International Environmental Law
- To what extent should the government of an oil or gas-producing nation seek advice from outsiders on how its oil or gas reserves should be developed and the resulting revenues should be used?
- How far should an oil or gas company go in supporting the development of local communities in which it operates and to what extent should it take on government responsibility for this?
- Responsibility for Environmental Management: To what extent should the government of an oil/gas-producing nation and/or an oil company seek specialist advice from outsiders, including NGOs on how environmental issues should be managed? What rule should apply to NGO activities?
Consulting External Advice
To a great extent, the government of oil producing nations should be more focused on establishing local contents and benefits as opposed to relying on outside help on how to develop their oil reserves. First, it is imperative that the government has very clear objectives concerning those responsible for the exploration (Wokoro 2010: 323). They should identify the arms of government responsible for upholding the various aspects of their national development goals. More importantly, the government should have a robust plan on the implementation of the development process. This implies that that the government should first seek domestic expertise and advice concerning matters of oil exploration as opposed to external sourcing. However, in cases where there is an identified lack of expertise such as technology and various issues, then outside assistance can be sought.
Oil exploration presents numerous challenges and dilemmas especially those associated with environmental impact and the economic returns likely to be acquired from the projects. Most developed countries will have the resources and capacity to undertake oil exploration independently. Most oil exploration companies also originate from the developed countries including Shell and BP (Söderholm & Svah 2015: 81). As such, there is a concentration of expertise and resources in these countries. On the other hand, there is an identified lack of expertise and resources required in oil exploration in the developing countries. Oil exploration is a costly and sensitive undertaking and most developing countries lack the huge capital and expertise locally to undertake exploration (Morrison, Wilson, & Bell 2012: 481). This makes it necessary for the developing countries to seek outside advice and expertise in developing oil reserves.
By and large, seeking expertise and advice from outside by governments should be done within a clearly defined framework. Developing of oil resources should be largely a domestic undertaking with little interference from outside. Expertise should be sought where necessary. In addition, it is the responsibility of the government to consult the various stakeholders in developing the policies that will guide resource allocation and use (Sullivan, Ryser, and Halseth 2014: 220). This will prevent any crisis that would emanate from corrupt resource allocation.
Likewise, revenue distribution in oil producing countries should be an internal issue concerning the various stakeholders. This should a participatory process whereby all relevant stakeholders are involved in planning for wealth distribution to avoid crisis where sections or groups feel left out. The general expectation is that oil revenues will be invested in developing the public infrastructure. This requires that the government manages the oil sector in a prudent manner. Transparency is mandatory if revenues are to be managed and distributed effectively. to achieve this, the government and the relevant stakeholders must be in consensus in establishing effective and relevant policy and legal framework for the regulation of the oil sector. There should also be an institutional capacity for the economic management and development. Additionally, the government should devise procedures and mechanisms for the implementation of provisions in the national oil policy including sharing of the oil revenues. There should be minimal external intereferances in sharing of oil revenues.
The Role of Oil Companies in Development of Local Communities
The last decade has seen a tremendous increase in agitation by the various stakeholders for oil companies to embrace social responsibility. This is viewed as a way of encouraging sustainable development as well as mitigating the social risks that could have profound effects on the project’s bankability and rate of return. On a wider scope, it is taken as a way around the age long challenge of environmental degradation, infrastructure decay, corruption and staged development, and human rights abuses that characterise resource rich communities especially in emerging economies (Ruggiero, Onkila, & Kuittinen 2014: 156).
Social responsible practices by MNCs has generated heated debates central to the management practice and decision making. Indeed, some scholars posit that managers should operate business purely within the interests of the shareholders. They argue that using the resources of the organization for good social good largely undermines the market mechanism and jeopardizes the survival of the organization and places the management in the place of nonelected policy makers (Ranängen & Zobel 2014: 299). Contrasting views posit that business posses the responsibility and indeed and obligation to help challenges of public concern (Finch, Deephouse, & Varella 2015: 265). This is seen as an issue of enlightened self-interest for corporations to be socially and environmentally responsible primarily because ethical behaviour is far more profitable and rational than unethical behaviour. It is also critical for organizational effectiveness.
Social responsibilities by MNCs has three facets including compliance with the law, establishing and adhering by moral and ethical standards, as well as giving philanthropically. As such, social responsibility becomes the obligation of both the society and the business to assume proper legal, ethical, and philanthropic initiatives will not only protect but also improve the welfare of both the society and the business (Ibrahim & Aziz 2012: 242). These responsibilities should be achieved within the economic framework and capacities of the parties involved.
