An Examination of Corporate Social ResponsibilityImplementation and Stakeholder Engagement:A Case Study in the Australian Mining Industry

Angela R. Dobele,* Kate Westberg, Marion Steel and Kris FlowersSchool of Economics, Finance and Marketing, RMIT University, Melbourne, Australia

ABSTRACTThis case study explores the experience of a company in a controversial industry sector andits efforts to act in a socially responsible manner when establishing a presence in a regionalmarket. We examine the management of stakeholder relationships and communication, andidentify the challenges associated with implementing corporate social responsibility (CSR)initiatives. Our findings highlight the importance of ongoing and broad stakeholder identifi-cation, prioritization and management. This case study demonstrates the key role ofcommitment from senior management and front-line employees and the importance of aCSR champion. Commitment must be demonstrated at a local level to facilitate communityengagement, feedback and monitoring. Finally, the findings highlight the externality of stake-holder networks and their non-centric relationship with the company. Thus, a company isnot the centre of the stakeholder network; the network has a life of its own, regardless ofa company’s involvement or non-involvement. Copyright © 2013 John Wiley & Sons, Ltdand ERP Environment.

Received 20 August 2012; revised 3 December 2012; accepted 11 December 2012

Keywords: corporate social responsibility; mining; environment; stakeholder engagement; case study

Introduction

COMPANIES ARE INCREASINGLY BEING HELD ACCOUNTABLE FOR THE SOCIAL AND ENVIRONMENTAL CONSEQUENCES OF

their activities (Porter and Kramer, 2006) and the topic has gained prominence in both the academicand business contexts (Kotler and Lee, 2005; McWilliams et al., 2006). However, the reality of implementingsocially responsible strategies can be a challenge for organizations (Bhattacharya et al., 2009) and the process

by which implementation occurs has not received much attention in the literature (Maon et al., 2009). Firms incontroversial industry sectors may experience even greater hurdles, due to a lack of trust or credibility, and can findthat their efforts in corporate social responsibility (CSR) are subject to more intense public scrutiny (Palazzoand Richter, 2005; O’Riordan and Fairbrass, 2008). Mining companies in particular have historically had a‘questionable reputation for social responsibility’ and have been increasing their effort and resources dedicated toCSR (Kapelus, 2002, p. 275).

*Correspondence to: Angela R. Dobele, School of Economics, Finance and Marketing, RMIT University, GPO Box 2476, Melbourne,Victoria, Australia. E-mail: angela.dobele@rmit.edu.au

Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment

Business Strategy and the EnvironmentBus. Strat. Env. 23, 145–159 (2014)Published online 1 July 2013 in Wiley Online Library(wileyonlinelibrary.com) DOI: 10.1002/bse.1775

This study explores the efforts of a company in an industry with significant environmental impacts to implementa more socially responsible mode of operation, as well as associated CSR activities. In particular, we examine theorganization’s process for managing and building relationships with its stakeholder groups and identify a numberof challenges and impediments. We use as our case study Southern Pacific Petroleum (SPP), a company operatingin the petroleum extraction industry, and examine its efforts to act in a socially responsible manner, from the initialstage of establishing a presence in a regional Australian market through to manufacture and processing. The SPPventure was designed from the outset to use new technology that would allow the extraction of resources in a lessenvironmentally damaging manner than previous industry practice. However, as complications arose with thenew technology, significant challenges occurred in managing a number of stakeholder groups.

The paper will begin with a review of the literature pertaining to CSR in the mining sector. Focus will then begiven to the critical issues in CSR implementation. The methodology is outlined next, and the case study presentedand discussed, highlighting key challenges around stakeholder identification and engagement, building relationaldialogue and trust as well as internal and external communication. Finally, the paper will conclude with implica-tions, limitations and suggestions for future research.

Corporate Social Responsibility

CSR has been described as ‘a commitment to improve community well-being through discretionary businesspractices and contributions of corporate resources’ (Kotler and Lee, 2004, p. 3). However, despite the potentialfor these activities to achieve favourable outcomes, the reality of successfully implementing CSR initiatives ischallenging (Porter and Kramer, 2006; Bhattacharya et al., 2009). Firms whose outputs have an environmentalimpact operate in a hostile marketing environment and need to consider engaging a range of stakeholders in stra-tegic development (Fry and Polonsky, 2004). In particular, a company’s environmental policy can be influencedby both coercive and normative pressures from a range of institutions including government, customers, commu-nity and environmental groups as well as industry (Delmas and Toffel, 2004). The mining industry has embracedCSR, particularly in relation to environmental sustainability, due to increasing criticism inherent with the extrac-tion of non-renewable resources as well as the associated environmental and community impacts (Jenkins, 2004;Kemp, 2010).

