Stakeholder Engagement in an Organization

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Introduction

This assignment is a critical reflection essay whose aim is to demonstrate a critical understanding of stakeholder engagement and to develop an informed interest concerning a complex sustainability issue through an experiential stakeholder engagement activity.

The essay is based on the production of Coal Seam Gas (CSG) in the State of New South Wales (NSW) in Australia and how stakeholder dialogue activity might be a useful tool in pursuing CSR in the CSG industry.

The stakeholders include industry employees, farmers and land owners, miners (Eastern Star Gas, Santos, and Dart Energy), NSW government, environment-green and NSW local community.

The essay starts by exploring the concept of corporate social responsibility based on the recent literature from various sources, then goes on to explain how the various stakeholders may team up, through dialogue to purse and enhance a sustainable corporate social responsibility. The discussion draws heavily from the stakeholder dialogue, and represents the point of view of the community members.

Corporate Social Responsibility

This concept is generally used to refer to the relationship between businesses and their environment. All businesses operate in social, political, economic, and natural environments. The concept therefore takes into account how businesses interact with these environments, either positively or negatively.

The topic of corporate social responsibility can be broken down into four main components namely the ethical, economic, philanthropic and legal components (Aras and Crowther, 2010).

The ethical component of corporate social responsibility comprises the requirements or expectations of any business by the society. Such requirements or expectations include things like doing what is just, fair and right, using the law as the basis of organizational behaviour, avoidance of questionable practices and doing business in a manner which is above the minimal requirements (McWilliams, Siegel and Wright, 2006. pp. 1–18).

This component is one of the most crucial aspects of CSR because it influences the philosophy of corporates which determines the extent to which they engage themselves in activities which do not generate profits for them.

The ethical climate in corporations constitutes adherence to principles of ethical behaviour and conduct, both within and outside the corporations. It also constitutes how corporations relate to their internal and external environments.

The ethical climate therefore touches on things like working environment, safety of the employees, care and conservation of the environment and practices which promote the interests of the consumers like adhering to the rules of manufacturing of products and putting the correct ingredients of products during packaging as well as disclosing full details of the costs of any project implemented within a community setting (Harrison, 2007. pp.371-384).

For many corporations, the ethical component of corporate social responsibility appears to be more deterministic than it is a matter of choice, that is, the ethical conduct of corporates touches on decisions which the corporates must make on how to relate with their employees, clients and the general business environment. The nature of these decisions only allows for the executives to make them (Beets, 2004.pp.193-219).

What this means is that the corporate executives make decisions in a unilateral manner, without factoring in the views, interests or concerns of all relevant stakeholders. When this happens, the corporate executives conduct themselves in a biased manner, where they prioritize profits at the expense of safety of people (both employees and the general population) and the environment, a concept referred to as utilitarianism.

In corporate ethics, utilitarianism is about considering several courses of action, considering the costs involved and choosing the course of action which produces maximum good for the maximum number of people, irrespective of the negative effects of the maximisation of the good, in this case, profits (Britannica Educational Publishing, 2011).

In some cases, this utilitarian cum capitalistic line of thinking is extended to the employees, by requiring them to abide by the utilitarian philosophy or quit, a concept referred to as deontology.

The deontological principles require employees to perform their duties as per the given instructions, leaving no room for them to give their opinion regarding the consequences of their actions as they perform their duties.

According to the utilitarian corporate chiefs, if employees do otherwise, it not only amounts to unethical conduct but also to gross misconduct, which may warrant suspension without pay (Britannica Educational Publishing, 2011).

The other perspective to corporate ethics is the decision making model, which begins with clarification of the issues on which ethical decisions are to be made.

After doing the clarification, what follows is the evaluation of the clarified decisions, which paves the way for arriving at a precise decision on the most appropriate course of action. The decision is then implemented with modifications coming after the implementation (Marshall, 2007).

This model is more or less similar to the normative approach (utilitarianism and deontology) to ethics in that during the implementation stage, the guiding principle is mainly the maximisation of profits and minimisation of the costs.

This is done mainly with a view of ensuring that the corporations realize their objectives with the use of the minimum resources possible. The decision making model, same as the normative approach exclusively involves the corporate leaders with the employees playing insignificant or no role in the same.

According to Lock the Gates Alliance, Many of the corporations which deal with CSG in NSW have been operating under the influence of the normative ethics, which comprises utilitarianism and deontological approaches to corporate ethics. For instance, the production of CSG generates a lot of water as a by-product. This water is very toxic both to the human and aquatic life.

