Business organizations implement powerful models and structures to produce superior services or products and market them successfully to their customers. Many people admire companies whose procedures, practices, and initiatives add value to them. Leaders and managers should also consider or pursue evidence-based strategies that have the potential to drive performance and fulfill the changing needs of all stakeholders.
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One of these approaches is known as corporate social responsibility (CSR). Businesses that ignore the importance of such attributes will eventually become obsolete, uncompetitive, or unsuccessful. This term paper gives a detailed analysis of the State Oil Company of the Azerbaijan Republic (SOCAR) and the effectiveness of its CSR strategies. The discussion goes further to provide appropriate strategies that have the potential to transform this company’s CSR model.
The government of Azerbaijan established SOCAR in the year 1993 to offer solutions to the energy sector, explore gas and oil, and market the products both internationally and locally. This means that the organization continues to support the performance and effectiveness of the country’s economy. SOCAR currently operates in these key industries: fiber and energy technologies, natural gas, petrochemicals, logistics, and refinery (“About SOCAR,” n.d.). The organization’s leaders have managed to establish representative offices in different countries, including the United Kingdom, Nigeria, Singapore, Georgia, Greece, and Switzerland.
SOCAR has a vertical organizational structure that borrows a lot from the bureaucracy experienced in the region. On top of the hierarchy is the company’s president. There are also several vice-presidents who focus on different aspects, such as economics, marketing and investment, refining, and social issues. Below them are managers who undertake a wide range of activities to deliver positive results (“About SOCAR,” n.d.). Such a structure is also flexible since all people communicate effectively and solve emerging problems.
The major products associated with this company include refined oil, crude oil, and natural gas. It also provides solutions in oil and gas exploration, marketing, consultancy, and processing. The organization’s mission is to improve its value chain by operating in a sustainable, cost-effective, and timely manner while at the same time supporting its customers (“About SOCAR,” n.d.). Its strategic goal for 2020 is to become a leading partner in its industry.
External Environmental Impact
SOCAR operates in a sector that is associated with unpredictable or negative impacts on the natural environment. Most of the oil and gas exploration initiatives this company undertakes tend to have negative impacts. As the leaders in this sector focus on the best developmental objectives, the negative effect on the surrounding environment has been on the rise (“Environment & safety,” n.d.). However, this organization pursues the concept of sustainability to minimize its impacts. As this industry continues to develop, stakeholders will continue to take the question of environmental impact more seriously.
Many countries are currently grappling with the issue of sustainability. For instance, Azerbaijan is facing numerous challenges that can affect its future economic goals. As a country focusing on the oil and gas industries, it becomes impossible to implement superior technologies and practices that can protect the natural environment. Oil and gas exploration practices result in the destruction of resources. Severe pollution is a major sustainability challenge affecting Azerbaijan (“SOCAR Group,” n.d.). This is the case since the country is presently relying on oil and gas, agriculture, and industrial functions to support economic development. Soil erosion, deforestation, and increased exhaust from vehicles are critical issues affecting Azerbaijan’s climate cycle.
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Similarly, SOCAR continues to record or face various sustainability concerns that have the potential to affect its future performance. Firstly, natural gas and oil are not sustainable in nature. These are fossil fuels that can be depleted after a specified period. This means that SOCAR has to develop a superior strategy to address this challenge. Secondly, SOCAR has embraced superior technologies in an attempt to reduce its negative impacts on natural environments. Unfortunately, such innovations are yet to deliver positive results in terms of sustainability. Thirdly, the company’s sustainability programs have not been sustainable (“Environment & safety,” n.d.).
This is true since they have resulted in the depletion of fossil fuel and increased pollution. Most of the company’s operations have also failed to support or empower local residents, communities, and stakeholders. This is a clear indication that such projects have not supported the integrity of the natural environment. Addressing these issues can make SOCAR’s operations and projects more sustainable and eventually maximize profits.
