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Introduction

Corporate Social Responsibility

Retrieved from https://impakter.com/corporate-social-responsibility/

According to Fernando (2020), Corporate Social Responsibility (CSR) pertains to the self-regulating business model that helps a company be socially accountable—to itself, its stakeholders, and the public. During the late 1770’s, Adam Smith introduced the expression ‘the invisible hand’ to demonstrate how capitalists inadvertently brought  about  domestic  economic  prosperity even though their real intentions  were  the pursuit  of  self-interest.  Smith  argued  that  the metaphorical ‘hand’ helps produce benefits to society even when the capitalists did not plan for such social benefits. The invisible hand produces outcomes that may not be consciously planned To  Smith,  social  welfare  is  a  by-product  of capitalists’  activities. Today, numerous companies are adapting numerous CSR plans to help fulfill their social responsibility to communities where their operations are being held at. Some  argued  that  CSR  is  an excellent tool to market the firm and  should therefore be led by marketers (Lantos, 2001) or be  used  to  enhance  the  company’s  brand (Lewis, 2003). By this, some companies take CSR as a market strategy to promote their company to increase profitability of the firm, which takes into consideration the self-interest of such firms and disregards the condition of the community involved. Mintzberg (1983) indicates that the purest form of CSR is when the firm expects no return from their CSR activities and they become socially responsible because ‘that is the noble way for corporations to behave’. To Mintzberg, CSR leads to firms doing actions to serve society without considering any return from such actions. Looking at an ethical perspective, Jones (2003) indicates that it is problematic for CSR to be exercised with the aim of obtaining calculative advantage or strategic competitive edge. If the concept of being socially responsible means “to give back to society” or “the art of giving”, then we can consider that when a company begins to consider and calculate their returns from doing CSR activities, then such companies are not acting ethically when providing CSR actions.

Royal Dutch Shell

Retrieved from https://www.africanleadershipmagazine.co.uk/sustainable-development-csr-the-spdc-example/

Royal Dutch Shell has contributed to the detriment of the environment due to events like BP’s Deepwater Horizon oil spill, the Amoco Cadiz oil spill, etc. Due to the inherent risk of the gas and oil industry, companies should prepare for the outcomes that will come from their operations. For instance, the Nigerian Oil Spill caused damage to numerous sectors from the environment to the community. From this, Shell had recognized the fault in their actions and so acted promptly by addressing the needs and focus on working with communities and managing their impact on the environment. In 2015, Royal Dutch Shell, together with the Bodo community of Nigeria, signed a memorandum that granted the SPDC JV access to areas to start-up clean up of the oil spills (Royal Dutch Shell, 2018). Recognizing the need to address the inherent problems and risk in the industry, Royal Dutch Shell has integrated numerous CSR plans to help out affected communities. Royal Dutch Shell has been engaging itself with numerous environmental groups to help aid them in recovering the damages brought out by their operations and actions.

References

Fernando, J. (2020, November 17). Corporate Social Responsibility (CSR). Investopedia. Retrieved January 5, 2021, from https://www.investopedia.com/terms/c/corp-social-responsibility.asp

Jones, C. (2003). As if business ethics were possible, `within such limits'... Organization, 10(2), 223-248. https://doi.org/10.1177/1350508403010002003

Lantos, G. P. (2001). The boundaries of strategic corporate social responsibility. Journal of Consumer Marketing, 18(7), 595-632. https://doi.org/10.1108/07363760110410281

Lewis, S. (2003). Reputation and corporate responsibility. Journal of Communication Management, 7(4), 356-394.

Mintzberg, H. (1983). The case for corporate social responsibility. The Journal for Business Strategy, 4(2), 3-1

Royal Dutch Shell. (2018). Spill response and prevention in Nigeria - Shell sustainability report 2018. Annual Reports and publications | Shell Global. https://reports.shell.com/sustainability-report/2018/special-reports/spill-response-and-prevention-in-nigeria.html

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CSR Initiatives of Oil and Gas Industry

Retrieved from http://redblue.vn/

The oil and gas industry is the key element in every country. It powers infrastructures and keeps the electricity running. It also powers transportations and keeps engines at work. However, the benefits of oil and gas are not one without cost. The irresponsibility of oil companies produces environmental blunders such as the Amoco Cadiz Oil Spill (1978), the The Ixtoc 1 Oil Spill (1979-1980) and the Deepwater Horizon Oil Spill (2010) (Rafferty, 2020). Its production and use also emits harmful greenhouse gas which inevitably causes global warming (Denchak, 2019).  Destruction of natural resources and the pollution of the Earth risk creating a bigger problem than one without energy. For this reason, oil and gas companies must have CSR initiatives to give back to the society.