After the extraction of the CSG in form of methane, most of these corporations just transport the water by road using tankers which are not properly sealed thus leading to spillage. Once this water lands on the ground, it not only interferes with the respiratory systems of people who are near, but it also leads to permanent destruction of soil fertility (Cleary, 2011.pp.115-120).

It is not that the corporates do not have the capacity and capability to dispose the water in a proper manner but what is there is that the corporate chiefs channel the funds intended for such purposes back to the business as capital, which is used to purchase more equipment, pay for labour or compensation of the displaced landowners. This is purely a utilitarian way of operation, whose sole interest is the maximisation of profits.

The Lock the Gate Alliance reports indicate that the employees of most of the corporations which deal with the exploration and exploitation of CSG in NSW are not a happy lot. This is because the corporates sometimes force them to work for long hours without adequate safety equipment like gloves or masks, which puts their health at stake especially due to the inhaling of the toxic fumes of the CSG.

These employees are not supposed to report safety concerns, say for example the linkage of the toxic water produced after the extraction of CSG. Those who dare reporting are threatened with termination of their contracts.

This is what is referred to as deontological principle of corporate ethics, which oblige employees to focus on rules and directives in their job irrespective of the effects of the rules and regulations to themselves and to the environment (Cleary, 2011.pp.115-120).

The economic component of CSR comprises taking care of the interests of the shareholders, investors and customers, profit making and maximization, the minimization of the costs in undertaking the business and the formulation and implementation of strategic policies which propel business forward (Clarkson, 1995).

Most of the corporates which deal with CSG extraction in NSW do not take care of the interests of the stakeholders, especially rural communities and farmers.

According to an article written by Bronwyn Herbert of the ABC news, there is a growing discontentment by the rural farmers with the manner in which the miners, especially those interested in CSG conduct themselves.

These farmers, through the NSW farmers association are now calling for the government to enact a legislation to give them veto powers to land access (Herbert, 2011).The only thing which the corporates can be given credit for is the development of policies which propel their business forward in total disregard of the interests of the stakeholders.

The legal component comprises the respect and compliance of the business to laws such as environmental laws, consumer laws, laws which protect the employees, as well as the respect of contractual and warrants agreements between a business and its clients or employees (Aras and Crowther, 2010).

Most of the corporations which deal with CSG extraction in NSW are not in compliant with the rules and regulations of human and environmental safety. What they do is that they sometimes collude with some law enforcing agents and get away with their gross misconduct as far as adherence to environmental rules and regulations is concerned.

Finally the philanthropic component entails basically giving back to the society by the business. Businesses may do this in a variety of ways like establishing or supporting programs which directly benefit the society like health, education, and cohesion programs as well as programs which boost harmonious living of people of diverse backgrounds (Blowfield, 2005. pp. 515–524).

Most of the corporates dealing with extraction of CSG are rarely involved in any acts of philanthropy. They merely use the media to make the impression that they are seriously committed in giving back to the community, but there has never been a proper audit of what tangible activities they have undertaken on purely philanthropic grounds.

In fact, majority of them treat the compensation given to the land owners as philanthropic acts, arguing that the compensations are far beyond the actual amounts which they should give. This is hypocrisy of the highest order.

How stakeholder dialogue activity might be a useful tool in pursuing CSR in the CSG industry in NSW

In NSW, the CSG industry is a very crucial as well as a sensitive one to the various stakeholders. It is important to mention that these various stakeholders have different interest, views and perspectives regarding the generation of petroleum using CSG.

On the part of the mining companies led by Eastern Star Gas, Santos, and Dart Energy among others, their priority is maximisation of profits irrespective of the side effects of their business to the people and the environment (Daniel, David and Chris, 2010, pp. 299-312).

On the part of the government, its priorities may be the protection of the citizens, but it’s equally interested in the generation of revenue from the CSG industry. The land owners and the communities in general have their priorities being the protection of their health, land security and compensation issues (Australian Petroleum Production and Exploration Association, 2009).

Due to these varied interests, the conceptualization of CSR is different among these stakeholders. This calls for a dialogue among all of them, so as for them to reach a compromise position. This dialogue generated CSR should be a product of give and take, in which the stakeholders must be willing to compromise some of their passionate priorities for the sake of those of the other stakeholders (Fraser and Barrett, 2010).

