Concordia University - John Molson School of Business
MBA 641: Mid Term Submission
Topic: Suncor’s Political Role in Fort McMurray
October 26th, 2023
Student Name: Ashish Pandita
Student ID: 40292045
CASE BACKGROUND:
Suncor’s long-term growth and future prospects in the oil sands are at risk because of the
incapability of the local government to address the social and ecological issues that have
resulted from the oil sands growth in the Fort McMurray and the surrounding area.
Although Suncor had been producing oil in this region since 1967, the region saw explosive
growth after oil prices started to increase in 2003. Population grew from 38,667 in 2001 to
72,363 in 2010 representing an annual growth rate of 9.9 percent between 1999 and 2007.
This unprecedented growth and population overburdened the infrastructure, public services
and environment. The local municipality and public-sector service providers were not able to
meet the housing, medical and educational needs of the ever-increasing population. The high
demand caused by the influx of workers resulted in high real-estate prices and inflation
making it difficult for the permanent residents to meet their basic needs. Public-service
providers (i.e., police, emergency services, teachers etc.) were the worst hit- overworked with
no income growth. Furthermore, the region’s ecology had been negatively impacted by the
oil sand operations. The soil and water bodies were contaminated and wildlife had also been
affected. The health and livelihoods of the First Nations people are also negatively impacted.
MAIN ISSUE:
Suncor is unsure whether it should go beyond its CSR efforts to address the social, economic
and ecological challenges that have resulted from the oil sands growth in Fort McMurray.
Historically, Suncor has always been recognized for its commitment to society and
environment and has an excellent track record of giving back to and strengthening the
communities it operates in, especially through advancing education and healthcare.
However, the situation in this case demands taking up the government’s responsibility to
provide for the solution to these issues since the government is incapable to create the
infrastructure and processes needed to address these issues. The issues at hand related to
crime, drug use, prostitution, income inequality, indigenous rights violation, poor public
service provision and biodiversity loss are all systemic issues related to public service
provision at municipal level.
The decision that Suncor has to make is whether it will extend its CSR role to take up
government’s responsibility and address the issues by helping with infrastructure, filling gaps
in educational and health services, playing a decision-making role in housing and addressing
ecological issues that resulted from the industry more generally.
1. Core issue/s with the organization
Applying McKinsey’s 7-S Framework (Exhibit A), Suncor’s core issue is that its Strategy,
Style and Systems are not supporting or are misaligned with the shared values of the
organization.
Exhibit A: The McKinsey 7-S Framework
The sustainability goal of the organization includes all stakeholders including society and
communities as well as environment:
To live our purpose of providing trusted energy, we’re focusing on sustainable energy development
that minimizes our environmental impact, while building relationships with local communities,
Indigenous Peoples and stakeholders.
However, the following three aspects of the company are misaligned with these goals in the
following ways:
1) Strategy: Clearly the company’s strategy has focused on growth and production
increase, but has failed to address the associated negative social and environmental
impact of this growth to a large extent. There are no strategic guidelines and action
plans in place to establish the level and depth of engagement with the government in
order to systematically solve the anticipated social and environmental challenges
during the course of such long-term growth projects. In short, the existing strategy has
not been successful to achieve sustainable growth.
2) Style: The style of CSR activities of the company has been traditional and retroactive
through charity, education and health initiatives for local communities. It has clearly
proved to be insufficient and ineffective. In the given situation instead, the company
should have proactively assessed and addressed the social needs by directly and
systematically working with the government to build additional public infrastructure
for housing, healthcare, education etc. proportional to the anticipated growth. The
focus should also be on modification of operational activities to minimize
environment pollution and safeguard the ecosystems on which the Indigenous people
are dependent.
3) Systems: In absence of strategic directions, there are no systems put in place by the
company to cater to the social issues resulting from its growth activities. Some of the
systems that the company may be lacking are system to train and hire local permanent
residents than bringing outsiders; Suncor’s provided housing, medical and schooling
provisions for workers reducing burden on local government and public services
providers; create a voluntary team of workers and staff to support public service
activities like teaching, building homes or any other social support roles even if the
company needs to slow down growth and finally, the company may also be lacking
systems to engage and work together with government at different levels.
MAIN STAKEHOLDERS:
The stakeholder salience model (Exhibit B) is used to analyze the stakeholders in the
situation.
Exhibit B: The stakeholder salience model (Mitchell et al. 1997)
2. Stakeholder Identification and Mapping
The seven stakeholders in the context of the problem at hand and the traits they possess are
summarized here:
Table: Stakeholder Categorization
Stakeholder
Power
Legitimacy
Urgency
Stakeholder
Type
Local Government (Municipality)
N
Y
Y
Dependent
Provincial Government
Y
Y
N
Dominant
Social service groups (Civil society
organizations)
N
Y
N
Discretionary
Labor Unions
N
Y
Y
Dependent
Environmental Activists
N
Y
Y
Dependent
First Nations People
N
Y
Y
Dependent
Shell Management
N
Y
N
Discretionary
Local Government (Municipality):
The municipality is clearly lacking resources to address the socio-economic problems
resulting from the growth which include escalating costs of living, water access, health and
educational services, plateaued public servant salaries, lags in infrastructure development,
and increasing crime and drug abuse. The municipality want Suncor to extend its CSR role to
help solve these issues. In absence of direct support from provincial government and oil
companies, municipality clearly lacks power to address the social issues at hand. They surely
have legitimacy and urgency to prevent further worsening of the situation.