Past research has examined CSR in the mining industry, particularly in the context of multinational ventures andrelationships with local communities, often in developing countries (e.g. Kapelus, 2002; Wheeler et al., 2002;Imbun, 2007; Newenham-Kahindi, 2011). Previous studies have highlighted some of the tensions created whenfirms in this controversial industry attempt to pursue their obligation of maximizing shareholder value as well astheir commitment to other stakeholder groups. A number of factors have been found to contribute to these pres-sure points, such as a lack of a uniform view and consistency within the company, challenges in establishingcredible communication and trust as well as the firm’s inability to manage complex relationships (Wheeleret al., 2002). In particular, relationships with key constituents in local communities have proven to be a challenge(Newenham-Kahindi, 2011). Kemp (2010) highlights the need for mining companies to adopt a strategic approachto community relations which extends beyond a public relations focus, primarily concerned with managingcorporate reputation, to a more inclusive approach that recognizes even the less empowered groups in thecommunity and involves ongoing engagement.

On the other hand, mining companies may face unrealistic expectations of facilitating beneficial social andeconomic change in the local landscape, particularly in areas with limited government resources (Imbun, 2007).These local communities often have a ‘love–hate’ relationship with mining firms driven by resentment of thedamaging environmental and livelihood impacts of mining conflicting with an appreciation for the economic anddevelopmental benefits that accrue as a result of these activities (Kepore and Imbun, 2011). In any event, increasingpressure from government, communities, non-government organizations concerned with human rights and theenvironment and even global organizations such as the World Business Council for Sustainable Development,mean that CSR, and its associated activities, is an essential part of business strategy for the mining and resourcesindustry sector (Kapelus, 2002).

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Implementation of Corporate Social Responsibility

The literature has not extensively discussed how firms actually implement CSR and it has been suggested thatmanagers have a need for guiding principles in this area, particularly in relation to management and communica-tion (Lindgreen et al., 2009). A number of authors have proposed design and implementation models for CSRwhich consider a variety of factors (e.g. Werre, 2003; Cramer, 2005; Maignan et al., 2005; Maon et al., 2009). Ingeneral, these models differ in the detail of their conceptualization, but tend to identify the following processesas key aspects in implementation: assessment of organizational values and norms, identification of stakeholdergroups and their key issues, internal and external communication and the monitoring of CSR activities.

A key aspect in implementing CSR is identifying key stakeholders. Stakeholder engagement is necessary toachieve CSR objectives and a key task for business is to identify ‘to whom they are responsible and how far thatresponsibility extends’ (O’Riordan and Fairbrass, 2008, p. 747). Further, effective stakeholder engagement canprovide firms with a competitive advantage (Rodriguez-Melo and Mansouri, 2011). When identifying stakeholders,in addition to those parties that have a direct stake in the business such as employees and customers, organizationsshould also be cognizant of ‘stakewatchers’, such as pressure or environmental groups, and ‘stakekeepers’, primar-ily regulators (Fassin, 2009, p. 128). These categories are deemed to better reflect the different activities ofeach group and allow for more effective stakeholder management (Fassin, 2009). The media is also an importantconstituent, not as a direct stakeholder benefiting from the firm, but as an entity having significant influence(Donaldson and Preston, 1995), and these influencers have power in relation to the organization, with or withouta valid stake or claim (Mitchell et al., 1997).

As it may be unrealistic for firms to appease all categories of stakeholder groups, managers need to identify andprioritize according to the power, legitimacy and urgency of a given stakeholder’s claim (Griesse, 2006). Further,relationships between stakeholders must also be considered, particularly where there may be opportunities to collab-orate and pressure the firm (Henriques and Sharma, 2005; Rowley, 1997). Additionally, with regard to environmen-tal issues, stakeholder engagement should consider ‘differences in stakeholder relationships, the actors involved,and the attributes of stakeholder interest’ (Onkila, 2011, p. 391). As such, the approach to stakeholder engagementmay need to vary to accommodate these differences. Effective stakeholder management has been found to be a keysuccess factor in implementing CSR (Sangle, 2010).

Finally, it has been proposed that CSR initiatives need to be promoted or communicated to the relevant stake-holder groups and their responses monitored (Cramer, 2005; Maignan et al., 2005; Maon et al., 2009). Theseactions are critical in creating positive interactions and relational dialogue with stakeholders, building trust andsocial legitimacy. However, there is a need for research into the communication activities that are most effectiveand the conditions under which those communications take place (Bhattacharya et al., 2009). The importance ofinternal communication has also been highlighted, noting the crucial element of employee support in embeddingthe company’s values in their actions and representing the company accordingly (Werre, 2003; Cramer, 2005).

However, ‘the journey to corporate social responsibility is not clear-cut’ (Cramer, 2005, p. 583). Our study seeksto add to the limited literature on the process of implementing and managing CSR by exploring the challenges facedby a firm operating in the mining industry, particularly the challenges associated with identifying relevant stake-holders, communicating with different stakeholders and the management structure for implementing and manag-ing CSR. Our case study on SPP provides a unique context in which to examine CSR, given that the company soughtto initiate a venture that considered, from its point of conception, its broader social responsibility by using technol-ogy that was assessed as less environmentally damaging than other available methods.

