Voluntary Standards are Smoke Screens: The Case of Pacific Rabiales Energy in Colombia

M’Lisa Colbert

Meet Pacific Rubiales
   “Pacific is Colombia” reads a recent marketing campaign by Canadian multinational oil and gas giant, Pacific Rubiales Energy. Pacific Rubiales is one of the fastest growing crude oil producers in the world and, for the greater part of the decade, they have been aggressively expanding in Colombia. Their average annual growth rate is an impressive 8.4% and their current market value is estimated at US$6.23 billion (Pacific Rubiales Energy Corp (PRE: CN) Market Data). Moreover, their CEO, Ronald Pantin, is one of the highest paid in the industry. He makes around 5 million dollars a year in compensation and benefits while the average annual income in Colombia is approximately US$692 (Executive Profile: Ronald Pantin, International Labour Organization). To put it in perspective, Ronald Pantin’s salary roughly amounts to the income of 7,225 Colombians. Pacific Rubiales is quickly becoming one of the richest crude oil producers in the world and the community of investors that have helped this company grow are being lead to believe that it is also one of the most socially responsible companies as a result of the way Pacific Rubiales conducts Corporate Social Responsibility (CSR) practices internationally.
Voluntary CSR Standards
   Companies in the extractive sector works tirelessly to assure Canadian citizens that they protect the rights of local communities and share profits with them by highlighting voluntary participation in social responsibility initiatives. Yet in the case of Pacific Rubiales, voluntary CSR standards have not been effective. Social responsibility is both defined and decided upon solely by the company; members of the civil society have no access to the decision making process. Voluntary participation in CSR initiatives has been one way that Pacific Rubiales has bolstered their reputation to increase their shareholders and revenue without actually being accountable to the local societies in which they operate.
   For instance, Pacific Rubiales has voluntarily completed a CSR and Sustainability report annually since 2009 and they claim to have invested approximately $37,787,801 in social causes over this period of time. A few of the projects and initiatives they have either created or joined that are included in this total investment are: the Monitoring Committee for Investment Royalties (MCIR) — a program the company initiated to support transparency of royalty spending in local governments in Colombia — the Extractive Industries Transparency Initiative (EITI), the United Nations Millennium Development Goals and Global Compact Contract (UNGC); the CORDEPAZ in Colombia, the Humanitarian Committee; the European Union; the Women’s UN; The World Bank; The IFC; and Export Development Canada. Involvement in these committees illustrates their commitment to CSR, at least on an international front, but it does not illustrate Pacific’s commitment to CSR practices in the towns where they operate — and where it is most important.
   Moreover, in 2012, Pacific Rubiales was honoured with an award for the Best Oil and Gas producer in CSR for 2012 from Capital Finance International, a London-based business and finance print journal. They also received an award for The Most Sustainable Oil and Gas Company in Latin America from World Finance, another London-based financial magazine that is produced by World News Media. Also, from Corporación Calidad, a Colombian IT Firm, and RS Magazine, a magazine published by el Centro International de Responsabilidad Social y Sostenible, Pacific received the Colombian National Responsibility award. Pacific’s most prized accomplishment is the UN Global Compact Award (Pacific Rubiales Sustainability Report 2012).
   However, these awards that Pacific has won are not of as much merit in CSR leadership as its shareholders believe. For example, World Finance details on their website that the awards they distribute are determined using a panel of “qualified judges” that oversees and decides on the votes presented to them by investors and members of the website (World Finance). It does not mention how they are qualified, but it is clear that investor votes and feedback from customers weigh heavily on the judges’ decisions. Moreover, the UN Global Compact Award is not as difficult to obtain as one might think. The award is granted to any voluntary corporate participant that pays their annual commitment fee. In the case of Pacific, that amounted to US$15,000 last year (United Nations Global Compact). It is awarded in faith of voluntary implementation of international CSR standards approved by the UN and voluntary commitment to accomplishing the millennium development goals. So, the awards that Pacific colourfully displays in its CSR reports every year are not much more than ink they have paid to put on the page. Their voluntary participation in these initiatives drives their shareholders to believe they are socially responsible, even though civil society in Colombia is not actually the major recipient of Pacific’s CSR initiatives.
   Pacific’s documented social track record has not only helped the company’s public image; it has also contributed to their eligibility for publicly funded loans. In 2012, Pacific Rubiales was approved for a supply chain loan from Export Development Canada (EDC). This raised questions and prompted activists and media to ask for further review as a result of labour complaints and protests surrounding Pacific’s operations in the Meta department in Colombia. EDC first commented on Pacific’s application for the loan saying, “…in terms of their social and environmental review directive or the OECD common approaches, corporate loans are generally not subject to review.” However, as a result of external pressure, EDC did eventually elect to conduct a review of Pacific Rubiales. Their preliminary research uncovered that there was in fact evidence supporting these complaints (Profile: Corporate Facility Review, Pacific Rubiales Energy). Nonetheless, the loan was issued as a result of Pacific’s voluntary participation in improving the situation. The EDC commented on Pacific’s steps toward progress saying:
…the company added a direct stakeholder engagement model through roundtable discussions…We engaged in an extensive dialogue with the company over its perspective on the labour issues, which included collaboration between EDC’s CSR group and internal country risk experts. Looking forward to 2013, one of PRE’s notable CSR goals is to formally adopt the Voluntary Principles on Security and Human Rights. We reached a favourable conclusion on the CSR front for this customer (Profile: Corporate Facility Review, Pacific Rubiales Energy).
   The EDC did not comment on whether Pacific was held accountable for its past actions and it did not require Pacific Rubiales to engage in dialogue with Columbian civil society or labour unions. This case illustrates the ineffectiveness of voluntary participation — in this model, it is the company, without consultation with civil society, that defines “responsibility”. Thus, the needs of those most directly affected by mining operations in local towns are those most often ignored and the EDC investigation was not of particular help to this growing problem.
Civil Society’s Evaluation of Pacific Rubiales
   Civil society’s analysis of Pacific Rubiales’ CSR performance has been much less positive in comparison to the EDC’s evaluation. For example, in July of 2014, nine Canadian organizations travelled to Colombia to attend a people’s tribunal against Pacific Rubiales after learning about complaints of poor working conditions and abuses of worker and human rights at PRE’s oil fields in Puerto Gaitain, Colombia (NGO’s Prepare Ethical Tribunal on Pacific Rubiales). The company was accused of, “systematic violations of the union right to freedom of association, the militarisation of the oil fields, violation of constitutional rights and practices that go against ethics, collective rights and the environment, non-respect of environmental legislation, profiting off the lack of state control over the taxation of production and causing the deterioration of public resources.” The final verdict of the tribunal found Pacific Rubiales guilty on all counts (Verdict of the Popular tribunal, PASC). USO, the national oil workers union in Colombia, also filed an official lawsuit in 2013 against Pacific Rubiales for violations of freedom of association, accusing the company of union-busting and oppressing independent labour organizing (USO Files Suit against Pacific Rubiales, PASC).
   Despite this lack of approval from Colombian and international civil society, Pacific Rubiales recently announced the World Bank and the International Financial Corporation (IFC) as investing partners in their latest expansion project, Pacific Infrastructure. Pacific Rubiales is overseeing the development of a new crude oil port and pipe line in Puerto Bahia, Colombia and, the IFC and the World Bank have invested over US$150 million towards their further expansion (Oil and Gas News).
   Thus, this case illustrates the need to include the voice of civil society in the Voluntary Corporate Social Responsibility model. Compared to current standards that have been put in place by those involved in the extractive sector, society has a much better understanding of what it means to be socially responsible. Civil society groups — from social organizations to indigenous communities to autonomous unions — are afar better source for understanding how socially responsible a company is, as they are outside the industry and experience the impacts of the extractive sector firsthand. It is important for institutions like Export Development Canada and the World Bank to prioritize civil society’s voice and sincerely consider civil society’s approval of extractive sector companies before funding their further expansion. This is the only way to ensure that violations do not continue to go unnoticed and that future investors are well-informed.
   The case of Pacific Rubiales in Colombia also demonstrates that there is a need for a comprehensive legal framework to formalize procedure, hold Canadian companies accountable for their actions, and aid civil society in its watch dog role. Until decision-makers and public institutions begin to take civil society voices seriously and until a legal framework is developed to hold Canadian extractive companies accountable for their actions, voluntary CSR practices will continue to be mere smokes screens, concealing corporate crime instead of bringing it to light.

