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Scope of Engagement

Describe about the CST Audit for BHP Billiton.

Scope of Engagement

In the present report, I have been instructed to conduct the Corporate Social Audit for BHP Billiton. In a standard corporate social audit, a thorough assessment of the organisation is done with respect to its actual performance on various goals of corporate social responsibility. It appraises quantifiable targets envisioned to support the company to achieve the potentials desired by the stakeholders for the social and environmental obligations of the company. The prime concerns of this audit is to understand whether the company is an upright global citizen or the company follow the CSR policies that it announces it does, or in other words does the company “walk-the-talk”. Also, the evidence and measurable information is collected in CSR audit to prove these points. The purpose of this audit is to ensure that the actual social performances of the company are achieved with reference to the social aims that the company has envisioned for itself.

While conducting the CSR audit for BHP Billiton, scope of my engagement allows me to do cautious, precise monitoring, and assessment of the social responsibilities policies of BHP Billiton and actions they undertake to implement these policies. As a result of this audit, it would be evident whether the company is implementing strategies as it has deliberated. The nature of CSR allows the information to be thoroughly scrutinised by public, as it is meant for the benefit of the society at large, thus this audit would help achieve this goal. The following questions would be answered in the current CSR audit report:

Whether BHP Billiton is achieving the target it has set for its CSR or its falling short of its own goals and expectations?

The important question, whether BHP Billiton “walk-the-talk?”

What are the current policies that BHP Billiton claims regarding CSR and what further steps it can take to include communally accountable enterprises into its business which also adds value to it?

As early as 1917, the corporate social responsibility could be seen in the announcement made by Henry Ford, of the Ford Motor company which said that the company aims to spread benefits to the society, to make profits and utilize it for the upliftment of everybody concerned (Lee, 2008). Ford is thus among the pioneers of social responsibility initiatives in the business world. However, the Social Responsibilities of the Businessman (1953) by Bowen is said to be the first work that set the academic perspective in the relationship between society and the companies (Matten and Moon, 2008). According to Bowen’s book, in order to achieve greater performance and sustainability in the long run, the company must be conscious of the ethics of business. CSR enterprises are highly significant in the background of commercial conscience (Maignan and Ferrell, 2004). Since its inception several aspects of CSR have attracted the scholars and CSR practitioners alike. Godfrey, Merrill, and Hansen (2009) in their work on CSR have compared that the CSR initiative gives an “insurance-like” shield to the company in case of undesirable events occur.  Bhattacharya, Korschun, and Sen (2008), advocates that the company’s CSR activities shows its influence in the growth of its sales along with increase in opportunities of investments and employment prospects. Reverte (2011) determined that the companies which have a higher rating in CSR ratings may enjoy a maintainable competitive lead engrained in the human assets. Such companies tend to attract extra and better workforces as compared to the companies which have rather low ratings in CSR. Therefore, if the company has aim to achieve the sustainable growth, and pursue a desirable and good public reputation in the highly competitive business world, it must ensure to incorporate, initiate and also publish CSR reports and CSR disclosures.            

Literature Review to understand CSR

The CSR has its foundations in the view of the social responsibility. After the book by Bowen in 1953, CSR pyramid (Fig.1) was coined by Carroll in 1979. This pyramid had four phases of CSR growth, namely: the economic, the legal, the ethical, and the philanthropic duties (Dudovskiy, 2012).

CSR Pyramid

Fig.1 (Source: Dudovskiy, J. (2012) Carroll’s CSR pyramid - research methodology. Available at: https://research-methodology.net/carrolls-csr-pyramid-and-its-applications-to-small-and-medium-sized-businesses/ (Accessed: 25 August 2016).)

The marketing researchers began to give regard to the aspects of CSR since the 1960s. the aim was to put emphasis on the social duties with respect to the marketing functions primarily. The researches in this area of CSR placed importance on the marketing related dimensions, like the aspects of cause-related marketing (Jahdi, 2014), environmental marketing (Crouch, 2006), social sponsorship (Becker-Olsen, Cudmore and Hill, 2006), collaborating with customers about CSR matters (Caruana and Crane, 2008), the response of consumers towards the company’s CSR performance (Ellen, 2006) and the reputation of the company (Wagner, Lutz, and Weitz, 2009).

The additional foundations of CSR are defined by the stakeholder theory which as per Maignan and Ferrell (2004) is derived by few key motivators like the instrumental approach. The corporates depend on the continuous support and resources from the stakeholders, thus their needs and claims have to be considered by the company (Vilanova, Lozano, and Arenas, 2008).

Another important perspective of CSR is the moral one. Donaldson and Preston, (1995) suggests that each group or person which has legal interest in being part of the company, participate for some benefits and the interests of these parties cannot be prioritized. Academics scrutinize the issues of CSR from the perspective of the stakeholder’s relationship and emphasis is given on keeping the stakeholders informed (Basu and Palazzo, 2008), the impact of this relationship with the stakeholder the commercial sustainability (Michelon, Boesso, and Kumar, 2012), the knowledge of CSR in the company’s stakeholders and their association with financial performance of the business, commercial investments and loyalty of the worker (Allouche, 2006).

