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SYSTEMS THINKING, CORPORATE SOCIAL RESPONSIBILITY (CSR) AND CREATING SHARED VALUE (CSV) FOR THE ENERGY INDUSTRY IN THE TWENTY FIRST CENTURY: PART I

In this first article I look at what is meant by “radical engagement” with society, and also the relevance of Systems Thinking to CSR, and the energy industry.

John Browne, former CEO of BP, estimates the risk for a company having the wrong relationship with society, of neglecting those aspects of their activity that go beyond narrowly legal requirements at about 30 per cent. He advocates a policy of “radical engagement” as the basis for how companies should engage with society, using four main principles:

  • Businesses do well when they have a good understanding of the world around them, and of their place in the world;
  • Businesses need to understand better how to communicate their total contribution to society – activities that make a social contribution should be construed as being part of a company’s central purpose;
  • CSR and sustainability should be “part of the performance contract of a business and evaluated as such”;
  • In an interconnected world it is important not to engage or communicate only when you have to. Business engagement with society should be radical, not grudging and episodic.

One of the issues that has changed in corporate policy making is the notion that profit should be an “outcome”, rather than the goal of commercial life.

The question of “purpose” and “meaning,” and the role of “value” are at the heart of Fritjof Capra’s systems approach. Capra’s work has been heavily influenced by the insights of quantum science, in particular the work of Werner Heisenberg, author of “Physics and Philosophy.” Interviewed about the influence of Heisenberg on his work, Capra said:

“…the exploration of the atomic and subatomic world brought them in contact with a strange and unexpected reality. In their struggle to grasp this new reality, they became painfully aware that their basic concepts and language, indeed their whole way of thinking were inadequate to describe atomic phenomena. The problems were not merely intellectual, but amounted to an intense emotional, and one could even say, existential crisis. It took them a long to overcome this crisis, but in the end they were rewarded with deep insights into the nature of matter and its relation to the human mind.”

Capra’s systems thinking originates in this intellectual crisis of the 1920s. Out of that crisis came the realization that there are no fundamental constituents of matter. Instead everything is a web of connection and interrelationship. Solutions to the world’s current multiple crises cannot be isolated. They must be interconnected.

Capra says:

“The problem of energy cannot be solved by finding cheaper sources of energy. If we had hydrogen fusion right now, or some new energy source that was cheap and safe, all our other problems would only get worse. If you fuel a system that is out of balance, you have just the same system but on steroids. We would damage the rainforests, deplete the ecosphere, pollute the air and increase health problems. In other words, the energy problem is also a health problem and a food problem and a water problem.”

John Browne believes that energy companies must engage radically with society. He believes that profit should be an outcome, rather than the goal of corporate decision making. The systems thinking of Frithjof Capra has much to say in relation to debate about meaning, and purpose. Furthermore, it advocates an approach to strategy that considers energy issues within a wider context than the industry itself.

In my second article I will look at the connection between ecology and systems thinking, and why it is that systems thinkers believe that the illusion of perpetual growth is at the heart of the global crisis of affairs. I will examine the possibility that society needs to transform its understanding about growth from one that is quantitative to one that is qualitative.

By Mark Jenkins

Prospect Law and Prospect Advisory provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article is not intended to constitute legal advice and Prospect Law and Prospect Advisory accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

This article remains the copyright property of Prospect Law and Prospect Advisory and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

For more information please contact us on 020 7947 5354 or by email on: info@prospectlaw.co.uk.

For a PDF of this blog click here

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CSR AND CONNECTED LEADERSHIP: THE MASTERS OF THE HUAINAN (PART II)

In his book “Connect – How Companies Succeed by Engaging Radically with Society“, John Browne, formerly CEO of BP, articulates how companies engage with society in a way that goes beyond the normal conceptions of Corporate Social Responsibility (CSR).

Browne believes that “connected leadership” requires the integration of societal and environmental considerations into core business decision making at all levels. He says that “connected leadership” ensures long term viability for a business, and also generates a competitive advantage. Browne states: “crucially, connected leadership is predicated (most of the time) on mutual advantage; society would benefit considerably if it could enable a transition to this new paradigm, regardless of which firms gain the extra edge by engaging particularly well.”

Browne says that there are four tenets of connected leadership which, when applied, can revolutionise a company’s standing in society.

These four tenets are:

  1. Map your world
  2. Define your contribution
  3. Apply world class leadership
  4. Engage radically

Browne believes that any success he achieved in the commercial world came when he engaged effectively, and sustainably, with the external world.

Browne quotes Teddy Roosevelt, who stated in 1903:

We demand that big business give the people a square deal…in return we must insist that when anyone engaged in big business honestly endeavours to do right he shall himself be given a square deal.”

