Petroleum Industry In Pakistan Management Essay

Corporate Social Responsibility can be defined as, the go oning committedness by concerns to act ethically and lend to economic development while bettering the quality of life of the people every bit good as of the local community and society at big. In today ‘s universe it is imperative for modern organisations to to a great extent depend upon its concern activities, it has to work on its function for prolonging long term repute and good will, which is known as Corporate Social Responsibility ( CSR ) of houses. CSR comes under the umbrella of corporate administration patterns sing concern processs, legal and ethical patterns with the focal point on investors ‘ rights protection and societal stakeholders of the house.

Over the last few decennaries, the overall growing of transnational giants and globalisation has been enormous, which resulted in making issues for turning public consciousness. Many houses are playing their function in the development of economic system, but on the other manus they are making environmental issues and societal jobs that are harmful for the society and environment. ( Mitra et al. 2008 ) has researched on this issue often and his range of work includes ; long corporation power, employer safety and wellness, environmental proactiveness, waste direction, resource depletion and merchandise quality. The exclusive intent of the corporations is non profit maximization they besides cater a wider audience which includes all its stakeholders, environment and the society as a whole. In the words of Friedman ( 1962 ) , that the lone societal duty of the director is to maximise the net income of stockholders, is non universally acceptable ; instead the function of the corporate administration is to maximise the portion holders ‘ wealth along with prolonging appropriate returns for all other social stakeholders. Surveies have proved that consciousness is turning on the portion of houses seting an duty to assist society even if it earns loss or net income ( Wise and Ali, 2008 ) , the research concluded that a part of Net incomes of the organisation should be utilized for the interest of sustainability and stakeholder support.

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With the transition of clip, consciousness among corporations sing corporate administration increased drastically and assorted accounting establishments began to see societal revelation in company ‘s studies due to the unfavorable judgment of utilizing net incomes as the concluding mean to measure corporate public presentation. Furthermore the research worker besides began to joint the different theories in this respect i.e. bureau theory, legitimacy theory, stakeholder theory and political economic system of accounting theory ( Belkaoui and Karpik, 1989 ; Gray et al. , 1988 ; Guthrie and Parker, 1990 ; Patten, 1991, 1992 ; Roberts, 1992 ; and Gray et al. , 1995a ) .

The survey by ( M. Zia, I. Ali 2010 ) , in their research on, Corporate Social Responsibility influence on employee committedness and organisational public presentation with regard to Pakistan, has identified that CSR activities and employees committedness are positively correlated and CSR activities by a company consequences in employee committedness which in bend affects the overall public presentation of the organisation. The present survey purposes at analysing the corporate administration patterns of three Pakistani houses from crude oil industry associating to corporate societal duty with a position to analyze and associate corporate administration patterns with ethical concern procedures every bit good as supplying some domestic grounds on corporate societal revelations of houses in Pakistan utilizing instance survey method.

Current Environmental Social Responsibility:

Corporate Social Disclosure has become an of import portion of company ‘s coverage, it may be in the signifier of one-year studies, describing through stand-alone societal studies, and environment sustainability studies etc. Social coverage can besides be done via selling activities like ; advertisement, merchandise packaging, conferences and company web sites. An organisation might voluntary study information ‘s for many grounds in order to develop corporate image, to legalize current activity, to deflect attending from other countries, to dispatch answerability, to prevent statute law ( Gray and Bebbington, 2001 ) . Guthrie and Mathews ( 1985 ) defines Corporate Social Disclosure ( CSD ) as the proviso of fiscal and non fiscal information stated in the Company ‘s one-year study or separate societal studies associating to interaction with its physical and societal environment. The chief aim of an organisation should non be restricted in making wealth for its stockholders ‘ but after the fiscal crunch the organisations are traveling towards a new attack to unwrap all their information to its stakeholders in order to get the better of information dissymmetries.

The function of Corporate Social Disclosure for crude oil industry is really of import as the refineries are responsible for the waste they emit in the sea is really black for the life under sea and causes air pollutions besides. The overall environmental effects for the society, natural environment are really high related to the crude oil companies who are specifically associated with refinery concerns.

