Introduction We chose to analyze the company Shell Global (Multinational), which had operations running all over the globe and even now, with the financial drawbacks, is still growing. Shell Global started business back in 1833 and has gone through a lot of hardships but also many golden periods, of which many will be mentioned in this report as some of them concern ethical issues. In 1958 Nigeria became one of the largest oil producers for the Shell Group, where Shell has been accused of many human rights violations especially in the Niger Delta area.
Their corporate and ethical image was heavily damaged and they soon realized they needed to regain the confidence of society to remain successful compared to their (more ethical) competitors. In this period, Shell produced their first Corporate Social Responsibility reports (1998) and started paying actual attention to human rights and of course which of them they violated. Asking questions such as: What can we do to change? The CSR report included parts about their business principles and how Shell’s statement of General Business Principles is going to be implemented.
Though a ‘clean up’ has started in Ogoni, an area in Nigeria, the problem remains because, it takes up to 30 years for the nature of that place to fully recover of the damage, according to the UN reports. What happens in this area is that the people do not have access to clean drinking water, now the communities drink water which includes Carcinogens (a substance, radionuclide, or radiation that is directly involved in causing cancer). Even so, oil spillage is the biggest problem for Shell Global in Nigeria since they are the largest and most well-known company in the country and there for getting all the blame. Shell Global consists of energy and petrochemical companies, and has over 93.000 employees spread over 90 different countries. This makes Shell one of the biggest companies in their line of business, but challenges remain.
Their hardest challenge is to give energy a ‘new future’ and keep innovating in order to sustain their competitive advantage. When we look at Shell from a global perspective concerning operations, what choices must Shell make? Or rather, what choices can Shell make? Is Shell really to blame for all that happened in Nigeria?
Nobody is perfect, same goes for companies and their ethical codes, rather the lacking of or ignorance of some, but we have to keep in mind that everyone can change. In this report we start with describing four different ethical issues revolving about Shell Global, Nigeria. Starting with the Human Rights, representing the fundamental rights that people have due to the fact that they are human beings. Backed by the Labour Laws, which contains information about the ethical thoughts and contemporary issues related to the Labour Law and their relevant stakeholders and of course their corporate social responsibility. Thirdly, the environment.
Here we discuss how the natural environment can be considered as a stakeholder in correlation with Shell working together with non-governmental organizations. Part of this section are also Sustainability and Climate Change. And finally, Anti-corruption, answering the question if Shell Global is corrupt or not. Following we will compare Shell Global to three other multinationals also established in Nigeria, this section is called Benchmarking. At the end of the report a recommendation will be formulated for Shell Global concerning the Ethical dilemmas previously discussed.
Almost 200 years ago, Marcus Samuel a London antique dealer began importing seas shells from the Far East to supply a fashion for exotic decor. His enterprise laid the foundation for a thriving import-export business later run by his sons, Marcus Junior and Sam. At this time oil was largely used in lightning and lubricants and the industry was based in Baku, Russia, with its large reserves of high quality oil and strategic natural harbour.
With the arrival of the internal combustion engine in 1186 a surge in demand for transport fuel sharply raised. Building on their shipping expertise, the Samuel brothers commissioned a fleet of steamers to carry oil in bulk. They revolutionized oil transport with the maiden voyage of their first tanker to transit the Suez Canal. The brothers’ company was named the Shell Transport and Trading Company in 1897, with a mussel shell as its logo.
Shell Transport’s activities in the East, combined with a search for new sources of oil to reduce dependence on Russia, brought it into contact with a company called, Royal Dutch Petroleum. The two companies joined forces in 1903 to protect themselves against the dominance of Standard Oil. They fully merged into the Royal Dutch Shell Group in 1907.
Shell changed its logo to the Scallop shell, or pectin, which is still used this day. By the end of the 1920s Shell was the world’s leading oil company, producing 11% of the world’s crude and owing 10% of its tanker tonnage. The 1930s were difficult, the group’s assets in Mexico were seized and it was forced to concede generous terms of the Venezuelan government when it nationalized its oils fields. After WOII, as peace brought a boom in car use, Shell expanded into Africa and South America. Shipping became larger and better powered. In 1947 Shell drilled the first commercially viable offshore oil well in the Gulf of Mexico. In 1955 Shell had a little over 300 wells, and three years later they began production in Nigeria.
Shells code of conduct
As a company-wide document, the Code of Conduct does not provide detailed guidance about compliance with every local legal requirement in all of the many different countries in which we operate. As a Shell employee, you are responsible for compliance with the local laws and regulations in force which apply to your work from time to time, as well as with the Code.
As the code of conduct of Shell consists out of 80 pages, we took a few principles which are relevant to our sub questions concerning: Human rights, labour law, environment and anti-corruption.
Human rights Conducting our activities in a manner that respects human rights as set out in the UN Universal Declaration of Human Rights and the core conventions of the International Labour Organization supports our licence to operate.
Shell’s approach to respecting human rights consists of several core elements, including adherence to corporate policies, compliance with applicable laws and regulations, regular dialogue and engagement with our stakeholders and contributing, directly or indirectly, to the general wellbeing of the communities within which we work. Our commitments in this area are supported by the Shell General Business Principles, this Code of Conduct and relevant Group policies in such diverse areas as: Social Performance
Human Resources, including Diversityand Inclusiveness Contracting and Procurement
We seek business partners and suppliers that observe standards similar to ours. All employees must understand the human rights issues where they work and follow Shell’s commitments, standards and policies on this topic.
page 9 of Shells’ English code of conduct 2010
Labour law To respect the human rights of our employees and to provide them with good and safe working conditions, and competitive terms and conditions of employment. To promote the development and best use of the talents of our employees; to create an inclusive work environment where every employee has an equal opportunity to develop his or her skills and talents. To encourage the involvement of employees in the planning and direction of their work; to provide them with channels to report concerns. We recognize that commercial success depends on the full commitment of all employees.