Primary and Secondary Stakeholders
The success of SOCAR in the global oil and gas industry is attributable to the roles of both secondary and primary partners. The first group of primary stakeholder includes employees and contractors. These individuals use their expertise, ideas, and tools to meet the company’s goals. The second category is composed of customers. These include corporations, firms, and consumers in the country and across the globe.
These individuals are the sources of income for SOCAR. The next group is comprised of suppliers, shareholders, marketers, and logistical operators. They support the company’s business model. The first category of secondary stakeholders includes communities living in different regions. Members of such societies influence the projects, action plans, and models implemented to deliver positive results (“SOCAR Group,” n.d.).
Special interest groups and the media also form a critical part of SOCAR’s secondary stakeholders. They use their social positions to influence practices at the company. SOCAR also considers evidence-based initiatives to address these partners’ needs. Trade associations, government agencies, and professionals in the learning sector play significant roles that dictate the future performance of the company. They also provide insights for improving corporate social responsibilities and business activities. The outstanding observation is that both secondary and primary stakeholders are essential since they support this company’s business model and profitability.
Materiality Matrix: Stakeholder vs. Company’s Needs
Conclusions from the Matrix
The above materiality matrix was developed after examining the needs of SOCAR and those of its key stakeholders. This information guides or empowers the leaders to implement evidence-based initiatives that can address materials that matter the most to different shareholders (see Figure 1). From the above diagram, it is evident that issues such as climate change, consumer health, deforestation, water and waste management, and economic performance are critical to both the company and different partners (“SOCAR Group,” n.d.).
The company goes further to provide quality or appropriate working environments for all employees. The corporation also focuses on initiatives that promote local community empowerment or development. The quality of products associated with SOCAR is something critical for all stakeholders and the company. Finally, both stakeholders and the company appreciate the power of transparency in reporting to comply with existing international and local laws.
CSR Strategy Analysis
SOCAR takes the issue of social responsibility seriously to promote sustainability of the natural environment. This company does not have a specific department that focuses mainly on the issue of CSR (“SOCAR Group,” n.d.). However, each segment has a unique framework aimed at promoting most of the activities or goals outlined above (see Figure 1). All offices and units are required to create teams that can meet the company’s goals. They are also encouraged to implement evidence-based initiatives that that will support the company’s CSR model.
Managers of different segments or departments embrace evidence-based strategies to create desirable social values. They also consider actions plans, technologies, and innovations that can promote sustainability. Within the past decade, the company has gone a step further to adopt new state-of-the-art applications and innovations that fulfill outlined global standards (“Environment & safety,” n.d.).
Additionally, the company has focused on initiatives that can improve communities’ health comes and the welfare of all employees. Different divisions and operations in the above identified countries have managed to focus on various CSR activities. These measures have resulted in the development of long-term CSR initiatives.
CSR Activities: 3Ps (People, Planet, and Profit)
From the 1960s, many activists began to propose superior models and sustainability practices that could safeguard the natural environment. Governments across the globe also began to implement regulations to guide, monitor, and dictate the initiatives companies undertook. These ideas catalyzed the concept of CSR that has today become a critical aspect of every corporation. SOCAR embraces the triple bottom line (TBL) model to pursue its suitability objectives.
Using this concept, the company implements desirable business practices that can promote social equity (“Social responsibility,” n.d.). This is achieved through the use of competitive salaries, better working environments, and improved living conditions for community members. For instance, this company has been supporting educational programs to empower more people. It also provides relief food and resources to people living in troubled regions.
The second element of the model is that of the planet. SOCAR focuses on the best practices that will minimize the negative effects on the natural environment. As described above, the organization manages it wastes effectively and implements superior strategies to conserve water.
This means that the company has appropriate measures for minimizing its ecological footprint. This business also uses new technologies to improve productivity and reduce negative implications on the environment (“Social responsibility,” n.d.). It ensures that logistical operations do not result in pollution. However, the fact that SOCAR operates in the gas and oil industry explains why it cannot achieve positive results in protecting or maintaining the integrity of the natural environment.