Method

Case study research is indicated when: the research questions ask how something happens or why somethinghappens; the context is an important source of information (Yin, 2009); and the conditions in which the activityoccurs are not able to be controlled (Patton and Appelbaum, 2003). More specifically this can be described as

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looking to understand the decision making, the implementation and the change processes that are occurring andto understand the relationship between constructs (Siggelkow, 2007). This is particularly important in examiningsystems that change over time.

The focus of this study is SPP’s demonstration plant that was located in Gladstone, a regional city in north-eastern Australia. The plant, since closed, now belongs to Queensland Energy Resources who have proposed plansto open a non-commercial, demonstration shale oil plant (Robinson, 2011). Gladstone is home to a range of largemulti-national and regional producers of manufactured products with significant environmental impacts.

SPP had received government funding, beginning with a federal government excise rebate in 1991, to establish afacility in the community on the basis that it would be using technology that would offer a safe, clean and cost-effective means of producing final quality oil from shale extraction (Anderson, 2002). This venture was designedfrom the outset to use new technology to allow the extraction of resources in a manner that was seen as less dam-aging to the environment than methods existing in the industry at the time. As a case study, SPP Gladstone offered aunique perspective of a firm initiating a CSR focus from initial resource funding through to preliminary production,and thus had the potential to offer insights into CSR efforts in a controversial industry that other companies may notprovide (Siggelkow, 2007).

The research was carried out as a case study using multiple data sources to ensure a broad understanding ofSPP’s corporate social policy and practice, to provide depth to the case (Creswell, 2007; Yin, 2009) and to allowfor the triangulation of emerging themes (Perry, 2001). First, three semi-structured in-depth interviews were under-taken with SPP’s stakeholder relations adviser (SRA). The SRA was a local position created by SPP almost 2 yearsafter opening the demonstration plant. Interviews were approximately an hour long and were staggered across 13weeks allowing the researchers to incorporate additional secondary data into the design of the interview guide basedon the insights suggested by the SRA as a key informant (Yin, 2009) and enabling development of more richlydetailed descriptions as follow up with the SRA clarified issues that emerged in earlier interviews (Kvale, 1996).

Second, additional data included newspaper articles from local media, published information from environmen-tal groups such as Greenpeace, press releases, community presentations from SPP and published research from thelocal university. Government documents and publicly available accounting reports were used to identify sources ofgovernment funding. Finally, the researchers conducted two additional interviews, the first with a reporter from theGladstone Observer who wrote media reports during this time, and the second with a senior executive from anotherGladstone-based industrial company which had been an SPP customer. The researchers analysed the data indepen-dently for content, processes and patterns and then compared their interpretations. Throughout, the analysis tackedback and forward between the literature on CSR and the data (dialectical tacking) leading to a number of concepts(Spiggle, 1994; Henderson, 1995) on the requirements of relevant management structures, processes for identify-ing stakeholders and the interactive nature of CSR actions embedded in broader communities.

Case Study Findings

The findings will be discussed according to four critical junctures of SPP’s operations: initial planning, start up ofthe demonstration plant, a rethinking of stakeholder management as a result of operational issues and stakeholderresponse and, finally, a revised approach to stakeholder management.

Stakeholder Communication During the Planning Phase

The main activity of SPP since its inception in 1973 was the exploration of oil-bearing shale and the development of aviable extraction method. During the decade 1990 to 1999, SPP actively presented itself to governments, investorsand potential business customers, such as oil companies, as a viable producer of oil from shale using technologicaladvances and a production process that had greater environmental and economic benefits than existing processes.SPP were also active in sponsoring conferences associated with the clean production of energy (Scott and Pagan,1999) and participating in forums and meetings on topics associated with clean energy or emissions reductions(IEA Bioenergy, 2001).

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SPP’s communications focused on reduced environmental impacts compared with alternative production systems,regional economic contributions and a solution to the long-term supply of oil (Crandall, 2002). The aim was to buildrelationships with the primary stakeholders and use media, conference sponsorship and government workshops toengage with those stakeholders. In this initial stage SPP identified a number of key stakeholders that they perceivedas being relevant to the future of the firm in economic terms or the exchange of social benefits. The stakeholdersinitially identified, and the reasons for engaging with them, are listed in Table 1.