Provincial Government:
Oil sands are a major source of revenue for the provincial government of Alberta. So, they
have both power and legitimacy to address the situation at hand. They can support the local
government through direct economic packages for addressing the social and environmental
challenges that have resulted from the high growth in the region. They can also work with the
oil companies to create an integrated social development plan for the region proportional to
the oil sands growth. However, so far, they have shown unwillingness and lack of urgency.
Social service groups (Civil society organizations):
They hold both government and Suncor responsible for the unplanned growth resulting in the
increase in social problems like drugs, prostitution and crime. They want the companies to
direct resources to curb the social issues. Their protest is legitimate since they represent
public issues but they may not have power or urgency.
Labor Unions:
The labor unions in the public sector are negatively affected by the growth in the region. Low
earning compared to oil workers, high cost of living and high workload has lead lot of them
toward crime. They are seeking economic support from Suncor. Their demands are both
legitimate and urgent.
Environmental Activists:
They want Suncor to set stringent targets to reduce pollution levels in absolute sense and act
beyond a predetermined environmental plan and even slow down the growth if needed to
achieve those limits. They want a commitment from the oil companies to cap carbon dioxide,
tailing pond and fresh water use. Based on the situation, they have both legitimacy and
urgency.
First Nations People:
The environmental pollution from the oil sands development has adversely affected the
livelihoods of the First Nations and Aboriginals Peoples. The waterbodies, soil and wildlife,
these people depend on in and around the region, are contaminated and poisoned because of
the pollutants emitted by the oil sands companies. Consequently, it has affected their health
as indicated by growing instances of cancer among them. They demand the companies to
reduce pollution and address the impact of existing pollution levels on the people. They want
restrictions on use of water from the rivers. They also want economic compensation for loss
of income due to health issues. They seem to have both legitimacy and urgency.
Shell Management:
Shell Management are a legitimate stakeholder given they can share learnings form their
Niger Delta operations to help Suncor management to decide the future strategy regarding the
best possible way to engage with the government and the public to make a collective growth
and development plan to ensure sustainable growth with long term social needs addressed.
PROPOSED CHANGE PLAN:
While Suncor’s management need to take some urgent corrective actions to address the
pressing social issues in the given situation, a sustainable and long-term change plan is
needed over a broader timeline (Exhibit C) to create an all-inclusive growth plan which
integrates a framework to proactively identify, allocate resources and build an action plan to
address the social and environmental impact of the long-term growth. The level of
engagement with the government needs to be reworked and an optimum change plan created
with all the above stakeholder’s concerns addressed to the best possible level.
Exhibit C: A basic change plan with broad timelines.
3. Managing the Problem
Short-Term
a. Fill the void for the local government: Support the local municipality to cover
the social infrastructure deficit by dedicating financial and human resource
support towards public service.
Metrics: Demand-supply gap in social services to assess the economic support,
manpower and resource deficit in public service providers, employee manhours
spent towards social needs.
b. Reduce burden on the community social infrastructure: Reduce the
dependency of the company employees and workers on the community public
services by creating in-house provisions for their housing, medical, educational
etc. needs. If possible, also collaborate with local government to allow members
from general public to use company social services.
Metrics: Percentage of employees using community pubic services, existing inhouse capacity and company budget allocations towards employee benefits,
percentage of public members using company facilities, housing prices and cost of
basic services in the community at large.
c. Employment support for non-oil workers: Train and employ labor union
workers either directly or in co-ordination with government from non-oil sectors
to improve their earnings. Also support the local governments to increase hiring in
public sector and with better salaries to reduce overall economic disparity and
unemployment created by the oil growth. This will also help in crime reduction.
Metrics: Government data on cost of living, inflation, unemployment, income and
labor demand in the public sector. Reported data and statistics on incidents of
prostitution, drugs and crime related to unemployment.
d. Share government’s responsibility by dedicating company efforts to help
social initiatives: Considering the increased social issues and lack of government
infrastructure, the company, in addition to its CSR activities, should create a
response team composed of staff and works to directly engage in public social
initiatives either as volunteers or paid workers. The team should work with
member of public to help build low cost housing, medical facilities, schools and
community education centers. Also, the government can use their services through
temporarily making them public services provider staff in healthcare, education
and law-enforcement. This will also improve the levels of engagement and the
trust deficit between members of public and the oil company.
