Ethical stance
For a large company like Shell, they should not be engaging in activities that have obvious negative environmental consequences and when they knowingly done this they crossed an ethical line (see article 1). According to diagram 1 we can see that it is quite detrimental for Shell to constantly receive these sorts of negative media coverage. A companies corporate image is very important to a business especially for a company like Shell that has to try and create positive public relations with there stakeholders. Shell should be trying to create positive public relation. Media coverage should be add to the companies profile not damage its reputation.
Below are aspects a large company should work on in order to improve its corporate identity.
- Product & Service Quality
- Social Accountability
- Environmental Performance
- Management of sustainable issues
- Operational Integrity
- Employer/Customer/Supplier relations
If all these aspects are generally being sustained and performance is strong in some of the areas a company will promote there business to, customers employees, shareholders, suppliers, and other potential partners. This promotion is a form of self promotion which will only occur when the business is maintaining sustained performance in the area identified above; this sustained performance will in turn lead to positive corporate images passed to the customers, employees shareholders etc. This in all will raise the company’s corporate reputation.
If a company doesn’t maintain sustained performance in their product and service quality social accountability etc. there corporate identity will not be improved but may have a negative impact. Images portrayed to the media, interest groups/NGOs, outside Investors etc can have a negative impact on the company’s corporate image. This can and will lead to a company’s reputation being ruined.
Environmental disasters and ethical dilemmas for Shell petroleum will affect their business in different ways. Their identity is an important part of their mission as a business and pressure groups and environmental activists are constantly trying to portray them as unethical corporations. Although Shell are constantly trying to maintain sustained performance in the key aspects of their business, and are doing this well they could try and improve their environmental performance and try and give a more positive view of its goals to interest groups and NGO’s etc. This will help maintain Shells corporate image in the future.
Another evident Gap is Shells constant troubles with adhering to local laws and chemical regulations. In 1990 the chemical dieldrin, a toxic substance used in the production of pesticides was banned from use for crop cleansing. On the 01/28/03 Shell were given a courts summons regarding 156 locals being exposed to this toxic pesticide. This doesn’t show there commitment to the environment or to there employees working in this region. Oil spills and environmental liabilities clean up costs for Shell are extremely low as you can see, but the cost of reputation damage occurred is immeasurable. After disaster like this, Shells pressure groups will be working against them and drumming up negative images for the company. This is something that can be avoided by Shell if they operate with more integrity and consider the environmental liabilities that are apparent when using chemicals that are harmful.
In 2001 forty-two people lost their lives working for Shell. Although figures are not available Shell states that this is significantly less than in 2000. Indeed Shell states that this is the lowest number of fatalities ever recorded for the organisation. 76% of incidents resulting in fatalities were associated with road accidents, mainly in developing countries with poor driving conditions.
On a broader base Shell uses total reportable case frequency (TRCF) to monitor accidents and incidents. In 2001 TRCF improved a further 9% from 2000 to 2.9 cases per million hours worked.
The lowest paid employee of Shell in 2001 earned $50 per month, plus $18 transport allowance and medical and life insurance benefits, in an African country where the statutory minimum is $28 per month. No Shell employee receives less than the legal minimum, or has a standard contractual week of more than 48 hours. However, many Shell employees say that they find it difficult to maintain a healthy balance between work and home life.
Equal opportunity procedures are adopted in all of the one hundred and twenty four countries that Shell operates in. By the end of 2001 only 7.9% of Shells senior executives were women. This is only marginally better than 2000’s figure of 7.8% and still some way from the organisations target of 20% by 2008. 46% of country chair positions (senior representative in a country or group of countries) are currently held by people from that country. This is an improvement on 2000’s figure of 40%.
Shell uses total reportable occupational illness frequency (TROIF) as the parameter to monitor health performance of its employees. During 2001 Shell implemented a set of minimum health management standards and currently achieves a TROIF of 2.3 illnesses per million hours worked.
On the 20th of March 2003 Shell petroleum UK decided to let 350 people on its North Sea Oil rig go. This is about a third of the work force on this rig and there are serious health and safety implications to this. Is this really going to motivate the rest of the work force on this rig? Probably not, are others in the company going to be worried about job security, probably so. This is a problem that Shell needs to fix, they have stated that they want to recruit the best employees, but is this going to attract potential employees or worry them.