Garavito, Cesare Rodriguez. El País de Pacific Rubiales. El Espectador. 24 Sept 2012.

Colombia. Export Development Canada. 2013. Web.

Executive Profile: Ronald Pantin” Bloomberg Business Week. July 2013. Web

Have Your Say: Vote Now in the 2013 World Finance Awards. World Finance. 2013. Web.

International Labour Organization. Global Wage Report 2012/13: Wages and Equitable Growth. ILO Publications Online. 2013. Web.

NGO’s Prepare Ethical Tribunal on Pacific Rubiales. Projet Accompagnement Solidarité Colombie (PASC). July 2013. Web.

Pacific Rubiales Provides Operational Update. Your Oil and Gas News. August 7 2013. Web.

Pacific Rubiales Sustainability Report 2012. Pacific Rubiales. 2013. Web.

Profile: Corporate Facility Review, Pacific Rubiales Energy. Export Development Canada. 2013. Web. July 12 2013.

Projet Accompagnement Solidarité Colombie (PASC). May 2013. Web.

United Nations. How to Participate. United Nations Global Compact. 2013. Web.

USO Files Suit Against Pacific Rubiales for Violations of the Right of Freedom of Association.

Verdict of the Popular Tribunal On the Extractive Industry Practises in Colombia. Projet Accompagnement Solidarité Colombie (PASC). July 2013. Web