Paper

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CORPORATE SOCIAL RESPONSIBILITY (CSR) PRACTICES:

THE CASE OF SAUDI ARAMCO

Muhammad Moinuddin Qazi Abro, Muhammad Adnan Khurshid, Alamzeb Aamir

ABSTRACT

This case analyzes the best practices of Saudi Aramco, the world’s biggest oil producer, using

the Triple Bottom Line model. Aramco’s CSR policies focus on the need for business

transparency and ethical behavior. Aramco’s CSR values include achieving sustainable

development and complying with national and international laws. The CSR strategy is integrated

with the company’s corporate business strategy, which is based on the four conceptual pillars:

Economy, Community, Knowledge, and Environment.

Keywords: Aramco, Corporate Social Responsibility, Triple Bottom Line model

INTRODUCTION

Globalization has rapidly changed the conduct of international business in response to key

factors, such as depletion or shortage of resources, economic recessions, disruptive innovation,

environmental pollution, and society’s expectations of the corporate world. This last factor is the

focus of Corporate Social Responsibility (CSR), a topic that has achieved wider recognition and

acceptance not only in the business world but also in the academic literature. CSR may be

defined as a “situation where the firm goes beyond compliance and engages in ‘actions that

appear to further some social good, beyond the interests of the firm and that which is required by

law” (McWilliams et al., 2006). CSR refers to an organization’s commitment to perform its

business operations in an economically, socially, and environmentally sustainable way.

According to Panapanaan et al. (2003), “CSR encompasses three dimensions – economic,

environmental and social.”

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Today many business organizations not only incorporate CSR practices into their business

operations, they also periodically publish CSR reports. Research published in 2006 suggests that

73 of the UK’s largest 100 listed companies had issued a public statement indicating adoption of

CSR practices (Ethical Investment Research Service, 2006). Furthermore, McWilliams (2006)

and his colleagues suggest that organizations in the United States, the European Union, and the

so-called “Asian tiger” countries (e.g., Japan, South Korea, Malaysia and China) are at the

forefront in implementing CSR practices. It is also worth mentioning that many organizations

within developing counties are also focusing on the importance and use of CSR in conducting

their business operations.

The Middle East is not lagging behind in the adoption of CSR practices in business

organizations, particularly in the Gulf Co-operation Council (GCC) countries (e.g., UAE, Oman,

Qatar, and Saudi Arabia). As the largest economy in the Arab world and the world’s largest oil

producer, Saudi Arabia, which is an active GCC member, has started paying attention and has

begun to show greater commitment to instituting CSR guidelines and programs.

Most Saudi Arabian companies seem to focus their CSR activities on the local communities in

which they operate. They have a relatively unstructured orientation to CSR philanthropy, so their

CSR activities are less formalized, primarily oriented toward local concerns, and reflect a mix of

personal, religious, and cultural motivations (Khurshid et al., 2013).

However, in a study of CSR in Saudi Arabia, Ali and Al-Aali (2012) reported that Saudi

executives who have a broad understanding of CSR are both attentive and receptive to the

government’s CSR regulations and initiatives. Their response contradicts widespread belief that

executives in Saudi Arabia and throughout the GCC focus primarily on the charitable aspects of

CSR.

This case analyzes the best practices of a leading Saudi Arabian company, “Saudi Aramco,” the

world’s biggest oil producer. Saudi Aramco’s CSR practices will be analyzed according to

Elkington’s suggested CSR model (1997). Also called the Triple Bottom Line, this model (Figure

1) asserts that there are three components to CSR: social responsibility (People), environmental

responsibility (the Planet) and economic responsibility (Profit). This means that the socially

responsible company considers that, as an organization, it has responsibility in three key areas:

economic prosperity, social equity, and environmental protection. The Triple Bottom Line

concept is broadly recognized among business firms. In its linkage of three domains – people,

planet, and profit – it asserts that what is good for the environment and what is good for society

are also good for the performance of the company.

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FIGURE 1

CSR Model

Source: Elkington, J (1997).