An Anglo-Australian company, BHP Billiton, is a renowned international metals, mining, and petroleum corporation. It has its headquarter in Melbourne, Australia. BHP Billiton was established by amalgamation of BHP, a company of natural resources and Billiton, a mining corporation in 2001. Today the company has its operations in around 25 countries and provide employment to nearly 29,670 workers. As per 2015 data it has made revenue of A$61.2 billion (BHP Billiton Plc, 2015). According to the management of BHP Billiton, the CSR Policy of the company is devised to address the risks and it clearly establishes its rule of "zero tolerance" for the delinquencies specially in the areas like, involuntary or compulsory labor, child labor, conduct of workers, living remunerations, health and safety measures in the workplace, liberty of forming association, world heritage sites and endangered zones, use of biofuels, dishonesty, corruption and extortion, discrimination, obedience with laws, indigenous privileges and the environment (BHP Billiton Our contribution, 2016).

CSR Commitment of BHP Billiton

The uniqueness of BHP Billiton CSR policies is their transparency in making public announcements and advertisement regarding their annual CSR reports. The company each year publishes such reports on its websites and media for public scrutiny and analysis. It uses four channels of communication to advertise their CSR policies. On the official website of the company one can find the company’s CSR reports, whose purpose is to be scrutinized by the company stakeholders. Also, the announcements and news regarding CSR activities are available on its website, which are intended to deliver updated information on the company’s CSR performance and events. The multimedia available on the website regarding the CSR of the company also proves to be an effective way to impart information and enhance their reputation. With apt use of multimedia, relevant interview, news, images, etc. company succeeds to build a good image of socially responsible entity in the society. It also allows, feedbacks from the stakeholders through its website by means of submitting online enquiries, thus making the company not only proactive but also responsive with regards to its duties towards the environment as well as the society (BHP Billiton Community & sustainability reports, 2016).

The drivers of CSR for BHP Billiton are the contemplations regarding the necessities of environment, health, safety, community and socio-economic risks. Being a mining and petroleum corporate the company uses the feedback of stakeholder and pursue to continuously improve its CSR activities.

The company uses several ways to make sure it complies with the CSR policies it has set for itself. BHP uses a number of methods to ensure it complies with its CSR Policy. Some of the evidences can be observed in the company’s conduct of a developmental evaluation on its own performance with regards to the Global Reporting Initiative and the UN Global Compact code. This ensures alignment of the company’s operations with its CSR policies. Also, BHP Billiton, holds Forum on Corporate Responsibility (FCR), an annual event that ensures collaboration of people from the senior management, public opinion leaders and chief non-government organizations. The purpose of these meetings is to deliberate and discuss the social and environmental issues which are important for the operations of BHP Billiton. Also, the company investment in public schemes and make records of its public charities in the UN Millennium Development Goals (MDG). This grants a steady outline for gauging the tangible development of the company in its CSR initiatives. All these reports and updates are openly available on the company’s official website.

Exclusivity of BHP Billiton policy of CSR

Though the company has historically argued in model that it stands by its sturdy corporate responsibility policy model, however there could be seen some gaping windows between the pompous announcement and actual ground realities. The company’s core operation is to provide natural resources and the social pressure on this industry are manifold. Thus it can be seen that the company’s CSR policies are devised to as a tool of public relations to mitigate negative influences caused by extensive mining or petroleum extraction. The deals made by the company historically are evidence of more inclination towards making profits then actual concern for the welfare of the society, like the Chinese deal of 10,500 tons of uranium annual supply against which the company was warned by the Australian Conservation Foundation (ACF). However, BHP Billiton had more interests in making profits for the company. Similar examples of bribery and lack of concern for the health and safety of the workers working in its mines are alarming examples of gaps in the theory and actual practice by the company.

In this highly competitive business world, the impact made by the petroleum and mining companies is a matter of great concern for the environmental researches and social scientist. Each company have different level of CSR policies. Comparison of BHP Billiton with other similar companies like British Petroleum and Shell shows how the globally successful companies use the CSE policies to stand apart in the industry.  Each company attempts to create value through their CSR reporting which puts emphasis on the social and environmental concerns of the stakeholders.

The CSR policy of BHP Billiton must attempt to adhere to the standards it has set for itself. It is extensively necessary for a company to obtain creditability specially in regards to what it claims and how it actually acts upon. The company make announcements for the initiatives it undertakes in regards to fulfillment of CSR policy guidelines, it must also ensure to acknowledge and take responsibilities for the cases where it failed to do so. It is unavoidable for large companies like BHP Billiton to stay away from controversies, especially since they are operating in the industries such as petroleum and mining, which are highly controversial areas when the concerns of society and environment comes.  Thus it is highly recommended for the company to ensure strict adherence to its CSR policies to avoid any legal or reputational issues. The company must make policies only to which it can stick while making its own profits and value for the society as well as the environment its working in. Thus verification and transparency must be adopted by the company with strict adherence to its CSR policies. Moreover, since the stakeholders and society today are much more informed and connected, therefore BHP Billiton must incorporate CSR policies which are actually achievable by it, ensuring creditability and image of being a responsible entity.

