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CSR IN EGYPT: Balancing Environmental and Communal Needs

Research & Analysis

By Gamal Shaban

Oil and gas companies have been trying to showcase the corporate social responsibility strategies and their decisions considered to ameliorate the unhealthy practices, within their supply chain systems, that negatively affect the surrounding environment. Yet, the CSR practices by energy firms demonstrate a slight discrepancy between the offered societal services and the actual needs of local communities.

The case of Egypt indicates this gap in terms of environmental concerns. In the North African country, some state owned and international oil and gas companies portray CSR as an approach to give back to the society’s social needs, yet they seem to have come in a rather homogenous way. The homogeneity of CSR strategies adopted by oil and gas companies in Egypt with a focus on philanthropy and ethical engagement stems from the existing challenges of the country in terms of sustainable development. However, their attention to the country’s alarming environmental needs is lagging behind.

While Egypt might be in bad need of these philanthropic activities that aim at enhancing local services to people, the country also starves for direct and indirect environmental projects as the world’s fifth most polluted nation, according to the 2016 pollution index published by the world’s largest user contributed database, Numbeo. The environment oriented projects thus aim to lower the environment’s unhealthy pollution levels that are continuously increasing, given the character of oil and gas companies’ operations and their impacts, and maintain the country’s natural resources for the coming generations.

Homogeneity in CSR

National and international oil companies (NOCs and IOCs) in Egypt tend to offer Community Development Projects (CDP) that revolve around three singular types of activities.

First, educational projects focus on material and technical improvements of educational facilities and training programs for the local inhabitants. These types of projects include renovating and equipping existing school buildings, constructing new educational institutions, and offering educational opportunities for underprivileged people.

Second, companies undertake medical projects that aim to improve the health care services. These types of projects include improving the quality of hospitals, building new health centers, and donating money, food, and medicine to charity.

Third, awareness raising projects that encourage people to become more conservative towards the energy they use. These types of projects include spreading energy conservation awareness campaigns through various media channels.

Two examples of well-known IOCs with conspicuous Community Development Programs in Egypt are Apache, the Houston-based petroleum company, and Dana Gas, the Sharjah-based oil firm. They have become proficient at investing in social action projects through the educational, medicinal, and informational services that they offer to their communities.

Apache has founded an initiative – Springboard that aims to meet the educational needs in Egypt. According to the company’s website, Springboard’s objective is “to provide educational opportunities to underserved populations.” To date, the company has built 201 one-room schools attended by about 7,000 girls in Egypt’s remote rural areas where females have scanty educational opportunities. The first of these schools was completed in 2004 in Abu Sir, a small village located 16 kilometers south of the Giza Pyramids. The program has currently expanded its initiative to target 1,000 schools; primarily, the initiative involved developing 200 schools. Apache and Springboard have been working with the Egyptian Ministry of Education on a continuous project that ensures a long-term success and sustainability of these schools. Hence, the company is continuously monitoring the student performance, furnishing the school supplies, and providing property maintenance, on a timely basis.

As for Dana Gas, the company has so far invested over $4m in bringing sustainable local development in the company’s operational sites. In the past seven years, the company has successfully upgraded several local health centers and renovated schools. The company has fully upgraded the health centers and schools of Benban Ambulatory Center, Fares 2, and Al SoltanAbd El-Salam in Aswan, San El Hagr El Bahria, El KasbyGharb, San El Hagar El Keblya, Tanees, and El Rest Primary School in Sharkia, Abu Al Akhdar in Dakahlia, and Sharbas Primary School in Damietta.

The projects that these companies deliver are all purpose-driven initiatives that succeed in making significant positive change within the Egyptian community by providing the local inhabitants with access to quality education and health care, which are part of the development scheme. While these are highly appealing to the individuals who live in the underdeveloped areas, a fundamental issue seems to be sidelined, namely the environmental responsibilities.

Environmental Responsibilities

The more the oil and gas companies expand within a country, the more the hazardous material and contaminating chemicals increase within the localities. Even though developing schools, hospitals, and awareness campaigns are needed, these can thrive in a long term only if the companies help in sustaining the Egyptian environment as well. The different types of pollution that oil and gas operations cause represent one of major challenges in the country.

As the oil and gas companies explore, drill, and produce their targeted volumes of fuel, heavily polluting the environment, the communities call for a significant shift in their CSR strategies to address the real threat to their living conditions. While the underprivileged members of local communities welcome compensations in terms of expansion of available social services such as job opportunities, school facilities, training programs etc., in theWWW long run, the communities should be included in the negotiations about needed CSR actions that would help preserve their surrounding and environment.

Therefore, and especially in Egypt, energy players should reconsider expanding their current CSR activities aiming at relevant scope of restoration and revitalization of the polluted environment. The notion of compensations for local communities within the CSR scheme are often pre-defined as appropriate, affordable, and temporary, however, they may need to be revisited in favor of sustainable, long-term, and efficient recovery.

Egypt is threatened by numerous environmental challenges, many of which complicate the efforts made to promote economic and social development of the nation. According to the governmental report, Egypt State of Environment, that was published by the Ministry of Environmental Affairs in 2010, the general primary issues are water quality and quantity, soil loss, air pollution, lack of recycling, and weak waste management systems. As long as these issues persist, reaching optimum community development results will likely remain unattainable.

None of Egypt’s environmental difficulties is impossible to solve. However, the expenses of developing and implementing the adequate projects to solve these issues are expensive and time consuming as the great amount of time is needed before significant results appear.

These are the reasons why many oil and gas companies in Egypt prefer executing CDPs over environmental projects, as those are faster to execute and tend to receive more favorable positioning for the companies vis-à-vis the general public. Eloquently presented CDP projects seem to have built up an awareness strategy, which suggests that social services are the utmost that oil and gas companies would be willing to offer, which is not necessarily valid.