page 33 of Shells’ English code of conduct 2010
Environment Sustainable development for Shell means helping to meet the world’s growing energy needs in ways that are economically, environmentally and socially responsible. Shell’s commitment to sustainable development requires us to balance our short- and long-term interests; and integrate economic, health, safety, security, environmental and social considerations into business decisions.
page 6 of Shells’ English code of conduct 2010
Anti corruption We comply with all applicable laws and regulations of the countries in which we operate. Shell does not tolerate bribery, insider dealing, market abuse, fraud or money laundering. Facilitation payments are bribes and must not be paid. You must also avoid any real or potential conflict of interest (or the appearance of a conflict) and never offer or accept inappropriate gifts or hospitality. Remember, even unsubstantiated claims of corruption can damage reputations and business.
page 11 of Shells’ English code of conduct 2010
Violation of the provisions of the Code of Conduct, or of any laws or regulations governing our operations may have severe consequences for the individuals concerned and also for Shell. A failure to follow the Code that involves a criminal act could result in prosecution after referral to the appropriate authorities. Employees who violate the Code or any laws or regulations may also be subject to internal disciplinary action, including termination of employment
(http://wwwstatic.shell.com/static/aboutshell/downloads/who_we_are/code_of_conduct/code_of_conduct_english_2010.pdf) (sww.shell.com/ethicsandcompliance/areas/index.html) (sww.shell.com/finance/controllers/Controls_Governance_Assurance/anti_fraud/Anti_Fraud_Website.html) (sww.shell.com/ethicsandcompliance/report_concerns/global_helpline.html)
Shells code of ethics
The Statement of General Business Principles of the Royal Dutch Shell plc has been adopted by all Shell companies and, amongst other things, provides that all persons must avoid conflicts of interest between their private financial activities and their part in the conduct of company business. This Code is specifically intended to meet the requirements of Section 406 of the Sarbanes Oxley Act and the listing requirements of the New York Stock by providing for a number of implementing requirements in the area of disclosure controls and the avoidance of conflicts of interest by the category of job holders and persons referred to below. This Code is applicable to the following job holders and persons: the Executive Directors of Royal Dutch Shell;
the Chief Financial Officer; the Executive Vice President – Controller; the Executive Vice President – Treasury and Corporate Finance; the Chief Internal Auditor; the Executive Vice President - Taxation; the Executive Vice President - Investor Relations; the Executive Vice President - Strategy & Planning; the Executive Vice President - Finance Trading; the Executive Vice President - Finance Operations; the Executive Vice Presidents - Finance of Upstream International, Upstream Americas, Downstream and Projects & Technology; any person or job holder designated by the Chief Financial Officer (a register of such designated persons will be maintained by the Company Secretary). All of the above are hereinafter referred to as "COE Addressees". Key Requirements
Each COE Addressee shall: a. act in accordance with the highest standards of honesty, integrity and fairness and expect the same in their relationships with others while maintaining a work and business climate fostering such standards; and b. adhere to the SGBP, any applicable code of conduct on dealing in securities and any provisions for the avoidance of conflicts of interest stipulated in applicable terms and conditions of employment; and c. excuse himself from making any decision about an issue at hand in which a conflict of interests arises or could arise and in such event, disclose in writing the relevant facts and explain the circumstances that create or could create the conflicts of interest to:
(a) the chairman of the Audit Committee in the case of: (i) the Executive Directors of Royal Dutch Shell, (ii) the Chief Financial Officer, (iii) the Chief Internal Auditor and (iv) the Executive Vice President Controller, and (b) to the Executive Vice President
Controller, in the case of any other COE Addressee; and d. avoid having any financial interest in works of or contracts awarded by a Shell company or a company associated with a Shell company, or in supplies effected or services rendered to or by such a company and where this is unavoidable or immediate family members have such a financial interest, such interest shall be disclosed in writing in the same manner as set out in c. above; and e. not seek or accept from third parties to his own advantage any favour in whatsoever form or howsoever described in connection with the business of any Shell company or his duties (except for the acceptance of such things as gifts of nominal value and working lunches, dinners and entertainment of reasonable value, frequency and duration, appropriate under the circumstances, and subject always to the standards of a. above);
and f. not hold positions or jobs or engage in outside businesses or other interests that adversely impact the performance of duties owed to any Shell company or the interests of the same; and g. avoid any relationship with a contractor or supplier that could compromise the ability to transact business on a professional, impartial and competitive basis or influence decisions to be made by any Shell company; and h. consistent with the scope of his job responsibilities, ensure full, fair, accurate, timely, and understandable disclosure in regulatory filings and in other public communications made by Royal Dutch Shell. Reporting
Each COE Addressee shall report any breach thereof in writing to: (a) the chairman of the Audit Committee in the case of: (i) the Executive Directors of Royal Dutch Shell, (ii) the Chief Financial Officer, (iii) the Chief Internal Auditor and (iv) the Executive Vice President-Controller, and (b) the Executive Vice President Controller in the case of any other COE Addressee. No person reporting in good faith a suspected breach of conflicts of interest should be concerned about retaliation by Shell companies. Any job holder or person involved in retaliation will be subject to the sanctions referred to below. Accountability
Each COE Addressee is held accountable for the full compliance with this Code with respect to any issues within his control. Sanctions for a breach of this Code shall be determined by: (i) the Board of Directors of Royal Dutch Shell where it concerns the Executive Directors of Royal Dutch Shell or the Chief Financial Officer; and (ii) the Audit Committee where it concerns any other COE Addressee. Sanctions may include serious disciplinary action, removal from office and dismissal as well as other remedies, all to the extent permitted by law and as appropriate under the circumstances.
