Mikkelsen A., Langhelle O. (eds.) Arctic Oil and Gas. Sustanability at Risk?
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model for major actors associated with oil and gas development in the Arctic in
Figure 13.1).
Communities, rights and development
According to Sayre Shatz (1987b), people in developing regions exhibit one of
three approaches to economic development and interaction with multinational
enterprises (MNEs): acceptance, rejection or pragmatic. He characterizes
the approaches as follows: In the acceptance approach, local or Indigenous
communities view relations with MNEs as economically rational, with benefits
generally outweighing costs for the community (Shatz, 1987b). This view leads
to a decision to optin and unconditionally participate in business interactions with
MNEs (see Figure 13.1).
Under the rejection approach, local or Indigenous communities view MNE
activities as essentially baleful. Harm is seen to outweigh benefit for the commu-
nity (Shatz, 1987b). This view leads to a decision to opt out and resist participa-
tion in business interactions with MNEs.
Between these two is the pragmatic approach which views MNE operations
as mixed in effect; which believes that feasible government pressures can
produce a worthwhile improvement in the benefit-cost mix; and which there-
fore advocates intelligent bargaining.
(Shatz, 1987b: 108-109)
For the local or Indigenous community, this means a decision to opt in to
interaction with an MNE on a case-by-case basis, where participation may be
transformed to best meet the needs of the community.
Shatz and others contend that the pragmatic approach has become the strategy
of choice for most developing people, including the First Nations in Canada.
1
The assertively pragmatic approach of the Tahltan people of British Columbia
and the Yukon towards companies wishing to develop natural resources on their
traditional lands is typical.
We wish to make it very clear that the Tahltan People and the Talhtan Tribal
Council are not inherently opposed to any specific type of business or resource
development within our country. However, we do feel strongly that any devel-
opment within our tribal territory must adhere to some basic principles.
Before a resource development project can commence within Tahltan
territory, it will be necessary for the developer and the Tahltan Tribal Council
to enter into a project participation agreement that encompasses the following
elements and basic principles:
1 assurance that the development will not pose a threat of irreparable envi-
ronmental damage;
356 A. Mikkelsen, R. D. Camp II and R. E. Anderson
Managerial implications 357
2 assurance that the development will not jeopardize, prejudice or other-
wise compromise the outstanding Tahltan Aboriginal rights claim;
3 assurance that the project will provide more positive than negative social
impacts on the Tahltan people;
4 provision for the widest possible opportunity for education and direct
employment-related training for Tahltan people in connection with the
project;
5 provision of the widest possible employment opportunities for the
Tahltan people with respect to all phases of the development;
6 provision for substantial equity participation by Tahltans in the total
project;
7 provision for the widest possible development of Tahltan business oppor-
tunities over which the developer may have control or influence;
8 provision for the developer to assist the Tahltans to accomplish the
objectives stated above by providing financial and managerial
assistance and advice where deemed necessary. (Notzke, 1994: 215)
Transnational bodies and rights of Indigenous communities
Transnational organizations are working to shape the interactions between
Indigenous communities, governments, civil organizations and corporations.
Events during the final decades of the twentieth century and the opening decade
of the twenty-first resulted in Indigenous people emerging as a group of some
consequence to all players in the global economy. We will briefly cover these
events by focusing on three transnational statements pertaining to the rights
of Indigenous peoples: (i) ILO 169 of 1989 of the International Labour
Organization; (ii) the United Nations Declaration on the Rights of Indigenous
People that went before the General Assembly in the fall of 2006 for a ratification
vote; (ii) and the policy of the World Bank towards Indigenous people revised
in 2005. These policy decisions address four areas of rights for Indigenous
peoples: the right to control over their own land and resources; the right to
economic benefit from traditional lands; the right to self-determination in
development and the right to maintain and strengthen institutions, cultures
and traditions.
The International Labour Organization Convention 169
In 1989, the International Labour Organization (ILO), revised its Convention 107
of 1957 regarding Indigenous peoples and created the new ILO Convention 169.
