employees, the local communities, and society at large. Today, the principle of CSR dictates that organizations must not only ensure returns to share holders, wages to employees and products and services to customers, it must also respond to community, societal and environmental concern.

Kaliski (2007) saw social responsibility as an ethical or ideological theory which shows that an entity whether it is a government, corporation, organization or individual, has a responsibility to the society. He proceeded by saying that this responsibility can be “negative” in that it is a responsibility to refrain from acting (resistance stance) or it can be “positive” meaning there is a responsibility to act (proactive stance). Kaliski went further to say that social responsibility is voluntary. It is about going above and beyond what is called for by law (legal responsibility). It involves an idea that it is better to be proactive towards a problem. Social responsibility means eliminating corruption, irresponsible or unethical behaviour that might bring harm to the community, its people or the environment.

Reynard and Fortes (2002), say however, for many MNCs CSR is an outcome of public pressure arising from their operations in developing countries in relations to human right, environmental pollution and labour issues. He proceeds, CSR is a process driven by globalization. Proponents of CSR are keen to demonstrate that business has responsibilities beyond the production of goods and services and profit making. Social responsible business in today society must maintain ethical principles in order to be successful.

Abagail and Donald (2002) assert that CSR depends on its size, level of diversification, research and development, advertisement, sales, consumers income, labour, market conditions and stage in the industry’s life cycle. Base on these cost benefit analysis of the corporation, the ideal level of CSR which managers can offer is determine. There is relationship between  CSR and financial performance of any organization.

The principle of CSR holds companies or organizations responsible for the people they affect, it also holds the companies responsible of inactive or indecision. Basing that organization has the power to help people or at least not harm them. Social responsibility is a doctrine which says that every being whether it is village, town, state, corporation, organization, government or individual has responsibility to the society. Social responsibility is a doctrine which says that every being whether it is village, town, state, corporation, organization, government or individual has responsibility to the society. A sustainable community is continually adjusting to meet the social and economic needs of its residents while preserving the environment’s ability to support it. A sustainable community uses its resources to meet current needs while ensuring that adequate resources are available for future generations. It seeks a better quality of life for all its residents.

Wheeler (2002) asserts that sustainable communities maintain nature’s ability to function over time by minimizing waste, preventing pollution, promoting efficiency and developing local economy. He concludes that a sustainable community is a living system in which humans, natural and economic elements, are interdependent and draw strength from each other.

The oil industry in Nigeria is predominantly located within the Niger Delta region. Most of the inhabitants of this region are heavily dependent on the environment for livelihood, through fishing and farming. However, oil exploration by multinational oil companies (MNC) has had a lot of negative environmental, political and socio-economic influence on the communities. The dynamite (explosives) used by exploration companies for exploration destroys aquatic life, cracks the communities buildings (houses) and oil spillages which flow into lands, rivers, swamps and creeks destroy crops, and make the soil sterile and unproductive.

Environmental degradation is very obvious and as a result, poverty is a pervasive problem among these communities. This has resulted in the development of a sense of relative deprivation and perception of alienation within the host communities.

Suberu (1998), observes that the difficulties and deprivations of oil producing communities have invariably brought them into direct confrontation with the oil prospecting companies. These agitations are being spear headed by ethnic Nationality, Associations such as the Movement for the Survival of Ogoni People (MOSOP). Ethnic Minority Right Organization (EMIRON) and numerous others. The conflict between the oil producing communities and the multinational oil companies has manifested in several forms. Hutchful (1998) asserts that at times it involves disruption of company’s operations through blockage of company premises, and access routes to production sites forcible seizure of oil installations and protest demonstrations. It may also take the form of destruction and theft of company properties. Some times the conflict can manifest in legal tussles arising between affected groups or individuals from the oil bearing communities and the affected oil producing companies.

The activities of the oil industries in Nigeria is dominated by multinational oil companies such as Shell Petroleum Development Company (SPDC), Chevron, Mobil, Texaco, Elf, Nigeria Agip Oil Company (NAOC), etc.