Retrieved from https://www.culturalsurvival.org/publications/cultural-survival-quarterly/changing-way-business-done-un-global-compact

Oil and gas companies take part in international initiatives such as the UN Global Compact (see photo above), Voluntary Principles on Security and Human Rights, Combat Climate Change 3C Initiative and the UK Government's Extractive Industries Transparency Initiative which protects human rights and invests in renewable energy, communities and sustainability. There are also other initiatives such as the Carbon Disclosure Project and the Global Methane Project which focuses on the evaluation and reduction of carbon and methane emissions in communities. Programs for the construction of schools and hospitals, protection of human rights as well as youth development were also organized. More specifically, BP, Shell, Chevron and ExxonMobil spent approximately $660 million altogether for health and educational programs (Gayatri, 2018 & Oil industry’s, 2010). Finally, oil and gas companies also integrate ISO 14000 or environmental management systems in order to lessen or eliminate the damages to the environment (Spence, 2010).

These CSR initiatives will benefit the oil and gas companies not only by protecting the environment from more damage but also by enhancing their reputation (Oil industry’s, 2010). These companies must continually look for the best corporate social responsibility practices since these initiatives have a vital contribution to the public image of a company (Collier, 2018). Nonetheless, it is important for companies to give effort to these initiatives and show through their words and action that they are working towards a better future.

References

Collier, E. (2018). The importance of corporate social responsibility to your business. Retrieved from https://www.highspeedtraining.co.uk/hub/importance-of-corporate-social-responsibility/#:~:text=CSR%20demonstrates%20that%20you're,business%20sense%20to%20operate%20sustainably.

Denchak, M. (2019). Greenhouse effect 101. Retrieved from https://www.nrdc.org/stories/greenhouse-effect-101

Gayatri, G. (2018). Corporate social responsibility in oil and gas industry. Retrieved from https://insights.energydais.com/corporate-social-responsibility-in-oil-and-gas-industry/#:~:text=Some%20oil%20and%20gas%20companies,particularly%20in%20the%20developing%20nations.

Oil industry's increasing focus on CSR. (2010). Retrieved from https://www.petroleum-economist.com/articles/corporate/company-profiles/2010/oil-industrys-increasing-focus-on-csr

Portalewska, A. (2015). Changing the way business is done. UN global compact. Retrieved from https://www.culturalsurvival.org/publications/cultural-survival-quarterly/changing-way-business-done-un-global-compact

Rafferty, J. (2020). 9 of the biggest oil spills in history. Britannica. Retrieved from https://www.britannica.com/list/9-of-the-biggest-oil-spills-in-history

Spence, David B. (2010). “Corporate Social Responsibility in the Oil and Gas Industry: The Importance of Reputational Risk.” Symposium on Energy Law, vol. 86 (1), 59-85. Retrieved from https://scholarship.kentlaw.iit.edu/cgi/viewcontent.cgi?article=3776& context=cklawreview. 

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Royal Dutch Shell CSR Initiatives

Corporate social responsibility encourages businesses to be part of the solution to responsible business challenges like scarcity of resources and environmental concerns. Doing corporate responsibility includes educating the citizens and proposing self-sustaining solutions to address the problems faced by the communities.

Royal Dutch Shell establishes a Commitment and Policy on Health, Security, Safety, the Environment and Social Performance that is designed to involve communities to work close to our operations. The Group is committed to pursue its goals with no harm to people, protect the environment, usage of material and energy in the most efficient way and promote a culture in which all Shell employees share this commitment (Shell, 2020c). In this way, the firm could earn the comfort of the customers, shareholders and society as well as to contribute to sustainable development. Every Shell Company has a systematic approach to HSSE & SP management designed to ensure compliance with the law and engages effectively with the impacted communities. 

External CSR Initiatives

Royal Dutch Shell’s established business principles and code of conduct primarily primarily guides the operations and activities of Shell companies, including their support to quite a number of external and international initiatives.

1. Shell supports the United Nations Global Compact (UNGC). 

Retrieved from https://www.environmentalleader.com/2019/03/report-companies-committed-to-un-global-compact-perform-better-across-supply-chains/

This voluntary initiative strives to implement universal sustainability principles, in which companies are called to align their business strategies that cover human rights, labor, environment and anti-corruption (Shell, 2020a). UNGC encourages its members to take strategic actions to reach broader societal goals, similar to the UN Sustainable Development Goals, which stresses the need for innovation and collaboration among its members. Participants show initiative in executing responsible business practices and solutions addressing poverty and supporting health and education.