Figure 1: CSR coverage, repute and legitimacy, J. Bebbington, C. Larrinaga & A ; J.M. Moneva ( 2007 )

Literature Reappraisal:

The 20th century has brought a singular alteration in the universe which has developed significance of societal and environmental issues. There has been an addition in economic activity, technological promotion and growing in volume of concern activities during this period. Therefore, these at the same time brought inauspicious consequence on the environment with societal inclusion. Among the noticeable consequence is that caused by human and industrial activities which lead to devastation of ozone bed, societal prostration, famine, devastation of home ground, malnutrition, poorness, famishment etc ( Gray and Bebbington 2001 ) .

The demand to unwrap societal and environmental impact of organisation has been widely debated between bookmans. Some believe that by going accountable to the society organisation will be holding more good will and it helps in executing better. Others are of the sentiment that organisation is merely responsible to its stockholders, that it exist merely to do money for its stockholders and non to shower it on the society ( Gray, Owen and Maunders 1987 ) .

As such argument has led in widening the answerability of organisations ( peculiarly companies ) , beyond the traditional function of supplying a fiscal history to the proprietors of capital, in peculiar, stockholders. Therefore the bookmans invented the footings like ‘Corporate Social Reporting ‘ and which was finally adopted by policy shapers as Corporate Social Disclosure.

Gray et Al. ( 1987, p. nine ) defined Corporate Social Reporting as “ The procedure of pass oning the societal and environmental effects of organisations ‘ economic actions to peculiar involvement groups within society and to society at big. Such an extension is predicated upon the premise that companies do hold wider duties than merely to do money for their stockholders. ” This definition contradicts positions of fiscal accounting which in the words of Laughlin and Gray ( 1988, cited in last 1996, p.3 ) can be divided and limited to four countries:

The fiscal description ;

Specified ( priced ) economic events ;

Defined organisations or accounting entities ;

Provide information for specified users of that information.

Corporate societal and environmental coverage provides a wider scope by taking accounting to a measure farther, non merely giving study on organisations public presentation but besides its impact on the society at big. Therefore, it tends to unwrap accounting for different things, media, groups and intents ( Gray, Owen and Adams 1996 ) .

Most organisations, peculiarly the extractive industries dispose waste merchandises unethical and this is harmful to our wellness ( Gray and Bebbington 2001 ) . The oil companies particularly in the development states engaged in unhealthy disposal of waste merchandises such as gas flaring among others.

Corporate Social Disclosure is the extent of societal and environmental coverage in one-year studies of the companies ; this includes revelation of fiscal net incomes along with environmental plus societal impacts on the society. Major work on CSD has been done on developed states but the paradigm is now switching towards the development states, where the construct of Corporate Social coverage is emerging and corporations in these states are being required to describe all their societal and environmental actions. The survey by Hossain M, Islam K & A ; Andrew J 2006, on CSD activities of a underdeveloped state identified that a really few companies in Bangladesh are doing attempts to supply societal and environmental information on a voluntary footing, which are largely qualitative in nature. Companies in Bangladesh appeared to hold the lowest degrees of societal and environmental revelation. The research besides identified that important figure of the lowest ranking companies suffered losingss during the period under survey and important proportions of the superior companies were subordinates of transnational companies or big corporations. On the other manus the companies in developed economic systems consider the CSD coverage as an incorporate portion of their company coverage.

Mia P & A ; Abdullah- Al- Mamun 2011, have researched on CSD activities of companies during the fiscal crisis of 2008, which about affected the full universe ; the consequences of the survey reveal that there is an undistinguished upward alteration in CSD during the fiscal crisis. In add-on, the survey examined the association between several steadfast degree factors ( profitableness, purchase, alteration in profitableness, alteration in purchase and size ) and the extent of CSD and alteration in CSD. The survey finds that the extent of CSD is non significantly associated with purchase and profitableness but it is significantly associated with size. Additionally, alteration in profitableness and size do non hold any important influence on alteration in CSD. However, alteration in purchase has a important negative association with alteration in CSD.

Hess D 2007 argues that societal coverage can be an of import signifier of New Governance ordinance to accomplish stakeholder answerability. Current societal coverage patterns, nevertheless, fall short of accomplishing stakeholder answerability and really may work against it. By analyzing the success and failures of other transparence plans in the United States, he identified cardinal factors for guaranting the success of societal coverage over the long term. These factors include increasing the benefits-to-costs ratios of both the users of the information and the disclosers, and acknowledging the importance of the engagement of third-party mediators.