Remedy to Environmental Needs

In a search for viable alternatives, some oil and gas companies have been exploring new paths to contribute to sustainable development in Egypt. There is a pool of various interconnected direct and indirect potential projects that provide possible remedies for Egypt’s environmental issues. Despite concerns over demanding funding, these projects suggest that environmental CSR actions may not necessarily result in a loss of revenues for oil and gas companies, rather provide a sustainable win-win climate.

The oil and gas companies can choose from direct projects that are usually considered by the big multinationals. This type of projects is implemented within a company’s internal operating system in order to minimize the negative environmental impacts that are directly associated with the oil and gas production operations. Examples of these projects include developing systems that dispose the carcinogenic organic compounds and waste oil in an environmental friendly way, gas flare stacks that do not produce humongous emissions of methane, carbon dioxide (Co2), and volatile organic compounds (VOCs), heavy duty transmission pipelines that are not vulnerable to sabotage, and water risk assessment tools that help in sustaining and sanitizing fresh water.

On the other hand, local companies and smaller corporations usually depend on indirect projects to meet their environmental responsibilities since they cannot afford developing or implementing sustainable technologies within their operation capacities. These indirect projects help the companies give back to the environment in a way that does not necessarily have to be within their business scope, thus make up for the pollution and the damage that they cause. Examples of such projects include transforming deserts and abandoned suburban areas into farmlands, promoting material recycling procedures, decreasing the levels of noise pollution, traffic congestions, and greenhouse gases within urban zones, diminishing the use of carcinogenic chemicals in planting, and decreasing the year-round irrigation that leads to the loss of agricultural land.

In this way, participating in preserving the environment through indirect projects helped minimize the drought risks, for instance, in America’s most populated and third-highest crude oil producing state of California. In 2015, California regulators took immediate steps to respond to the drought risks that the state had been facing by ordering a dozen oil and gas wells to cease production over concerns that the wells might possibly be contaminating the groundwater. Oil companies, Chevron Corp. and Linn Energy LLC, have voluntarily stopped production at ten Central Valley wells as they believed that contributing to protecting California’s groundwater in order to overcome the extreme drought is of their paramount responsibility. Nowadays, water in California is being carefully managed, thanks to the extensive pipeline network that the government has installed to serve the most populated and dry areas of the state, and the mandatory water conservation measures that it has also introduced.

In a similar manner as the state of California conducts its environmentally responsible activities, the Ukrainian government demanded its oil and gas companies to work hand-in-hand with the state to move to an environment friendly industry that meets the European environmental standards. In 2013, Ukrainian Minister of Ecology and Natural Resources, Nikolav Romanov, encouraged building a $60m plant that recycles used oil in the village of Borodianka in Kiev. Oilpro, a professional online network for oil and gas sectors that was designed specifically for knowledge sharing, wrote that the modern technologies used in this project are developed by Sequoia Energy & Environment. “Using 100% salvaged oil, the plant will have the capacity to process 80,000 tons of used oil annually. The used oil will be refined into high quality motor oil and sold to the public. Recycling of this used oil will help against environmental pollution, reducing harmful toxic chemicals and heavy metals from reaching nature.”

As this shows, the governments and local municipalities play a major role in encouraging the environmentally responsible projects.

Environmental CSR Practices in Egypt

The positive impacts of these environmental projects on the oil and gas sector have been gaining prominence in some countries. Implementing such projects is viewed as a necessity and not as an option anymore. Some NOCs in Egypt have taken up this path.

One of the leading local companies in the country that already pursues noteworthy environmental practices along with its other ethical and philanthropic CSR projects is Midor, a crude oil refining and production firm.

Midor stated in a report that was exclusively sent to Egypt Oil & Gas that “the preservation of the environment is no longer a luxury, but rather a necessity, as well as the optimizing of the use of natural resources.” In the report, Midor further admits that the oil and gas sector can potentially heavily contaminate the environment, thus the company aims to implement further projects that “maintain the safety and health conditions of the employees, production units, and surrounding community.”

Therefore, in cooperation with the Egyptian Environmental Affairs Agency (EEAA), Midor is implementing an environmental monitoring project that “links the company’s flares to the National Grid for Monitoring Industrial Emissions to detect emissions and assure their compliance with the legitimate maximum limits.”

Another nationally owned company that is trying to maximize its environmental scope is Tharwa, an upstream operations company that was established in 2004. Egypt Oil & Gas had a chance to interview the company’s Health, Safety, and Environment (HSE) Manager, Amr Ziedan, who provided insights into the environmental measures that the company undertakes within both its operational areas and main premises. He mentioned that regarding the operational sites, “aside from the obligatory environmental studies that Tharwa has to go through before initiating any projects at its concession areas, the company always makes sure that these studies are brought to reality and not just remain in the form of paperwork.”

In line with its practical strategy, “Tharwa is continuously searching for the best practices to dispose its operational wastes away from the soil so that it would not damage Egypt’s underground water resources,” clarified Amr Ziedan. He added that the company also aims to save on the resources that are used in its daily operations at the offices. Its main concern is to reduce the water, electricity, and natural gas consumption at its premises.

On the other hand, a number of other oil and gas companies in Egypt are yet to implement relevant environmental projects as opposed to conducting activities with restrained developmental potential.  The choice of a CSR strategy that would be reflected in the implementation of unmitigated CSR practices, especially within the energy industry, can further boost companies’ outputs and performance.

Therefore, oil and gas companies in Egypt may wish to consider focusing on leveraging their CSR agendas to cover both the philanthropic and environmental responsibilities with equal importance, as opposed to offering unvaried CSR projects with limited outcome.