Discuss about the Corporate Social Responsibility for Oil and Gas.
This report is aimed to illustrate the voluntary disclosure of Corporate Social Responsibility (CSR) and Corporate Governance (CG) aspect in the year ending reports as per the global reporting initiatives GRI (G4) standards as well as according to Australian stock exchange rules and regulation. This report is focused on the Australian corporate sector considering oil and gas sector as a main sector (Hopkins, 2012). In this context, the report is examining the financial statement and profile overview of the two companies in oil and mining sectors that is Woodside Petroleum Limited (WPL) and Paladin Energy Limited (PEL). This study is emphasizing on the critical evaluation of corporate governance and corporate social responsibility. The sustainable report of the companies is being analyzed and compared according to the set standards of G4 and ASX in the Australian industry. Moreover, the report also details on the recommendation for the improvement in the current situations and future financial reporting. Therefore, this study provides a combination of comparative analysis and critical examination of two companies with each other as well as with Australian standards of CG and CSR in G4 and ASX.
A Brief on Company’s Overview
Woodside Petroleum is one the most famous and largest oil and gas companies in Western Australia (Woodside, 2017). The company was founded in 1954, earlier named as Lakes Entrance Oil Co has operations in exploration, development and other operating activities in various countries. The joint ventures with other oil and gas companies and government promotes the expansion of oil exploration of the company in other countries. It mainly engaged in the development of Liquefied natural gas projects but also explores and operates in pipeline gas, oil and LPGs along with this, has joint ventures in Australia with Australia Oil and Sunrise LNG Development (Woodside, 2017). In 2016, company’s earnings before interest and tax were US $2734m reporting US$ 868m net profit after tax and overall operating revenue is recorded as US $4075m.
On the other hand, Paladin energy ltd. is operating Uranium production in Western Australia (Paladin Energy Ltd, 2015). It was established in 1993 and has one of the largest explorations of uranium in the mining sector of Australia. The company is also working in Africa’s regions like Namibia and Malawi also operates in New Zealand and United States. The operations of the company’s was banned for more than decade in early 90’s because of the government rules but again restarted in 2015 in some of the regions of Australia. The company also has joint ventures with other companies and government of other countries like China, Japan and Russia. The earnings before interest tax, depreciation and amortization of the company in 2016 were reported as US$5.7m with the fall of US$11.3 from 2015 which was recorded as US$ 17m (Paladin Energy Ltd, 2015). Consequently, sales revenue of the company in 2016 was US$55.2m with a sale quantity of 2.125mlb U3O8.
Corporate Governance and Corporate Social Responsibility
Today, in this competitive intense industries and government requirements for the survival of the company every organization is bound to incorporate corporate governance and corporate social responsibility as a crucial part of its operations (Brennan, and Mullerat, 2011). Corporate governance is the bridge between social, individual and communal goals with the economic goals of an organization. It promotes the interest of every stakeholders of the company individually as well as group. It focuses on the optimum utilization and credibility of resources (Brennan, and Mullerat, 2011). It ensures accountability in terms of resource management with the stakeholders in financial recording as well as operations of the business.
However, in Woodside continuous disclosure and market communication policy, shareholders communication with ethical consideration involving policies such as anti bribery and corruption policy and whistleblower policy is the part of corporate governance of the organization (Woodside, 2017). In addition to this, internal auditing, CEO and CFO assurance with risk management and responsibilities and internal control is also incorporated in the organization’s CG. Likewise securities ownership and dealing with payment to political parties are also CG’s basics in the organization. Admittedly, both the companies follow ASX rules and regulation for the compliance of corporate governance in the organization.
On the contrary, corporate social responsibility is the ethical and moral responsibility towards stakeholders; it is social responsibility for the future generation. Stakeholders of the company in CSR entail both external and internal stakeholders of the company. It promotes the human development inside and outside of the organization and better prospects for future generation (Brennan, and Mullerat, 2011). It includes sustainable development and environmental issues that influenced by the organization. Especially in oil and mining sector, integration of CSR is vital due to adverse effects in the environment caused by its operations and functions.
In Woodside, sustainability disclosure is done with the individual report as per global initiatives guidelines. The corporate social responsibility is been applicable in the organization as a predominant part of the organization and it articulates regulatory compliances, transparency, anti bribery corruptions, incident prevention policies, climate change, disruptive technology, human rights, biodiversity and ecology with payment transparency and health and safety performance (Woodside, 2017). Therefore, it can be depicted that it almost has all the written guidelines in the sustainability report of the company.
Apart from this, Paladin also encompasses in its sustainable report with human rights, anti corruption and transparency of payment to government, procurement practices, local communities and material stewards (Paladin Energy Ltd, 2017). At the same time, it emphasis on the material management, environmental issues, waste management, diversity and equal opportunities with further education and training facilities for improvement. Thus, these guidelines are also followed as per the global report initiative to make a standard and systematic approach.
Critical analysis of GRI disclosure guidelines and ASX Corporate Governance
In order to set a standards format and mandatory disclosure of facts to encourage transparency for the stakeholders of the company GRI and ASX are the principle federations that provide brief on standards and policies concerned with the corporate governance and social responsibility (Brennan, and Mullerat, 2011). . GRI or G4 Guidelines are aimed to ensure the transparency and accountability in the financial report of the companies in terms of their sustainability report (Global Reporting Initiative, 2014). It comprehends general disclosure of business model, reports and external assurance, environment policies, social issues and related standards, employee’s health and safety, diversity, human rights, anti corruption and bribery with diversified management and top level bodies. Besides this, AXS listing rules of the Disclosure in the oil and gas activities are pertaining to petroleum tenements drilling programs, market sensitive information, geographical and reserve statements in the annual report (ASX Listing Rules, 2014). It also encourages the guideline formation for the petroleum resource management system with the application of petroleum resources management system. The guideline note 8 also emphasis on the continuous disclosure of the petroleum material and the information related to the resource management and reservoirs.