(http://www.shell.com/home/content/aboutshell/who_we_are/our_values/code_of_ethics/) Shell bad practice
Contempt case for Shell over gas By Richard Black Environment Correspondent, BBC News website
The oil multinational Shell is facing contempt of court proceedings in Nigeria over gas flaring. Last month, a court ordered the company to stop flaring gas from oil wells in the country, which accounts for much of Africa's greenhouse gas emissions. Shell has not halted the practice, so campaign groups have initiated proceedings for contempt of court, which can result in imprisonment. Shell has appealed against the initial judgment and denies it is in contempt. Waste of resources
In November, the Nigerian Federal Court, sitting in Benin City, ruled on a case brought by environmental and social groups on behalf of the Iwherekan community of Delta State. They argued that flaring creates significant local pollution and health problems, and is inherently wasteful of a resource which could bring income to local communities. International environmental groups also argue it is a significant source of greenhouse gas emissions, with flaring in Nigeria perhaps the biggest source of emissions in Africa.
The Benin court ruled that gas flaring amounts to "...a gross violation of [the plaintiffs'] fundamental right to human life and dignity...", and that Shell and the Nigerian National Petroleum Corporation had broken national law by failing to carry out an environmental impact assessment. By failing to stop flaring, as ordered by the court, campaigners now argue Shell is in contempt, and have initiated proceedings in the Federal Court. "Since judgment was passed, Shell has not halted her illegal activities," said Nnimmo Bassey, of the Nigerian group Environmental Rights Action. "We see a multinational corporation that has no respect for the rule of law, but who at every turn loves to characterize local people as vandals and saboteurs."
Earlier this month, an attack with explosives on an oil pipeline forced Shell to suspend extraction at two of its wells and delay shipments. The background to this and other incidents is the view held by some Nigerian communities that they do not benefit from oil wealth, with profit going to the multinationals. "It's astonishing that Shell has not complied with this court order preventing it from continuing gross violations of human rights," added Peter Roderick of the international organization Climate Justice, which has been involved with the action. "Its behavior seriously undermines respect for the rule of law that its operations rely on." Appeals pending
In London, a Shell spokeswoman said that the company did not believe itself in contempt. "The Benin High Court went ahead with its decision despite the fact that Shell Nigeria's preliminary appeal on jurisdiction was still outstanding," she told the BBC News website. "In addition, the company has made a further appeal because it believes that the court did not adopt the correct procedure. "Our appeals will be held by the Nigerian Court of Appeal; until then, our understanding is that we are not in contempt of court for continuing to flare gas."
The company says it flares the gas rather than processing it because there is no local market and no facilities which could liquefy it for export, though such facilities are now under development. Shell and the Nigerian government have both committed to phase out flaring in Nigeria by 2008. In 2004 the World Bank said that companies operating in Nigeria, which include Shell, ExxonMobil and Chevron, flare 75% of the gas that they produce (http://news.bbc.co.uk/2/hi/science/nature/4556662.stm)
This is an example of a bad practice because Shell is endangering the environment and the people who lived in that area. While the judge order them to stop flaring gas and they didn't stop.
Shell best practice
Shell Foundation fuelling change More than three billion people, or almost half the world’s population, cook in their homes using traditional fires and stoves that use fuels such as wood, dung and crop waste. They spend much of their time indoors breathing in lethal fumes which, according to the World Health Organization, claim the lives of 1.5 million people a year, or one person every 20 seconds. Women and children make up the majority of these deaths due to their increased exposure in the home.
The Shell Foundation and the US-based environmental non-profit organization Envirofit International hope to change that bleak picture. They’ve set up a partnership that has the potential to significantly reduce the number of global deaths caused by this form of ‘indoor air pollution’.
The Foundation, which was established by oil company Shell in 2000 as an independent charity, is providing Envirofit – which specializes in green engineering – with $25million (£12.1m) of investment and organizational support to form a programme that should see 10 million clean-burning stoves sold in India, Latin America and Africa over the next five years. Envirofit, working with Colorado State University’s Engines and Energy Conversion Laboratory, will design, develop, market and distribute the ‘clean-cook’ stoves, which emit significantly fewer toxic emissions and use less fuel.
Scientists at a private US firm, Berkeley Air Monitoring Group, will carry out detailed evaluation of the stoves once they are put into the field. And all parties have pledged to develop the programme with a keen eye on the real, rather than perceived, needs of their future customers.
Shell Foundation initially got involved with the indoor air pollution issue in 2002, running nine pilots as part of its ‘Breathing Space’ initiative in seven countries with various bodies, many of whom will be involved in the new push. One of the partners, Harish Hande, managing director of Selco India, an Indian social venture enterprise, says the programme is ‘a breath of fresh air’ because it’s based on trying to provide something of real value to its target group, rather than handing a product down to them.
The fact that the stoves will be sold – at prices ranging from $20–$150 (£10–£75) – is important. The partners believe the commercial, rather than aid-driven, model will provide a more sustainable way of tackling indoor air pollution – because it relies on market mechanisms to guide product development and drive consumer demand, instead of aid agencies donating or subsidizing the sale of stoves.
The Foundation hopes that by treating people as customers rather than aid recipients, the stoves will be seen by householders as high-quality, aspirational products. ‘The only way we’re going to make a significant long-term impact and achieve the scale needed is to get private sector thinking involved,’ argues Shell Foundation director Kurt Hoffman.
It’s early days yet, but if the model proves to be as effective as Hoffman and his partners hope, then the return in human terms could be significant. (http://www.ethicalperformance.com/bestpractice/casestudy/73) This is an example of Shell best practice because Shell investing money into research on how to reduce indoor pollution. This will help save many lives. Shell’s Ethical Dilemma’s
Human rights Human rights represent the fundamental rights that people have, pure due to the fact that they are human beings. Human rights are thus conceived as universal and count for everyone equally, these rights may exist as natural rights or legal rights, in both national and international law. Also they were not created by any government or any other legal group, and they are not able to cancel these rights out either.