In subsequent blogs I will be looking at the concept of “Connected Leadership”, and its relevance to CSR, in more detail.

Introduction to Prospect Energy, Prospect Law and Mark Jenkins

This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.        

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy.

Mark Jenkins advises clients on how to achieve commercial resilience in high-risk/non permissive environments. Among Mark’s specialist areas of expertise are the management and motivation of traditional communities such as Bedouin tribesmen in the Sinai Desert, Somali Muslims in NE Kenya and Eastern Orthodox Christians in remote parts of Eastern Europe. He has a particular interest in Islamic culture and has worked on the staff of HRH Prince Ghazi bin Muhammed bin Talal, Special Advisor and Personal Envoy to HM the Hashemite King of Jordan. Other interests of Mark’s include renewable energy, especially solar power, and economic solutions which are based on the principle of sufficiency, rather than consumption.

For more information please contact us on 01332 818 785 or by email on: info@prospectenergy.co.uk.

For a PDF of this blog click here

 

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CSR AND CONNECTED LEADERSHIP: THE MASTERS OF THE HUAINAN

Mark Jenkins, CSR Specialist Project Advisor at Prospect Energy

In the second century BCE scholars gathered at the court of the Chinese King to debate philosophy and statecraft. Their conversations were recorded in the text: “The Masters of the Huainan.”

They identified five types of wasteful consumption that are “the source of all disorder” – wood, water, earth, metal and fire. The text railed against miners who “exhaust the riches of the earth:”

“Any one of these five types of wastefulness is sufficient to bring about the loss of the Empire,” they warned.

The nature of the “tragedy of the commons” is such that when companies can externalise the costs they impose on the environment, there is little short term incentive to them to desist.

The environment cannot answer back.

“Connected Leaders”, however, are different. They impose “win win” solutions, rather than “win lose” ones. Nowhere is connected leadership more in evidence than in relation to its attitudes towards the environment.

John Browne, former CEO of BP has said that the ability of “companies to confront issues of long term industry viability without the certainty of short term returns” is critical to the delivery of effective environment policy.

Investment in game changing technologies will be critical for the development of policies that will respect the environment. But – in the short term – these technologies will contradict the need for short and mid term profitability.

There is a need for a “circular economy” – one which makes products that can be recovered, and regenerated at the end of each serviceable life.

In his book “Heart of Darkness” Joseph Conrad spoke of the “sordid buccaneers” who had torn up the African landscape with no regard for the environment, or local communities.

Another Chinese sage wrote in the first century BCE: “Crooks and upstart industrialists exploit the common people with their dishonest practices. They appropriate the bounty of our natural resources as their own rich inheritance. But we will put down the wealthy traders and great merchants. We shall not give the advantage to the over bearing and aggressive.”

Disdain for commerce was engrained in ancient China. The Chinese elite believed that enterprise was dangerous, and immoral. John Browne says that when a list defining seven categories of criminals was published in 97 BCE, in order to explain who would be conscripted for a criminal campaign, the last four categories were as follows: “merchants, former merchants, sons of merchants and grandsons of merchants.”

The Connected Leader understands these fears. His leadership ensures that these fears are not justified.

Introduction to Prospect Energy, Prospect Law and Mark Jenkins

This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy.

Mark Jenkins advises clients on how to achieve commercial resilience in high-risk/non permissive environments. Among Mark’s specialist areas of expertise are the management and motivation of traditional communities such as Bedouin tribesmen in the Sinai Desert, Somali Muslims in NE Kenya and Eastern Orthodox Christians in remote parts of Eastern Europe. He has a particular interest in Islamic culture and has worked on the staff of HRH Prince Ghazi bin Muhammed bin Talal, Special Advisor and Personal Envoy to HM the Hashemite King of Jordan. Other interests of Mark’s include renewable energy, especially solar power, and economic solutions which are based on the principle of sufficiency, rather than consumption.

For more information please contact us on 01332 818 785 or by email on: info@prospectenergy.co.uk.

For a PDF of this blog click here

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THE CURSE OF RESOURCES IN ACTION: THE LOSS OF A SOCIAL LICENSE TO OPERATE

Mark Jenkins, Prospect Energy

A few years ago I travelled to a remote part of the Balkans to deliver risk management support to a client from the extractive industry.

The client’s corporate security officer told me that commercial operations were being hindered by sabotage and theft, reputational attacks in the social media as a consequence of those acts of sabotage and theft.

The client believed that the best way to mitigate its risk was through the delivery of security solutions based around CCTV, armed guards and drones.

I travelled to the remote, mountainous area where the acts of theft and sabotage were occurring.

It immediately became clear that the root cause of the trouble lay in the symptoms of Dutch Disease/the Curse of resources, which had led to a complete collapse of the client’s Social License to Operate.

