Malcolm Rivera
The oil business has long been viewed as a controversial industry due to its adverse impacts on the environment and human rights. Unethical conduct in the oil industry includes corruption, bribery, lobbying, and money laundering. Oil and gas firms operating in non-competitive industries are more likely to engage in unethical practices, especially in countries with poor legal enforcement, weak regulations, and a lack of institutional framework. To ensure ethical practices, companies must implement codes of conduct, provide ethics education, and abide by anti-corruption laws and policies. Due diligence is crucial when dealing with foreign governments, including understanding ownership structures and potential conflicts of interest. The presence of a strong CSR committee can also improve social responsibility and mitigate environmental concerns.
| Characteristics | Values |
|---|---|
| Lack of competition in the industry | Oil and gas firms operating in non-competitive industries are more likely to engage in unethical practices |
| Poor legal enforcement, regulations, and institutional frameworks | Countries that rank poorly in these areas are more likely to have oil and gas firms engaging in unethical practices |
| Low oil imports | Countries that import less oil are more likely to have oil and gas firms engaging in unethical practices |
| Lack of transparency | Transparency is key to better resource governance and can limit opportunities for corruption and mismanagement |
| Inadequate due diligence | Due diligence must be performed on all potential local content partners, including understanding their ownership structure and whether they are tied to government officials |
| Non-compliance with anti-corruption laws and policies | Compliance with anti-corruption laws and policies is essential to ensure ethical conduct |
| Lack of sustainability | Oil companies face pressure to leave fossil fuels in the ground and transition to a low-carbon future |
| Human rights violations | Oil companies have been criticized for their human rights records and their impact on local communities |
| Corruption | Corruption is a concern in the oil and gas industry, including bribery, lobbying, and money laundering |
| Environmental damage | Oil companies must balance energy access with fighting climate change and minimizing environmental damage |
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What You'll Learn
Lack of transparency and corruption
The oil industry has long been viewed as controversial due to its adverse impacts, and its operations often lack transparency. Oil and gas firms operating in non-competitive industries are more likely to engage in unethical practices, especially in countries with weak legal enforcement, poor regulations, and a weak institutional framework. This dynamic is particularly pronounced in countries that import less oil, as they may have fewer alternatives to meet their energy needs.
To address these issues, policymakers should encourage competition in the industry and strengthen country-level enforcement laws, regulations, and institutional frameworks, especially in developing countries. Additionally, oil companies should implement robust ethical codes of conduct and provide comprehensive compliance training to their employees. Due diligence is crucial when entering into joint ventures or contractual agreements with local partners to ensure alignment with anti-corruption laws and policies.
Furthermore, the presence of a strong Corporate Social Responsibility (CSR) committee within a company, comprised of experienced board members, can effectively improve social responsibility and mitigate the company's carbon footprint. However, the power dynamics within a company, such as the influence of the CEO, can impact the effectiveness of CSR governance in addressing environmental concerns.
The strategies of "unethicising" are common in the oil industry, where companies develop sophisticated repertoires to deflect blame and justify their behaviour. This can lead to endless chains of blame and the legitimisation of questionable practices. Therefore, it is essential to foster a culture of transparency and accountability within the oil industry to address these issues effectively.
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Violations of human rights
The oil industry has a long and controversial history of human rights violations in developing countries. Oil and gas firms operating in non-competitive industries are more likely to engage in unethical practices, particularly in countries with poor legal enforcement, weak regulations, and a lack of institutional framework. These practices often result in severe human rights abuses, including forced labour, illegal detention, torture, and even death.
One of the most well-known examples of human rights violations in the oil industry is the case of Ken Saro-Wiwa and the Ogoni people in Nigeria. In response to the environmental devastation, poverty, and instability caused by oil extraction in the Niger Delta, Saro-Wiwa launched a non-violent movement for social and ecological justice. Shell and Chevron were accused of waging an ecological war and a series of genocidal attacks against the people of the Delta. Despite Shell pulling out of the Ogoni region in 1993 due to the effectiveness of the movement, Saro-Wiwa was framed for murder and executed, along with eight other Ogoni leaders.
Another example of human rights violations in the oil industry is the construction of the Yadana and Yetagun pipelines in Burma in the mid-1990s. The Burmese army committed human rights abuses against peasants during the clearing of routes for the pipelines, including forced relocation, forced labour, rape, torture, and murder. In 2005, Unocal agreed to compensate Burmese villagers in a landmark case, illustrating corporate collusion in these abuses.
It is not just an issue in developing countries, however. With the increasing use of extreme extraction techniques like fracking and tar sands in North America, communities near extraction sites in Canada and the United States are also raising human rights concerns.
To address these issues, multinational corporations must go beyond simply adopting human rights policies. While high-quality human rights policies can have some impact on preventing the most serious forms of abuse, they are often insufficient unless reinforced with concrete measures such as engagement with local communities. By deepening their engagement and adopting concrete measures, corporations can work to stop human rights abuses in their supply chains and avoid charges of ethical window-dressing.
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Environmental damage
One of the most well-known examples of environmental damage caused by the oil industry is the Deepwater Horizon oil spill in the Gulf of Mexico in 2010. The incident spread oil across 68,000 square miles of sea surface, killing approximately one million seabirds, five thousand marine mammals, and one thousand sea turtles. This disaster prompted the U.S. government and the oil industry to re-evaluate drilling technologies, procedures, and regulations to prevent similar accidents in the future.