Environmental policies
Shells commitment to sustainable development and its leadership in research and development has lead to the organisations prime position in the development and production of bio-fuels. Bio-fuels are carbon free and are derived either from vegetable oils for use in diesel engines or from fermented and distilled products of crops such as corn or sugar beet for use in gasoline engines. As with any intensive agriculture, there are environmental issues such as the use of agrochemicals and the effects of mono-crops on biodiversity. The use of bio-fuels creates less greenhouse gas emissions than traditional fuels. However, their production is up to four times more expensive than conventional fuels. The European Union has recommended that all fuels should contain a 2% minimum bio-content from 2005 and nearly 6% from 2010. Shell currently markets bio-fuels in Brazil, Sweden, USA and France.
Total waste produced by Shell in 2001 was 897 000 tonnes, an increase of 0.79% on 2000’s figure of 890 000 tonnes. Around half of this (@ 448 500 tonnes) is classified as hazardous waste, mainly oil-based and synthetic mud and cuttings, sludges from water treatment and tank cleaning and spent catalysts, which are disposed of to landfill or incineration. Many of Shells operating units set local programmes for waste reduction but there are no group-wide programmes or targets.
At the end of 2001 Shells total liabilities for environmental clean-up, decommissioning and site restoration were $3 069 million, an increase of 2.6 % on 2000’s figure of $2 989 million. These figures can be compared to the corresponding sales figure to deliver a sales per $ of environmental liability:
2000 2001
Sales per $ environmental liability: $66.07 million $57.76 million
This comparison of sales to liabilities incurred due to environmental impact can be used to assess shells more ethical approach of consideration of the environmental impacts of the organisation. As can be seen 2000 was far more successful in terms of sales per dollar of environmental liability, in other words Shell took $66.07 million dollars for every dollar of environmental liability paid out. 2001 saw a large fall in this figure to $57.76 million. However, is must be stated that although the figure for environmental liabilities is not available for 1999, the over all group results for all areas were exceptional for 2000, and 2001’s fall in sales per $ environmental liability is likely to be around the same or an improvement on 1999’s figures.
As can be seen in figure ************** below, total oil spills for 2001 amounted to 17.8 thousand tonnes, an increase of 79.9% on 2000’s figure of 9.9 thousand tonnes. The target for 2001 had been 8.5 thousand tonnes, 9.3 thousand tonnes below the actual result. However, Shell did experience an increase in the spillages resulting from sabotage from 19% in 2000 to 24% in 2001. This 24% for 2001 represents 4.27 thousand tonnes, just over half of the target for total spillages for 2001.
Again it is useful to compare these figures to sales to assess the extent to which Shells environmental policies and procedures are impacting the organisation
1999 2000 2001
Sales per tonne of oil spill: $8.01 million $12.07 million $9.96 million
As can be seen in both figure ******** and the table above, Shells performance in 2000 was exceptional, whilst 2001 saw a slip back to slightly better than 1999 levels. Shell took $9.96 million for every tonne of oil spillage. Comparing these figures to the sales per $ environmental liability shows a vast difference. In 2001 Shell took $9.96 million for every tonne of oil spillage yet took $57.76 million per $ environmental liability
In addition Shell paid a total of $1.4 million for not meeting regulations, permits and breaking laws………………………..very low??????????????????
ExxonMobil, whos UK arm is Esso, is currently coming under in creasing pressure from environmental organisations for its part in scuppering international agreement to limit the burning of fossil fuels and persuading George Bush to pull the U.S out of the Kyoto agreement.
Financial performance
Recommendations
Technology differentiates Shell from its competitors. It will also be the key to anticipating future markets whilst at the same time help Shell cater to wider social demands for more sustainable energy resources. In the future Shell will need to reduce the time it takes for the deployment and incorporation of new technologies and initiatives around its global network of operations. The faster the organisation can adopt and incorporate new technologies the faster the return in terms of either cost savings or entry into new markets. Shell is also in an excellent position to commercialise new technologies through Shell Global Solutions, the consultancy arm of the organisation making Shell expertise, knowledge and resources available to other organisations. The use of patents and licences will provide revenue with which to offset the initial costs of research and development of new technologies.
Shell will need to adhere to its theme of portfolio management. The organisation will need to identify potential, suitable new additions to its portfolio to compliment its existing holdings as well as move into areas of opportunity and innovation.
