Trends and Innovations in Corporate Social Responsibility - The Case of BP in Algeria

Good morning

It is indeed a pleasure to join you today.

I am honoured to join this distinguished panel at Africa’s most important oil and gas forum, and to contribute my thoughts on this important topic.

In just the last few years, the field of Corporate Social Responsibility has moved from the margins to the mainstream of every corporate agenda. It has also advanced beyond charity and legal compliance with local laws to address core business issues such as risk management, innovation, and value creation.

Yet, over this same period, the performance of certain companies has prompted a decline in public confidence in major corporations as a whole. The spotlight on corporate activities has never been so intense.

I am very aware that there are many views of the proper role of corporations in economic development and the appropriateness of corporate social responsibility.

There are some who - at one end - believe that corporate social responsibility is limited to making profits. That the most effective role for private sector companies is return all profits to shareholders and let the shareholder determine the most appropriate use of funds.

There are others who - at the other - believe that companies should act in and protect the best interests of government. That corporate social responsibility should be limited to so called “national capitalisation”, ensuring social stability by supporting and financing its activities in concert with government or government institutions.

I would propose, however, there are wider considerations to be made.

Recent trends and innovation in corporate social responsibility recognise not only the importance of companies in society but also their legitimacy in society.

In response, companies now must assume new and important responsibilities. Firstly, they must constantly seek to demonstrate their relevancy to society. Secondly, and equally importantly, they must demonstrate how environmental, social and ethical issues help shape their business strategy, and benchmark their performance.

My remarks today will focus briefly on trends in this area. Then, I will take as an example how BP seeks to apply it in Algeria.

Toward a New Paradigm

First, let me begin with a very simple statement:

The business of business is business. Our fundamental purpose is to create maximum shareholder value.

While simple, it is a statement that makes complex demands.

Energy companies are long-term enterprises, and we want to ensure that the business we are doing is sustainable.

At the same time, energy companies know that we cannot exist in isolation. We have a deep interest in the economic health and prosperity of the countries and communities in which we work. We seek legitimate, effective government and a proper framework of law. In other words, a sustainable operating environment.

We must, therefore, recognise and manage the impact of our business and its contribution to society. We must operate at all times and in all circumstances on the basis of long-term mutual advantage.

This means developing a strategy that will give companies a competitive advantage and create value. It also requires building companies that will endure. In other words, a sustainable company operating in a sustainable world.

The strategy defines the destination - shareholder value - and the test of sustainability provides the reference by which we judge everything we do.

In practical terms, companies do this by defining core values, enshrining them in policies with real meaning, and then applying them through specific management processes and standards throughout the company. All carried out within a well-defined system of governance.

Together, this represents a new paradigm in corporate social responsibility: responsible operations and responsible development.

More importantly, it moves the paradigm beyond Corporate Social Responsibility to what we call “Sustainability”.

BP counts itself among the world’s innovative and progressive companies. We have long believed that our long-term future depends on our world-class environmental and social performance, and excellence in all operations.

BP constantly strives to be a force for good and a force for human advancement in every country we operate. A responsible global citizen, earning the confidence and support of its employees and partners; its customers and suppliers; as well as its shareholders and stakeholders.

At the same time, and in parallel, BP actively pursues excellence in all operations. Excellence is founded on responsibility, and starts with responsible operations that promote safety and integrity; minimise the impacts to the environment; and provide a healthy and safe work environment for its employees.

Moreover, BP has set the corporate standard on many important issues.

Let me cite just a few.

• Energy-related issues such as the Global Gas Flaring Partnership; the US/UK Voluntary Principles on Security and Human Rights; the Energy and Biodiversity Initiative. Global initiatives on climate change and on transparency in the extractive sector. Industry issues such as HSE
• Corporate governance issues such as the UN Global Compact, the 2002 Global Reporting Initiative, as well as progressive positions on what we call “code of conduct” that governs our approach to among others our values, ethics, transparency, and diversity and inclusion

Acting as a good corporate citizen and taking a progressive position are often not enough. It is not easy as we must live it everyday. In a sustainable way. Over the long term for the mutual advantage of all parties.