These oil companies operate under a joint venture agreement with the Federal Government, represented by the Nigerian National Petroleum Corporation (NNPC). Shell Petroleum Development Company of Nigeria Limited (SPDC) is the largest oil and gas exploration and production company in Nigeria. It is the operator of a joint venture in which NNPC holds 55% percent shares; Shell 30 percent, Elf 10 percent and Agip 5 percent.

Shell Development Company of Nigeria is prominent in the history of Nigeria’s development since the need to develop the country has over the years been wholly dependent on fund from the oil industry. The oil exploration. The discovery of oil in 1956 in commercial quantity and its subsequent oil boom in 1970’s Nigerians Societies have observed remarkable structural transformation which has resulted to rapid urban development as opposed to environmental degradation of oil bearing communities.

Shell Diary, (1998) shows that SPDC produces almost half of the country’s oil from more than 90 oil fields in the Niger Delta areas. It also supplies 95% of the country’s commercial gas reserves. The scale of SPDC operation is massive, involving an estimated land of 6,200 kilometers of pipeline more than 1000 wells, 87 production stations, 9 gas plant and large terminals at Forcados and Bonny.

Nigeria Agip Oil Company (NAOC) struck oil in 1965, but actually started production in 1970. The federal government of Nigeria has control over all oil companies through the Nigerian national petroleum corporation (NNPC). NNPC has a share of 55 percent on Nigeria Agip Oil Company. Agip has two terminals at Brass. The terminals handles treatment, storage and shipment of crude oil. The brass terminal is one of the spots where crude oil is exported in Nigeria.

Many communities and individuals have spoken against the activities of Shell and Agip in their areas of operation. The assumptions hold that the oil companies in Nigeria are massively exploiting their host communities but giving little or nothing in return to the people.

Uwen (2002) says that a closer examination of issues shows that underdevelopment in Rivers State could be linked to Corruption, poor governance (political and corporate), and lack of accountability on the part of Nigerian government, its leaders and statutory agencies. He went further to say, it is simply not enough to declare commitment to CSR objectives or have CSR programmes, rather CSR initiatives should serve as useful means for mitigating the negative effects of the existing relationship among key stakeholders in the Nigeria oil industry, that is the FGN, the oil MNC (Shell and Agip) and the host communities. After all, CSR is really about the management of relationships.

Prior to 1995, Shell’s CSR strategy in Nigeria focused on risk and reputation management. For the purpose of contributing to socio-economic development of Niger Delta communities, Shell adopted the community assistance (CA) approach to development, which emphasized corporate philanthropy. It was essentially about giving things to the communities. (Ogwuezi 2002).

With its CA approach to development, Shell placed emphasis on “gift” rather than support for sustainable development programmes. This focused on what Shell felt the communities lacked or on Shell’s perception of poverty within the communities. Ite (2002) posits that as a result, the communities became perceived as helpless victims of circumstances rather than capable actors in the development process. Gradually, the dependence culture became established and the communities saw the development of infrastructure provided as charity and as a form of rent for Shell’s use (and abuse) of the environment and resources. In effect, the community groups were the passive recipients of Shell’s donations. This is typical of the top-down approach to development (development not conceived with the full involvement of the people) which has been found to be largely an ineffective approach to poverty alleviation.

Statement of the Problem

Rivers State is one of the major oil producing state in Nigeria. This makes the state a significant contributor to the country’s national income. However, her contribution to the national economy has not translated to corresponding physical and human development in the state, despite the fact that the people and their communities suffer and make lot of compromises for the land to produce crude oil that Nigeria depends upon for significant percentage of the national income. Often the people of the oil rich state complaint of deprivation, marginalization, environmental pollution and general neglect by both the government and the multinational oil companies involved in the exploration and exploitation in their communities.

Armanyie (2001) posits that this area that contributes the largest chunk of the country’s revenue has remained the most neglected and impoverish in Nigeria. Inspite of the huge contribution of the region to the nation’s economy, the inhabitants continue to live in abject poverty, suffers both ecological and environmental degradation, and remain grossly underdeveloped, lacking the most basic amenities that make life worth of living such as good drinkable water, good roads, electricity, manpower development, good health service etc.