The comparison of figures regarding Shells environmental liabilities and total spillages highlight a number of areas where performance can be improved. Firstly the gap between target and actual thousand tonnes of spillage is 7.9 thousand tonnes, just 2 thousand tonnes less than 2000’s total spills figure (9.9 thousand tonnes). This sharp increase needs to be addressed. Shell will need to identify and implement initiatives to combat the rise in spills. The organisation could look back to 2000 and examine the policies and procedures that lead to that years low spill figure. By comparing these to the policies and procedure implemented in 2001 Shell can identify differences and implement policies and procedures to decrease and eventually eliminate spills. Technology and learning can also play a key role here, with the development and innovation of methods and practices used in operations. Research and development can result in advancement in areas such as transportation of product (safer stronger pipelines with reduced spillages). This would not only benefit the organisation in terms of its environmental position but also in stock available for sale.
SAOTAGE why up blah blah……….security……lost revenue…..etc
To continue to improve performance and achieve its objective of world leadership in energy and petrochemicals Sell needs to refine and develop its areas of competitive advantage. The organisation will need to use money, materials and energy ever more efficiently to create value, reduce costs and minimise environmental impact.
Over all Shells performance in 2001 slipped from the standards achieved during 2000. Although there have been significant additions to Shells portfolio there has also been a reduction in competitive advantage with organisations such as BP gaining ground in areas such as branding and attracting and retaining top talent.
Businesses generally are coming under increasing pressure from members of the public and more recently government to clean up their act. In July 2002 a MORI poll revealed that 92% of people believe “multinational companies should meet the highest human health, animal welfare and environmental standards wherever they are operating”. This Mori poll played a key part in a private members bill demanding greater social and environmental accountability from big business. The bill was backed by a range of organisations, including Friends of the Earth, Amnesty International, the New Economics Foundation and Save the Children, and required companies to provide environmental reports, consult on big projects and established a new regulator for corporate environmental and social standards.
In the investment community there is more and more emphasis on social and environmental responsibility. There is a growing expectation of stakeholder groups that organisations should perform and behave in a more open, socially caring and responsible way. These principles are even more important in times of intense pressure, for example where there is a real or perceived risk to public health, safety and environment.
Although the inevitable war in Iraq is not primarily about oil, the range of possibilities that could occur in Iraq need to be included in Shells short as well as long term strategies. As the worlds second most oil rich region, with its reserves located relatively shallow beneath desert conditions, Iraq plays a key role in the global oil business. In the likely outcome of a U.S/U.K occupation and redevelopment Shell will be able to use it’s operational advantage of speed of execution and it’s knowledge and technological advantage of expertise in sub-surface evaluation to move ahead of its peers developing Iraq’s resources.
But Shell's investments in renewable energy aren't as they seem. In a sense they are, in that they are being treated as real businesses. However the use of renewable energy will not in any way prevent climate change in itself; it will only decrease in the use of fossil fuels. A Shell scenario for future energy supply reckons that renewable energy will provide around 15% of world energy by 2030; however this is within the context of expanding total energy consumption (with statistics saying that there is only enough fuel to last us till 2050) and oil and gas production will almost double over that period (Shell has quietly withdrawn its more optimistic scenario of 50% renewable energy by 2050). Clearly, despite the renewable energy’s growth, there is still a massive problem.
Shell could improve the way it communicates with its various audiences, both internally and externally and need to build consensus (e.g. through press campaigns, employee awareness meetings and publications, community forums, and shareholder updates). They currently have a report published every year called People, Planet and Profits. This reports aims to inform the public of Shells aims and objectives regarding environmental and social aspects of their business. This report is a huge improvement in the way Shell communicates with its stake and shareholders and the general public. A few years back they would not have even done this much. The main problem with this though is the fact that this report is still slightly biased and doesn’t really show negative issues surrounding the company and ways that they will approach fixing this.
A strong record of environmental and social responsibility will increase the image of a company as a desirable business partner, supplier or employer, not just a good neighbour. The strong reputation earned in this way can create and sustain competitive advantage by helping to win customer preference, secure outside financing, and gain government approvals on more favourable terms. Shells social and environmental record isn’t very strong if they do improve this they will contuinue to expand, and attract and retain a top knotch work force which is important to Shell which is stated in there mission to maintain a diverse work force.
