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Corporate Social Responsibility Audit Report For BHP Billiton

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Question:

Describe about the Corporate Social Responsibility Audit Report for BHP Billiton.

 

Answer:

Introduction

Over the past few years, corporate social responsibility (CSR) has become a common term in the business environment. Companies are learning the importance of sustainability in their business and pressure is also mounting from environmentalists, NGOs and Governments for greater transparency.Almost all organizations now have a CSR policy in place and with annual reports on progress (Saeed, 2007). Each organization has a different CSR policy which entails different activities they consider to be socially responsible. It is therefore difficult to come up with a single definition for CSR. Various organizations, professional bodies and academia have come up with different definitions. According to (Growther & Aras, 2008) definitions of CSR should be concerned with the dealings between organizations, governments and citizens. CSR is therefore voluntary integration of social and environmental factors into their activities with a view of positively impacting on them. CSR is the obligation of an organization to make business policies and practices that are in line with the existing societal values (Bowen, 1953).

Scope of engagement

The main purpose of this report is among others to provide the findings and recommendations of the CSR audit on BHP Billiton to the company management. The report will therefore seek to analyze general understanding and emerging issues regarding CSR. It will further identify the various activities carried out by BHP Billiton aimed at satisfying their CSR, the success of such activities and their impact on the business as a whole. The report also try to investigate why many organizations find it challenging trying to transform their great aspiration for sustainable operation into a reality.

To compile the report different sources of information was used. These included various academic and professional articles on CSR, bibliographical references o these articles as well as other internet sources where key words were searched. Further, the BHP Billiton website was an important source for specific information for the report.

Current issues in CSR

Due to pressure from various bodies which include environmentalists, many organizations are now embracing CSR. Some of these organizations though fail to recognize the positive impacts that CSR bring along. To further understand the scope of CSR three basic principles have been advocated namely: sustainability, accountability and transparency. Sustainability is mainly concerned with the options available in the future. It advocates for current practices that will not in any way negatively affect the existence of the future generations. According to the Brundtland report of 1987 sustainability is the satisfaction of the current requirements without crippling the ability of the future generations to satisfy theirs. Accountability mainly deals with organizations knowledge that their activities affect the environment and the society in a way therefore taking responsibilities for their actions. CSR requires for accountability by leaders, organizations, customers and members of the society (D’Amato, Henderson, & Florence, 2009). Transparency entails that the organization makes public the impact of their activities to the society and environment.

BHP's CSR commitment

From the company profile, BHP Billiton is a Dual Listed Company (DLC) comprising BHP Billiton Limited and BHP Billiton Plc. It was created in 29 June 2001 through the merger of BHP Limited and Billiton Plc. According to the Wikipedia BHP Billiton Group is an Anglo-Australian multinational mining, metals and petroleum company and it is headquartered in Melbourne, Australia.

CSR claims embedded in BHP's vision and strategic documents.

The BHP’s strategy titled “A disciplined approach. A proven strategy” embeds different CSR claims which prove its commitment to corporate social responsibility. In the fourth paragraph it states that “Our products are the raw materials fuelling not just today’s growth, but growth that will occur a century from now. We have a world-class portfolio of growth options that will ensure we are able to plan for the short and long term and continue to create value for our shareholders”. This statement proves that BHP is observing the principle of sustainably which is an important aspect of CSR. Further, in paragraph three, it states that BHP seeks to recruit from the host communities in order to reflect their values and those of the societies from which they operate. This proves that BHP is mindful of the values of the societies from which they operate.

The BHP’s charter which describes their values and purpose also contains claims that prove BHP’s commitment to CSR. These values are listed as:

BHP ensures future survival through mindfulness of health and safety, environment and providing support to the communities within where they operate as part of their CSR.

Integrity by doing what they promise rightly

Respect through the mutually beneficial relationships

Taking responsibilities and delivering on their commitments.

Giving priority to the more important issues.

Getting best results through hard work.

All these are important aspect of CSR

The BHP Billiton’s code of business conduct seeks to acknowledge and respect the indigenous communities as original owners of the land and therefore seeks to establish a mutual relationship between the community and the company. They conduct surveys to establish the current owners and the use of the land. Both voluntary and involuntary resettlements are done in line with the provisions of the International Finance Corporation (IFC) Performance Standard 5: Land Acquisition and Involuntary Resettlement.

Integration of the actions into the BHP’s performance and governance documents.

BHP Billiton has tried to integrate these actions into their governance documents as seen in their actions on climate change info graph. Its perspective on climate change states that “We accept the Intergovernmental Panel on Climate Change’s (IPCC) assessment of climate change science which has found that warming of the climate is unequivocal, the human influence is clear and physical impacts are unavoidable.” They recognize their responsibility in taking appropriate action, lists the actions they intend to take as an organization to address climate change and further acknowledges that it requires an integrated effort from all the concerned parties. Some of the steps listed include mitigation, adaptation and use o technology.

BHP Billiton also lists actions they have already undertaken regarding climate change starting in 1996 to 2014. For instance in 1996 they “acknowledged the scientific consensus on climate change. Announced US$1 billion in projects to address GHG emissions and improve energy efficiency - achieved six million tones of reductions by 2000” and in 2014, they “abated 807,000 tones of GHG through Business greenhouse gas reduction projects”.

BHP Billiton is also showing a willingness to responsibly manage the environment. This they do through the reduction of green house gas emissions, proper management of natural resources and increasing biodiversity and water management.