The specific activities and focus described in Table 1 demonstrate that SPP was able to customize the communi-cations for each group of stakeholders and highlight specific components of the value proposition and the potentialsocially responsible outcomes. For example, the message to local government and the press was centred around acombination of alternative energy, with lower environmental impacts and increased long-term employment, whilemessages to peer industries seeking engagement focused more strongly on the development of alternative energysources (shale oil) using new technology. To develop the plant and production capability, SPP needed to attract bothfunding and support. The funding was from government and private commercial sources, but SPP managementrecognized that multiple stakeholder engagement was needed to develop market acceptance and raise funds (seeFigure 1), and as such, although the message was customized, the overall CSR position was consistent (see Table 1).The early approach to stakeholder engagement was successful, with SPP gaining funding from state levels ofgovernment (Queensland Government Department of Infrastructure and Planning, Stuart Oil Shale Stage 1,A$250 million) as well as support and endorsement from local government. Investors were also drawn to the projectgiven the level of government support. The local newspapers published positive articles strongly promoting communitybenefits (McDonald, 2004) and industry conferences were espousing the SPP approach as a new way to look at oilextraction (Proceedings of the 2nd Asia Pacific Cleaner Production Roundtable, 21–23 April 1999).

Although the analysis of the data suggests that each stakeholder was considered and managed separately, SPP didnot appear to engage with any stakeholders in a way that recognized additional relationships or linkages betweenstakeholders which were external to SPP and its immediate goals. SPP had a presence at conferences, where bothgovernment bodies and potential customers were participants (e.g. Cleaner Energy Roundtable); however, SPP com-munications and activities still focused on single stakeholder groups. As shown in Figure 1, SPP developed andmanaged relationships with customers, industry bodies and government bodies, but did not consider the linksbetween these three groups when planning their CSR engagement. A more sophisticated approach to CSR andstakeholder engagement would have been to consider that the organizations involved also formed relationshipsand exchanged information with each other. Over time, this became a critical issue for SPP as they failed to under-stand the network of stakeholder relationships until they reached a crisis situation, as discussed later.

Stakeholder Management During Start Up

Early operations of the pilot plant produced unexpected emissions with a pungent odour (Anderson, 2002),resulting in regular plant shutdowns (MacDonald, 2004). In fact, from 1999 to 2000 the plant operated for only23 days while SPP undertook testing to ‘better understand the odour formation mechanism’ (Anderson, 2002, p. 6)and to determine means to eliminate or reduce the odour. In addition, the long-term environmental impacts ofindustry on the coastal region, including SPP, were the subject of State government investigation (Curtis CoastalRegional Management Plan, October 2003). During this time the local press still portrayed the demonstrationplant in a positive light; despite initial problems of plant shutdowns, the plant was good for the local communityand would bring benefits to the region (MacDonald, 2004). Community sentiment was also supportive of theendeavour (MacDonald, 2004).

Greenpeace protesters arrived in the Gladstone region in July 1999, prior to the completion of construction of the Stu-art Oil Shale project demonstration plant, and began an intense programme of protest (MacDonald, 2004). Greenpeaceargued that the plant would contaminate water in the Great Barrier Reef World Heritage Area, increase greenhouseemissions by up to 200% (Greenpeace, 2004) and lead to ocean warming and coral bleaching (Whelan, 2005).

Initially, coverage of the protests showed clearly that local media, as well as political and industry leaders, did notwelcome the protestors. Greenpeace’s actions were viewed as ‘media stunts’ rather than a serious call for debate oraction, and the view was that these activities were ‘bringing capital city values to a regional centre’ (MacDonald,2004, p. 7). Such a view may have been understandable considering that Greenpeace had been known to ‘deliberately

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plan its action to satisfy the needs of newspapers and television news for strong visual content’ (Kapelus, 2002, p. 56).Thus, while media coverage during this time highlighted the conflict, and it received considerable press attention,overall media opinion remained positive towards SPP and the Stuart Oil Shale project.

The company decided to withdraw all but the operations management of the plant and relocate back to headoffice, possibly for financial or centralization reasons. Company policy and strategy were now directed from headoffice in Sydney (approximately 1400 km from Gladstone), including all marketing, communications and publicrelations activities. However, this decision had a negative impact on the ability of the company to provide timelycommunications to the local region and also reduced the ability to obtain information from local stakeholders.Further, it removed management from any possible direct engagement with stakeholders such as local government,the local community and the newspaper. At this time SPP did actively work to find the source of the odour bycommissioning their own research, but did not consider that stakeholders, such as employees, and stakewatchers,like the press or other local industries, needed to be engaged as part of ongoing CSR.

From late 1999 to early 2001 newspaper reports contained information from other sources, such as local andstate government and Greenpeace, but very little comment from SPP or its investors (MacDonald, 2004). Duringthis time, coverage of the plant remained optimistic, and it was seen as a positive industrial development for theregion, although much of this content derived from local government and the Gladstone Area Development Board(MacDonald, 2004) rather than SPP.

Media requests for information received by Gladstone-based SPP operations staff were referred to the headoffice, which increasingly became less responsive. Local residents soon realized that their anxieties, particularlyin relation to the health concerns associated with emissions from the plant, were being ignored and turned to thelocal newspaper to voice their complaints. As a result, the tone of local media coverage changed during 2001 toreflect that ‘public opinion was polarised’ in relation to the SPP plant (MacDonald, 2004, p. 10).