Metrics: Staff manhours towards social activities, temporary Suncor staff hired
by public sector providers, track public sentiment through public surveys on
company involvement in community and social improvement, track improvement
in public service performance through metrics on housing need addressed,
improvements in medical coverage to more people and reduction in crime.
e. Reduce the levels of environmental and ecological pollutants on a short-term
basis: On a short-term basis, the company should try to reduce its harmful
emission levels through downsizing its growth and rework its waste management
processes and infrastructure. The health issues of the first nations people should
be addressed as a top priority and they should be compensated for loss of
livelihood because of damage to their habitats caused by the pollutants from oil
industry. Efforts should me made to employ members from the First Nations into
mainstream employment providers.
Metrics: Continuous monitoring of pollutant levels and improvement trends
towards short-term emission targets. Data on health issues, employment and land
usage of the First Nations People.
Mid-Term
a. Layout new sustainability goals and take investors into confidence to plan for
a temporary growth slowdown: Build on the momentum gained on the shortterm improvements, revise the CSR plan and spending goals to incorporate a shift
towards continuous social and environment impact assessment and action plan.
Make the investors aware that in order to achieve long term sustainable returns, a
temporary slowdown of growth and income diversion towards social and
environmental actions is needed. Also, this is the only way to prevent public
backlash and a mass outrage and maintain the socially and environmentally
conscious organization public image that Suncor has built over a long time.
Metrics: Conduct a feedback survey to assess the investors approval on growth
slowdown and social improvement spending increase in the affected region,
public feedback via social media and local media in the region on the social
improvements and public disclosures on money invested in the community and
environment improvements by the company.
b. Continuous stakeholder engagement and grievance resolution: Appoint a
committee of representatives from the various stakeholders who are impacted by
the company’s operations and meet with management on a periodic basis. The
issues faced by the members of the different stakeholder groups that are directly
linked to the company’s activities can be discussed and mutually resolved. This
proactive approach will help better coordination, communication and help
management to make more informed decisions and actions.
Metrics: Database of issues faces by various stakeholders with detailed
documentation on the resolution process and resources deployed.
Long-Term
a. Negotiate and budget for the Social Action Plan with the Provincial
Government: While taking up future growth projects from the Provincial
Government in the oil sands, emphasize on incorporating Social and
Environmental Action plan in the contractual scope of work with explicit
budgetary allocation over and above the core project cost. The action plan should
be based on a Social and Environmental Impact Assessment done during the
project feasibility stage. If the Provincial government agrees to fund but wants the
social action plan to be taken by the local governing bodies or any other party, a
multi-party legal agreement between Suncor, provincial and local governments
should be made to ensure both the core oil project and social and environment
action projects will run in parallel and budgetary allocations are done for both. In
short, ensure that the growth project does not run in isolation and social action
plan is put in the same timeline as the growth project.
Metrics: Contractual inclusion of Social and Environment action plan in the
future growth projects with a project timeline and completion tracking.
b. Plan new integrated regional development projects to expand the public
infrastructure: If the provincial government offers no support, Suncor and the
local municipality should form a consortium to create social infrastructure
expansion and revenue generation by planning new regional development projects
in the region. They should survey and identify land and invite land developers,
urban planners and real estate companies to build new greenfield townships which
will include community housing, hospitals, educational centers, law-enforcement,
commercial zones and other civic facilities. This will not only expand the social
infrastructure but also generate long term income for the local municipality. Apart
from social infrastructure land development projects should be planned to create
buffer zones to prevent waste from the tailing ponds and other effluents to
contaminate the land, rivers and ecology around the oil sands.
Metrics: Budget allocation towards the projects and progress tracking once work
contracts are allotted, land usage improvement surveys and overall infrastructure
growth monitoring. Environments pollution monitoring in the water bodies and
land around the oil sands.
c. Operational Improvements to achieve pollution reduction and reduce
ecological impact: Suncor should start investing in research and adopt new
technologies for operational improvements to reduce its emission levels and
negative impact on the environment. Buffer zones should be created around the oil
sands after ecological impact assessment to minimize impact on the First Nations
people’s habitats. Representation of First Nations people should be increased in
the organization and their needs given due consideration while planning new
growth projects. Economic and healthcare facilities should also be extended to
them.
Metrics: Priority matrix of new technologies based on the most to least polluting
operational activities, budgetary spending tracking towards pollution reduction
processes and measuring the pollution levels as improvements are done, also use
health and socio-economic data of the First Nations people to monitor progress on
the ecological impact.
References:
1. Suncor's Political Role in Fort McMurray by: Michael Valente
https://hbsp.harvard.edu/product/W11103-PDF-ENG
2. Valente M, Crane A (2010): Public Responsibility and Private Enterprise in Developing
Countries. (California Management Review) vol 52, no 3, pg52-78
3. Fort McMurray in the news: https://www.youtube.com/watch?v=heQReViTIEg
4. Becoming a Better Corporate Citizen by Indra K. Nooyi and Vijay Govindarajan
https://hbr.org/2020/03/becoming-a-better-corporate-citizen