In response to pressure from Indigenous people, Article 8 of the 1989 convention
dropped the ‘integration’ or ‘assimilation’ philosophy and recognized the rights
of Indigenous people ‘to retain their own customs and institutions, where these
are not incompatible with fundamental rights defined by the national legal system
and with internationally recognized human rights’.
358 A. Mikkelsen, R. D. Camp II and R. E. Anderson
Two additional articles are relevant for companies wishing to do business with
Indigenous communities. ILO 169 Article 14 addresses land rights and Article 15
addresses resource rights. In particular, Article 14 calls for the recognition
of Indigenous peoples’ ownership rights over the lands, which they have tradition-
ally occupied and usage rights over lands ‘to which they have traditionally had
access for their subsistence and traditional activities’. It also calls upon govern-
ments to identify these traditional lands and effectively protect Indigenous
peoples’ rights of ownership and possession.
Article 15 addresses the rights of Indigenous people to control over the natural
resources associated with their lands, including participation in the use, manage-
ment and conservation of these resources. In the case where the State retains
ownership of mineral or sub-surface resources, Indigenous peoples have the
rights to consultation over the use of these resources, to participate in the bene-
fits from these activities, and to be fairly compensated for any damages which
they may sustain from such activities.
United Nations Declaration of the Rights of Indigenous People
2
For more than two decades, efforts have been under way in the United Nations
(UN) to develop international standards to address the widespread discrimination
and marginalization that has forced Indigenous peoples worldwide into situations
of extreme poverty and cultural destruction. On June 29, 2006, the Human Rights
Council of the United Nations adopted a resolution on the Declaration on the
Rights of Indigenous Peoples ‘that offers both an inspiring affirmation of the
rights of Indigenous peoples and an assurance that “the human rights . . . of all
shall be respected”’ (Amnesty International Canada, 2006).
In the preamble, the Declaration recognizes the importance of lands, territories
and resources to Indigenous people, that they have the right to develop in their
own way (PP5), that these rights are inherent to their existence as peoples (PP6),
and that these rights are essential rebuilding Indigenous communities as
Indigenous people wish to rebuild them (PP8). Furthermore, these rights include
control by Indigenous peoples over developments affecting them and their lands,
territories and resources in order to maintain and strengthen their institutions,
cultures and traditions, and to promote development in accordance with their
aspirations and needs as a people.
A series of statements about specific rights follow the preamble. Statements
most relevant to land and resource rights and development on their own terms
address the rights to maintain and develop their political, economic and social
systems or institutions, their own means of subsistence and development, and
the right to engage freely in traditional activities. These statements establish
the notion of traditional ownership, occupation and use of land. They also
establish a right to fair and equitable redress, restitution or compensation for the
use of lands, territories and resources, which they have traditionally owned,
occupied or used.
The World Bank policy on Indigenous people
In 2005, the World Bank instituted a new policy with respect to Indigenous
people, BP4.10, replacing OD4.2 dated September 1991. While only pertaining
to the activities of the Bank itself and the projects it funds, the new policy
recognizes Indigenous rights, including those related to land and resources.
One of the centrepieces of the new policy is the concept of ‘free, prior and
informed consultation’.
The Bank’s policy states that borrowers are responsible to ensure that the
consultation process with Indigenous peoples is free from external manipulation,
interference or coercion, and that the Indigenous peoples concerned have ‘prior
access to information on the intent and scope of the proposed project in a cultur-
ally appropriate manner, form, and language’. This notion of being culturally
appropriate extends further. Borrowers need to recognize existing Indigenous
institutions, including councils of elders, headmen and tribal leaders. They should
also start the consultation process early enough to allow ‘for adequate lead time
to fully understand and incorporate concerns and recommendations of Indigenous
Peoples into the project design’.
