Position Paper Shell And Csr Business Essay
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Published: Mon, 5 Dec 2016
This position paper will be based on Shell Company and it will address the issue of CSR. Shell is a global group of energy and petrochemical companies with around 101,000 employees in more than 90 countries and territories. Its headquarters are in The Hague, the Netherlands, and its Chief Executive Officer is Peter Voser. The parent company of the Shell group is Royal Dutch Shell plc, which is incorporated in England and Wales. Its strategy seeks to reinforce its position as a leader in the oil and gas industry in order to provide a competitive shareholder return while helping to meet global energy demand in a responsible way. Shell defines its aim as “to meet the energy needs of society, in ways that are economically, socially and environmentally viable, now and in the future.” Shell was one of the pioneers in the movement for Corporate Social Responsibility. The company says it is committed to sustainable development and human rights: “Our core values of honesty, integrity and respect for people define how we work. These values have been embodied for more than 25 years in our Business Principles, which since 1997 have included a commitment to support human rights and to contribute to sustainable development.” However, this paper will show to what extent Shell has failed in the past and how due to aggressive consumerism it is trying to be more CSR conscious but it is still lagging behind.
The phrase Corporate Social Responsibility was put forward in 1953
with the publication of Bowen’s ‘Social Responsibility of Businessmen’, which posed the question ‘what responsibilities to society can business people be reasonably expected to assume?’. This subject was expanded in the 1960s, suggesting that beyond legal obligations companies had certain responsibilities to society.
HISTORY OF PETROLEUM PRODUCTS
Petroleum, like all fossil fuels, mainly consists of a complex mixture of molecules called hydrocarbons. When it comes out of the ground, it is known as crude oil, and it may have various gases, solids, and trace minerals mixed in with it. Through refinement processes, a variety of consumer products can be made from petroleum. Most of these are fuels: gasoline, jet fuel, diesel fuel, kerosene, and propane. It is also used to make asphalt and lubricant grease, and it is a raw material for synthetic chemicals. Chemicals and materials derived from petroleum products include plastics, pesticides, fertilizers, paints, solvents, refrigerants, cleaning fluids, detergents, antifreeze, and synthetic fibers.
The modern petroleum industry began in 1859 in Pennsylvania, when a man named Edwin L. Drake constructed the first oil well, a facility for extracting petroleum from natural deposits. Since then, petroleum has become a valuable commodity in industrialized parts of the world, and oil companies actively search for petroleum deposits and build large oil extraction facilities. There are several deposits exist in the United States. However, around 1960 oil production in the country began to decline as oil in the deposits was being used up and fewer new deposits were being discovered. The demand for petroleum products continued to increase and as a result the United States came to rely more and more on oil imported from other countries. In 2001, the amount of petroleum extracted from deposits in the United States was estimated to be only one-third of the amount demanded by U.S. consumers. A similar pattern exists in other industrialized countries, and some, like Japan and Germany, import almost all of the oil they use.
PETROLEUM AND POLLUTION
Petroleum-derived contaminants constitute one of the most rampant sources of environmental degradation in the industrialized world. In large concentrations, the hydrocarbon molecules that make up crude oil and petroleum products are highly toxic to many organisms, including humans. Petroleum also contains trace amounts of sulfur and nitrogen compounds, which are dangerous by themselves and can react with the environment to produce secondary poisonous chemicals. The dominance of petroleum products in the United States and the world economy creates the conditions for distributing large amounts of these toxins into populated areas and ecosystems around the globe.