The third aspect of the TBL model is that of profits. This attribute deals with the unique economic value SOCAR creates. For this company, initiatives are implemented after considering the elements presented in the above matrix. This means that the corporation pursues profits by ensuring that all surrounding communities receive added advantage. For example, SOCAR Turkey implements powerful initiatives to produce oil and gas that is capable of supporting people’s demands and protecting their health (“Environment & safety,” n.d.). The leaders at this company believe that a powerful model that meets consumers’ needs will result in a clean environment for all. Most of the profits are also accrued back to different societies.
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Several documents reveal that SOCAR is one of the companies that undertake numerous measures and initiatives in an attempt to deliver positive CSR results. For example, it acts in accordance with Azerbaijan’s National Program for Improving the Living Conditions and Employing Refugees and Internally Displaced Persons (“Social responsibility,” n.d.). This approach explains why the company has been proving parcels of food to refugees living in the country during key holidays or festivals.
Over the years, SOCAR has been donating sportswear, clothes, and carpets to children in different camps. Additionally, it sponsors different educational institutions and projects that are capable of addressing the needs of many citizens. This model is also evident in other countries where this corporation operates, including Ukraine, Turkey, and Greece. This is a clear indication that such actions are ethically acceptable and appropriate.
SOCAR’s social responsibility efforts have also met some challenges or resistance in the country. For example, the corporation is finding it hard to distinguish between its CSR responsibilities as a state-owned organization (“Environment & safety,” n.d.). Its corporate efforts to improve economic and social development continue to face competition from the government’s macroeconomic initiatives or policies. The existing political institutions have also continues to affect this company CSR initiatives. This means that there is a need for the government and all state-owned corporations to develop a better model for addressing the unique challenges many people continue to face in different countries.
On its website, SOCAR acknowledges that it has been undertaking various social responsibility duties and responsibilities in accordance with the TBL model. For example, the company has been striving to create social values by producing and marketing high-quality products and services. The corporation also uses emerging technologies to drill and deliver oil and gas to different consumers. This company pursues this objective by ensuring that surrounding environments are protected from severe deforestation or soil erosion (“Social responsibility,” n.d.). These attributes show conclusively that the organization has been embracing ethical measures to promote its CSR goals.
Within the working environment, SOCAR implements appropriate measures that promote safety and wellbeing of all workers. It adopts friendly approaches that have the potential to empower many people. It also introduces newest systems, chemicals, and equipment that pose minimal risks to its engineers and workers. These initiatives continue to maximize the level of security (“Environment & safety,” n.d.). Employees are also encouraged to present their views and ideas in an attempt to transform operations. These ethical practices explain why SOCAR is an admired employer in different countries.
SOCAR is a large company that continues to invest in different countries in Asia and Europe. Its managers and leaders adopt evidence-based initiatives and practices that can minimize the projected negative implications on the natural environment. The corporation utilizes cutting-edge technology in an attempt to promote human health. This company encourages members of the public to present insights and ideas that have the potential to improve the company’s CSR strategy. The ultimate objective has always been to pass an admirable and clean world to all people (“Company overview,” 2019). These ethical measures explain why the company remains successful and competitive in its sector.
SOCAR uses emerging ideas to produce and deliver high-quality products that can meet the energy needs of the greatest number of people. The company focuses on the best strategies that will encourage more consumers to use renewable or sustainable energy sources. The leaders at this company appreciate the importance of efficiency. This knowledge explains why SOCAR has been keen to reduce its ecological footprint (“Environment & safety,” n.d.).
It implements superior strategies that are capable of protecting the natural environment. This is achieved through the continued production of oil products and gases that do not contribute to pollution or degradation. SOCAR operates successfully in the global chemistry industry by adhering to the outlined international health standards and norms. Such a practice has catalyzed the production of high-quality oil and gas products that remain suitable for different consumers across the world. From a critical angle, it is evident that SOCAR’s actions and CSR activities are ethical in nature and resonate with the dictates of the TBL model.