All this because human rights are supported by treaties and international conventions ( for instance the UN Global Declaration of Human Rights in 1948), these include political, economic, and cultural rights, as well rights for life, liberty, freedom, right of association, religion, belief, free speech, education, information, nationality, movement, and equality before law.
No country is obliged to promulgate these rights; however they function as a model of concern for people and form the basis of many modern national constitutions, as well as a measurement tool for government’s treatment towards its people. In the twentieth century a worldwide agreement has been developed, this agreement refers to the jurisdiction institutions of nations versus the international moral code.
It determines that some particular kinds of treatment and benefits are mandatory for all humans just because they ‘are’ human. John Locke (1632-1704) a Scottish philosopher claimed that human rights are essential moral aspects and entitlements to life, liberty, and property.
He is best known for his expression of human rights from the Virginia Declaration of Rights in 1776. He stated that: “All men are by nature equally free and independent and have certain inherent rights, of which, when they enter a state of society, they cannot, by any compact, deprive of divest their posterity.” (http://www.sfu.ca/~aheard/intro.html)
(http://www.businessdictionary.com/definition/human-rights.html) The Universal Declaration of Human Rights All quoted from www.un.org
Whereas recognition of the inherent dignity and of the equal and inalienable rights of all members of the human family is the foundation of freedom, justice and peace in the world, Whereas disregard and contempt for human rights have resulted in barbarous acts which have outraged the conscience of mankind, and the advent of a world in which human beings shall enjoy freedom of speech and belief and freedom from fear and want has been proclaimed as the highest aspiration of the common people, Whereas it is essential, if man is not to be compelled to have recourse, as a last resort, to rebellion against tyranny and oppression, that human rights should be protected by the rule of law, Whereas it is essential to promote the development of friendly relations between nations.
Whereas the peoples of the United Nations have in the Charter reaffirmed their faith in fundamental human rights, in the dignity and worth of the human person and in the equal rights of men and women and have determined to promote social progress and better standards of life in larger freedom, Whereas Member States have pledged themselves to achieve, in co-operation with the United Nations, the promotion of universal respect for and observance of human rights and fundamental freedoms, Whereas a common understanding of these rights and freedoms is of the greatest importance for the full realization of this pledge, Now, Therefore
THE GENERAL ASSEMBLY proclaims THIS UNIVERSAL DECLARATION OF HUMAN RIGHTS as a common standard of achievement for all peoples and all nations, to the end that every individual and every organ of society, keeping this Declaration constantly in mind, shall strive by teaching and education to promote respect for these rights and freedoms and by progressive measures, national and international, to secure their universal and effective recognition and observance, both among the peoples of Member States themselves and among the peoples of territories under their jurisdiction.
All Human Rights Articles including this definition can be found on: (http://www.un.org/en/documents/udhr/index.shtml) Shell and Human Rights
Nigeria, Shell Global was accused under the law of human rights violations against the people of Ogoni and the company’s image and reputation was badly damaged. This lead to Shell being charged with complicity especially for the execution of Ken Saro-Wiwa and eight other members of the Ogoni tribe, who began to demonstrate against Shell’s activities and where the founders of the Survival of the Ogoni people. It seemed that Shell had been working together with the Nigerian military and police force, supporting them with funds to ensure suppression of any demonstrations and protests of activists in Nigeria.
In 2009 they agreed to a settlement of $15.5 million. (http://ccrjustice.org/ourcases/current-cases/wiwa-v.-royal-dutch-petroleum) The importance of public reputations regarding businesses increased in the mid 90’s, because of the tragic incident in Nigeria as well as other issues Shell Global was accused of in this time period. Damage on Shell’s image as well as the boycotting of customers have caused massive profit collapses and made Shell formulate a new strategy approach to regain the confidence of society as an ethical company.
This is something some companies loose out of sight, when blinded with profits and rising number one tends to forget ‘how’ you obtain these as long as you obtain them, ethical or not. In 1998 Shell Global published a report in which the commitment to corporate social responsibility was presented and was called “Profits and Principles- Does there have to be a choice?”. This report was one of the first Corporate Social Responsibility (CSR) reports published by a large multinational company. Shell learned the hard way that in order for companies to ensure long-term success they must adopt a stakeholder value approach.
“A firm’s stakeholders include those who effect or are affected by the firm’s goals” (As stated by Edward Freeman in: 1984 cited Werther and Charter, 2006, p. 3).
A firm’s purpose in not only to maximize their profits to in turn satisfy their stakeholders, but also a business exists to satisfy all stakeholders’ needs and therefore needs to be aware of the external environment and meet the societal expectations set by these stakeholders. All these Stakeholders belong to different kinds of groups, and purchase different kinds of interest and each of them invests efforts as well as trust in the corporation.
This corporation’s task is to balance the differences in interest among the stakeholders since they are not only groups who can help a business stimulating growth (and more), but also able to hurt one (the image and therefore profits etc.). If the wellbeing of all stakeholders is not carefully taken into account, the firm’s reputation, in this case Shell Global, might easily be damaged. Nowadays, scandals and negative events regarding one or more stakeholder group’s spread like wildfire, because of the social media, think about the Newspaper, Television, and of course the Internet.
The “Profits and Principles” CSR report was a first attempt of Shell to address different stakeholders and to be aware of their distinguished interests. Furthermore it informs about their business principles and how their Statement of General Business principles is put into practise. Also it includes issues and dilemma’s the Shell is facing on global scale, an example of one of these dilemma’s is for instance Human Rights. They could also include renewable resources and operating in politically sensitive regions.