SHELL’s MARKETING MIX
Shell provides transport fuel to around 10 million customers each day through its 44,000 service stations around the globe. It is working to deliver cleaner burning and more efficient fuels. Its products and services are also designed to meet the needs of businesses; that is; from the construction industry to aviation and from chemicals to shippings. It engages much in R&D, and keep implementing an innovating its products; for example; the AeroShell Oil Sport Plus4, a new aviation oil for light sport four stroke engine. It further provides services like card services which is offered to customers rewards on Shell purchases and provide an efficient, secure way to buy fuel and other goods. These cards are fuel cards for all transport businesses, from small car fleets to major road transport. From Shell Helix to Pennzoil, Shell provides its customers with a full range of motor and bike oils. Furthermore, Shell has been making use of promotional strategies like “$1 petrol per litre” for a limited time so as to educate people about fuel economy. It can be said that Shell adopts very interesting marketing strategies like product innovation, promotional campaigns, good pricing strategies and its locations throughout the globe. However, when it comes to CSR the question still lingers whether Shell as the Number 1 in the petroleum industry is it contributing towards the society, green marketing, environmental and ecological marketing? This issue is highly debatable.
SHELL AND ITS FAILURES
Shell Nigeria is one of the largest oil producers in the Shell Group. Through 80% of the oil extraction in Nigeria Niger Delta, it can be said that Shell is making surplus extraction and use of this resource. The Delta is home to many small minority ethnic groups, including the Ogoni, all of which suffer exploitation by multinational oil companies, like Shell. Shell provides over 50% of the income keeping the Nigerian dictatorship in power. The boycott was felt when the Nigerian government hanged 9 environmental activists in 1995 for speaking out against exploitation by Shell and the Nigeria government, outrage has exploded globally. The tribunal which convicted the men was part of a joint effort by the government and Shell to suppress a growing movement for environmental justice, human rights and economic justice among the Ogoni people. Shell has brought extreme, irreparable environmental and societal damage to Ogoniland.
Although oil from Ogoniland has provided approximately $30 billion to the economy of Nigeria, the people of Ogoni see little no contribution for their society from the part of Shell. Emanuel Nnadozie, writing of the contributions of oil to the national economy of Nigeria, observed “Oil is a curse which means only poverty, hunger, disease and exploitation” for those living in oil producing areas. Shell has done next to nothing to help Ogoni: by 1996, Shell employed only 88 Ogoni (0.0002% of the Ogoni population, and only 2% of Shell’s employees in Nigeria). Ogoni villages have no clean water, little electricity, few telephones, abysmal health care, and no jobs for displaced farmers and fisher persons, and adding insult to injury, face the effects of unrestrained environmental molestation by Shell everyday. The Ogoni people were victims of poverty, malnutrition and diseases.
Since Shell began drilling oil in Ogoniland in 1958, the people of Ogoniland have had pipelines built across their farmlands and in front of their homes, suffered endemic oil leaks from these very pipelines, been forced to live with the constant flaring of gas. This environmental assault has oppressed the land with oil, killed millions of fish and other aquatic life, and introduced destructive acid rain to the land of the Ogoni. For the Ogoni, a people dependent upon farming and fishing, the poisoning of the land and water has had upsetting economic and health consequences. Shell claims to clean up its oil spills, but such “clean-ups” consist of techniques like burning the crude which results in a permanent layer of crusted oil meters thick and scooping oil into holes dug in surrounding earth. From the above, it can clearly be deduced that Shell is not environmentally responsible at all. It has firstly damaged the environment and then come up to “repair” it.
Natural Gas Flaring
In Ogoniland, 95% of extracted natural gas is flared compared with 0.6% in the United States which can be said that the Shell company is abusing of the illiteracy and political system of Nigeria to boost its economic profits. It is estimated that huge amount of carbon dioxide and methane are released by the gas flaring, Nigerian oil fields are responsible for more global warming effects than the combined oil fields of the rest of the world.
Although Shell drills oil in 28 countries, 40% of its oil spills worldwide have occurred in the Niger Delta. In the Niger Delta, there were 2,976 oil spills between 1976 and 1991. Ogoniland has had severe problems stemming from oil spillage, including water contamination and loss of many valuable animals and plants. A World Bank investigation found that the levels of hydrocarbon pollution in water in Ogoniland is more than sixty times that of US limits and a 1997 Project Underground survey found petroleum hydrocarbons one Ogoni village’s water source to be 360 times the levels allowed in the European Community, where Shell originates.