Environmental Social Responsibility in Pakistan:

The construct of Environmental Reporting is comparatively new in Pakistan. CSD provides an chance for companies to inform its stakeholders about their corporate attempts for guaranting operations and concern that have minimum impact on the environment. Some companies view environmental coverage as an hindrance on their concern ; instead companies should see this as an chance to heighten their concern while increasing assurance of its stakeholders. Corporate Social Reporting is a large challenge for a state like Pakistan, where the companies are largely ruled by bid and control systems. Institute of Chartered Accountant of Pakistan ( ICAP ) has been working in this respect to supply regulative model that will non merely concentrate on disciplinary actions but it will besides supply corporate sector with an environment that enables greater conformity on societal and ecological criterions.

ICAP has introduced IAS 19, that mainly trades with employee ‘s benefits for short term, long term, post employment and expiration benefits. Benefits sing rewards, wages, securities parts, short term foliages, ill foliages, medical foliages for household, and different retirement benefits are given to employees harmonizing to their occupation position. Disclosures about employee ‘s safety and occupation security policies guarantee public about ethical and moral values of a corporation and pull foreign investings ; hence a positive consequence is shown on house ‘s public presentation. ICAP has launched coverage demands sing internal control and revelation of different hazard direction systems, yet no peculiar criterion has been developed sing the external environmental control criterions.

Government of Pakistan has introduced Pakistan Environment Protection Act ( PEPA ) and National Environmental Quality Standards ( NEQS ) in 1997 ; which requires that companies to follow environmental ordinances commanding population, agricultural wastages, societal jeopardies or any harm to human life. Mr. Hammad Naqi Khan, Director, Freshwater and Toxics Program WWF Pakistan, signifies the turning consciousness of CSR amongst Corporations by presenting companies, they have launched Environmental Reporting Awards in coaction with Ministry of Environment and IUCN Pakistan in 2002 to appreciate the attempts who reports corporate environmental, societal and sustainability public presentation, he said thatA the awards guarantee that companies target betterments in the quality of information disclosed during the coverage procedure. Hence the awards help concerns streamline sustainable patterns and development.

2.2 Petroleum Industry in Pakistan:

Pakistan is a developing economic system and for the economic development it requires higher energy ingestion and accordingly seting higher force per unit area on state ‘s economic system. A. Ahmad, M. Jha ( 2008 ) , states that Pakistan chiefly depends upon oil and gas resources to carry through energy demands. Autochthonal resources of Oil are non plenty to slake energy thirst of the turning economic system. Presently in oil upstream and downstream sector there are some local and international companies involved and authorities of Pakistan is set uping such policies that it can pull more international investors in this sector but the rapid gait of alteration, high grade of uncertainness and unstable political state of affairs of the state present important challenges and hazard to foreign investing.

Petroleum industry in Pakistan comprises of Attock crude oil, Attock Refinery, Burshane, Byco Petroleum, Mari Gas Company, National Refinery, Oil and Gas Development, Pak Oil Fieldss, Pak Petroleum, Pak Refinery, PSO and Shell listed on Karachi Stock Exchange. There are other private companies that are besides runing in Pakistan as crude oil geographic expedition companies. The crude oil sector contributes 6 % in the overall economic system of Pakistan and it is turning at 10-12 % per annum, it is besides estimated that during the FY 2012-13, major part of non-tax gross would be established from the crude oil sector amounting to Rs 147.878 billion ( Daily Times-Budget Review, 2012 ) . The oil and gas sector in Pakistan is chiefly controlled by the province through intercessions in pricing, allotments, returns and other administrative controls. Largely Multi-national companies are involved in oil and gas geographic expedition concern while province owned companies are responsible for selling and distribution of crude oil merchandises e.g. PSO, Sui Northern Gas Company and Sui Southern Gas Company. Likewise, Pakistan Petroleum Ltd is the largest geographic expedition and production company while the Attock Refinery Ltd. and Pakistan Oilfields Ltd are two other state-owned companies. The present survey purposes at analysing the corporate administration patterns of three Pakistani houses from crude oil industry associating to corporate societal duty with a position to analyze and associate corporate administration patterns with ethical concern procedures every bit good as supplying some domestic grounds on corporate societal revelations of houses in Pakistan utilizing instance survey method.