Principles listed in the Shell CSR report also contains a section about their responsibility towards society and what they view as their responsibilities to be (or become) a good corporate citizen. For instance “Observing the laws of the countries in which they operate, to express support for fundamental human rights in line with the legitimate role of business and to give proper regard to health, safety and the environment”.
This report also states that Shell is engaged in social investments and charitable giving, which lifts a positive perspective by Stakeholders and consumers alike. These responsibilities refer to components of Corporate Social Responsibility, and are based on economic, legal, ethical, and philanthropic responsibilities stated by Carroll (as cited in Stanwick, 2009, p. 51-53). (http://www.ethicalconsumer.org/CommentAnalysis/Features/CorporateSocialResponsibility.aspx)
As mentioned before, in order to attain and sustain long-term success, firms must develop the need to go beyond profits, which in turn means that they have to go beyond economic interests and develop a corporate strategy, which combines economic, legal and social interest in all.
The concept of CSR is no giving away money to the poor, but simply put, strategic CSR stands beyond legal and economic requirements and focuses on the social side of profitability. When corporations such as Shell are considerate of their stakeholders and society alike they are implementing sustainability accepting their comprehensive responsibilities as an entity.
CSR creates a win-win situation since both the society and the corporations benefit. This is because the stakeholder appreciate when their interests are A) taken into consideration, and B) implemented in the corporate strategy, and this will in turn boost the contribution for the business.
In this part of the report Shell Global also mentions the tragic case of the execution of the Nigerian activists in 1995, including other documents and articles about the incident that were published by the company inform. In most of these documents it is notable that Shell apologizes for their wrongdoing and abuse of Human Right in Nigeria , however also mention that they have contributed to the country with regard of paying taxes, providing jobs, social investment, and so on.
What you can see here is that Shell is admitting they were wrong and that they apologize for this but on the other hand, try to cover their mistakes with the good things they have done for society. Even so the public still want Shell Global to apologize to Nigerian citizens publicly. Shell made mistakes, but that is only human, and now they are trying to learn from their mistakes to improve their overall performance in the (near) future.
Only until recently Shell is actually taking steps to put their statement into practice, Shell’s chairman of the Nigerian companies, Mutiu Sunmonu, states that they, referring to Nigeria, want to take action in different areas ( Sustainability Report 2010). For instance, the Shell Petroleum Development Company in Nigeria began to let communities decide on and develop projects, community involvement is key and lead to remarkable results (2006).
“The best contribution SPSDC can make is to grow and sustain our business in a responsible way: this will maximise revenues to the government, protect tens of thousands of jobs, provide valuable contracts to Nigerian companies, and develop industry skills” (http://sustainabilityreport.shell.com/2010/securingdiverseenergy/deliveringenergyresponsibly/nigeria.html? cat=b)
Shell Global made analyzing their ethical behaviour an easier task by uploading the sustainability report on their website, so everyone can take a closer look at it. Shell has been a member of the UN Global Compact from the very beginning and report their progress towards the ten principals.
“The UN Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption”. (http://www.unglobalcompact.org/AboutTheGC/)
Shell is not only stating their principles on Human Rights in the Code of Conduct or Code of Ethics and the General Business Principles Document, but are implementing several steps to incorporate these values and principles into a corporate strategy as well as in the daily decision making.
Their business principles require Shell to respect the Human Rights of their employees and to support the fundamental Human Rights in line with the legitimate role of business. In doing so they have developed several things such as: Human Rights Training: Shell provides training on the Business Principles for new employees and all others, of how the comply with the Code of Conduct, also special training for their staff in difficult areas where Human Rights are not really taken into account. Tools
Guidelines All these are to ensure the company to meet the principles. For example employees working in Nigeria get training of how to behave in certain situations and how they should respond. Each training program differs per country as every country is different. Shell Global participated in consultations by the UN special representative on business and human rights, Professor John Ruggie, and seek to implement a framework whereby governments are obliged to protect human rights and the fact that businesses should respect said rights. (http://www.shell.com/home/content/environment_society/society/human_rights/)
The general intent of corporate social responsibility and values is not an actual guarantee that it is incorporated into a business’ daily operations. Towards customers, employees and society corporate social responsibility has to be embedded within a corporate culture and into the codes of conduct mentioned before, this is now a core element in Shell’s strategy. Established a value system (Code of conduct & statement describing what is expected of employees and what is acceptable - Guidelines).
Compliance management system: in order to measure the effectiveness, ensure employees comply with policies. Certification/ guidelines such as ISO standards: achieve more creditability among stakeholders (Global reporting initiative guidelines “that strive to increase the transparency and accountability of economic, environmental, and social performance”) (http://www.shell.com/home/content/environment_society/reporting/reporting_against_gri/)
Naturally these standards are only of meaning if Shell conducts audits internally or externally, using UN Global Compact reporting making use of an External Review Committee. In 1988 Shell realized that social auditing becomes more important since society demands greater accountability and to make their commitment transparent their annual report includes the ‘Triple Bottom Line’. Meaning it includes parts such as environmental and social performance as well. (Lantos 2011, p. 38). Then the results of the audits (which are published for instance in the annual report) are made available for the stakeholders, so they can get a clear overview of the ‘how’s’ and ‘what’s’ of Shell Global, and feel involved.
Shell has been operating in Nigeria from 1958 up until now. 80% of Shell’s total crude oil production comes from the Niger Delta. Nigeria has always been an interesting and prosperous country for Shell when it comes to crude oil; the company has over 4400 employees in the country. Yet, it has been an incredible difficult country for the company due to poverty and corruption in the past few decades. Now, for strategic reasons Shell wants to sell some of their Nigerian oil fields. This causes several problems, especially on labour law.