Report analysis of both the Companies
Corporate governance in both the companies is critically examined in terms of companies’ comparison as well as issues faced by the companies in setting proper rules and regulation of the company (Hopkins, 2012). Corporate governance is the vital practice in oil and gas sector along with the mining sector. In the above context, the corporate governance implementation in both the companies is well defined and many policies and standards have been formed (Brennan, and Mullerat, 2011). Paladin has more elaborated guideline and issue related to the corporate governance. In facts covers most of the issues and topics of disclosure. However, health and safety of labor in the mining activities plus financial benefits disclosure to the labors in the incidents and risk management is not covered precisely (Paladin Energy Ltd, 2017). In case of Woodside, company encompasses some of the topic but almost follows every rule and regulation. The health and risk management of the labors and stakeholders are finely elaborated (Woodside, 2017). But it lacks some of the key issues such as learning policies in terms of training and education of stakeholders, diversity management in the upper level as well as employers fair and equal opportunities.
Apart from this, both the companies fail to achieve effective implementation of climate change and environmental policies in the disclosure and lacks in attainment of sustainable development of the resources (Paladin Energy Ltd, 2017). Furthermore, even after mentioning the anti bribery or corruption policies the companies are accused with dome allegation of bribery and corruption that shows failed execution of corporate governance. The companies do not disclose its ASX standard format in resource disclosure properly and efficiently (ASX Listing Rules, 2014). In fact, Woodside criticized under corruption charges, climate change accusation and many more environmental problems (Woodside, 2017). Along with this, Paladin also banned for decades as uranium is a natural source as nuclear source that has some serious issues on health of labors and surrounding environment.
In case of CSR both the companies provide an illustration that is according to G4 guidelines (Hopkins, 2012). Though both the companies ensured the serious acquisition of these standards, yet there is enormous chance of improvement in it. Paladin lacks in the execution of CSR in comparison to Woodside because it covers less topics and do not provide up to date reports of the company in the current year (Woodside, 2017). Thus, it can be said that both the company has a scope of improvement in the better implementation of CSR.
The recommendations for each company are same such as more engagement of stakeholders and implementation o new business model or change management in the company. Along with this, capacity building through better leadership and good governance should be added in the governance (ASX Listing Rules, 2014). Human resources will be added as a partner of the company and diversified approach will be accepted as a main part of the business operations. Appointment of experts in the corporate governance to deal with each area and issue of the corporate governance should be sustained (Hopkins, 2012). Transparent and reliable source of information in terms of reporting and disclosure is necessary for the improvement.
In the end, it can be investigated and concluded that both the companies has implemented policies of disclosure in their reports, yet its effective and efficient implementation is necessary. There are some issues with the G4 and ASX guideline catch up but can be resolved with some extra caution and implementing practices as a fundamental part of the guidelines for the company.
ASX Listing Rules.2014. Reporting on Oil and Gas Activities. [Online].Available at: https://www.asx.com.au/documents/rules/gn32_reporting_on_oil_gas_activities.pdf [Accessed on: 25 April 2017].
Brennan, D. and Mullerat, R. 2011. Corporate Social Responsibility: The Corporate Governance of the 21st Century. Kluwer Law International.
Global Reporting Initiative. 2014. GRI Sustainability Reporting Guidelines (G4) and the European Directive on non?financial information disclosure. [Online].Available at: https://www.globalreporting.org/SiteCollectionDocuments/2014/G4%20and%20EU%20NFR%20Directive.pdf [Accessed on: 25 April 2017].
Hopkins, M. 2012. Corporate Social Responsibility and International Development: Is Business the Solution? Earthscan.
Paladin Energy Ltd. 2015. Corporate Brochure. [Online].Available at: https://www.paladinenergy.com.au/sites/default/files/15.07_Paladin_Corporate_Brochure_July_2015.pdf [Accessed on: 25 April 2017].
Paladin Energy Ltd. 2017. Corporate Governance 2016. [Online].Available at: https://www.paladinenergy.com.au/corporate-governance-0 [Accessed on: 25 April 2017].
Paladin Energy Ltd. 2017. Financial report 2016. [Online].Available at: https://www.paladinenergy.com.au/sites/default/files/financial_report_file/17.02.14-dec-qtr-mda.pdf [Accessed on: 25 April 2017].
Woodside. 2017. Annual Report 2017. [Online].Available at: https://www.woodside.com.au/Investors-Media/announcements/Documents/01.03.2017%20Annual%20Report%202016.pdf [Accessed on: 25 April 2017].
Woodside. 2017. Corporate Governance 2016-17. [Online].Available at: https://www.woodside.com.au/Investors-Media/announcements/Documents/01.03.2017%20Corporate%20Governance%20Statement%202016.pdf [Accessed on: 25 April 2017].
Woodside. 2017. Sustainable Development 2017. [Online].Available at: https://www.woodside.com.au/Investors-Media/announcements/Documents/16.03.2017%202016%20Sustainable%20Development%20Report.pdf [Accessed on: 25 April 2017].