In addition to free, prior and informed consultation, the Bank’s policy requires
a social assessment of positive and negative project effects. These effects may be
unique to Indigenous communities in that their distinct circumstances and close
ties to land and natural resources affect their relative vulnerability. Furthermore,
these unique risks require diligence in planning the measures necessary to avoid,
minimize, mitigate or compensate for adverse effects, and to ensure that the
Indigenous peoples receive culturally appropriate benefits under the project.
Finally, the policy requires the development of an Indigenous Peoples
Plan. This plan incorporates a framework for ensuring free, prior and informed
consultation during project implementation. It also incorporates an action plan
for ensuring that Indigenous peoples receive culturally appropriate social and
economic benefits. Where necessary, this includes measures to increase
the capacity of the borrowing agency to provide these benefits. It also includes
measures to avoid, minimize, mitigate or compensate for potential adverse effects
for the Indigenous communities involved.
Concluding comments on statements on Indigenous peoples’ rights
The ILO Convention and the UN Declaration are not binding on states unless they
ratify them (Canada, the United States and Russia have not done so) and
the World Bank policy applies only to projects in which the organization is
involved. However, according to the UN’s International Working Group on
Indigenous Affairs (IWGIA), the three statements put pressure on governments to
live up to their objectives and ‘serve to reinforce such universal principles as
justice, democracy, respect for human rights, equality, non-discrimination,
good governance and good faith’ (IWGIA, 2006).
These expectations are not limited to governments; corporations are subject to
them as well. This is especially true for multinational enterprises, including oil
Managerial implications 359
and gas companies, whose activities take place on remote, often traditional
Indigenous, lands.
The four cases studied in this book (Chapters 7-10, see also Chapter 11) clearly
show that the Indigenous people of the Arctic expect the principles of ILO 169,
the UN Declaration and the World Bank policy to be respected and followed by
governments, corporations and others. Their expectations are expressed in
demands for long-term, sustainable economic and social benefits as an outcome
of oil and gas developments, and the inter-related environmental concerns tied to
place-specific matters, such as whale and caribou migration, and, more generally,
their deep concerns about the impact of global climate change on their traditional
lands and activities.
The civil sector
As could be seen in the previous section on transnational bodies, within Arctic
communities, two groups of civil institutions are important for our discussion:
those focusing on environment, and those focusing on human rights. Many civil
sector organizations promote interests and values that conflict with Indigenous
groups’ rights as set out in ILO 169, the UN Declaration and the World Bank
policy. Some groups, focused on conservation and preservation, are in open
conflict with Indigenous groups about what constitutes acceptable activities on
Indigenous lands. Other groups, concerned with human rights, find aspects of
traditional (often male-dominated) governance models and an emphasis on
collective over individual rights, objectionable. The discussion that follows will
highlight both the convergence and divergence of interests between these groups
of civil institutions and Indigenous communities in the Arctic.
Environmental issues
There is considerable common ground between the people of the communities in
the Arctic and environmental groups in two general areas – climate change,
and local regional impacts of oil and gas exploration, extraction and transporta-
tion. The people of the Arctic see first hand the impact of climate change on their
traditional lands and activities and the need for economic development, as do
environmental groups. The range of responses regarding possible solutions to
these issues is similar for both groups. Some favour continued development of
hydrocarbon resources as essential to economic sustainability, and are looking to
methods of controlling and reducing greenhouse emissions; for example,
the underground storage of CO
2
and more efficient combustion. Others see
conservation and alternative fuels as the answer to energy problems and question
the wisdom of ongoing reliance on hydrocarbons, and hence the wisdom of oil
and gas activities in the Arctic. This is part of the larger challenge facing oil and
gas corporations, and is not unique to the Arctic.
The local impacts of oil and gas activities have also drawn considerable attention.
Clearly, the communities expect companies to respect Indigenous and other
360 A. Mikkelsen, R. D. Camp II and R. E. Anderson
Managerial implications 361
rights, including the right to pursue traditional activities on the land. This concern
is common across all the cases, as is evident from the concern for whale migration
among the people of the North Slope of Alaska, and concerns about caribou
among the Indigenous people of the Mackenzie in Canada. Similar concerns are
apparent in Norway and Russia.