2. Shell supports the World Bank’s “Zero Routine Flaring by 2030” initiative. 

Retrieved from https://breakingenergy.com/tag/zero-routine-flaring-by-2030/

This “Zero Routine Flaring by 2030” initiative, introduced by the World Bank, brings together governments, oil companies, and development institutions who recognize the flaring situation is unsustainable from a resource management and environmental perspective. A typical flare used in the oil and gas industry is composed of a stack collecting unwanted gases waiting to be flared. Routine flaring has profound negative consequences such as creation of greenhouse gases and other harmful pollutants in the biosphere. Shell, being a member of the said initiative, continues to pursue its 2015 commitment to put an end on associated gas flaring by 2030 (Shell, 2020b). This strategy is in line with  Shell’s HSSE & SP, where it implements flaring policies to minimise flaring through updating energy management plans and regulating their facilities to comply with it (Shell, 2020c)

3. Shell supports the Alliance to End Plastic Waste. 

Retrieved from https://www.ecomagazine.com/news/industry/global-companies-form-alliance-to-end-plastic-waste

Plastic usage has undeniably helped improve the living standards, however Royal Dutch Shell has also recognized the problems brought by unmanaged plastic waste. All economic agents -- industries, government and consumers, are accountable for this global issue but must also work together to solve this. Shell is a leading member of the alliance and has already started its projects focusing on 4 areas namely: infrastructure, innovation, education and clean-up. According to Shell, their ambition is to use one million tonnes of plastic a year in their global chemical plants by 2025. Moreover, they seek certain technologies which can transform used plastic into liquids possible as an energy source, chemicals or convert into new products. Shell’s retail business is helping its service stations and customers reduce, reuse and repurpose waste across its operations and supply chain (Shell, 2020e).

Shell's Partnership In Protecting Ecosystems

Shell's environmental partners include International Union for Conservation of Nature (IUCN) and The Nature Conservancy. Furthermore, Shell in close collaboration with an environmental charity called Earthwatch, trains managers from affected areas, helping them to acquire crucial business and leadership skills. In addition, Shell employees gain a broader understanding of environmental issues by making a hands-on contribution to scientific research (Shell, 2020d). 

Retrieved from https://www.shell.com/sustainability/our-approach/environmental-and- community-partners/earth-skills-network-partnering-earthwatch.html

A. Business leader Andrew Stevenson and his team worked with the staff from Mole National Park in Ghana in order to develop an action plan to address lack of funding, local poachers clashes and decreasing number of visitors. The said park is home for 600 to 899 African elephants, antelope, hyenas and many other species. The plan was a success and it generated an 200% increase in revenue and 50% increased number of visitors. Moreover, it worked with a governmental agency to improve the roads in and around the area (Shell, 2020d).

Retrieved from https://www.shell.com/sustainability/our-approach/environmental-and- community-partners/earth-skills-network-partnering-earthwatch.html

B. In Nigeria's Wetlands, the area was once widely affected that could possibly affect the native's livelihood. In response, Shell's Pearl Eneh and her team mentored two managers from the area and helped construct an action plan in order to promote and improve the safety of the wetlands. Eneh has once said that once we know who our stakeholders are, we can properly engage with them (Shell, 2020d).

Shell Works With Communities

Retieved from https://www.shell.com/sustainability/communities/working-with-communities.html

Shell contributes to the community by hiring experts to study community specialist areas. With this, in-house specialists from Shell manage the communities and its indigeneous people, taking into consideration the impact of their initiatives on cultural heritage (Shell, 2020f). This is deemed to be the first step towards reaching out to the community, assessing the area considered and deciding on actions that minimise the impact of projects on culture. 

Once the area has been assessed by the in-house experts of the company, the philanthropic initiative of Royal Dutch Shell continues in engaging with the local communities. Engaging includes understanding the story of the people – their priorities, grievances, and concerns. In exchange, the company receives feedback and responses to establish a relationship with these communities. Moreover, the indigineous people may possibly be affected by the projects of the company, and it is imperative for the company to protect the rights of these people. By mutually agreeing, and conducting negotiations in good faith, the needs of the indigenous people are addressed and considered (Shell, 2020f). There are instances, however, that the projects of the company affect the people in such a way that they are forced to resettle in another place or residence. Shell considers this problem and understands that it is a possibility for some areas to be negatively affected. With this, the company manages the resettlement of the indegenous people along with preserving their culture by “resettlement actions plans'' and “livelihood restoration plans.” As a result, Royal Dutch Shell works towards restoring the area, as seen in projects in China, Kazakhstan, and the Philippines. 