The geographical distance of SPP’s head office from the local plant created tension as the organization was seento be out of touch with the local community. This was a key issue which contributed to later conflict. The long-distance stakeholder management approach which appeared adequate when the company was receiving govern-ment and media endorsement, became increasingly ineffective as negative publicity about the company expandedfrom the local to the national press (MacDonald, 2004). Initially, SPP had identified stakeholders based on theexchange of value in terms of economic benefits and social benefits, but as the company began to operate, thisapproach of using value exchange to identify potential stakeholders was ignored. SPP was happy to accept thepositive outcomes from using a socially responsible approach to oil production, but appeared to ignore the negativereactions. Although this was not entirely the case, as seen by commissioned research and attempts to find the sourceof problems such as the unacceptable odour, they did, however, withdraw from engaging with some stakeholders.

Infrastructure and employment

SPP

Investors

Government –state

Government –local

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Government –national

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Conferences

Funding and Support

Local community –Source

of employees

Press

Figure 1. Southern Pacific Petroleum (SPP) targeted stakeholders (B2B, business-to-business)

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This failure to recognize that CSR requires long-term, ongoing engagement with stakeholders and a broader net-work of stakewatchers contributed to many of the later problems.

SPP’s business customers became concerned by the negative publicity, community criticism and persistentlobbying by Greenpeace. The principal buyer for a large manufacturing company based in Gladstone, and formercustomer of SPP, explains their decision to withdraw business from SPP:

In my experience as a buyer, cost effectiveness, responsiveness and flexibility were prerequisites to be in thegame to do business. But the game has changed, particularly in the last two years! Today . . . major organi-zations are becoming increasingly concerned about how environmentally friendly suppliers’ manufacturingprocesses are . . .

Other companies also withdrew custom, including BP and Caltex, and SPP was forced to make a bid to theQueensland government to have their grant documentation amended to allow sales overseas (Australasian BusinessIntelligence Section, 2002). In fact, the campaign by Greenpeace, which targeted oil shale specifically, promptedSPP to approach the federal government for financial assistance, which resulted in a sales subsidy worth A$36 millionto counter the impact of Greenpeace activities that had resulted in lost sales.

Re-thinking Stakeholder Management

In response to increasing local pressure, from the community via the press, from the press directly and from effortsby Greenpeace, the company decided to appoint a SRA to be based in the Gladstone community with responsibilityfor managing the increasingly volatile public opinion. This appointment was made from within the company so thatthe incumbent would have an understanding of the values and business practices of SPP. According to the SRA, theinstructions given at the time of the appointment were ‘design your job and then get on with it’. The focus of theSRA was to develop relationships with community stakeholders and, in particular, the media.

While SPP initially adopted a targeted approach of identifying and managing stakeholders, their focus was lim-ited to those with the power at that time to directly affect the company or those who expected benefits and outcomesfrom the manufacturing facility, namely local government, investors and potential customers. SPP’s focus was onprimary stakeholders (Carroll and Buchholtz, 2003) and only limited attention was given to stakeholders that hadmore indirect relationships, such as environmental groups, the local media and the community. Thus, SPP failedto recognize that stakeholders’ claims are dynamic and change over time in response to external events or manage-rial decisions (Savage et al., 2004; Griesse, 2006).

Further, they neglected to consider that they were not at the centre of the network of stakeholders (Rowley, 1997).After removing themselves from conversations with stakeholders, by withdrawing local marketing efforts, those con-versations did not stop; the local community still required information and had to look to other sources to fill that gap.

A New Stakeholder Management Model is Implemented

In an attempt to create a foundation for his new role, the SRA completed a self-directed audit of the company’s pro-cesses, and all marketing and CSR activities to that point, in order to understand the image of the company in thecommunity and the events that led up to the need for his appointment. The self-imposed parameters for the auditwere limited to the community located in and around Gladstone, as the SRA was to deal with the ‘coal face’, that is,primarily the local people in the community and the plant’s immediate neighbors.

A key priority recognized by the SRA was the need to improve the relationship with local media. The media,although not directly affected by a company’s actions like true stakeholders, were key stakewatchers (Fassin, 2009)or influencers (Donaldson and Preston, 1995) as they played a critical role in communicating company actions andreactions to other stakeholders. The local media also communicated the views and opinions of other stakeholdersand stakewatchers in the region, particularly the local community, a link not explicitly recognized by SPP duringthe operation start-up. As the local press reporter noted:

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An organization has to be seen as supportive and as proactive in a crisis . . .[there was] a lack of communicationand relationships with local people, who were perhaps viewed as less important than, for example, governmentor financial backers.