SOCAR’s Current Reporting Status
SOCAR operates in countries that provide guidelines for both financial and CSR reporting. This means that the company should develop appropriate green or CSR accounting procedures and present the reports to the relevant authorities (Gibassier & Alcouffe, 2018). In many regions, companies should present their green accounting and sustainable development reports every year (“Company overview,” 2019). The purpose of such documents is to make it possible for auditors and governments to monitor the social responsibilities companies undertake.
Through the use of such measures, SOCAR has been factoring its environmental costs whenever presenting its financial operations and results. This approach has been guiding policymakers and stakeholders to present insights that can promote the organization’s performance (“Environment & safety,” n.d.). The use of social accounting has made it possible for SOCAR to monitor and measure the effects of its actions and projects on different people and every surrounding environment. The continued use of these reporting methods will eventually make this company sustainable and profitable.
Conclusions and Recommendations
The above discussion has revealed that SOCAR implements appropriate CSR measures that have the potential to support the demands of different consumers and societies. The programs this corporation undertakes have resulted in better living standards for many people.
It also considers the needs of different stakeholders whenever developing its CSR model (“Environment & safety,” n.d.). However, the company has been facing numerous challenges whenever pursuing its CSR goals, including poor planning, conflict with existing governmental policies, and the nature of its sector or industry. With such weaknesses, there is a need for this company to consider various initiatives and strategies that will deliver a superior CSR strategy.
The first approach is for SOCAR to align the current social responsibility efforts to its business strategy. This initiative will ensure that every activity or core business process resonates with the intended CSR goals (Gibassier & Alcouffe, 2018). This model will empower all workers and leaders to implement procedures that can deliver positive results (Behringer & Szegedi, 2016). This move is also essential since it will minimize cases of duplication and eventually support the company’s competitiveness in its industry.
The second suggestion is for SOCAR to identify new opportunities that can maximize its CSR abilities. For example, the company can hire competent HR officials who have recorded positive CSR outcomes in other companies. The corporation can use this idea to introduce learning sessions that encourage engineers, logistical officers, marketers, and decision-makers to develop better CSR activities (Behringer & Szegedi, 2016). Learning institutions should also become useful sources of superior ideas for improving SOCAR’s CSR model.
The third suggestion for improving SOCAR’s CSR strategy is the introduction of superior technologies and systems. Such applications will ensure that drilling and refining operations are sustainable. Similar ideas will be replicated in every segment of the company (Behringer & Szegedi, 2016). This approach will result in increased levels of environmental protection and eventually support the social needs of the targeted beneficiaries.
The government can present superior insights and frameworks to guide its corporations whenever pursuing the issue of CSR. This recommendation is relevant since SOCAR is a state-owned corporations aimed at promoting economic development. The government will borrow successful models from other countries and implement them successfully (“Social responsibility,” n.d.). This ingenuity will address most of the challenges many people encounter, result in better waste and water management practices, and eventually support the needs of all people.
The above choices are justifiable since they can result in a superior CSR strategy for SOCAR. The involvement of the government is something that can result in superior social responsibility actions or initiatives. The involvement of leaders and the introduction of modern technologies can address the sustainability issues for many companies in the oil and gas industries (Behringer & Szegedi, 2016).
The decision to employ competent people will ensure that the company benefits from emerging ideas that can support its sustainability efforts. Finally, any effort implemented to combine the company’s business model and CSR strategy will minimize duplication and ensure that all initiatives and business procedures remain sustainable These measures will eventually support the needs of consumers, community members, and stakeholders and drive organizational performance.
About SOCAR. (n.d.). Web.
Behringer, K., & Szegedi, K. (2016). The role of CSR in achieving sustainable development – Theoretical approach. European Scientific Journal, 12(22), 10-25. Web.
Company overview of State Oil Company of the Azerbaijan Republic. (2019). Bloomberg. Web.
Environment & safety. (n.d.). Web.
Gibassier, D., & Alcouffe, S. (2018). Environmental management accounting: The missing link to sustainability? Social and Environmental Accountability Journal, 38(1), 1-18. Web.
SOCAR Group. (n.d.). Web.
Social responsibility. (n.d.). Web.