Even smaller spills during oil and gas extraction can be extremely harmful and dangerous. A report by the Center for Western Priorities found that 2,179 spills were reported in Colorado, New Mexico, and Wyoming in 2020 alone. These spills can have devastating effects on local wildlife through direct contact, inhalation, and ingestion of toxic chemicals.
Another technique used in the oil industry, hydraulic fracturing or "fracking," also has significant environmental impacts. This technique requires large amounts of water and the use of potentially hazardous chemicals to release oil from rock strata. In some areas, the significant water use for oil production can affect water availability for other uses and potentially harm aquatic habitats. Improper handling and faulty well construction can result in leaks and spills of fracturing fluids, further damaging the environment.
Additionally, the development of fossil fuels often invades public lands, removing large amounts of rangelands and vegetation essential for wildlife and people. Oil drilling operations can also generate noise and air pollution, impacting the surrounding areas. The environmental damage caused by the oil industry can be long-lasting and challenging to reverse, with some sites taking centuries to recover even after companies abandon them.
To mitigate these impacts, technological advances in exploration, production, and transportation, as well as stricter enforcement of safety and environmental laws and regulations, are crucial.
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Breaches of codes of practice
Unethical behaviour in the oil industry has been a topic of interest for many years. Breaches of codes of practice can take many forms, and the oil and gas industry has long been viewed as controversial due to its adverse impacts.
One of the most well-known examples of unethical behaviour in the oil industry is the case of Exxon Valdez, which caused significant environmental damage. This incident highlighted the potential for gross environmental damage as a result of unethical practices in the industry.
Another key area of concern is human rights abuses. For instance, there have been allegations of human rights violations against China National Petroleum Corporation. The oil industry has also been criticised for its involvement in countries with poor human rights records, such as China and certain petroleum-producing nations.
Corruption is another significant issue. Oil and gas firms operating in non-competitive industries are more likely to engage in unethical practices, particularly in countries with weak legal enforcement, poor regulations, and a weak institutional framework. This can include corruption, bribery, lobbying, and money laundering. For example, in some countries, the government may own the oil and gas industry, creating a conflict of interest and the potential for corruption.
Furthermore, the oil industry has been criticised for its lack of transparency, particularly regarding revenue disclosure and the distribution of wealth. This lack of transparency can lead to mismanagement and corruption, as seen in the case of Ghana, where fieldwork revealed that people in villages near oil fields lacked access to information about oil revenues.
Oil companies have also been accused of "unethicising", where they develop sophisticated strategies to offload blame and justify their behaviour. This can create endless chains of blame and potentially justify any kind of behaviour.
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Anti-sustainability rhetoric
Unethical conduct in the oil business can take many forms, one of which is anti-sustainability rhetoric. The oil industry has a long history of engaging in practices that contradict the need to mitigate climate change. As early as the 1950s, the industry began to fund research on the effects of pollution, with some companies even acknowledging the connection between burning fossil fuels and climate change. However, instead of taking meaningful action, oil companies often resorted to climate change denial, disinformation, and the promotion of voluntary, non-binding solutions. This has contributed to public distrust in climate science and delayed meaningful progress on mitigating climate change.
The tension between the social goal of climate change mitigation and the financial pressures of the oil industry has led to defensive and strategic responses from oil companies. One such response is the use of anti-sustainability rhetoric, where companies attempt to shift the focus away from their contributions to climate change and towards economic growth and technological innovation. For example, instead of pledging to reduce carbon emissions, companies like Shell have claimed that they will combat climate change by continuing to produce oil and gas, arguing that it will fuel economic growth and foster technological advancements.
Oil and gas firms operating in non-competitive industries are more likely to engage in these unethical practices, especially in countries with weak legal enforcement, poor regulations, and a lack of institutional framework. The quality of enforcement laws, regulations, and institutional frameworks needs to be improved, especially in developing countries, to discourage firms from gaining undue benefits and engaging in anti-sustainability rhetoric.
The oil industry's response to climate change has evolved over time, with companies gradually shifting their language from blatant climate denial to more subtle forms of delayism. This involves using carefully crafted rhetoric that acknowledges climate change without accepting responsibility or committing to meaningful action. By drawing on the tactics of the tobacco industry, oil companies have threaded a fine rhetorical needle, exculpating themselves from charges of marketing a harmful product.
To address these issues, policymakers should consider encouraging competition in the industry and strengthening country-level enforcement laws, regulations, and institutional frameworks. Additionally, there are campaigns to hold PR agents and ad agencies accountable for their role in promoting propaganda and misleading the public about climate change. By understanding the range of responses to the tension between sustainability and the oil industry's interests, stakeholders can work towards a more effective transition to sustainable practices.
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Frequently asked questions
Unethical conduct in the oil business includes corruption, bribery, lobbying, money laundering, human rights violations, and environmental damage.
Corruption can occur when oil companies engage in joint ventures with foreign governments or state-owned entities. For example, a foreign company might have to choose between abandoning investments or continuing in a corrupt venture due to unethical conduct by their local partner.
Oil companies can promote ethical behaviour by implementing a code of conduct, providing ethics education programs, and adhering to internationally recognized human rights programs. Additionally, having a strong CSR committee with experienced board members can help improve social responsibility and mitigate carbon footprints. Transparency is also key to better resource governance and limiting corruption and mismanagement.