For instance, the mining companies must be ready to fully abide by the NSW Petroleum (Onshore) Act 1991, which requires that all mining companies must disclose the full details of the nature of the mining projects and their impacts on the environment.

According to the Lock the Gate Alliance, some of the companies have been reported to be applying guerrilla tactics to win the confidence of land owners and local communities in acquisition of land for exploration and exploitation of CSG (Wildcat Publishing Inc, 2009).

In the dialogue, the government on its part should push for full enforcement of rules which govern the exploration and exploitation of products like CSG. It should come up with new pieces of legislation to hold the companies fully responsible for the effects of CSG on the environment and their mitigation.

The government should also engage researchers to evaluate the production of CSG and come up with recommendations on whether it is economical for the State of New South Wales or not (Martin, 1986).

The local communities must be informed about the mining of CSG and how it affects them. They should seek information from experts regarding the compensation issues as well as how the projects may impact on their lives in terms of pollution, displacement and exposure to chronic illnesses (Standard and Poor’s Corporation, 1988).

All these propositions can however best happen in a dialogue setting, in which all stakeholders would air their passionate concerns, which should then be analysed and harmonised to inform the corporate social responsibility for the CSG producing companies. Results from the dialogue would ensure that all the stakeholders reach a consensus on the way forward (Durie, Williams and Mcmullan, 2001).

The results would also ensure that the CSR agreement arrived at is a sustainable one because it would be a result of a wide consultation of all relevant stakeholders, as opposed to the current situation, whereby CSR is defined from the perspective of the companies which produce CSG, with little or no adherence to the rules and regulations governing the health of people and environmental safety (Standard and Poor’s Corporation, 1988).

Reference List

Aras, G & Crowther, D. (2010). A handbook of corporate governance and social responsibility corporate social responsibility series. Farnham GU9 7PT: Gower Publishing, Ltd.

Australian Petroleum Production and Exploration Association.(2009).The APPEA journal, Volume 40, Issue 1. California: Australian Petroleum Production and Exploration Association.

Beets, S.D.(2004). Critical Events in the Ethics of U.S. Corporation History.Journal of Business Ethics Volume 102, Number 2, pp.193-219.

Blowfield, M. (2005). Corporate Social Responsibility: reinventing the meaning of development?. International Affairs. Volume 81, Issue 3, pp. 515–524, May 2005.

Britannica Educational Publishing. (2011).Thinkers and Theories in Ethics. New York, NY: The Rosen Publishing Group.

Clarkson. M.B.E. (1995). A stakeholder frame work for analysing and evaluating corporate social responsibility. The Academy of Management Review Vol. 20, No. 1, Jan., 1995.

Cleary, P. (2011).Too Much Luck: The Mining Boom and Australia’s Future. Chicago, IL: Black Inc.pp.115-120.

Daniel M.F., David, B., and Chris , M.J.(2010). Managing the cumulative impacts of coal mining on regional communities and environments in Australia. Impact Assessment and Project Appraisal,Volume 28, Number 4, December 2010 , pp. 299-312.

Durie, R.A., Williams, D.J., and Mcmullan, P.A.(2001).Greenhouse Gas Control Technologies: Proceedings of the 5th International Conference on Greenhouse Gas Control Technologies. Collingwood VIC 3066: Csiro Publishing.

Fraser, A., and Barrett, B.(2010). ‘LNG wells threaten Murray’. Available from https://www.aph.gov.au/

Harrison, E. (2007). Estate Planning under the Bush tax cuts. National Tax Journal, 60(3), pp.371-384.

Herbert, B. (Monday, September 12, 2011). NSW farmers call for power to veto coal seam gas explorers. PM ABC News.

Martin, H.(1986).Australasian coal mining practice Issue 12 of Monograph series Australasian coal mining practice. Golden, CO: Australasian Institute of Mining and Metallurgy.

Marshall, J. (2007). An Ethical Decision-Making Model. The Ethics Scoreboard, ProEthics, Ltd.

McWilliams, A., Siegel, D.S., and Wright, P.M.(2006). Corporate Social Responsibility. Strategic Implications Journal of Management Studies Volume 43, Issue 1, pp. 1–18, January 2006.

Standard and Poor’s Corporation.(1988).Standard and Poor’s register of corporations, directors and executives, Volume 1, Part 1. Jamestown, ND: Standard & Poor’s Corp.

Wildcat Publishing Inc.(2009).The Oil & Gas Year Australia 2009. Beverly Hills, CA: wildcat publishing.

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Stakeholder Engagement in an Organization

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