However, while communities and environmental groups generally demand
similar things from companies with respect to these rights, some environmental
groups have agendas that extend beyond that of the people of the communities.
This often finds voice in demands for conservation and protection of areas or
species, even at the expense of local traditional practices and economic develop-
ment, bringing the conservation/preservation-oriented environmental groups into
conflict with the communities. This, in turn, places corporations in a challenging
position. For example, taking a proactive approach to supporting the whaling
activities of Indigenous groups would demonstrate respect for Indigenous rights
to traditional practices. However, it would also bring the corporation into conflict
with many environmental groups that want a complete ban on whaling. Similarly,
there is clearly a disagreement between Indigenous people and conservationists
about what should or should not be allowed in protected areas, in Alaska and
elsewhere.
Human rights issues
Human rights organizations also impact the operations of oil and gas companies
in the Arctic and elsewhere. In general, their concerns centre on equality rights.
Many organizations seek redress for Indigenous people and support them in their
drive to reacquire their traditional lands and resources and rebuild their commu-
nities. However, other organizations see concerns about gender, individual rights
and democracy (one person, one vote, majority rules) as critical issues. These
latter organizations operate at two levels, within Indigenous communities,
and between Indigenous and non-Indigenous communities. At the within-
communities level, many organizations express concerns about involvement,
governance, accountability and equitable treatment. At the Indigenous/
non-Indigenous level, some organizations argue that preferential treatment
towards Indigenous peoples is appropriate.
However, conflict exists between Indigenous and non-Indigenous communities
where there are significant numbers of the latter (e.g. Yellowknife, Canada) in the
Arctic. This conflict is usually expressed as resentment towards preferential
treatment for Indigenous people, and is an issue with which the four Arctic govern-
ments must wrestle. One partial solution has been to mandate special treatment
beyond the Indigenous community, for example, hiring and procurement targets for
people in the region of the project, rather than just Indigenous people. This has
worked to some extent, though employees often object to diversity programmes that
give preferential treatment to specific groups of employees. Objections to special
rights for Indigenous people by others affected by these projects have found some
support with organizations whose focus is on individual rights and equality.
362 A. Mikkelsen, R. D. Camp II and R. E. Anderson
Government issues affecting business activities
in Indigenous communities
We think three conclusions emerge from our case studies with respect to govern-
ment. First, governments are generally in accord with the notion of Indigenous
rights and what constitutes appropriate social responsibility with respect to
Indigenous communities in the Arctic, as expressed in ILO 169, the UN
Declaration and the policies of the World Bank. This is not to say that all four
states accept all that is in these three pronouncements. Indeed, Canada voted
against taking the UN Declaration on Indigenous Rights to the General Assembly
in its present form, but for reasons that do not disavow most of the principles in
the Declaration. If a corporation was to espouse these general principles, it would
find itself in general accord with policies of the four states we studied.
Second, the four states leave no doubt as to their position regarding the continued
use of oil and gas. All see development of these resources in their Arctic regions
as essential. They vary in their approach to the issue of greenhouse gases but none
seem about to adopt a radical shift away from oil and gas as a source of energy.
This settles the issue for oil and gas corporations. The states have declared that
oil and gas development in the Arctic is socially responsible and critical for
economic sustainability.
Third, the states have made a series of pronouncements on various issues
that might lead to conflict between communities and civil groups that relieve
corporations of some of the challenges of clearly conflicting expectations as to
social responsibilities. Alaskan authorities accept limited whaling. Canadian
authorities permit the trade in furs. Both require preferential hiring and procurement
schemes and so on. In spite of objections from other stakeholders, firms must
incorporate these things into their approach to CSR.