Economic Sphere

Within the CSR model, the economic dimension refers to the production of goods and services

and the generation of profit from those sales. There are also important, related concepts and

practices, such as salaries, return on equity, technological advances market share, and

innovation. Many organizations misunderstand this dimension: here the model’s “economic”

indicator refers more broadly to a balanced scorecard, i.e., the balance between customers,

employees, and shareholders, rather than simply financial performance.

Social Sphere

The CSR model’s social dimension encompasses ethical and philanthropic concerns and, overall,

the question of what is good for society in general. This dimension encompasses activities and

practices that are either desired or prohibited by society, but which may not be codified into law.

Companies which want to manifest a level of acceptable behavior are expected to behave in a

manner which extends beyond compliance with the law. For example, companies should not sell

products that could damage consumers’ health. Social dimensions can be the most difficult for

business firms to deal with because ethical rules are usually culturally determined and not

perceived as global in nature.

So firms need to balance economic returns while also complying with the law and then go

beyond that to operate as good corporate citizens who are helping to improve the general quality

of life. CSR therefore encompasses activities such as donating food and other necessities to

natural disaster victims; promoting drug awareness; feeding the hungry; financing scholarships

for poor students; digging water wells where they are needed; and building schools in rural areas.

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Environmental Sphere

Environmental concern and a commitment to sustainable development are key components of

CSR. In producing their products and services, corporations often have a negative and

detrimental impact on the environment. This may include excessive use of natural resources,

depletion of non-renewable energy resources, pollution of water, soil, or air, destruction of

biodiversity, acceleration of climate change, and deforestation.

Firms can take measures to alleviate negative environmental impacts. Such steps include

assessing the environmental performance of a product; choosing the proper raw materials to be

used in production; and selecting suitable procedures for waste and surplus materials disposal.

Establishing environmental management systems is also an important foundation for responsible

environmental performance. Consumers today demand environmentally-friendly products,

processes (i.e., “green products’), and services, which pushes business entities to realize the

importance of adopting environmental standards to promote their own long-term sustainability.

SAUDI ARABIAN OIL COMPANY (SAUDI ARAMCO)

Saudi Aramco is the largest company in Saudi Arabia. A multinational corporation, it is fully

owned by the Saudi government. With more than 50,000 employees, Aramco has extensive

human resources. The world’s biggest oil company, it has revenues of more than 1 billion US

dollars per day (Agnihotri, 2015). The company’s global operations takes place in America,

Europe, and parts of Asia.

CSR at Saudi Aramco

Aramco’s CSR policies focus on the need for business transparency and ethical behavior. In

addition, they are stakeholder-driven and integrated into all Saudi Aramco operations. Other

additional CSR values at Aramco include the importance of (1) achieving sustainable

development, and (2) complying with national and international laws.

For Saudi Aramco, being a good corporate citizen means more than simply doing good. Saudi

Aramco makes a positive impact in the community and in the lives of Saudi nationals when it

uses its extensive resources to mobilize energy, and combines that with its unique expertise to

generate opportunities that help others. Saudi Aramco’s belief in the power of energy to create

opportunity underlies the company’s efforts to produce lasting impact and value wherever

business activities and the Kingdom’s priorities intersect.

At Saudi Aramco, the CSR strategy is integrated with the company’s corporate business

strategy, which is based on the four conceptual pillars: Economy, Community, Knowledge, and

Environment.

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The company developed a specific CSR department in 2009. While Saudi Aramco had focused

somewhat on CSR prior to that year, creation of an actual CSR department signaled the

company’s increasing commitment to CSR. Saudi Aramco was certainly engaged in community

development long before the term “CSR” entered the business vocabulary. For example, in the

early years of its development, Saudi Aramco focused on basic health and education services;

later, their community development activities expanded to include the provision of social

assistance services.

The senior Vice President is directly responsible for the quality of Aramco’s CSR initiatives and

for the development of the implementation strategy for making sure that whatever CSR policies

the company adopts are integrated across the entire organization. The company’s main webpage

states that Saudi Aramco deploys "enormous efforts and resources" to serve the communities in

which it operates, as well as the Kingdom of Saudi Arabia as a whole.

