In 2003, Chevron’s socially responsible initiative for community development within the Niger Delta of Nigeria turned into a crisis, where violent protests against the corporation by local community not only destroyed the infrastructure that Chevron had invested but also forced Chevron to suspend its local operations. This case leads us to question whether corporate social responsibility (CSR) activities of similar kind always win social approval by local communities. In our new research published in the Journal of Management Studies, we examined the situations under which CSR does not perfectly translate into community approval, which the global mining industry refers to as social license (SL) to operate.

What have we found?

We used sentiment analysis to evaluate the SLs of 43 multinational corporations mining within 523 local communities of 27 host countries between 2008 and 2020 based on 3,696 news articles. We found that a positive CSR-SL relationship is negatively affected when a corporation’s social legitimacy is deemed weak by global society, or when members of the community in which the corporation operates are polarized. Although these findings are applicable to various corporations, they can be elucidated by Chevron’s case in the Niger Delta.

Social Legitimacy in Global Society

As a corporation within the mining industry, of which the extractive nature is regarded as controversial, Chevron’s legitimacy has always been challenged at the global level. For several decades prior to Chevron’s crisis in the Niger Delta in 2003, it has already had conflicts with communities elsewhere, for instance, in Ecuador. What adds to the problem is that Chevron has not shown its adherence to universal norms by signing up for such global standards as the Global Reporting Initiative and the United Nations Global Compact. Given Chevron’s history, or lack thereof, it is hard for the Niger Delta community to trust Chevron or to believe that social justice can successfully be claimed from Chevron. In other words, Chevron’s CSR initiative can be judged by the local community as dubious, and hence, unacceptable.

Polarization within Local Community

As a fixed and identifiable ethnic group dominating over Ijaw within the Niger Delta, Itsekiri has always been treated by Ijaw as a rival. Envious of Itsekiri’s prosperity, Ijaw tends to perceive that benefits have been distributed disproportionally to Itsekiri’s advantage over time. As such, despite Chevron’s effort to satisfy both ethnic groups through separate agreements, it encountered unrealistic demand escalated by competition between groups that made the agreements unmanageable. Ongoing tensions between Ijaw and Itsekiri eventually broke into anger manifested by bloody clashes in 2003. Owing to a lack of consensus, it is apparent that the Niger Delta community failed to reasonably approve the CSR activities run by Chevron.

What should managers do?

There are three major takeaways from our research for managers aiming at winning SLs:

First, managers should keep track of the SLs of their corporations. They can do so by following the sentiment analysis of news articles demonstrated in our research. A community-specific SL can be operationalized as the degree of trust as opposed to anger.

Second, managers should engage in CSR activities at both the local and the global levels, because the global social legitimacy of a corporation is as important as the quality of local CSR initiatives in terms of attaining a SL. They should prove the trustworthiness of their corporations. One way of doing so is ensuring that CSR initiatives across all local communities are consistently up to the global standards established by international organizations and performance rating agencies.

Third, managers should avoid locating operations within a community where the stakeholder group having dominant veto power over SL is rigid. This is because the rivalry between the dominant and the minority groups hinders them from reaching any agreement. They are thus unable to consent altogether what or how much is needed for them to approve a corporation’s SL.