The Corporate Impact of Addressing Social Issues: A Financial Case Study of a Project in Peru

Large, multinational resource development projects can affectmany aspects, including social, economic and ecological realities, in the regions where they operate. Social and environmental issues that are usually ignored in such projectsare increasingly affecting the financial future of multinationalcorporations in negative ways. In this article, we advance the argument that corporations can successfully manage these issuesand that if they choose to view these management efforts as an investment rather than an expense, they may well acquire a competitive advantage over companies that do not. We describe asa case study the Camisea natural gas and condensates developmentproject in Peru, operated by Shell Prospecting and Development Peru (SPDP). Camisea is one of the first projects anywhere inthe world to conduct a detailed analysis of key industry-relatedsocial issues and the processes, required investment and financial impact of managing them. The Camisea example supportsthe argument that addressing social and environmental concerns makes financial sense. In present value terms, the benefit ofmanaging these concerns was expected to surpass the cost investment by approximately US$50 million.