One example of these efforts is the development of the Eastern Region electric power grid. The

company has also undertaken other major infrastructure projects, including the construction of

135 schools and community-based programs that drew additional financing through donations

and fund-raising events, and the development of health campaigns and public safety programs

that stress traffic and fire safety awareness. Corporate citizenship, human resources, equity and

fairness, integrity, responsiveness, trust, accountability, and appropriate supervision are essential

components of Saudi Aramco's values. The CSR Division is under the company’s Public

Relations Operations Department. In managing Aramco’s CSR activities, the PR Operations

Department has several core objectives. The department seeks to:

- Streamline and enhance current CSR activities;

- Align CSR activities with Aramco’s business priorities and stakeholder needs;

- Increase both the impact and visibility of Aramco’s CSR activities; and

- Ensure the continued impact and sustainability of Aramco’s CSR activities.

Furthermore, the CSR division focuses its work on four key areas:

- The Economy

- The Community

- Knowledge

- The Environment

(Saudi Aramco, Citizenship Report, 2014).

Aramco’s Economic CSR Activities

Aramco is Saudi Arabia’s largest employer. The company uses other Saudi companies in its

supply chain, which helps boost the nation’s economy. Saudi Aramco is an equal opportunity

employer, so it uses international Human Resource practices and policies to attract the most

highly qualified international and local human capital. Saudi Aramco believes its employee

resources constitute one of their key competitive advantages, apart from its physical assets.

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Saudi Aramco believes that the best strategy for driving the Kingdom’s long-term economic

growth is to invest in best-in-class oil, gas, refining, and chemicals facilities. Saudi Aramco’s

many investments in mega-projects also provide direct economic benefits for the Kingdom.

For example, Yanbu Aramco Sinopec Refining Company (YASERF), a full-conversion 400,000

bpd refinery, is designed to process Arabian heavy crude oil from the Manifa oil field. It is a

joint venture with Asia's largest refiner, Sinopec (China), and is located in the Yanbu’ Industrial

City on Saudi Arabia’s West Coast. The refinery uses proprietary technologies to ensure the

quality and quantity of its production of premium transportation fuels, such as gasoline and ultra-

low-sulfur diesel. The plant also produces liquefied petroleum gases (LPG) as well as other

export products, including benzene, sulfur, and petroleum coke. Africa and Europe are its

primary target markets. Within a few years of operation, YASREF is expected to generate about

6,000 direct and indirect jobs for the West Coast community surrounding the refinery. The joint

venture’s apprentice program has also enrolled approximately 700 Saudi employees who will be

trained to assume full-time jobs at the refinery, in operations, maintenance, industrial relations,

and engineering positions. YASREF, like all domestic downstream projects, provides multiple

benefits to Saudi Arabia and key oil markets. It will process Arabian heavy crude oil; export

high-value products; help meet domestic demand for refined-oil products; provide feedstock for

industry; generate direct and indirect jobs; and create opportunities for material and service

providers.

The Saudi Aramco Total Refining and Petrochemical Company (SATORP) is another joint

venture, this one with Total, a French company in Jubail, on the East Coast of Saudi Arabia.

SATORP is one of the largest, most complex refineries in the world. It is capable of fully

converting 400,000 bpd of Arabian heavy crude oil into low-sulfur gasoline, diesel, and jet fuel,

all of which meet the highest standards and specifications in the United States, Europe, and

Japan. In addition to producing some of the world’s cleanest naphtha and gasoline, the complex

also produces more than one million tons per year of “paraxylene, benzene,” and high-purity

propylene. Other products include petroleum coke, a fuel for cement, power, and sulfur plants. In

August 2014, SATORP’s crude oil output reached the facility’s full design capacity of 400,000

bpd. It is believed that this venture will generate approximately 5,700 direct and indirect jobs.

The SATORP and YASREF joint venture projects, for example, not only add to the development

of a knowledge-based economy in the Kingdom by providing technical job opportunities for

thousands of Saudi technicians, engineers, and operators, they also incubate Saudi-owned small

and medium-sized manufacturers and service providers (Saudi Aramco, Citizenship Report,

2014).