Contradictory demands on sustainable development in the Arctic
In the previous sections on transnational bodies and on the civil sector we have
looked at the context in which oil and gas companies must operate in the Arctic
and elsewhere. From these sections, we can see that the demands from communities,
the civil sector and governments are myriad and often contain contradictory
elements. If a corporation seeks to satisfy the expectations about Indigenous
rights expressed in ILO 160, the UN Declaration and the policies of the World
Bank, it may make other important stakeholders unhappy. For example, the prin-
ciple related to Indigenous rights clearly supports ongoing whaling by the
Indigenous people of the North Slope. Socially responsible corporations working
in the North Slope should, therefore, support communities in this traditional
endeavour, and minimize and mitigate negative impacts of their operations on
whales and whaling. However, the anti-whaling movement would likely not be
satisfied with actions by these corporations that assisted the whale hunt.
Similar issues arise in regard to protected areas and interaction with legitimate
community leaders. While companies and communities likely could reach
agreement about the careful and sustainable use of special areas, some civil sector
groups want absolutely no activity in these areas. Likewise, corporations must
work with the leaders that are there and yet that leadership may not be ‘proper’
by either Indigenous or civil sector standards. It will often fall to the state to
specify legally recognized leaders.
Similar arguments can be made from the perspective of a corporation trying to
meet the needs of other major stakeholder groups. None of the states involved
subscribes completely to the principles expressed in ILO 160, the UN Declaration
and the policies of the World Bank. One obvious example in Canada is the
environmental assessment process. It treats Indigenous people as one group,
equal among many, whose interests need to be considered when activities will
occur on traditional lands. Furthermore, the Canadian government considers
the oil and gas under traditional land to be the property of all Canadians with
royalties from its use accruing to all Canadians. Yet Indigenous people feel that
these are their lands and their resources; that they should decide what can be
done, where and how; and that they should benefit from the resources of the
lands. Grand Chief Matthew Coon Come of the Cree of Northern Quebec
captured the essence of this issue, saying ‘immense wealth – several billion
dollars a year – is being taken [out] of land in Eeyou Astchee . . . and that
we Crees get no share in the wealth, either in the form of royalties, business
opportunities or work’ (Grand Council of the Crees, 1998: 1).
In reality, the Indigenous people in all four jurisdictions do possess separate,
special rights recognized by the states involved and by other bodies such as the UN
and the World Bank. Corporations must address and accommodate these special
rights, because, in spite of objections by some, these rights will not disappear.
Another reality is the lack of consensus on these rights and their status relative
to other values and concerns, which can make negotiations difficult and good
agreements, acceptable to all, difficult to reach and sustain.
So what can a corporation do? Clearly the stakeholders are demanding socially
responsible behaviour. And equally obviously these demands extend beyond those
found in the classic view of CSR. We think these demands can best be viewed as a
package captured by the concept of sustainable development. In the next section we
briefly examine current practices, and offer suggestions we feel might be useful to
oil and gas corporations trying to promote sustainable development in the Arctic.
Managerial implications
In this section, we go back to the concepts of corporate social responsibility
presented in Section 2. In particular, we argue that the approach to date has tended
to operate towards the left of the continuum presented in Figure 13.2, that is treat-
ing CSR issues as a constraint and a cost to be minimized in pursuit of profit and
shareholder wealth maximization, and in the lower left corner of the matrix
presented in Figure 13.3 and modified earlier as Figure 13.4 (cell 1).
Based on the analysis of the cases presented in this volume, we argue that, in
order for CSR activities to promote sustainable development in local and
Managerial implications 363
364 A. Mikkelsen, R. D. Camp II and R. E. Anderson
Indigenous Arctic communities, corporations must operate under a more strategic,
proactive orientation (see cell 4 in Figure 13.4). This orientation implies two
things. First, the identification and satisfaction of social responsibilities must be
considered a critical, strategic corporate objective essential to long-run corporate
survival and profitability. Second, the corporation must be committed to develop-
ing an economy that is socially, environmentally and economically sustainable.