There is enough evidence that good corporate citizenship indicates that MNCs have an obligation to act responsibly as members of the societies granting them a legal standing. The implication of good corporate citizenship goes beyond meeting the minimum or expected legal requirements (Hannon & Bolton 2015: 198). By and large, social responsibility entails notions of voluntary corporate behaviour that are acceptable and beneficial to the various social and constituencies surrounding the business enterprise (Steiner & Atterton 2015: 98). As Ruggiero, Onkila, and Kuittinen (2014: 53) notes, by their very nature, MNCs operate within dissimilar societies where values, expectations, and standards of corporate conduct differ radically. the big diversity in attitudes, systems, and cultures makes it difficult than in the case of homogeneous national business setting that determine common standards for expected corporate conduct. In this regard, MNCs can participate in social governance directly, not only within their boundaries but indirectly by reaching out to the wider society.
Corporations can be called on to take government responsibility for development of communities in areas where they operate. This happens in exceptional circumstances where they are called to take on additional responsibilities because the government has failed in carrying out these duties. In some developing countries like South Africa and Nigeria, the role of the oil companies in social responsibility is broadest because the free market regulating mechanisms are not fully effective or formed (Van Alstine, Manyindo, Smith, Dixon, & AmanigaRuhanga 2014: 56). Oil companies in such circumstances have a distinct challenge but also an opportunity to address the social responsibility issues. In some cases, the host government lacks the legal framework, established traditions, experience of market economy, and societal infrastructure.
Some situations force MNCs to take responsibility for functions of the government as a matter of necessity rather than by choice. The case of weak governments which does lacks capacity to address issues like education within the local communities where exploration is taking place (Ruggiero, Onkila, & Kuittinen 2014: 56). In some regions like the Niger Delta region, local communities demand for MNCs to take up social responsibility and development duties (Söderholm, & Svahn 2015: 258). The argument by the local leaders in these communities is that the wealth that is generated should be used for the community development. The idea of wealth creation is a central one to the economic role of companies, but it is the society that determines the extent to which such wealth can be enjoyed as well as the value systems surrounding the enterprises.
Responsibility for Environmental Management
It is the role of the government of oil producing nation to set up laws that focus on enforcing regulations to minimize the potential impacts on the environment. Performance-based regulations have been cited as more effective in stimulating more innovative environmental management across all areas as opposed to the traditional command and control approach (Feng, Zhang, & Gao 2014: 395). As such, consultation with the relevant stakeholders including NGOs and local communities forms an essential element of good environmental management. According to Mahdavi (2014: 228), some NGOs possess a rich resource of environmental management expertise and information that they can offer to governments. Such NGOs are directly involved in local management of the environment and should be involved in the planning stage (Ako 2015: n.p).
UNEP for instance, offers guidelines on environmental management for governments and oil companies. These guidelines are focused on oil production and are based on the collective experience the NGO has gained in the industry (Van Alstine, Manyindo, Smith, Dixon, & AmanigaRuhanga 2014: 58). The guidelines help to meet challenges of integrating protection of the environment within the regulatory and business process in oil production (Poisson-de Haro & Bitektine 2015: 326). By and large, the UNEP guidelines can be used by the host governments and the oil companies as a basis for preparing regulations, programmes, and policies that minimize the impact of oil production activities on the environment.
Environmental management planning and initiatives should be established based on the various legal and policy frameworks. Oil companies and governments should consider the national, regional, and international Laws and conventions (Ghandi & Lin 2014: 63). Some of the common international environmental conventions include Basel Convention, Montreal Protocol of Vienna, Biodiversity Convention, and UN law of the (Sea Paz Antolín & Ramírez Cendrero 2013: 707). They should also consider environmental protection acts and environmental impact assessment. The host government must have a solid understanding of the exploration and production activities and how they are likely to affect the environment. In cases where such understanding is inadequate, then the host government can seek outside advice in environment issues (Al-Kasim, Søreide, and Williams 2013: 137).
Environment management is a collaborative initiative that requires the combined effort of the various stakeholders including local communities, the host government, the oil company, and external efforts such as NGOs (Škare & Golja 2014: 562). According to Pedroni et al. (2013: 539), the different arms of the collaborative effort brings on board the various aspects of their expertise and knowledge as well as contribution in terms of participation in environment management. As such, success in environment management is largely dependent on how well the various efforts and contributions of the different stakeholders can be harnessed and combined in a coherent and meaningful manner.
Ako, R (2015). ‘Original article: A lega(l)cy unfulfilled: Reflections of the Wiwa-led MOSOP and the localisation of human rights’, The Extractive Industries And Society
Al-Kasim, F, Søreide, T, & Williams, A (2013). ‘Corruption and reduced oil production: An additional resource curse factor?’, Energy Policy, 54, Decades of Diesel, pp. 137-147. [Online] Available from< http://www.sciencedirect.com/science/article/pii/S030142151200972X# > [3 Jun. 2015].