Saudi Aramco has also developed Sadara, a joint venture with the Dow Chemical Company

(USA). It will be the world’s largest complex to produce integrated chemicals. It will also be the

world’s largest integrated chemicals complex built in a single phase, with production capacity for

more than 3 million tons per year of diversified chemicals and plastics. It will also be the first

country in the GCC chemicals complex to use naphtha as part of its feedstock. Fourteen of

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Sadara’s 26 world-scale manufacturing units are new to the Kingdom. Their differentiated

product slates are the building blocks used in high-performance flexible packaging, hygiene and

medical applications, chemicals and additives for the oil and gas industry, chemicals for water

treatment, soaps, detergents, cosmetics and other personal care products, as well as adhesives,

brake fluids, and car seats for the automotive industry (Saudi Aramco, Citizenship Report, 2014).

Apart from technical projects, Saudi Aramco is creating technological parks for the country’s

technological advancement. It is expected that more than 500,000 direct and indirect jobs will be

created as a result of these parks. These parks will be named PlasChem Park, Petro Rabigh and

Rabigh Plus Tech Park.

Saudi Aramco has developed the National Industrial Training Institute (NITI) in order to train

high school and vocational institute students. The first class of 352 high school and technical

college students from across the Kingdom arrived at the Al-Ahsa training campus in October

2014.

The company has established Aramco Entrepreneurship Center (AEC), in order to focus on

giving Saudi entrepreneurs access to the resources and expertise they need to allow great ideas to

flourish. In 2014, AEC screened 719 applications submitted by entrepreneurs and conducted 230

interviews with the authors of the most solid proposals. Training sessions on entrepreneurship

development and business plan formulation were provided to more than 300 trainees in Dhahran,

Riyadh, and Jeddah. Eighteen loans and four venture capital equity investments have been

approved. Since its inception, AEC has approved 38 loans and 14 venture capital investments

and more than 1,200 young men and women have been trained in entrepreneurship and business

plan development. Ventures funded by AEC are expected to create hundreds of high-caliber jobs

in the Saudi market. Along with job creation and revenue generation, these ventures will provide

lasting socio-economic benefit by promoting creation of a culture and commercial mindset that

appreciates and understands the value of entrepreneurship and risk-taking.

Aramco’s Social CSR Practice

In the social sphere, Aramco’s CSR efforts emphasize regional development and particularly

local community development. It is clear that in the Eastern Province, where the company is

located, communities have benefited from the company’s social CSR practices. One key aspect

of this CSR impact is that the company has played a major role in the development of the

region’s infrastructure.

Many of Aramco’s CSR programs focus on the development of Saudi human as well as social

capital. In 2014, the company contributed to community well-being in a number of ways. The

company entered into a joint venture with Johns Hopkins Medicine to improve health care

quality in the Eastern province. Other Saudi Aramco social CSR projects have included building

public schools that are safer, technologically smart, and energy efficient. Beyond the Eastern

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Province, the company has constructed the King Abdullah Sports City Stadium in Jeddah and

plans to build other such municipal sports complexes across the Kingdom.

The company also undertakes charitable giving activities to help people who are in need of

support. This includes charity to orphanages, autism centers, and other institutions that serve

disadvantaged Saudi citizens.

Through its joint venture with Johns Hopkins Medicine, Saudi Aramco has developed Johns

Hopkins Aramco Healthcare (JHAH), a health care company that aims to create innovative

medical services and health care programs in the Kingdom. One focus of the work being done by

the teams from Saudi Aramco and JHAH is to prevent and control the spread of the MERS

coronavirus. Saudi Aramco and JHAH health professionals are working on-site to make

recommendations for hospitals across the nation.

Saudi Aramco’s CSR education initiative has important social benefits. The company is working

to improve basic conditions in many of the Kingdom’s schools. This includes replacing furniture

and equipment, along with providing computer workstations, printers, copy machines, and

scanners. New furniture has been provided for administrative offices, clinics, and libraries for a

total of 59 schools, with new student chairs and desks being provided to 19 schools.