Shells ethical thought In the code of conduct there is a health, safety, security and the environment and Social Performance record described. In this code of conduct, Shell states their values related to labour law as well. Shell’s main goal is live up to the three principles written in this record: - One should base hiring, evaluation, promotion, training, development, discipline, compensation and termination decisions on qualifications, merit, performances and business considerations only. - Do not discriminate according to race, color, religion, age, gender, sexual orientation, marital status, disability, ethnic origin or nationality. - One should be aware of local legislation and cultural factors that may impact decisions.
All employees of approximately 1700 companies of the agglomerate Royal Dutch Shell and contractors or agents who are working on Shells’ behalf should keep themselves to these principles. These are the normative ethics of Shell in relation to labour law.
Shell’s contemporary issues related to labour law
Currently, Shell faces trouble with their Nigerian employees who join the Nigerian trade union for oil and gas workman. Shells policy for selling the oilfields in Nigeria has caused the trade union and their members to strike. Shell’s employees in Nigeria live in uncertainty for their future and ask for more transparency in the process of selling the oil fields. While Shell is not in a violent act against the Nigerian jurisdiction, it’s in a moral problem that leaves the employees insecure about their future.
The employees want more understanding and clearness of the future of the oil field they work on. Shell could say that they follow the law, or try the best they can to give more transparency in the selling process. After the options for actions are explained, the ethical judgment can be made. In this case it is better for Shell to do the best they can to create as much transparency as possible, not only to prevent the workforce for a strike, but also for the rules established in Shell’s own code of conduct.
Shell’s stakeholders and Corporate Social Responsibility
Because Shell a global company, active worldwide, many stakeholders are involved. The first stakeholder is Shell itself. Then there are the investors, which are in the case of Shell shareholders, because Shell is a public corporation. Shell’s employees are a very important group, especially in this matter. The Nigerian government (local and national), the labour union and Shell’s worldwide customers are also stakeholders.
In this case the major stakeholders are the firm, the employees and the labour union. The labour union statement is that the employees are in uncertainty and therefore they asks their members to strike. Shells management together with the investors wants to sell the oil fields for a high price.
More and more customers are focused on buying from a corporate responsible corporation. If Shell wants to maintain its customer base and good company name they have to act responsibly. The Nigerian government wants a reliable partner to buy the oil fields in order to continue with the 4440 jobs. If this cannot be found, there would be a large growth in the national unemployment rate.
Evaluate Shell Corporate Ethics There is nothing wrong with the code of conduct like it is now with concerns to labour law. The three principles, written in the health, Safety, Security and the environment and Social Performance record, are so broadly formulated that it covers a lot. What is left, is for everyone working in and with Shell to interpret it the right way.
Environment Also the environment is part of the ethical issues at Shell Global, however unlike the others this topic covers a variety of issues within the dilemma such as 1. The Natural environment 2. Beyond compliance leadership, 3. Stakeholders, 4. Sustainability, and ending with 5. Shell & climate, which covers climate change.
“From the mid-1990s public scrutiny of the oil industry intensified as environmental issues gained prominence. Shell was criticized over plans to dispose of the Brent Spar platform and also ran into difficulties in Nigeria. As the new millennium got under way, Shell expanded in China and Russia. In 2005 Shell dissolved its old corporate structure to create a single new company. Shell remains one of the world’s major oil and gas companies. We have interests in liquefied natural gas and gas to liquids products; we help develop sustainable bio fuels; and we are involved in wind projects.” (www.shell.com)
The natural environment For over 50 years, Royal Dutch Shell has been operating in Nigeria in the oil and gas industry and not without problems that damaged the natural environment. This entails problems such as: oil spillage (Shell Petroleum Development SPD), Gas flaring (greatest contributor to global warming). Shell Nigeria is aware of these environmental issues and admits being at fault. Oil spillage is a big issue for the natural environment, it directly and indirectly harms communities near factories and of course affect nature negatively.
Oil spillages wastes valuable resources for the communities to live forth. According to Shell Nigeria they are not at fault, oil spillage is not only caused by operational failure of human error. More than 70% are the results of sabotage, oil theft and illegal refining by criminal gangs (Shell Nigeria, 2011).
When Shell started their business in Nigeria there was no demand for said product at first, causing the gas to be ‘burned’ safely. However this changed when there was a steady demand in the past 50 years, resulting in more gas to be burned, which in turn affects the environment, even more so when a phenomenon called gas flaring occurs. Gas flaring plays a major role in global warming, and is an increasingly issue for the world (significantly increases CO2), causing 3rd parties to force the gas flaring to a stop. Some 400x106 toms of Carbon Dioxide are emitted annually in this way and it amounts to about 1.2% of the worldwide emissions of CO2.
This number may seem insignificant, but in perspective it is more than half of the Certified Emissions Reductions (a type of carbon credits) that have been issues under the rules and mechanisms of the Kyoto Protocol as of June 2011.
Somewhat between 2000 and 2009 the SPDC installed an Associated Gas Gathering (AGG) infrastructure at 33 sites, covering 60% of its associated gas production, these sites capture gas from its facilities. The gear does not fully rule out the gas flaring, but Shell Nigeria is trying to search for alternative solutions to avoid the flaring. This was Shell uses the potential area of the natural environment to develop a competitive advantage, and to increase their image as ‘environment caring’ unlike their competitors.
However it is very hard for Shell to see the natural environment as an advantage, since their productions hard the environment and are known for doing so. They have applied a typology of Mr Orsato, for which Shell Nigeria only has one strategy to apply where they use the natural environment as a competitive advantage: beyond Compliance Leadership.