The existence of sustainability and community reports is also an indication that BHP is integrating the CSR policies into performance documents. Some of these reports are; 2015 BHP Billiton Chile Sustainability Report (BHP Billiton, 2015), 2014 BHP Billiton Sustainability Report, Our Contribution: BHP Billiton in the community and many more. Still in the society page, they outline their contribution towards improvement of the future of the society. They cover areas such as community investments, education, health, economic development, disaster awareness and relief and rights and cultures o indigenous communities.

 


Concerning the indigenous communities’ issue, BHP has a formal way through the Indigenous Peoples Policy statement to address it. Establishing partnerships that ensure mutual benefit between the company and the local community is an important aspect of CSR. Businesses need to respect rights, cultures and needs of indigenous population they are operating within. The three main policies being used by BHP in dealing with the indigenous communities are:

Free Prior and Informed Consent (FPIC) where rights and interests of the indigenous are respected and their consent obtained

Acknowledging customary rights and laws. The BHP Billiton Code of Conduct and BHP Billiton Charter sets out the company’s commitment to acknowledging of indigenous communities customary rights.

Encouraging mutual respect. The Reconciliation Action Plan 2013-2015 seeks to improve relationships between the employees and the local community.

Positive effects of BHP’s CSR policy.

Proper CSR policies can positively influence a firm in various ways both internally and externally. They include:

Improves the confidence of potential investors.

Proper CSR policies tend to give a clear path for the organization going into the future due to the importance given to sustainability. This in turn gives a sense of security to potential investors. From the many joint ventures that BHP is undertaking like the Algerian and the Australian Joint Interest Units, it’s clear that investors have confidence in them.

Improves corporate image.

The views of the public on a company determine its success. A company willing to embrace CSR will have its public image increase significantly. The society views it as one who cares about their well being and not just profits. With a profit of around $4b, BHP has improved its corporate image, increased customer base and therefore the high profits.

Customer loyalty and attract new customers.

CSR creates a special bond between the customers and the business because they feel really valued. This in turn leads to customer retention. New customers are also attracted to companies that take CSR seriously.

Improve work climate and employee commitment.

Because BPH has a policy of hiring from the local community in its place of operation, CSR improves the commitment of the employees because they feel valued by the company. This translates to increased output by the employees eventually increasing the income.

Communicated intention and corporate practice

Many corporations find it difficult to implement CSR policies despite their communicated intentions through their strategic documents. This is majorly due to the challenges that they face during implementation. These challenges range from political to societal to internal. They include:

Financial constraints. Due to increased competition and worsening economy, businesses are recording a shrink in their profits. In a bid to remain profitable, operating costs are being cut with CSR budget always being one of the first costs to be affected.

The business image. Many corporations still take CSR as a publicity stunt and therefore big organizations that already have established image don’t see the need for it.

Legal background. CSR is still majorly considered a voluntary act by the companies and therefore many areas lack the laws to enforce it. As a result, corporations that don’t see it as an important aspect of their activities neglect it.

Corruption and unemployment. Due to unemployment, the indigenous communities where companies operate no longer care about the company’s commitment towards CSR as long as it can provide employment. This takes away the pressure to undertake CSR activities from the organization. Some corrupt leaders have also made a tendency of individually benefiting from payments by the firms at the expense of communal projects that are helpful to both the present and future generations. (McGaw, 2005) lists this problem with leadership as the greatest challenge CSR implementation.

Conclusion

CSR is a very important aspect of business existence and any organization that wants to succeed should embrace it. From the report, there is a need for businesses to properly manage their relationship with the society. The benefits of CSR by far outweigh the costs in the long term. With the global agenda on sustainability also taking shape, it is important for organizations that have not started implementing it to reconsider their stand. This will protect them from possible legal action. Globalization has also set in bringing with it increased competition. Businesses should therefore strive to retain their employees and customers and still be able to attract new ones. One way of achieving that is through CSR.

Recommendations

Although BHP has done a recommendable job in implementing their CSR policy there are some areas they need to add. These may include:

Help nonprofit organizations to generate funds. They can also help in developing local talents other than in the area of education.

Set aside cash for improvement of local infrastructure like community roads that are usually used by the company.

Allow the use of their resources and facilities by the society. For instance, their heavy transportation vehicles can be used to also transport construction materials for communal facilities like health centers.

Involve the employees in activities that reduce the company’s environmental impact. Common activities include recycling, composting, re-usage of water and car-pooling where necessary(Pacific Continental Bank, 2013).

 

References

BHP Billiton. (2015). Taking the Long View. Sustainability Report.

Bowen, H. P. (1953). Social responsibilities of the businessman. New York: Harper and Row.

D’Amato, A., Henderson, S., & Florence, S. (2009). Corporate Social Responsibility and Sustainable Bussiness. A Guide to Leadership Tasks and Functions.

Growther, D., & Aras, G. (2008). Corporate Social Responsibility.

Maignan, I., & Raltson, D. A. (2002). Corporate Social Responsibility in Europe and the US: Insights from businesses’ self-presentations. Journal of International Business Studies, 33(3), 497.

McGaw, N. (2005). Developing leaders for a sustainable global society. Strategic HR Review, 4(6), 32.

Pacific Continental Bank. (2013, May). The Importance of Corporate Social Responsibility. Business Development Series.

Saeed, U. (2007). Corporate Social Responsibility Analysis of current practices in selected companies and recommendations. Stockholm: Royal Institute of Technology.

World Commission on Environment and Development. (1987). Our Common Future (the Brundtland Report). Oxford: Oxford University Press.

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