In this regard, BP, in its activities in more than 100 countries around the world, constantly strives to operate responsibly. In particular, with respect and support for human rights; aversion to corruption; while supporting and advocating transparency.

Equally importantly, BP pursues responsible development in its social and environmental engagement in the communities where we operate, investing its resources in its core competencies. Notably – minimising environmental impact, encouraging enterprise and skills through capacity building and education, and supplying energy.

This combination - operating responsibly in our core business and operating responsibility in the areas where we operate - represents a powerful multiplier effect that will generate enormous benefits for communities and society, both in those areas in our sphere of control and, we hope, in our sphere of influence.

This represents the way we do business. Responsible operations and responsible development. For the long-term mutual advantage of all parties.

At this point, you are probably wondering how a company – like BP – applies these ambitious and unique principles on the ground in Algeria. Let me focus on my example of BP in Algeria.

My response: it is not easy.

Like anything else in Algeria, however, what we do and how we do it have enormous benefits not only for our company but also for the local communities in the remote Saharan desert communities where we work.

Sustainability – Responsible Operations

In Algeria, we pursue three multi-billion dollar joint development, world-class oil and gas projects with our partner, Sonatrach. Two are the largest joint development gas projects -- In Salah and In Amenas. The third is the innovative joint oil production project at Rhourde el Baguel.

As we pursue these world-class projects, we remain very aware of the significant impact on our operations on the fragile socio-economic environment in those remote desert communities near In Salah, In Amenas, and REB.

And, I remain very aware of our important role in contributing to the economic development of Algeria.

At the same time, our work as a global energy company and the largest foreign investor in Algeria brings us into contact with some of the most challenging issues facing society today. How do we reconcile economic growth and sustainability with environmental responsibility? How can we contribute to establishing secure supplies of energy in an unpredictable world? What role should BP play in Algeria?

These are questions that I confront every day in my work - and there are no easy answers. They represent different dimensions of a key paradox - the paradox in which the energy that provides society with heat, light and mobility, fuelling economic growth and development, simultaneously presents us with serious environmental and social challenges.

To do this, we must pursue a comprehensive responsible approach. We seek to be a good Algerian citizen by contributing to Algeria’s long-term growth and by engaging responsibly throughout the entire range of our activities that demonstrate our continuing commitment to Algeria.

In keeping with our pursuit on sustainability, our three major joint development projects with our partner Sonatrach and our new partner, Statoil, incorporate the latest technology, innovative management techniques, and world-class safety standards that respect and protect Algeria’s fragile environment.

These projects also bring new and exciting opportunities to many Algerians, enabling them to improve their quality of life and the quality of their communities.

Sustainability - Responsible Development

Most prominently, BP’s commitment to responsible development features our voluntary social investment programme. This landmark programme seeks to bring benefits directly to the Algerians who reside in the desert communities near our projects areas. It is an innovative and unique programme that has gained noteworthy mention. For example, the Algerian Minister of Energy and Mines, HE Chakib Khelil, cited BP’s social investment programme as the model for all companies operating in Algeria.

This landmark programme puts into place our values and brand, our approach to sustainability - responsible operations and responsible development. At its central core, BP’s social investment programme brings tangible benefits to Saharan communities located near our operations where we live and work while focusing on self-sustaining activities, targeted to local needs, and implemented by local ownership.

Responsible Development – What It Is Not

In contrast to others, BP’s social investment programme goes beyond philanthropy and charity; beyond unfocused contributions that fail to meet local needs and that burden local communities with unsustainable infrastructure.

Instead, it is fully aligned with our business and fully integrated in our strategic business operations.

Responsible Development - Objectives

This social investment programme has three objectives:

• Improve the quality of life of the residents in the communities where we operate
• Help create opportunities
• Help connect these local communities to the outside world

It is also firmly rooted in our core competencies: energy (water and solar), enterprise or capacity-building, and education.