Our Case Study Scope:

In the visible radiation of above treatment the present survey provides a nexus between theoretical position of Corporate Social Disclosure and Practices of Pakistani houses concentrating on oil, gas & A ; refinery sector. Three companies from Petroleum Industry have been selected as instance surveies to analyse the corporate societal revelation by these companies. The crude oil industry of Pakistan comprises of both public and private sector companies ; we have selected merely public limited companies which are listed on Karachi Stock Exchange, because studies of these companies are publically available and there will be fewer hinderances for informations aggregation ; and specifically the companies under reappraisal are refineries from crude oil industry as they are largely responsible for environmental jobs. In this respect, we will be utilizing the six classs of CSD proposed by Hackson and Milne ( 1996 ) .i.e. ( 1 ) environmental ; ( 2 ) energy ; ( 3 ) employees ; ( 4 ) merchandise ; ( 5 ) community engagement ; and ( 6 ) others. The CSR coverage of the three selected companies has been analyzed utilizing the above six classs.

Research Methodology:

The instance survey is qualitative in nature, informations will be collected through unfastened ended interviews, and the chief purpose of this survey is to garner an in-depth apprehension of the topic. The qualitative method will assist me to look into the why and how of determination devising, non merely what, where, when. For this intent the population of involvement is the Petroleum industry in Pakistan which includes the Companies listed by Karachi Stock Exchange and are public limited companies, the ground behind concentrating on this industry is that it has strong impacts on environment and society. The population frame of mention was constructed by taking all Petroleum Companies viz. ; PSO, Shell, Attock Refinery, PPL, Attock Petroleum Ltd, Burshane LPG, Byco Petroleum, Mari Gas Company, National Refinery, Pak Oilfields, Pak Refinery and Oil & A ; Gas Development.

The sample size is so narrow down to the Refineries in Pakistan as listed in KSE and are public limited company, as public companies are required to unwrap their all actions while executing operations. I will be utilizing non-probability convenient trying method for this instance survey, the sample size includes 3 Refineries from crude oil industry of Pakistan ; viz. Attock Refinery Ltd. , Pak Refinery and National Refinery. The crude oil Selling and geographic expedition companies could non go portion of our sample size because they are non in concern of refinement oil and crude oil merchandises. The information will be collected by questioning forces from direction of these refineries, holding their Head office or regional office in Karachi. The ground for choosing this sample is that probe would be made decently by analyzing three instances from individual industry and it will besides assist to maintain the survey focused. The chief purpose of this survey is to place the operational efficiency of refineries and how they dispose of waste so as to salvage environment and society as a whole.

Table 1: Outline of Sample Selection:






Petroleum Companies Listed on Karachi Stock Exchange

Petroleum Marketing & A ; Distribution Companies

Petroleum Exploration Companies

Consist the Sample ( Refineries )

The information will be collected by primary and secondary beginnings. The secondary informations will be collected from one-year studies, Karachi Stock Exchange ( KSE ) , on-line publications, Companies Environment and sustainability studies, company ‘s official web sites, research documents and books. For primary informations aggregation, personal interviews will be conducted in which unfastened ended inquiries will be used. The ground for choosing this instrument is to acquire in depth information and cognition as sometimes unstructured questionnaires miss some important cognition which may be gathered by structured inquiries.

Case Study I:

Pakistan Refinery Limited:


Pakistan Refinery Limited is a Pakistani Organization listed on Karachi Stock Exchange ( KSE ) ; the company was incorporated in May 1960 as a populace limited company, it was established in confederation with two major foreign oil companies viz. Burmah Oil California, Texas Oil Corporation, Shell Petroleum Corporation and Esso standard Eastern Inc. The refinery is located on the coastal belt of Karachi. PRL has maintained its mission, vision and values of going first pick for all its stakeholders.