The Nigerian Environmental Study Action Team observed increased “discomfort and misery” due to fumes, heat and combustion gases, as well as increased illnesses. This destruction has not been alleviated by Shell or the government. Owens Wiwa, a physician, has observed higher rates of certain diseases like bronchial asthma, other respiratory diseases, gastro-enteritis and cancer among the people in the area as a result of the oil industry.
The reasons of why Nigerian government allow this to happen?
In Nigeria, it is questionable whether it is multinational oil companies like Shell or the military which hold ultimate control. Oil companies have a complete influence upon the government: 80% of Nigerian government revenues come directly from oil, over half of which is from Shell. Incalculable sums disappear into the pockets of military officers in the form of bribes and theft. In 1991, $12 billion in oil funds disappeared. Local governments admitted that oil companies bribe influential local officials to suppress action against the companies. Hence the interests of the Nigerian military regime were clear: to maintain the status quo; to continue acting on Shell’s requested attacks on villagers whose farms were destroyed by the oil company; to continue silencing, by any means necessary, those who expose Shell’s complete disregard for people, for the environment, for life itself. Shell and the Nigerian military government were united in this continuing violent assault of indigenous peoples and the environment. And just as oil companies exploit numerous communities in the Niger Delta, the government’s involvement in the above crimes is not limited to the Ogoni.
Protest by the Nigerian population
The first highly visible action organized by the Movement for Survival of the Ogoni People (MOSOP) occurred on January 4, 1993 with 300,000 Ogoni (3/5 of the population) participating in the peaceful “Ogoni Day” demonstration. Since MOSOP became highly visible, other groups in oil producing regions have begun modelling their actions on MOSOP’s tactics of intense yet peaceful demonstrations and charters based on the Ogoni Bill of Rights. There are currently many groups in the Niger Delta working on researching and educating about the environmental and social impacts of the oil industry on the Niger Delta. A few of these are Environmental Rights Action and Niger Delta Human and Environmental Rescue Organization. Additionally, many ethnic groups other than the Ogoni are voicing and demonstrating against the environmental racism and human rights abuses. They are demanding to clean up of oil spills, reduce of gas flaring, fair compensation for lost land, income, resources, life, a fair share of profits gained from oil drilled at their expense.
The United Nations Special Rapporteur’s report on Nigeria (released 4/15/98) accused Nigeria and Shell of abusing human rights and failing to protect the environment in oil producing regions, and called for an investigation into Shell. The report condemned Shell for a “well armed security force which is intermittently employed against protesters.” The report was unusual both because of its frankness and its focus on Shell, instead of only on member countries.
As the Commonwealth believes in the promotion of international understanding and co-operation, through partnership, Nigeria’s membership of the Commonwealth was suspended by Commonwealth Heads of Government on 11 November 1995. Despite repeated pleas from Nigerian human rights activists, the Commonwealth has failed to follow through on threats of expulsion.
In word, the United States is a strong critic of the Nigerian government, both past and present. It has condemned the existence of the military regime, of election cancellations, and of the situation in Ogoniland. It has threatened to take action. Yet it never does. As the largest consumer of Nigerian oil, the US could be the strongest advocate for human rights and justice, yet it refuses to take on that role. The US government has even protected Nigeria from economic sanctions by states and cities within the US. In March 1998 an official from the Clinton administration warned the Maryland House and Senate that bills creating state-wide economic sanctions against Nigeria for human rights abuses are a violation of US commitments to international trade agreements and to membership in the World Trade Organization. The Clinton administration termed such bills a “threat to the national interest.” Not surprisingly, multinational oil companies such as Shell, Mobil, and Chevron lobby heavily against aggressive US policy towards Nigeria, an approach which appears to be working.
SHELL APPROACH TO THE ISSUE
Despite these allegations, Shell has completely ignored the truth of the damage it is supposed to have done and instead, it has scapegoated itself. Shell proposed to spend $8 billion followed by $1 billion per year over the following 10 years to clean up the Niger Delta. That’s a region in which more than 30 million people live. So there’s no way that an investment of $2.50 per person per week for two years, followed by $0.62 for ten is going to lift the region out of poverty.