To engage with local stakeholders, the SRA participated in community forums and attended town events (boththose formally related to the company such as town meetings as well as social events like charity fund raisers andsporting matches). By attending a variety of events, the SRA was able to interact with local individuals and groupsin a more relaxed social setting than in the middle of a protest or demonstration, thus working towards establishinga productive dialogue that would lead to greater trust. In addition, while at these community events, the SRA soughtto focus attention on the benefits of SPP’s operations, that is, a functioning plant using less environmentally dam-aging extraction methods that would bring economic and financial prosperity to the region. Through local events,the SRA aimed to demonstrate the company’s involvement within the community and highlight its commitmentto the region. Such settings provided an opportunity to gauge the nature of stakeholder attitudes toward the com-pany, provide responses to queries in a timely fashion and present the local community face of SPP. The SRAadvocated participation in these types of events by suggesting:

Always keep an open mind about invitations to attend or present at other events not already on your list. Lookdeeper; there may be good reasons for going, if only to show your face in the community.

This engagement by the SRA with the community, the local press and the plant’s industrial neighbours was thefirst overt effort to recognize a wider network of stakeholders and stakewatchers. The expanded model ofstakeholders is shown in Figure 2 and the shaded elements are the stakeholders considered in the audit.

To demonstrate the company’s commitment to the community and the environment, the SRA also initiated anumber of SPP-sponsored environmental research projects, some of which linked directly to the environmentalmonitoring that was already being undertaken by the company. These actions sought to address the concerns of

SPPInvestors

Government –state

Government –local

Business customers

Government –national

SPP identified links:

Network links:

IndustryBodies Conferences

Local community

Local industry & interest

groups

Consumers

Lobby & Interest Groups –

Greenpeace

Intermediaries

Potential employees

LocalPress

National Press

SPP Targeted Stakeholders

Figure 2. Stakeholder networks and communication paths identified in this research (SPP, Southern Pacific Petroleum; SRA, stakeholderrelations adviser; B2B, business-to-business)

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another stakeholder group that had previously not been considered; the agricultural industry in the surrounding area.For example, the SRA described his work with the local Fruit Growers Association as follows:

I began a project that required my active involvement with local fruit growers on issues such as resourcesustainability, soil conservation and water use. It was linked to our existing monitoring of the effects of thecompany’s production processes on soil and water. Projects like this one meant we could use a practical activityto demonstrate the commitment of SPP to local agriculture.

Thus, the SRA attempted to create a relational dialogue with this stakeholder group by involving them in address-ing issues of mutual concern. And, similar to attendance at community functions and events, such activities offeredan opportunity to establish productive dialogue that could lead to greater trust. It also provided an avenue wherethese stakeholder groups could offer comment to the SRA in less explosive settings, such as at heated town meet-ings or during protests.

In relation to the media, the SRA became proactive in seeking opportunities to provide commentary to reporterson stories related to SPP’s operations and made himself available for interviews, quotes and fact checking. Giventhat previous communication between the media and the company had been poor, with journalists struggling toget a response from head office, the SRA’s efforts to once again open the lines of communication with the mediawere imperative. The SRA describes the positive outcome of engaging with this stakewatcher as follows:

I was able to create a better image for, and of, the company as residents and the media were more inclined toput bad news in its proper perspective and to seek out both sides of a story before judging.

The actual message communicated to media and other stakeholders attempted to reinforce a consistent themearound the technology: better, not perfect. The SRA suggested that a critical element in the communication strategywas to ensure that information was available at all times. As part of his self-designed role, he began monitoringpress reports, media releases and featured stories. Where appropriate, the SRA volunteered information to newspa-per sources in addition to responding to enquiries with timely and factual information. The SRA described thecommunication strategy as follows:

The quick response time was essential because the media need to be provided with correct information aboutthe plant and its processes, or a company risks having misinformation or a one-sided argument provided bypressure groups taken as the whole truth. In any socially sensitive issue it is perhaps easier to paint a purelyblack and white picture; ‘this is bad therefore the opposite thing must good’. But many of the issues surround-ing SPP are not clear-cut and so do not permit an easy solution.

The SRA’s attempts at re-engaging with all local stakeholders was positive and underlined an attempt to ‘enhancea company’s sensitivity to its environment’ but also to increase ‘the community’s understanding of the dilemmasfacing the organization’ (Kaptein and Van Tulder, 2003, p. 208). Through this grassroots level of engagement,the SRA sought to build trust between SPP and its local stakeholders and in building this trust, the SRA advocatedhonesty and the need to be upfront with all stakeholder groups all the time:

You can’t lie, ever! If I did it just once, I’d get caught and everything I had worked for would be wiped out.With so much scrutiny on everything SPP does I cannot afford to present anything other than truth.

While the primary responsibility of SPP may have been to the owners and stockholders, other responsibilities,including moral, ethical and philanthropic, extended to include employees, suppliers, customers and the localcommunity (Carroll and Buchholtz, 2003). The creation of a new locally-based marketing position was due to over-whelming pressure from community stakeholders, the subsequent reputational harm and the loss of customers.