In the remainder of this section we offer some observations as to: (i) why we
think the current approaches to CSR activities of oil and gas companies in the
Arctic are closer to point 1 than 4 in Figure 13.4; (ii) why we think a company
should operate at point 4 in Figure 13.4; (iii) what operating at this position
means to a company and (iv) how we think a company might move to cell 4,
an enhanced stakeholder approach, should it choose to.
Current approaches to corporate social responsibility
The strategy of the oil and gas companies is to extract oil and gas for refinement
and sale. To pursue this strategy, they need access to oil and gas deposits,
and permits for exploration and development. Historic, adverse impacts on the
environment and communities have damaged the reputations of oil and gas
companies. This, in turn, has made it essential for oil and gas companies to create
goodwill with governments and communities controlling rights to these
resources. In the current approach by oil and gas companies, social engagement
and dialogue appear to be seen as prerequisites for gaining access to resources,
and to obtaining and maintaining licences to operate.
This current approach has several shortcomings. Engagement with communities
tends to be fragmented and ad hoc. Consequently, there is a lack of long-term and
cumulative impact planning, and a lack of an integrated management framework.
This in turn seems to lead to the practice of dealing with negative spill-overs
through monetary compensation, even when it is difficult to put a monetary
figure on cultural impacts. This holds true even though there appears to be a
general consensus that it would be more effective to create an alternative strategy
for sustainable communities. Often efforts to be more proactive are hindered by
a lack of strategic focus, which allows a lack of monitoring, enforcement
and follow-up on strategic impact assessments, and the practice of ticking boxes
Figure 13.4 Corporate approaches to social responsibility.
(2) Stakeholder(1) Classical
(3) Social demand
(4) Sustainable
development
Tactical/reactive Strategic/proactive
Bottom line/profit
maximization focus
Triple-bottom line/
social responsibility
focus
by external affairs officers and other managers with limited power within the
companies. Keeping the stakeholders satisfied enough to maintain access to
resources seems to be the overall aim of the processes, and the success factor that
the activities are measured against.
Classical approach
In practice we have identified four different models for how a company evaluates
or takes responsibility in the situation. From the first to the fourth, the movement
is up and to the right in Figure 13.4. The first approach to CSR, classical,
is simply to run the permitting processes and the operations as long as the
company can, by dealing with the authorities and upper decision-makers of the
system. The guiding strategic vision appears to be limited, with management
thought more focused on the tactical issues of securing important natural
resources for a given project. Likewise, the underlying idea of CSR seems to be
that ‘if it is legal, it is right’. This practice corresponds to the ideas of Friedman
outlined in Chapter 4.
Stakeholder approach
The second, and more widespread approach, is the stakeholder approach,
in which the company’s behaviour and thinking is more strategic. This more
proactive approach encourages the company’s managers to give limited attention
to the community representatives and other stakeholders. Recognizing the poten-
tially negative effect on future projects, managers appear to be concerned with
ameliorating the harm caused by oil and gas projects through handing out money
or monetary support in order to avoid further damage to a company’s reputation,
and to secure access to resources and licenses. In this model, corporate represen-
tatives go straight from issue identification to compensation in order to minimize
long-term resistance to the company’s projects and strategic initiatives.
Social demand approach
In the third approach, social demand, the company deals directly with project
concerns identified by the community and then physically mitigates those
concerns to the extent they can. The ‘community’ is listened to and the company
is flexible in providing a solution. While this approach provides a kind of
symptomatic therapy, where the companies address legitimate needs identified by
the stakeholders, there is little or no effort made to get beyond immediate project
concerns. Again, corporate thinking appears to be focused on tactical issues asso-
ciated with specific projects and securing specific natural resources. The underlying
causes of problems are neither identified nor dealt with. In addition, no effort is
made to identify further economic benefits associated with the community
surrounding the project, either as a source of labour with unique knowledge or as
a potential market.
Managerial implications 365