Responsible Development - Programme and Activities

Let me briefly highlight a few of our on-going social investment activities in Algeria. Not the entire list, but those activities currently under way this year -

• Water Desalination Project at In Salah: The first is our clean water project in the city of In Salah, near the major joint gas development project of In Salah. Over the past few years, we installed four water treatment stations that provide, for the very first time, potable water to the 35,000 residents of In Salah. At the same time, we created a micro-enterprise – “Saharan Water Company – to run and manage the project, providing jobs and invaluable skills for local residents. The company sells the water at a nominal cost, using the revenue to pay wages, rent of the buildings, maintenance, and access to city water
• Solar Energy Electrification Project at Hassi Ghanem: The second is a solar energy project in the agricultural village of Hassi Ghanem, near one of the operational hubs of our In Salah project. We supplied and installed solar panels for the town that provided electricity, for the first time, to entire village. At the same time, we trained the local residents in maintenance and care for the panels. Today, the residents of Hassi Ghanem not only have electricity but also the local authorities established teams that clean, maintain, and ensure the proper functioning of the solar energy system

• Clean Water at Hassi Ghanem: The third was just inaugurated three weeks ago. It is a clean water project for the village of Hassi Ghanem. It features the installation of a 3.5 kilometre water pipeline from the source of the town’s water source and the construction of seven water distribution stations around the town. For the first time, the town not only has its own source of electricity but also its own source of clean water
• Illizi Home: The fourth, and perhaps the most innovative and clearly unique, is Illizi Home. This project entails the production and marketing of Algerian products that are specifically designed and targeted for the UK consumer market. In particular, with the assistance of design teams, the scores of Algerian artisans - most of whom live in the desert south - craft and build products and then shipped to several high-end UK shops. Moreover, Illizi Home also features an e-business marketing channel through which you can purchase these products on-line. Products include furniture, carpets, baskets, ceramics, etc. I encourage you to visit the web site at Illizi.uk.com
• English Language Training: Lastly, and equally importantly, we are establishing English language resource centres in several Saharan desert communities. In collaboration with King’s College in London, we have trained 250 English language instructors from several Algerian communities and also acquired requisite instructional materials. As part of a collaborative effort, local communities have provided the infrastructure and other centres resources

At present, we are working on two additional projects for 2005 -

• Solar Energy Project at Iherir: Partnering with the Wali of Illizi and the local community near our In Amenas gas project, BP will soon begin an ambitious tri-lateral solar energy project for the 3000 residents of town of Iherir. The project will provide electricity for homes, offices, shops, community centres, and even street lights. For the very first time, the town will have its own source of electricity, and is one of the region’s most important development priorities
• Community Resource Centre at In Salah: As an extension of our clean water project, we have partnered with the Mayor and local residents in the city of In Salah to establish and kit-out a community resource centre in In Salah. The centre will feature a cyber café, library, business resource centre, and community centre. The Mayor will provide the facility and maintenance; BP will provide the resources and train a local group to provide on-site training and assistance, and centre our English language training there as well

These activities directly satisfy our three objectives of social investment and are firmly based on our unique core competencies.

Our Social Investment programme is not the only sustainable activity in Algeria. Earlier, I mentioned that we also seek to be a good Algerian citizen. In particular, we reacted quickly and comprehensively in response to two natural disasters -- the floods of Bab el Oued in November 20001 that killed more than 1,000 persons and, most recently, the massive Boumerdès earthquake in May 2003 that killed nearly 3,000. On each occasion, BP demonstrated its commitment to Algeria as an Algerian citizen in a responsible way, contributing directly to those left homeless by unimaginable devastation and destruction.

This is our unique, responsible approach. It also represents our commitment to responsible operations and responsible development.

What we stand for in Algeria.

I began my remarks with a reference to the purpose of business is business. It is a simple statement that makes complex demands.

Corporate Social Responsibility is not an add-on, a set of charitable activities undertaken to demonstrate that we are nice people. It is about constructive and responsible engagement in all the countries in which we operate on the basis of long-term mutual advantage.

The business of business is business. But that is a long-term objective. To stay in business for the long term, we must demonstrate that we are part of society, making a unique and valuable contribution to economic and social development through responsible operations on a responsible basis.

That is exactly what we do in Algeria.

At the same time, we grapple each day with difficult and complex issues. We realise that we will not get everything right all the time.

In the end, BP strives to be a force for good and human progress in Algeria. Corporate social responsibility – sustainability - remains at the heart of our business, driving everything we do.

Thank you for your kind attention. I would be very pleased to respond to your questions.