In effect, the SRA brought the communications and marketing function for SPP back into the community andmaintained it from that base; both in terms of a physical location and from a local perspective or way of thinking.Although this may appear obvious, for organizations in heavy industry, communications and marketing are often

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separated from the key functions of the company and are under-resourced (Wind, 2006; Ivens et al., 2009).Further, while the SRA did not use the term ‘champion’ in describing his efforts, in effect he became a passionateadvocate for, and defender of, the company and its extraction process (Maon et al., 2009). As he describes it, hisposition was a difficult one:

The problem heavy industry has, all of them, when managing reputation and value is that we all operate from abase which, no matter how carefully or rigorously controlled, will harm the environment.

Unfortunately, the efforts of the SRA to combat the pressure from a number of stakeholder groups were perhapstoo late. As a result of these tensions, US investors ultimately withdrew in 2003. After failing to find a local buyer forshale oil, SPP ended in receivership (Barlow, 2004) and Greenpeace formally withdrew from the Gladstone regionbelieving, rightly, their anti-SPP campaign was no longer necessary (Whelan, 2005).

Discussion

The existing literature proposes a number of implementation models for CSR, yet it is difficult for any one modelto reflect the complexity of CSR implementation, particularly the dynamic nature of stakeholder relationships andinterrelationships as well as the need for ongoing monitoring and re-evaluation. Initially SPP successfully identi-fied stakeholders that could have a clear impact on the company, and whether that impact would be financial orsocial. The early management of the stakeholders was successful based on an open exchange of information, fre-quent engagement and recognition of the exchange value with each stakeholder. However, SPP viewed them-selves as being at the centre of the stakeholder network, in line with traditional stakeholder models, which didnot accurately reflect stakeholder integration. In addition each stakeholder was managed as a separate entity withno links to any other stakeholders.

This case study highlights several key issues for the implementation of CSR, particularly in relation to stakeholderengagement and management:

1. the importance of ongoing and broad stakeholder identification, prioritization and management;2. the effective identification of the network of stakeholders, stakewatchers and stakekeepers;3. the need for internal commitment of management and employees to CSR and the appointment of a CSR champion;4. the need for a local presence to facilitate community engagement, feedback and monitoring; and5. the imperative to build trust and social legitimacy within the local community.

Organizations need to cast a wide net when identifying stakeholders, including those that may not have a directstake but can have significant influence on the firm or significant influence on other stakeholders. SPP, in the earlydays, identified and engaged with governments, investors, potential customers, the press and industry bodies, butdid not consider the wider network of groups that could influence or impact on the project such as industrialneighbours, community groups and lobby groups. When the company experienced problems, they withdrew to acentralized management approach that further isolated the company from the stakeholders. This approach hadtwo outcomes: the failure of the company to recognize additional stakeholders in sufficient time to engage success-fully and the lack of recognition of the network relationships between stakeholders. The latter was illustrated byGreenpeace’s powerful influence on the community and local media. Greenpeace’s actions contributed to increasedscrutiny by the national and international press, lawsuits (which also attracted press attention and cost SPP time andresources) and perhaps fuelled a change in local community sentiment towards SPP, certainly changing the time-line when such a transformation in community feeling may have occurred. Earlier recognition of engagement withthis broader network of stakeholders and stakewatchers would not have changed the activities of Greenpeace, but itmay have created a stakeholder network that was more positive towards SPP and supported their efforts to resolvethe issues. As noted by the press, they could not get direct answers, and over time this resulted in the swing fromsupport to opposition.

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While it is true that all stakeholders have a personal agenda and therefore it can be difficult to anticipate all the issues thatmay be subject to criticism (Cramer, 2005), SPP made a fundamental mistake in not realizing the externality of their net-work. They may have ‘created’ it by bringing various parties together for the purposes of starting the new plant, but thatnetwork operated independently. While most CSRmodels suggest the importance of a companymaintaining communica-tion channels with stakeholders, few models adequately recognize that stakeholders can and do talk with each other(Rowley, 1997). It was only when the company became the subject of criticism and negative media comment that it recog-nized the need to shift focus to managing another group of stakeholders and the importance of doing so at the local level.

Thus, in order to more effectively identify all stakeholders, companies must go ‘beyond the analysis of dyadicrelationships’ (Rowley, 1997, p. 906) and recognize that in CSR, all stakeholders are observing and reacting to allother stakeholders. The dissatisfaction of the local press, the concerns of the local community and the oppositionby Greenpeace became much more powerful when these three groups connected and began to form strong networkrelationships. The flow-on effects included national media coverage, the withdrawal of customers and a review bythe government bodies that had initially supported SPP. While the company actively undertaking CSR plays a crit-ical role, it is not always at the centre of the network. Instead, a company’s position depends on its own actions andthe actions of other network players, and these roles can shift, forming and re-forming.