References

Allouche, J. (ed.) (2006) Corporate social responsibility: V. 2: Economic-financial responsibility and Stakeholders. Basingstoke: Palgrave Macmillan,.

Basu, K. and Palazzo, G. (2008) ‘Corporate social responsibility: A process model of Sensemaking’, Academy of Management Review, 33(1), pp. 122–136. doi: 10.5465/amr.2008.27745504.

Becker-Olsen, K.L., Cudmore, B.A. and Hill, R.P. (2006) ‘The impact of perceived corporate social responsibility on consumer behavior’, Journal of Business Research, 59(1), pp. 46–53. doi: 10.1016/j.jbusres.2005.01.001.

Bhattacharya, C.B., Korschun, D. and Sen, S. (2008) ‘Strengthening Stakeholder–Company relationships through mutually beneficial corporate social responsibility initiatives’, Journal of Business Ethics, 85(S2), pp. 257–272. doi: 10.1007/s10551-008-9730-3.

BHP Billiton Community & sustainability reports (2016) Available at: https://www.bhpbilliton.com/society/reports (Accessed: 25 August 2016).

BHP Billiton Our contribution (2016) Available at: https://www.bhpbilliton.com/society/ourcontribution (Accessed: 25 August 2016).

BHP Billiton Plc (2015) Resourcing global growth annual report 2015. Available at: https://www.bhpbilliton.com/~/media/bhp/documents/investors/annual-reports/2015/bhpbillitonannualreport2015.pdf (Accessed: 25 August 2016).

Caruana, R. and Crane, A. (2008) ‘Constructing consumer responsibility: Exploring the role of corporate communications’, Organization Studies, 29(12), pp. 1495–1519. doi: 10.1177/0170840607096387.

Crouch, C. (2006) ‘Modelling the firm in its market and organizational environment: Methodologies for studying corporate social responsibility’, Organization Studies, 27(10), pp. 1533–1551. doi: 10.1177/0170840606068255.

Donaldson, T. and Preston, L.E. (1995) ‘The Stakeholder theory of the corporation: Concepts, evidence, and implications’, The Academy of Management Review, 20(1), p. 65. doi: 10.2307/258887.

Dudovskiy, J. (2012) Carroll’s CSR pyramid - research methodology. Available at: https://research-methodology.net/carrolls-csr-pyramid-and-its-applications-to-small-and-medium-sized-businesses/ (Accessed: 25 August 2016).

Ellen, P.S. (2006) ‘Building corporate associations: Consumer attributions for corporate socially responsible programs’, Journal of the Academy of Marketing Science, 34(2), pp. 147–157. doi: 10.1177/0092070305284976.

Godfrey, P.C., Merrill, C.B. and Hansen, J.M. (2009) ‘The relationship between corporate social responsibility and shareholder value: An empirical test of the risk management hypothesis’, Strategic Management Journal, 30(4), pp. 425–445. doi: 10.1002/smj.750.

Jahdi, K. (2014) ‘Cause-related marketing (CaRM) and corporate social responsibility (CSR)’, Social Responsibility Journal, 10(4), pp. 674–684. doi: 10.1108/srj-07-2012-0063.

Lee, M.-D.P. (2008) ‘A review of the theories of corporate social responsibility: Its evolutionary path and the road ahead’, International Journal of Management Reviews, 10(1), pp. 53–73. doi: 10.1111/j.1468-2370.2007.00226.x.

Maignan, I. and Ferrell, O.C. (2004) ‘Corporate social responsibility and marketing: An integrative framework’, Journal of the Academy of Marketing Science, 32(1), pp. 3–19. doi: 10.1177/0092070303258971.

Matten, D. and Moon, J. (2008) ‘“Implicit” and “explicit” CSR: A conceptual framework for a comparative understanding of corporate social responsibility’, Academy of Management Review, 33(2), pp. 404–424. doi: 10.5465/amr.2008.31193458.

Michelon, G., Boesso, G. and Kumar, K. (2012) ‘Examining the link between strategic corporate social responsibility and company performance: An analysis of the best corporate citizens’, Corporate Social Responsibility and Environmental Management, 20(2), pp. 81–94. doi: 10.1002/csr.1278.

Reverte, C. (2011) ‘The impact of better corporate social responsibility disclosure on the cost of equity capital’, Corporate Social Responsibility and Environmental Management, 19(5), pp. 253–272. doi: 10.1002/csr.273.

Vilanova, M., Lozano, J.M. and Arenas, D. (2008) ‘Exploring the nature of the relationship between CSR and competitiveness’, Journal of Business Ethics, 87(S1), pp. 57–69. doi: 10.1007/s10551-008-9812-2.

Wagner, T., Lutz, R.J. and Weitz, B.A. (2009) ‘Corporate hypocrisy: Overcoming the threat of inconsistent corporate social responsibility perceptions’, Journal of Marketing, 73(6), pp. 77–91. doi: 10.1509/jmkg.73.6.77.

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