Saudi Aramco is also providing robust support for the Kingdom’s efforts to transition from an

energy-based economy to one based on knowledge, science, technology, innovation and

entrepreneurship. These fields are clearly crucial to resolving a wide spectrum of global issues,

including energy availability and environmental sustainability. Developing the capabilities to

meet these challenges will require high-quality education, capacity building, research,

technology, an entrepreneurial mindset, and a commitment to innovation. To move the country in

this direction, Saudi Aramco is partnering with the Ministry of Education, the Saudi Telecom

Company, Huawei Middle East, Takaful Charity Foundation, and DHL to set up School Kit

Donation programs through its Gift of Knowledge campaign. The Campaign has already

provided computer tablets to 13,000 children, both boys and girls, in 31 locations across the

Kingdom. The tablets were pre-loaded with learning materials and equipped with prepaid SIM

cards for two years of Internet access and will give the next generation of students the ability to

access information using the latest available technology, a gift that will help put them on the road

to success in a knowledge-based economy.

Saudi Aramco has a good corporate image and serves as a key player in the overall development

of the Kingdom. Its many CSR activities include contributing to religious charity activities. For

example, for the Eid-ul-Fitr (the end of the Islamic month of Ramadan), Aramco provides gifts

to needy people and, on the occasion of Haj (a religious activity performed in the last month of

Islamic calendar), Aramco volunteers provide assistance to people with disabilities and to elderly

people from local communities.

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Aramco’s Environmental CSR Practices

As the world’s largest oil producer, Saudi Aramco has been taking care of the environment since

it launched its first inventions in 1930. For the environment, the company employs a two-fold

approach. First, it reduces the environmental impact produced by its operations and, secondly, it

conducts cutting edge research. The first formal Company Policy Statement regarding protection

of the environment was issued in 1963, and the company subsequently established its

Environmental Engineering Division. In 1991, the company issued an environmental awareness

policy report, which was then revised in 1999. It also established an Environmental Protection

Department, which is responsible for providing environmental guidelines for the company and

ensuring that Aramco operations are conducted in an environmentally safe manner. The

department also maintains contact with other national and international environmental protection

agencies. It also formulates environmental standards and codes and ensures that proper

procedures are following to protect air and water quality, public health, and safe waste

management.

In 2014, on the eve of the UN Climate Summit in New York City, Aramco announced its

support for the Oil and Gas Climate Initiative (OGCI). The initiative is a bottoms-up, voluntary,

technology-enabled, industry-driven, and international collaborative approach for identifying

solutions to energy and environmental problems. To date, the OGCI has focused on the role of

natural gas, carbon reduction instruments, and long-term solutions. Aramco was one of the ten

multinationals in OCGI to “welcome and support the historic result achieved by 195 nations at

the 21st Conference of the Parties (COP21)” to limit the global average temperature rise to well

below 2 degrees Celsius (http://www.oilandgasclimateinitiative.com/news/ogci-welcomes-the-

paris-agreement/).

Saudi Aramco employs a multifaceted environmental strategy for the protection of the

environment. For example, the company has undertaken many initiatives to reduce carbon

dioxide (CO2). The company is fostering an environmentally responsible culture within its own

organization by prioritizing the following four environmentally friendly efforts:

- Promoting energy efficiency

- Reducing environmental impact

- Protecting biodiversity

- Targeting renewable energy

As energy demand continues to grow in the Kingdom, the company is playing a vital role by

encouraging the adoption of energy-efficient technologies. It is widely believed that energy

efficiency is critical to improving environmental performance. The Kingdom’s per capita energy

consumption is almost double the world average. Hence, the company is closely working with

power and water integrated national plan of the government. This plan provides a comprehensive

analysis of the Kingdom’s water and energy needs and supplies. For the first time ever, this plan

will include an analysis of domestic human water and power consumption nationwide.

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As company operations continue to grow, so does Aramco’s commitment to reducing the

environmental impact of its oil production and refinery operations. The company now deploys

robust management and effective monitoring of their environmental performance throughout its

operations. To underscore those efforts, the company has also launched an environmental

performance assessment program, an effective management tool that assesses facility compliance

with company and government environmental standards.

Saudi Aramco has published a corporate biodiversity plan which identifies five Aramco-owned

areas of exceptional biodiversity in the Eastern Province. Under this plan, a 637-square kilometer

area will be protected, preserved and promoted to host vulnerable wildlife and ensure

biodiversity. The company is also establishing the Manifa coastal reserve to protect migrating

birds, such flamingos and ospreys. To protect and renew the Kingdom’s mangrove habitat and

promote biodiversity, the company is also planning to develop a mangrove eco-park in Rahima

Bay on the Gulf Coast.

