The Christian Science Monitor,
By Michael J. Jordan and Yigal Schleifer,
12, March 2008

Six days a week, Seymur Alizadeh and his chestnut-brown mare patrol the Azerbaijani countryside. Buried a few feet below is the prized Baku-Tbilisi-Ceyhan (BTC) oil pipeline, which delivers nearly 1 million barrels of Caspian Sea crude to Western markets each day.

Mr. Alizadeh, one of many local villagers guarding the oil route, says, "I feel like a very important part in protecting this pipeline." Hiring local horsemen is part of a larger effort by pipeline builder BP to create a massive neighborhood watch.

BP and other energy companies are under scrutiny for their relations with local communities worldwide for the cost, disruption, and even bloodshed their lucrative pipelines are responsible for. So in recent years they've honed a new formula: invest heavily in the affected communities and try to foster goodwill, neutralize controversy, and hopefully safeguard their multibillion-dollar investments.

"They have the spotlight on them to do something good in the societies in which they operate, and with the Internet communication revolution, you can very easily publicize something about them from any corner of the globe if they do not behave appropriately," says Lars Gulbrandsen, a Norwegian researcher who has studied corporate social responsibility (CSR) in Azerbaijan and elsewhere.

Shell in Nigeria boasts its student scholarships and HIV/AIDS awareness programs. ExxonMobil describes its vocational training for women in Indonesia, drug-prevention programs in Chile, and prenatal healthcare programs in Kazakhstan. Chevron says it provides food relief and agricultural development in Angola and "learning centers" in Venezuela and South Africa.

In Azerbaijan, what remains to be seen is whether BP's efforts are enough to overcome simmering resentment at corrupt government officials who siphon off oil money. BP says that the 1,100-mile BTC pipeline - which links the Caspian with the Mediterranean and is the second-longest oil pipeline in the world - includes the greatest community impact of any BP project to date.

By the end of 2008, BP says it will have spent close to $100 million in Azerbaijan, Georgia, and Turkey to build water-purification systems, medical clinics, primary schools, parks, and roads in the 450 communities identified as directly affected by the pipeline.

This expense, however, may be a drop in the barrel compared with the billions of dollars of revenue from Caspian crude. (Although BP won't reveal its profits in Azerbaijan, the government's share of its revenue last year was $4.7 billion.)

Still, some of the 125 Azeri communities, mostly impoverished and often neglected by their own governments, say that BP's efforts are the best they've seen. The company and several smaller oil partners work with nongovernmental organizations on community-development efforts that the government has yet to begin. "I don't think I have ever worked so closely with the private sector," says Pamela Flowers, the country director for the International Rescue Committee, which partnered with BP on community projects along the BTC. "They put a lot of effort into it."

This strategy, which some view as "enlightened self-interest," may seem like common sense. But compared with a decade ago, it represents a shift for companies that today face ever more scrutiny. "It's fundamental, good security practice, in terms of protecting our asset, to make sure that we are good neighbors to the communities we impact," says BP spokeswoman Clare Bebbington.

Prodding BP and others forward is the CSR movement, which presses firms to hoist their human rights, environmental, and labor standards. Launched in the mid-1990s by nongovernmental organizations, the movement spawned related campaigns such as the United Nations Global Compact, the "Voluntary Principles on Security and Human Rights" created by Washington and London, and the Oslo-based Extractive Industries Transparency Initiative.

But the movement has only picked up steam in recent years, as CSR advocates press for voluntary, nonbinding "soft law," says Mr. Gulbrandsen, the CSR expert. While lawsuits have had limited success, he adds, the real catalyst has been bad press beamed worldwide and immediately via the Internet.

Earlier, energy companies routinely failed to live up to these standards. Critics often cite Shell in Nigeria, which in the mid-1990s was accused of supporting military attacks against Niger Delta tribes. Shell denied those allegations. Today, Shell officials in Nigeria say that at more than $60 million, theirs is one of the largest private social investment programs in Africa.

"If you're looking at a long-term investment, being more responsible about how you treat the local community and local environment is the smart move, and I think global companies are realizing this," says Charles Esser, an energy analyst for the International Crisis Group in Brussels and a former US Department of Energy official. In Azerbaijan's underdeveloped countryside, analysts say the deluge of oil revenue pouring into state coffers - estimated at $10 billion a year - would generate one of the greatest growths in national income recorded in history. It also heightens public expectations. Yet so far it's barely visible. "The trickle down of money is certainly happening, but not in a transparent or predictable way," says one Western diplomat in the capital.

That may be why BP's investments seem to pay off. In the dusty farming village of Duzdag, a new five-room school building, freshly painted in light pink and built by BP and its partners, stands across the street from the old one-room school with broken windows and a leaky roof.

In return, the Azeri locals say they're invested in helping BP. "We have felt some positive benefits from BP, so, of course, we must show them the same," says Rauf, a farmer.