The SLO exists at different levels. These can be categorized as follows:Untitled

In the case of the client I was supporting it was clear to me that their SLO was at the lowest level, rejection/withdrawal, and they were facing the consequences of that in the form of violence, protests, legal challenges, blockages and sabotage.

It was obvious that the most effective way to mitigate the risk to the client’s commercial operations would be to apply the principles of good CSR in order to mitigate the effects of Dutch Disease, and increase its Social License to Operate to a point where the level of security risk it was facing subsided.

We could have put a security guard on every oil well, but theft would have continued if the community from which those guards came, and the many former employees who lived in the neighbour-hood, had remained antagonistic in their feelings towards the client.

Furthermore, modern social media methods meant that anyone with a grievance about the client had a global audience. It was clear to me that the client needed to engage in a process of self-analysis. As Woody Allen once said: “I’ve seen the enemy. It’s us.”

Symptoms of the loss of the SLO

The most immediate risk posed to the client was severe reputational damage. Acts of theft and sabotage, in the form of the bunkering of gas pipes, had resulted in a series of explosions in the area of a local playground, through which many of the pipes ran. A large banner had been erected across the front of a house which overlooked the playground, photographs of which had appeared on social media sites across the world. The banner described the client as “being the essence of explosion.”

Significant financial loss was being incurred by the client; locals were stealing copper wire from electrical equipment, which had resulted in a loss of production and the expenditure necessary to repair the consequent damage. Furthermore, the damage to equipment exposed the client to reputational damage caused by equipment malfunction.

Locals were bunkering oil and gas pipelines, incurring financial penalties for the client caused by loss of production, as well as possible reputational damage caused by the strong likelihood off damaged pipelines exploding – as referred to above.

The client’s physical infrastructure was also being systematically looted, as locals stole equipment, and pipes to sell for scrap on the black market.

As I looked further into the situation it seed to me that the root causes of the client’s loss of a SLO lay in issues related to the Curse of Resources.

Environmental concerns

First, there were environmental concerns. Locals felt that the oil and gas company had prioritized profit over concern for the environment. For example, the pipes in use were over thirty years old, and in many places had not even been buried, let alone secured. Thus those pipes were very vulnerable to being bunkered.

Lack of partnership

Second there was no real cooperation, or partnership with the local population. Much of the problem for the oil and gas company was that they had not worked out a plan for effective identification of suitable local stakeholders. The decision makers they had established relationships with had little moral authority in their community, and often their interests were national, rather than local.

Non local profit making

Record profit levels had been announced at the same time as mass redundancies; almost all of whom had come from local employees and contractor. Furthermore, and concurrent to the redundancy programme, an extravagant new headquarters had been established in the capital city with a big recruitment drive among urban based young professionals. These factors all combined to make locals feels that the client’s interests were those of an urban based elite, rather than traditional, local stakeholders.

Capitalism versus communism

This issue, the sense that locals were not benefitting from the exploitation of their resources, fuelled a backlash. In the days of communism there had been a big emphasison the importance of “mucking in,” the sense that everyone in the country should benefit –in a limited way – from resources exploited from within the respective regions.

The replacement of communism with free market capitalism meant that a much smaller percentage of the population – the shareholders, many of whom were foreigners, was benefitting from these profits, and to a much greater extent. This meant that the locals were now much more proprietorial about what was now perceived to be “their” wealth, rather than the country’s as a whole.

During my tour of local villages I met an old lady who was filling up her bucket with oil from one of the client’s oil wells in her village. When I asked her why she was doing this she pointed at the water well, and said that when she wanted water she went there, and when she wanted oil she went to the oil well.

Land rights

Similarly, locals had spent a lot of time and money researching land rights issues which had been forgotten during the communist era. Now that huge profits were being made there was serious incentive for people to stake claims to tiny pieces of land, in which there might be an oil well. There were a number of on-going disputes between the client and locals, who had staked a claim to a local piece of land, and set up home around the oil well on that land, refusing to allow the client access to that well.

Introduction to Prospect Energy, Prospect Law and Mark Jenkins

This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

Mark Jenkins advises clients on how to achieve commercial resilience in high-risk/non permissive environments. Among Mark’s specialist areas of expertise are the management and motivation of traditional communities such as Bedouin tribesmen in the Sinai Desert, Somali Muslims in NE Kenya and Eastern Orthodox Christians in remote parts of Eastern Europe. He has a particular interest in Islamic culture and has worked on the staff of HRH Prince Ghazi bin Muhammed bin Talal, Special Advisor and Personal Envoy to HM the Hashemite King of Jordan. Other interests of Mark’s include renewable energy, especially solar power, and economic solutions which are based on the principle of sufficiency, rather than consumption.

For a PDF of this blog click here