Environmental Social Responsibility practiced in PRL

The mission of PRL is to supply value added merchandises that are environment friendly, and protect the involvement of all its stakeholders in a competitory market through sustainable development and quality human resources. PRL takes the duty of Health and safety of its employees and it is explicitly mentioned in their mission and sustainability studies. PRL has an integrated Health, Safety, Environment and Quality Management system HSEQA based on ISO-9001:2008, ISO-14001: 2004 and OHSAS- 18001:2007. HSEQ has been headed by the Managing Director and Chief Operating Officer, as the Dupont analysis suggested that a committedness for Health, Safety and environment comes from the top of the organisation. Keeping the HSEQs is the nucleus duty of operations and supply section ; HSEQ ensures all systems are in topographic point that is required to extenuate and command any unwanted risky state of affairs ( doing menace to Health, Safety, Environment & A ; Quality ) originating in instance of any failure or accident in the refinery.A

Pakistan Refinery Limited has adopted UN Global compact rules since 2007, under the rules stated in this papers includes ; Human Rights, Labor criterions, environment and anti-corruption. The direction of PRL is to the full integral to pass on these rules to all its employees and maintain cheque on it so that they ever remain in conformity with Torahs and the company maintains its place strong towards the achievement of these ends.

Community Involvement:

Pakistan Refinery Limited assesses the deductions and effects of their determinations and policies on the constituents of the society and ensures that the involvement is non affected by their actions. Pakistan Refinery Limited takes a constructive involvement in societal affairs, which may non be straight related to the concern. Opportunities for involvement – for illustration through community, educational or contributions plans will change depending upon the range for utile private enterprises. PRL have a clear committedness towards community, they have a duty to guarantee that the operations and concern patterns are non damaging to the society.

Major Social Interventions by PRL:

PRL has been actively take parting in community, by playing its function as a responsible corporate citizen of Pakistan and it had won many Awards on its Social and community engagement and working for safety of Environment. PRL entirely invested Rs. 11.8 Million in legion meaningful plans for the community. PRL has established a Cardiology lab at Indus Hospital, Korangi. PRL continues to lend in CSR activities ; it had invested in a figure of charitable undertakings such as Layton Rahmatullah Benevolent Trust and Indus Hospital with an purpose to ease the destitute patients and The Citizen ‘s Foundation for educating the under-privileged kids. PRL has won many Awards or Token of grasp from ACCA WWF Environmental Reporting Awards, Annual Environment Excellence Award jointly organized by UN Environment Program, Occupational Health and Safety ( OHS ) award and Occupational Health and Safety ( OHS ) award.

Ethical motives and Integrity:

PRL has its ain Ethics commission which keeps an alliance with environmental criterion and ethical concern patterns, the Committee is responsible for guaranting that Company ‘s operations are conducted in conformance with organisational aims and policies with high criterions of values and ethical behavior. The Company has defined policies sing torment, credence of gifts ; struggle of involvement etc. and no divergences are tolerated.

Health, Safety, Environment and Quality as claimed by PRL

Pakistan Refinery Limited is committed to follow Health, Safety, Quality and Environmental Standards HSEQ, for PRL wellness of its employees comes foremost to everything because they believe that employees are the chief assets of the company and their wellness affairs a batch. Safety could be maintained by forestalling jeopardies by effectual leading and activities advancing high safety criterions. Environmental criterions are maintained at PRL by progressive decrease of emanation, wastewater and disposal of waste stuff that are known to hold a negative impact on the environment. The works s runing on specially designed waste H2O intervention, the wastewaters are processed in three phases and so waste H2O is emitted in the sea H2O, they are in line with National Environmental Quality Standards specifications. PRL continues to describe its emanation and outflowing trial consequences with Sindh Environment Protection Agency and Pakistan Environment Protection Agency under ego monitoring and Reporting Tools ( SMART ) plan.

Quality and uninterrupted Improvements:

PRL focuses on client satisfaction by runing expeditiously and developing a civilization which promotes invention, mistake bar and teamwork. As per ARL this is how a company becomes successful and is able to keep quality criterions. PRL representative provinces that, “ Quality and uninterrupted betterments at PRL are assured by Audits, Test tally, Compliance and development of PRL ‘s ain HSEQ in conformity with ISO 14001. ” PRL has achieved a three twelvemonth recertification in November 2011 on the ISO 9001:2008, ISO 14001:2004 and OHSAS 18001:2007 criterions severally.

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