Beyond Compliance Leadership Shell want to make continuous and conscious effort to acknowledge the demands of its stakeholders, requiring more than the industry’s average and wanting to go beyond the performance of their competitors. To be leader in the oil and gas sector and try to comply with stricter regulations in search for advantages. In doing so they spent millions in developing performance program’s and advertizing. (Rentato J. Orsate, 2006).
NGO as Environmental Stakeholder Over the years some NGO’s (non-governmental organizations) support the environment, this amount has grown significantly. There are some popular NGO’s such as Amnesty International, Greenpeace, and Friends of the Earth. Most of them are against operations companies as Royal Dutch Shell, because of the effects on the natural environment. The groups are against damages in nature, and accuse Shell of lack of protection of the environment and hiding ‘crucial’ information and exaggerating the percentage of oil spillage caused by sabotage (70% in the past five-six years) since Nigeria, world’s 8th largest oil exporter, recorded over 3.000 oil spills between 2006-2010 (June). (http://www.regjeringen.no/upload/MD/sub/oslocfc2010/dokumenter/nigeria.pdf)
They are even more so against companies as Shell since the process of extracting crude oil , it comes together with natural gas, which must be separated. When this gas is not separated for products such as fuel, it is vented into the air or burned. Venting and flaring produce Methane and CO2, both are Greenhouse gases, and there for contribute to the global warming. Besides these environmental effects many people suffer from lung diseases and Leukaemia, these can be linked to the pollution according to Sunny Ofehe, a Human Rights activist.
Sustainability Shell’s operations in the past located in Nigeria, had not been warmly accepted due to certain circumstances. However the Niger Delta has become more stable over the past few years. Even so the issues between Shell and the Nigerian government have led to many adaption’s and changes within Shell as a company.
The Niger Delta supplied over 65% of the domestic gas, said gas was used to provide power (to communities and such). Shell’s projects in Nigeria have provided so many jobs and have created numerous other opportunities of growth, and on the other hand they have also created many problems. Operating in an extremely challenging environment requires a certain skill set: since Shell has encountered situations such a kidnapping, one contractor got kidnapped and assaulted. This results from the Nigerian poverty, some people resort to violence and other crimes in order to keep on going, collateral damage can be dealt to the environment (polluting drinking water, fishing streams and farm lands, etc.)
Here the ethical issue lies with how Shell has acted during these periods. Even though essentially the oil spills were not Shell’s fault, not taking responsibility was what mattered most. Failing in doing so became the ethical issue at hand. Shell claimed that some of the spills that were caused because of corrosion instead by human and technological errors as Shell stated at first. Instead of dealing with the issue Shell departed without taking any actions, it kind of became a situation Shell VS stakeholders. Shell claiming that they have dealt and learned from their mistakes while others are saying the opposite.
There is even word of a three-way discussion between the community, the local authorities/government and Shell. If Shell (or for that matter any party) does not ‘deal’ with the spills it can have a serious impact on the environment, and may even cause complete areas to be used up and stay unusable. This dilemma opened the eyes of the company and changed their current way of conducting business. Also the fact that people were starting to ask hard questions about the situation and change, what about the future? In this period Shell learned to listen, and learn from past mistakes to improve in the future. This allowed them to become more environmentally aware and responsible.
Reflecting on the ethical dilemma, Shell’s biggest problem was the oil spills of their facilities caused by sabotage, theft, human errors, and equipment errors. It was a mixture of causes, partially they were at fault for not restoring their pipelines. Currently they replaces some pipelines and are working on an ongoing maintenance program. Shell has experienced firsthand that after failed projects or mistakes, community involvement is a very important key to success. Maximizes the government’s revenues
Protects jobs Provides valuable contracts (to local companies) Develop industry skills Shell want to be responsible in dealing with these kinds of challenges themselves and want to make sure that they learn from their past experiences and in turn become more aware of their actions in the years to come.
Climate change & Shell More companies around the globe are becoming aware that the environment is changing worldwide and that this has become quite the problem. This causes a large amount of companies to change their way of business and want to become more ‘green’ and aware of the impact they have as a company on the environment. This includes Shell Global, they also focus on climate changes and believes that the best way to secure a more sustainable energy future is to take action as of now.
Focus areas: Producing more natural gas Developing lower-carbon bio fuels Help advance carbon capture & storage (CCS) technology Improve energy efficiency concerning their operations
1. Natural gas “Natural gas offers an affordable and environmentally acceptable option to power people’s lives today. It will also help to meet the world’s rising demand for more, cleaner energy into the future. Shell is using advanced technology to open up new resources of natural gas. Cooling gas to liquid allows us to ship it to faraway markets and we are moving ahead to build the world’s first giant floating facility to turn gas to liquid. In Qatar, we have constructed the world’s largest plant to turn natural gas into liquid products.” (www.shell.com)
Shell is building their capacity in today’s biofuels and is also working on how to make the production of these fuels more sustainable, this also means that Shell is looking for developments in advanced biofuels form non-food sources, as well as new conversion processes that offer better environmental outcomes, fewer CO2 emissions en improved fuels and an end product. Shell distributed about 9.6 billion litters in the year 2010, making it one of the world’s biggest distributers of biofuel. Nowadays they produce lower carbon than petrol and diesel. Ethanol made from Brazilian sugar cane produces around 70% less CO2 emissions in production than regular petrol.
3. Carbon capture & storage
The energy demand is set to double in the next 40 years, mainly driven by population growth and economical prosperity. developing ways to capture and store the CO2 that comes from burning them is essential to help mitigate serious climate change.
CCS is critical to meeting the huge projected increase in global energy demand while reducing CO2 emissions, explained Peter Voser, Chief Executive Officer of Royal Dutch Shell plc. “If you want to achieve climate change goals, CCS has to be part of the solution.” The International Energy Agency (IEA) projects CCS could provide around one fifth of the world’s CO2 emissions reductions by 2050. The agency also calculates the cost of reaching those CO2 targets will be 70 per cent higher without rapid CCS progress. (www.Shell.com)
4. Improve efficiency
“How does Shell manage the environmental impacts?”
