Oil and mining companies should exercise leadership to ensure host countries benefit from their operations, argues Daniel Litvin
One senior manager in a western oil giant has described it as
potentially equivalent to tobacco litigation – an issue that ultimately
could cost firms billions of dollars.
The issue in
question is the ‘resource curse’, the theory that oil and mineral
extraction, far from aiding the economies of poor countries,
contributes to underdevelopment, corruption and even conflict. Although
the idea is not new, it has become more prevalent in recent years, and
has been taken up by a number of campaigning non-governmental
organizations.
While it is arguable that some countries
have certainly not been cursed by their resources – and in fact have
used them to widespread social and economic benefit – it is undeniable
that many others appear to have suffered as a result of their new found
‘wealth’. Whether this is a valid perception or not, business has to
face the fact that it is becoming common currency. As many oil fields
and mines in the rich world approach the end of their lives, big
western firms are increasingly seeking out reserves in poorer
countries. Favourite investment destinations for the oil industry
currently include West Africa, the Caspian, and (no doubt before long)
Iraq: all places with deep social problems. This comes amid a general
climate of suspicion regarding the behaviour of transnational companies.
The theory threatens not just the reputation of the big firms, but
could undermine the overall political climate in which they operate. If
the firms are perceived to be fuelling economic and social problems in
developing countries, governments eventually may respond with tougher
regulations.
From the companies’ perspective, solving the
issue presents major challenges. Better behaviour is called for not
only from them but also from the host governments (who need to manage
their economies better). Yet firms could be accused of neocolonialism
if they tell governments how to behave.
The big western
firms are already involved in various diplomatic initiatives (the
Extractive Industries Transparency Initiative comes to mind). But these
tackle only part of the ‘resource curse’ and could take years to bring
significant change. What is needed is a more ambitious, pre-emptive
company response: establishing a high-profile world commission of
independent experts, for example, to report speedily on ways in which
the firms should contribute to solving the problem – and also
(importantly) on what governments must do. As well as raising standards
of the CSR laggards in the sector, such an initiative would help
protect companies from criticism regarding problems for which states
are ultimately to blame. Over-ambitious? The scale of the potential
problem threatening their own long-term growth demands that companies
exercise leadership on this issue.
Daniel
Litvin is author of Empires of profit: commerce, conquest and corporate
responsibility (Texere), and director of Percept Risk and Strategy Ltd.
[email protected]