The continued neglect and low development level of physical and human resources especially the lack of basic social amenities in almost all the oil producing communities have led to series of violent and conflicts between the indigenes of the state and the multination companies. To ensure rapid development of the oil producing communities and to make the multinational companies partake meaningfully in the development process of their host communities, the principle of Corporate Social Responsibility (CSR) was introduced. This principle of CSR imposes some responsibilities that would make the companies return some of their profits to the communities in term of physical and human development. This study therefore examines the practice of CSR by the SPDC and NAOC as it affect sustainable community development in oil producing communities of Rivers State, Nigeria.

 

Purpose of the Study

The general purpose of this study is to examine the corporate social responsibilities of Shell petroleum development company (SPDC) and Nigeria Agip Oil Company (NAOC) for sustainable community development of the host communities in Rivers State. Specifically the study aims:

  1. to examine the corporate social responsibilities of SPDC and NAOC for sustainable development in its host communities in Rivers State.
  2. to examine the extent to which corporate social responsibilities assist in the resolution of conflicts between the oil companies and their host communities in Rivers State.
  3. to examine the extent to which corporate social responsibilities of SPDC and NAOC are promoting sustainable community development in their host communities in Rivers State.
  4. to examine the extent to which corporate social responsibilities of SPDC and NAOC help to mitigate environmental degradation of oil producing communities in Rivers state.
  5. to examine the extent to which the corporate social responsibilities of SPDC and NAOC have influenced the socio-economic life of the host communities in Rivers state.

 

Significance of the Study

This study is of great significance to the oil bearing communities, as its findings and recommendations will strengthen community development programmes of oil companies in meeting the developmental priorities of the host communities.

The findings of the study is also important to the government, since it will contribute to the body of knowledge on the critical issue of conflict resolutions between oil companies (Shell and Agip) and the host communities especially at this time the conflict has assumed greater dimension including hostage taking, and government is highly in need of enacting policies and recommendations that will bring about peaceful resolution of the issue.

The findings of the study is significant in that it will make the multinational oil companies identify corporate social responsibility practice for sustainable community development and give recommendations on the way forward to establish cordial relationship between them and their host communities, since CSR is more of management of relationship.

The findings of the study will help to identify those policy reforms including laws that excluded communities from participating in their developmental processes and make necessary recommendation that will correct these policy measures.

Finally, the findings of the study will add to the body of knowledge to community Development in Adult Education, since it deals on corporate social responsibility in relation to sustainable community development. Such knowledge will be very useful to guide future research on similar issues in the research area.

Research Questions

The following research questions were posed to guide the study.

  1. What are the corporate social responsibilities of SPDC and NAOC for sustainable community development in their host communities in Rivers state?
  2. To what extent do the corporate social responsibility of SPDC and NAOC help in resolving conflicts between the oil companies and their host communities in Rivers State?
  3. To what extent have the corporate social responsibilities of SPDC and NAOC helped to promote sustainable community development in Rivers State?
  4. To what extent have the corporate social responsibilities of SPDC and NAOC helped to mitigate environmental degradation in the host communities in Rivers state?
  5. To what extent have corporate social responsibilities of SPDC and NAOC influenced the socio economic life of the host communities in Rivers state?

 

Hypothesis of the Study

The following hypotheses which were tested at 0.05 level of significance guide this study;

  1. There is no significant difference in the mean ratings of respondents on the corporate social responsibilities of SPDC and NAOC for sustainable community development in their host communities in Rivers state.
  2. There is no significant difference in the mean ratings of respondents on the corporate social responsibilities of SPDC and NAOC in resolving conflict between the oil company and the host communities in Rivers state.
  3. There is no significant difference in mean ratings of respondents on the corporate social responsibilities of SPDC and NAOC in promoting sustainable community development in Rivers state.

 

Scope of the Studies

This study covers the activities of multinational oil companies in Rivers state. With particular interest on the activities of Shell Petroleum Development Company and Nigeria Agip Oil Company in their area of operations in Rivers State. The operations

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