Saudi Armco is also introducing solar power capabilities for street light service in several areas

of the Eastern Province. Approximately 130 solar-powered lighting bollards have so far been

installed.

Saudi Aramco is also concerned about air quality, particularly in the Eastern Province and

throughout the Kingdom. The company has established "sophisticated air monitoring stations"

which are used for ensuring the quality of air in compliance with international standards. The

company has also constructed a "Master Gas System" intended to reduce the use of fossil fuels

produced with crude oil. It is also argued that the region’s air quality has been much improved.

It is also worth mentioning that the Kingdom’s entire drinking water supply comes from ground

water. Saudi Aramco is therefore continually utilizing its resources to protect its water reservoirs.

To this end, the company has established the "Saudi Aramco Water Protection Program." The

purpose of this program is to collect ground water samples from different locations within the

Kingdom, in order to analyze the water contamination and pH value of the ground water.

The company also observes the Gulf and the Red Sea shorelines of the Kingdom. Aramco works

closely with universities and, in particular, irrigation and hydrology departments throughout the

Kingdom. Through these working relationships, the company makes its R&D facilities available

to institutional researchers and provides financial support for research in this area.

Saudi Aramco has developed an Industrial Waste Management Plan, which ensures that the

company disposes of its industrial wastes and hazardous chemicals properly and according to

international standards in order to protect the planet. Furthermore, the company also tries to

deploy environmentally acceptable methods to minimize waste production.

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Saudi Aramco and the Government’s Role in CSR

Saudi Aramco is a government corporation. As such, it is fully owned by the Saudi government.

Therefore, CSR efforts undertaken by Saudi Aramco are actually the efforts of the Saudi

government itself. It can be argued that in the Kingdom, the government is in the driver’s seat

and is closely monitoring all the company’s CSR activities. In addition, Saudi Aramco defines

and implements all its CSR efforts in accord with internationally accepted standards.

The company is utilizing all its resources and efforts in order to be socially responsible.

Throughout its CSR practices, the company uses the Triple Bottom Line model, as described

earlier in this case. The company has a wide range of socially responsible programs, ranging

from education of employees at Aramco and throughout the region to protecting the

environment.

Clearly, Saudi Aramco seeks to both legitimize its operations before the global community, as

well as the nation. A multinational organization, Saudi Aramco uses all the ISO26000 standards

for CSR implementation.

REFERENCES

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Ali, J. A., & Al-Aali, Abdulrahman. (2012). Corporate social responsibility in Saudi Arabia.

Middle East Policy Journal, 19(4), 40-53.

Elkington, J. (1997) Cannibals with forks: triple bottom line of 21st century business. Oxford:

Capstone Publishing Limited.

Ethical Investment Research Service. (2006).

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McWilliams, A., Siegel, D & Wright, M. (2006). Corporate social responsibility: strategic

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Panapanaan, V.M, Linnanen, L., Karvonen M. M. & Phan V. (2003). Road mapping corporate

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Saudi Aramco. Retrieved from http://www.saudiaramco.com/en/home.html

Saudi Aramco. (2014). Citizenship Report. Retrieved from

http://aramco.com/content/dam/Publications/citizenship-report/2014/CR-2014-

SaudiAramco-English-full.pdf online available on 23-05-2015

Saudi Aramco Annual Report 2014. (2014). Retrieved from

http://www.saudiaramco.com/en/home/news-media/publications/corporate-

reports/annual-review-2014.html

Muhammad Moinuddin Qazi Abro completed his Ph.D. in Management at the University of

Nottingham, UK, and is Assistant Professor at King Saud University, KSA.

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Muhammad Adnan Khurshid completed his MBA degree and is a lecturer at King Saud

University. He is currently a doctoral student at the International Business School at the

University of Technology in Malaysia.

Alamzeb Aamir completed his MBA degree and is a lecturer at King Saud University. He is

currently a doctoral student at the International Business School at the University of Technology

in Malaysia.

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