Business Ethics - Report on Petrochina

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CSR claims and actual implementation of CSR strategies

The Chinese Federation for Corporate Social Responsibility was established in 2007 in Shanghai, it includes 13 founding members, including both Chinese companies and foreign companies (Lin, 2009). At the same year, as one of the founding members of the federation, PetroChina also released its own CSR report.

The company firmly believes that its CSR’s publication can be beneficial for the public and the investment community in the sense that it can help them gain more profound and more direct knowledge of PetroChina’s CSR strategies. Based on its sustainability reports, its CSR strategy claims can be summarized as following: 1. First of all, CSR strategies are an inseparable part of the firms’ overall development strategies. 2. The firm’s most important, and also, long-run social responsibility is to secure energy resources, and achieve the goal of fuelling social development and prosper economic growth through the provision of stable energy supply. 3. PetroChina has regarded providing products and services of reliable quality to the public as one of its major responsibilities. 4. PetroChina’s CSR report in 2010 defines its core business management principle as “Honesty, Innovation, Performance, Harmony, and Safety”, and the CSR report also delivers the mission statement as “Energise, Harmonize, and Realize”. 5. To achieve the goal of sustainable development, PetroChina always puts clean development and safe development in the highest agenda. 6. Following the framework of Chinese government’ 12th five-year plan, PetroChina has a goal of building itself into a green, international and sustainable company.

Despite declaring these claims as its ethical principles in its CSR reports, PetroChina has also developed several kinds of systems, or say, CSR aimed projects, to achieve sustainability, for example, Quality Management System, which has a goal of “zero accident, zero defect”; HSE Management System, and etc. (Liu, Garcia, & Vredenburg, 2014). Nevertheless, the CSR aimed projects are more targeted at the domestic market in China. For example, it would be difficult to find CSR aimed projects outside China in PetroChina’s reports– only one is in Ecuador. Also, it would be hard to find documented donations, which happen outside China, in PetroChina’s CSR reports.

And in other countries, the CSR claims are not implemented as efficiently as in China. As previously mentioned in the introduction part, PetroChina was involved in several controversies in recent years, being accused of conducting complicity of violation of human rights for several times in the international arena. In this report, just one impressive example of violation of human rights in Sudan is listed. The first major foreign oil exploitation project of PetroChina was taken place in Sudan, and after this project, PetroChina starts to invest and exploit in other African countries. Since China has limited crude oil domestic reserves, PetroChina was left with no choice but increase its international oil supply exploitation. And under this background, Sudan is of great importance to PetroChina and therefore Chinese governments, in the sense that, among PetroChina’s oil investment portfolio, it is the largest foreign state. Moreover, over 35% of Sudanese oil production is originated from Chinese investments. To protect these investments, the Chinese government has chosen an unethical method, i.e., in Sudan’s long-standing civil war in Darfur, Chinese government became the largest and persistent supplier of arms to the Sudanese government. This war has caused a very severe and persistent humanitarian crisis in Sudan. Therefore, both the Chinese government and PetroChina are accused of violation of human rights (Chen, 2008; Whelan and Muthuri, 2017).

Based on the former examples and analysis, it would be reasonable to conclude that PetroChina did not apply the same ethical principles claimed by itself anywhere it functions. The reasons behind the differentiated CSR approach are two: 1. Since PetroChina has near-monopoly power on the demand side, just as stated in the introduction, thus it would be less worried about its images. Furthermore, in countries like Sudan, where the firm only conduct oil and gas exploration (i.e. supplier countries), the worsen reputation caused by less CSR-claim-compliant behaviours will only have minor negative effects on the profits, while those behaviours themselves can have very large positive effects on profits of the firm (for example, unethical behaviours that can help securing investment of PetroChina in these countries, just as discussed above). Therefore, in those countries, PetroChina tends to be not complaint with its own CSR claims. 2. However, in the domestic market, i.e. China, as a SOE, PetroChina should act carefully and stick to its CSR principles, considering that its actions within domestic market is highly associated with the images and reputations of Chinese government.

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Critical assessment on the CSR strategy of the company

In this subsection, firstly, the ethicalness of the CSR practice in PetroChina is discussed, and then propose recommendations on how to further develop CSR strategy of the company.

First of all, the CSR practice is not ethical. This can be easily seen if one judges the CSR practice in PetroChina using non-consequentialist theories, a subcategory of the normative theories, which focus on duties or principles. For example, the CSR management practice in PetroChina can be judged using the methodology of ethics of rights and justice. The theoretical foundation of ethics of rights and justice relies on natural rights and justice: the simultaneously fair treatment of individuals in a given situation with the result that everybody gets what they deserve (Tuck, 1981; Hart, 1955). Judging from this principle, in those supplier countries, the behaviours of PetroChina is not ethical, because the residents in these countries are deprived of human rights simply due to the profit maximization of PetroChina, and the firm’s behaviour neither exhibits fair procedure, nor exhibits fair outcomes, i.e., these residents in supplier countries have received both unfair procedure and unfair distributive outcomes.

Second, the major inefficiency of the PetroChina’s current CSR strategies are quite obvious. Through always putting Chinese government’s interest in the highest priority, and wrongly utilizing inefficient differentiated CSR approach, the firm improperly accentuate an “us and them” mentality, which is never a correct attitude for a MNC when implementing