As a result, a network approach to CSR is recommended in order to provide a means of examining both thepattern of relationships and the interactions (Nohria, 1992) as well as the dynamic nature of networks (Ellis andMayer, 2001). An examination of these patterns is important because they can provide understanding of the influ-ences of multiple and interdependent relationships of stakeholders outside of the organization. Where past modelsof CSR have portrayed the company as the focal point, and stakeholders as entities to be managed, this research hasshown that companies engaging in CSR are part of a network, where each network member interacts with one ormore other members (see Figure 2 for example) and can influence a range of members in the network, as shownin Figure 3. For SPP, the start-up of the project was also the start of this particular CSR network. For establishedcompanies commencing or developing their CSR activities, the networks may already exist.

Finally, any CSR-based communication strategy undertaken by a firm must recognize that stakeholders not onlyhave a relationship with the firm, but may have, or may seek out, relationships with each other. Firms also mustrecognize that their actions, or lack of action, can actually facilitate and encourage those interrelationships.

The findings from this study have a number of implications for companies seeking to implement CSR that have notbeen explicitly considered in previous stakeholder models, (e.g. Maignan et al., 2005). First, a key challenge for organi-zations is the fluid nature of managing stakeholder relationships. Further, any stakeholder model should put the com-pany to the side of the relationship network and consider the inter-relationships of all stakeholders (includingstakewatchers and stakekeepers) and recognize that these relationships may change over time, depending on externaland internal decisions and events. SPP found itself attacked frommultiple fronts as stakeholders who had been ignoredor marginalized began to connect and request answers. The positive local press became oppositional, the communitythat had initially welcomed the addition of a new industry submitted increasing numbers of complaints andGreenpeace attracted stakeholder allies. The change in relationship with the local press and community can be tracedto the increasing lack of trust due to the absence of a local management presence and the lack of answers.

Offering CSR company

Stakeholders

StakewatchersStakekeepers

Figure 3. Proposed model of corporate social responsibility (CSR) stakeholder relationships

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Further, while previous iterations of the stakeholder model identify the need to build trust, this research hasextended that idea and suggests that companies seeking to build trust in the industrial environment require atwo-pronged approach. Firstly, there is a need for internal commitment of management and employees to CSRand secondly, the appointment of a CSR champion. Much of the research on CSR tends to focus on external pres-sures (e.g. Bolton et al., 2011) yet the stakeholder management program must be dynamic or fluid, evidenced by itsconstant redevelopment. The CSR programme relies on employees as major stakeholders in what becomes a pro-cess for ‘co-creation and implementation’ of trust and engagement with other stakeholders, stakewatchers andstakekeepers (Bolton et al., 2011, p. 91). Employee involvement in the CSR initiation stage may be minor comparedto their vital contributory role in the overall long-term success of such a strategy. Further, the internal drive for sucha program needs to come from the internal CSR champion. The appropriate selection of a representative to liasewith all stakeholders, to build relationships, establish trust, promote the shared value of CSR initiatives andmanage the relationship between the company’s business and social goals is a critical one. SPP were able torebuild trust and regain the confidence of the local community by the appointment of the CSR champion.At the local CSR network level, the SRA’s activities were effective, but the timing meant that the broader networkrelationships that had drawn the spotlight to SPP were operating at the national level. So the appointment of theCSR champion needed to be part of the initial CSR strategy, and the CSR champion needs the authority to engagewith all stakeholders in the network.

Next, companies operating CSR activities, particularly in controversial industries, must recognize the importanceof community. A societal marketing aim is the first step to being part of this local community, but the perspectivemust permeate every aspect of the company’s operations. Efforts by a company to create legitimacy and buildrelationships are doomed to failure if not built upon a sense of community or at least recognition of the importanceof the local community. Effective community relations require an ability to bridge company and communityperspectives and engage in ongoing dialogue, which will ultimately require organizational change (Kemp, 2010).Consequently, a community focus requires onsite staff engaging with community stakeholders rather than theadministration and management of marketing and public relations campaigns from a geographically removed headoffice. Our research demonstrates the importance of developing effective communication strategies to promote CSRactivities and establishing relational bonds with the community, media and environmental groups.

These results represent a key contribution to the study of CSR in terms of practical application and implementa-tion and highlight a number of implications for companies engaging in CSR activities. Further, the choice of SPP asthe company of interest represents an extension to the limited research on CSR in a business-to-business contextand the limited research that considers additional stakeholders beyond the customer (Vaaland et al., 2008). Futureresearch can look at confirmatory analysis by investigating similar cases to SPP which are characterized by heavyindustrial operations geographically distant from the consumer markets, such as mining or petrochemicals. Futureresearch should explore the role of the individual(s) who represent the firm and champion its values and CSRinitiatives and consider how the values and characteristics of that individual affect the success of the CSR initiatives.Extensions to the CSR model could also be empirically tested.

Acknowledgements

The authors wish to acknowledge the assistance of many organisations in the development of this paper including SouthernPacific Petroleum, The Gladstone Observer, CQUniversity and Queensland Alumina Limited. Dr Tseen-Ling Khoo, from RMITUniversity, is thanked for her friendly review. The authors also wish to thank the reviewers and editorial team of BusinessStrategy and the Environment and the informants who gave up their time during interviews.

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