Petrobras and the social responsibility of companies – 06/20/2022 – Cecilia Machado

The rise in fuel prices last week reignited an important debate about corporate social responsibility. In the case in question, it is questioned whether Petrobras should deviate from its corporate objectives to absorb the increase in fuel prices by subsidizing its consumption by the population.

After all, the increase in the price of gasoline and diesel has broad social impacts. Indirectly, it represents higher costs for companies and price transfers to consumers. Directly, it makes the work of app drivers and truck drivers difficult, increases the cost of public transport, and is inconvenient for everyone, including the richest stratum of the population, who perceive the increase in fuel prices in their daily lives. .

What then would be the social responsibility of a company? There are certainly minimum parameters that define the scope of social action in the business itself. Labor legislation, for example, dictates irreducible guarantees in an employment contract. Other social objectives, such as inclusion and diversity policies, are not legal requirements, but can add value to companies that perceive that diverse teams are more productive, bring process innovations, and contribute to business growth through the expansion of customers that demand the social responsibility of the companies with which they interact.

In other words, corporate social responsibility is in the interests of the business itself. A corporate social responsibility policy that reflects society’s values ​​at a given time is consistent with the company’s growth, with increased productivity, with brand appreciation, with new business and investment opportunities, and with the ability to attract new talent and retaining good employees.

Would this be the case for a pricing policy that subsidizes fuel consumption in response to rising energy commodity prices? Petrobras’ performance in recent days shows that attempts to dam prices — or even unconventional policies to tax the sector or scrutinize the company’s corporate governance — go against the grain of an action that adds value to the company.

They are also misaligned with social values ​​that reduce inequalities in a comprehensive way, as when considering the deleterious effects of pollution on the health conditions of the poor population. Put in these terms, Petrobras’ actions in this direction do not seem to fulfill a social function.

First, a policy of holding back fuel prices is not consistent with the business orientation that has as its ultimate objective the production of oil and the refining and marketing of fuels. Even more so when it is evident that the price increase reflects the cost of a scarce good for reasons orthogonal to the company’s operations, such as the strong post-Covid global recovery, the adverse impacts of the war between Russia and Ukraine on the price of energy commodities, and the slow transition to a cleaner energy matrix.

Second, it is unclear whether a pricing policy that encourages the consumption of fossil fuels plays any social role, given that the poor are, in general, more exposed to pollution, and that this has adverse and lasting effects on health, harming children’s learning, employment opportunities for young people and adults, and the chances of overcoming poverty and social mobility.

In this case, forcing the profit function deviation to meet a surgical objective with dubious social benefits discourages investment in the sector, competition between companies and the interest of new entrants, making the sector as a whole less attractive and less innovative. , contrary to what is desired.

Corporate social responsibility does not antagonize business growth. Even in the case of a mixed capital company that has state control, it is desirable that the executives responsible for strategic decisions act in the best interests of the company, maximizing its return and returning it to its shareholders. In the case of Petrobras, greater profits for the State are greater profits for the population and more resources available for public policies with a more relevant social impact than subsidies for fossil fuels.

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About Abhishek Pratap

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