Such an expenditure might help clean up the Niger Delta and might not as well. Shell had promised to use locally-sourced suppliers and staff in a region in which it was and remains responsible for just a small proportion of the overall oil pollution, and in which it has little power to tackle the problem of leaks at source.
Shell also proposed to establish a $4 billion fund earmarked for compensation for perceived injustices in the Niger Delta caused by its operations since 1958. In describing its intentions, Shell borrowed emotive language from post-apartheid South Africa. It talked about creating a $45 million “truth and reconciliation process” fund, which will assess and award reparations. However, it is a fact to be acknowledged that Shell has caused irreparable damage to the Nigerian society, it has adopted an inhuman approach to maximise its profits and if the protest did not took an aggressive path, Shell would have never try to repair its damage.
SHELL IN SOUTH AMERICA
Vila Carioca is a neighborhood in the southern part of Sao Paulo, the largest city in South America. Greenpeace and the Union of Workers in the Mining and Petroleum Sector alleged in the 1990s that the region had its soil, air and water contaminated by several pollutants from industrial activities that took place in the area. The pollution may have contaminated approximately 30,000 people residing in the area. Shell has been accused of being one of the main sources responsible for the pollution among companies operating in the region. Shell has been in the area since 1951 and has disposed large amounts of residues in the soil for decades, which may ultimately be the source of soil, air and underground water contamination. The liability can reach significant values, as some specialists conclude that part of the land should be expropriated for cleanup and those populating the area should be relocated and compensated. However, the company claims that it followed all existing environmental laws and used the best technologies available and most of the material was disposed of long before the new environmental laws were passed. From this case it can be said that Shell somehow tries to abide by the laws and find loopholes in the legal and political systems to carry its activities. Therefore we can point out that Shell is not trying to go beyond the law and caring for the society.
SHELL AND BRENT SPAR
Operated by Shell in UK, Brent Spar, an oil storage was subject of much public concern in 1995 as the British government announced its support for Shell’s application for the disposal of the Brent Spar oil storage buoy in the deep Atlantic waters as with the completion of the pipeline connected to the oil terminal, the storage facility was considered to be of no value. This method of disposal was considered to be cheaper for Shell. As a result, Greenpeace mounted a successful campaign that influenced public opinion against Shell’s preferred option. It disputed Shell’s estimates of the contaminants on the Brent Spar, saying that these were much more than initially estimated. Activists which occupied the Brent Spar, so as to prevent it from being towed, the organisation called for a boycott of Shell products.
Greenpeace argued that the dumping of the Brent Spar should not be looked at as an isolated case as other oil companies would follow and this would add considerably to pollution of the ocean. They argued for the option to dismantle, reuse and recycle the Brent Spar. If Greenpeace did not intervene at that time on this issue, this act of Shell would have caused tremendous ecological hazard.
SHELL AND ITS ATTEMPTS TO RECONSTRUCT ITS IMAGE
Nevertheless, Shell is trying to contribute in CSR so as to re-build its image of being socially responsible and caring for the environment and its stakeholders. Its attempts are as follows:
According to the CEO of Shell, Peter Voser, Shell is raising its production of natural gas. It generates between 50% and 70% less CO2 than coal when burned to generate electricity and therefore it is contributing in reducing CO2.
Shell’s CEO also brought forward that its company will invest billions of dollars to tackle the greenhouse gas emissions globally and investing in R&D as well.
Shell, with its Shell Foundation is committed to incorporate elements of sustainable development into the strategic planning and daily conduct of the business of not only its group companies but also to propagate the urgent need for adopting Corporate Social Responsibility initiatives across the business world.
Shell’s CSR policy aims to balance the corporations’ need to make a profit and reward its shareholders sufficiently, with broader social concerns by involving communities in its operational and development plans.
