Leiden Law Blog

CSR for the sake of appearance

Posted on by Jari van Werkhoven in Private Law
CSR for the sake of appearance

Gazprom the Russian state-owned energy company lately received the shame award. The World Economic Forum grants this award annually to the most irresponsible multinational. The possessor of the largest gas reserves obtained this award because it violated several safety and environmental standards. Disquieting is that Gazprom is the company that will exploit the gas and oil reserves in the Arctic region. How can the winner of the irresponsibility award be trusted with the exploitation of the Arctic oil and gas reserves and therefore the safeguarding of the environment in that region?

Notwithstanding the award, Gazprom does have a Corporate Governance Code and a Corporate Ethics Code. These codes sound rather promising. Has the award been granted to the wrong firm? Or is the corporate social responsibility (CSR) policy of Gazprom an empty shell? To find out I will briefly analyse the CSR policy of Gazprom and do a reality check.

Multi-stakeholder approach

Gazprom is well aware that it is expected to behave as a corporate responsible citizen. Therefore the company created its own CSR principles. To overcome concerns from all over the world the Russian Minister of Energy Donskoj assured that the Russians will apply the multi-stakeholder approach to the exploitation. The section in its Corporate Governance Code concerning the involvement of stakeholders states the following: “Gazprom will secure the Company's active cooperation with investors, creditors and other stakeholders for the purpose of increasing in the Company's assets, value of stock and other securities of the Company.”

This section of the Corporate Governance Code centralizes the increase of assets, stock and value in its relation with the Gazprom shareholders. This completely undermines the idea of a multi-stakeholder approach, which is what CSR is all about. At the heart of this approach lies the willingness to exchange views with different stakeholders and try to come to a reasonable solution for problems that affect the stakeholders.

Oil spills

Most concerns have arisen about the possible environmental damage that could be caused by the oil extraction by Gazprom in the Arctic. Gazprom’s Corporate Ethics Code expresses that Gazprom will “use every effort to preserve the climate, biological diversity and to prevent any possible damage to the environment”.

It has been estimated that around 500,000 tons of oil are being spilled in Russia every year. Gazprom being the biggest of the oil and gas exploiters, it is responsible for the lion’s share of these spills. The coherence between the CSR policy and reality is completely absent.

Regulation from the Russian state is in my view unlikely since the state owns more than half of the share capital of Gazprom and earns billions of money from the exploitation.

Nenets

The habitat of local tribes will be harmed badly by the oil exploitation. The Nenets are one of these tribes. They are indigenous nomads who live on the Yamal Peninsula close the Arctic.

Gazprom’s Corporate Ethics Code states that it will “take account of the interests and rights of indigenous peoples to follow their traditional lifestyle and preserve their primordial living environment”. However, reality shows that preserving an environment in the eyes of Gazprom means constructing railways, roads and pipelines. The Nenets have little hope that Gazprom will see them as real stakeholders. On the contrary, when representatives made an appearance at a local festive occasion they offered token gifts but nothing substantial.

Taking all of this into consideration, we cannot escape the conclusion that Gazprom promises to do one thing and does something else. The company does not take CSR seriously at all and that is an unstoppable jeopardy for the Arctic region.

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