To maintain and protect the biodiversity, Shell works together with various conservation groups and want to ensure that if an area is rich in biodiversity they want to communicate with the stakeholders of that area (the local communities) and experts and develop a biodiversity action plan. They also want to consider the possible impact on benefits on nature, such as purifying water, air, and sustaining food supplies to communities.
Shell has reduced the amount of oil spillage during operations which needed extra control concerning corrosion and decreased operational failures, this reduces risk for surrounding stakeholders and the environment..
Upgrading their facility and installing (more) environment aware/friendly equipment (such as burners and sulphur dioxide capture technology) Shell is clearly participating to keep the environment cleaner as you can see they are implementing ‘greener’ technologies and strategies.
By using a new approach and advanced technology to help manage their water use. Shell has the Pearl GTL plant in Qatar, which creates fresh water from its dry surroundings.
They want to build a sustainable energy future.
Corruption is now recognized to be one of the world's greatest challenges. It is a major hindrance to sustainable development, with a disproportionate impact on poor communities and is corrosive on the very fabric of society. The impact on the private sector is also considerable - it impedes economic growth, distorts competition and represents serious legal and reputational risks. Corruption is also very costly for business, with the extra financial burden estimated to add 10% or more to the costs of doing business in many parts of the world. The World Bank has stated that "bribery has become a $1 trillion industry."
UN Global Compact Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.
The General Business Principles of Shell state their insistence on integrity, honesty and fairness in all aspects of their business. The indirect or direct offer, soliciting, payment or acceptance of bribes is marked unacceptable. Nevertheless, in Nigeria, a country that deals with poverty and corruption, Shell has several times proven to be involved in corruption. This part covers Shell’s undertakings regarding the anti-corruption dilemma.
Shell and five oil service companies agreed to pay $236.5 million in 2004 to settle probes by the U.S. Justice Department and Securities and Exchange Commission. Shell had a share in this bribe of $48.1 million, which stands to 20.34% of the total amount. It included the bribe of government officials, which helped their clients to avoid the customs process, pass off phony documents or smuggle illegal goods, including medicines and explosives.
Shell contracted Panalpina Nigeria for the logistics. Shell’s Nigerian employees ‘’specifically requested Panalpina Nigeria to arrange false invoices with line items to mask the nature of the bribes,’’ therewith hiding the nature of the payments to avoid suspicion if anyone audited the invoices. Additionally Shell admitted paying $2 million to Nigerian subcontractors on its deep-water Bonga Project. Shell was aware that some money would go as bribe-money to Nigerian officials to avoid the customs process and give the company an improper advantage.
While on the other hand the amount of countries in which Shell had procedures in place to stamp out child labor dropped from 86% to an average of 78% in 2 years, the number of proven cases of bribes being offered or accepted by Shell employees rose from four to eight.
In 2005 Shell set up a global helpline and website for staff and business partners to confidentially report concerns and get advice on any suspected infringements of the law, Shell’s Code of Conduct or Business Principles.
Cases of bribery and fraud are reported to the Audit Committee of the Board of Royal Dutch Shell plc. Shell reviews its relationship with any partner found to be taking bribes or committing fraud. After reports of violations of their Code of Conduct in 2011, Shell ended relationships with 78 staff members and contractors.
Shell & Corruption Shell’s principle as given before is harsh on corruption. Shell stands for ‘’honest business’’ and therefore there should be no place for corruption. Nevertheless, there are several cases in which Shell has appeared to be taking part in. One example is that; Shell was accused of bribing government officials in Nigeria. It is commonly reported that Shell had access to all levels of politics and governance.
The government officials helped to avoiding the customs process, passing off phony documents or smuggling illegal goods, including medicines and explosives. This way of doing business saved Shell a lot of money. Furthermore, next to having access to politics and governance, Shell also has a relationship with the Nigerian military. The corruption might have been good for Shell’s businesses on the short-term, but on the long term it creates a bad image of the company as well as negative influences on the country in which it takes place.
The effects of Shell’s corruption in Nigeria
Since 2004 Shell has had many oil spills in the Niger Delta. These oil spills caused by Shell in the Nigerian delta affected a lot of inhabitants, nonetheless Shell almost managed to avoid prosecutions for it. The crude oil that poured unchecked from the Bodo spills polluted the 20 square km network of creeks on which Bodo and as many as 30 other smaller settlements depend for food, water and fuel.
According to locals the only compensation Shell offered was an amount of $3.500 plus 50 bags of rice, 50 bags of beans and a few cartons of sugar, tomatoes and ground nuts. Allegedly no attempt had been made to clean up the oil that leaked into the water and farmland. Shell was able to change many statistics due to the bribery of governmental officials. They were able to claim that 85% percent of the oil leaks were caused by sabotage without giving a good explanation of the figure, and everybody seemed to take it all as it was.
Even though the oil from Ogoniland accounts for approximately $30 billion to the economy of Nigeria, the people of Ogoni see little to nothing from it. While Nigerian officials are getting richer, the inhabitants are left with the consequences of the leaks. The Ogoni villages have no clean water, little electricity, few telephones, little health care, and no jobs for displaced farmers and fishers.
Shell’s political power in Nigeria
Shell has allegedly been involved in the execution of the ‘’Ogoni Nine’’. The Ogoni Nine were a group of nine activists from the Ogoni region of Nigeria, whom were executed by hanging in 1995 under the military dictatorship of General ‘’Sani Abacha’’. They were were putting up strikes against Shell for exploiting their land. At that time, Shell already was accused of having an organized relationship with the Nigerian military for personal interests. Therefore Shell was brought in relation with the execution of the Ogon