Shell has launched the Shell Better Environment Award; the women’s empowerment initiative, Emirates Businesswomen Award; the Shell Professional Women’s Network for the personal and professional development of women in Dubai; the Intilaaqah programme for promoting entrepreneurship among local youth; and the environmental education programme Enviro-Spellathon. Shell has similarly sponsored the Counselling Arabia Conference and the annual Careers UAE Exhibition.
Shell Malaysia is trying to engage in CSR at a deeper level by protecting the health of its workers, protecting the environment by trying to minimise the impact of its operations by setting targets to progressively reduce emissions and discharges. It is promoting best practices through ISO certification.
SHELL’S FURTHER FAILURES IN CSR
However, despite trying to be socially responsible, Shell’s reputation with regards to CSR is not good. After being seen as leaders some years ago, they are now being perceived as just putting a lot of money in their communication
There is lack of CSR innovation as over the last few years Shell have not really convinced on the content and implementation side through innovation at all. This might be the consequence of not being leaders anymore combined with a lack of aspiration for bringing their reporting and best practice onto the next level. The corporate context and culture itself at Shell does not fully go hand in hand with their CSR messaging. In August 2008, the British Advertising Standards Authority (ASA) ruled that Shell had misled the public in an advertisement when it claimed that a $10 billion oil sands project in Alberta, Canada was a “sustainable energy source”. In Magdelena, Argentina, Shell was responsible for the largest oil spill that has ever occurred in freshwater in the world. On January 15, 1999, a Shell tank ship in Magdalena, Argentina collided with another tanker, emptying its contents into the lake, polluting the environment, drinkable water, plants and animals. In 2009, Shell was the subject of an Amnesty International report into the deterioration of human rights as a consequence of Shell’s activities in the Niger Delta. In particular, Amnesty criticised the continuation of gas flaring and Shell’s slow response to oil spills.
In 2010, a leaked cable revealed that Shell claims to have inserted staff into all the main ministries of the Nigerian government and know “everything that was being done in those ministries”, according to Shells top executive in Nigeria. The same executive also boasted that the Nigerian government had forgotten about the extent of Shell’s infiltration.
POSITIONING OF SHELL CSR APPROACH
This paper positions Shell’s approach to CSR as a very weak one. Shell despite having millions and billions of profits, it is not trying to be as socially responsible as other multinationals. Shell has always tried to misuse legal framework and political systems of various countries and it is only after protests of people or governmental bodies that it tries to repair the harm that it did. The world is running short of its natural resources and the approach of extracting surplus oil in under-developed areas like Nigeria, can be said to be an irresponsible act from the part of Shell. Shell has also tried to mislead the public with the advertisement on oil sands project in Canada. Shell cannot only think only doubling its profits by making overuse of the globe’s natural resources. Shell though is claiming to be socially responsible, at the end of the day, it only tries to increase its profitability of its business and take the society on a secondary basis. It somehow forget the fact that due to the society and people that it is able to gain so much profits and if this society itself boycott its product and go to its competitors, Shell will never be able to gain back its position in this particular industry. People of today are no longer gullible; they are very much informed about each and every thing. There is a great disparity between what Shell does and what it says. Shell should attempt to take the CSR on a much better level and investing in technologies that will lower the amount of destruction that it did to several nations.
Shell despite having a good marketing strategy for its services, price and promotions it somehow lagged behind when it comes to societal marketing. Shell must try to be more environmental conscious with sustainability in economy, practice of pollution prevention by having new environmental technologies and being more environmental friendly. All its activities must be designed by taking the environment in to consideration. Shell must concentrate more on its actions; that is; doing more good to the society instead of only preaching that what it is about to do. Shell must recruit potential marketing and CSR specialists which will be able to cater for both the company’s profitability and trying to lesser its damage to the environment and society.
If Shell takes the issue of CSR seriously it will be able to come up being more environmental and societal friendly; else it will have to face heavy boycotts from the entire world as customers and consumers of nowadays are very much informed with what is happening in the world and if the world decide to boycott Shell, the latter will never be able to regain its place in the market.
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