References

Shell. (2020a). External voluntary codes. Retrieved from: https://www.shell.com/sustainability/transparency/external-voluntary-codes.html

Shell. (2020b). Flaring. Retrieved from: https://reports.shell.com/sustainability-report/2018/responsible-business/environment/flaring.html

Shell. (2020c). HSSE and social performance - commitment and policies. Retrieved from: https://www.shell.com/sustainability/our-approach/commitments- policies-and-standards/hsse-and-social-performance.html

Shell. (2020d). Partnering to protect the world’s ecosystems. Retrieved from: https://www.shell.com/sustainability/our-approach/environmental- and-community-partners/earth-skills-network-partnering-earthwatch.html

Shell. (2020e). Plastic waste. Retrieved from: https://www.shell.com/sustainability/environment/plastic-waste.html

Shell. (2020f). Working with communities. Retrieved from: https://www.shell.com/sustainability/communities/working-with-communities.html

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Types of CSR Affected by Initiatives

1.  Environmental Responsibility

Retrieved from https://www.theguardian.com/sustainable-business/shell-foundation-sustainability-truly-independent

In Royal Dutch Shell, their Corporate Social Responsibility includes activities relating to the creation of a more sustainable environment by considering its environmental management, climate change and energy transitions, air quality, biodiversity, fresh water, and plastic waste. Shell recognizes their capabilities on making a change in society at a corporate level, since they act as the engines of the economy bringing progression through usage of the world's resources and human labor. They also have the potential to make a huge impact in terms of sustainability, because of their global reach (Guo & Munteanu, 2011). In line with this, they create performance standards matching or even exceeding the global best practices while operating under the rules of law and international standards. Again, they work in partnership in several areas as these are vital to aid enhance safety and practices in the oil and gas industry. Shell is also part of numerous energy-related collaborations all over the world, such as the Oil and Gas Climate Initiative. To be responsible is understanding the impact that Shell can do on the environment and communities they cohabit. Some of the issues they may be faced with if plans are often overlooked are spills of hazardous substances on land and sea. To prevent this, Shell employees ensure that facilities are well constructed and properly maintained (Shell, 2020c). They invest in equipment, expertise of professionals, double hulled tankers to prevent spills in the bodies of water.

Retrieved from https://seekingalpha.com/article/4007685-royal-dutch-shell-strong-dividends-and-growth-potential

The initiatives of Royal Dutch Shell affect the environment in such a way that the company works towards preserving areas that are affected by their projects. By partnering with the International Union for Conservation of Nature and the Nature Conservancy, the company is exposed to environmental issues, as they understand more about them through research. This partnership allowed the company to create action plans in the countries of Ghana and Nigeria, to address issues on preserving the wetlands and ensuring its safety. The company also contributes in mitigating environmental issues by supporting the Alliance to End Plastic Waste, as this allowed Shell to start projects that focused on infrastructure, innovation, education, and clean up as a solution to the problems caused by unmanaged plastic waste. Royal Dutch Shell also supports the World Bank’s “Zero Routine Flaring by 2030” initiative, as they aim to put an end on gas flaring by 2030 through the implementation of flaring policies and energy management plans.

2. Philanthropic Responsibility

Retrieved from https://indiacsr.in/corporate-social-responsibility-philanthropy-a-boon-or-a-bane/

The initiatives of Royal Dutch Shell is not limited to affecting the environment, as the company also contributes philanthropically by supporting the United Nations Global Compact. In this initiative, the UNGC calls for its members to reach broader societal goals, execute responsible business practice and solutions to address poverty, and to support health and education for all. Moreover, the company works together with local communities to establish a relationship with its people. Knowing about their priorities, grievances, and concerns, the company is able to adjust and create “resettlement actions plans” and “livelihood restoration plans” that are in line with preserving the culture of indigenous people. Moreover, the company also ensures that the next generation of people are provided with quality education, primarily in Science, Technology, Engineering, and Mathematics (STEM) subjects (Shell, 2020b). This allows students to be equipped with skills that can be used to solve the problems of tomorrow. In addition to this, the philanthropic initiatives of the company includes ensuring that community health is in check. Due to the effects of the pandemic, the company sees that it can contribute in providing access to adequate health care in communities, in partnership with local non-governmental organizations or development bodies (Shell, 2020a). Overall, Royal Dutch Shell ensures that communities are involved in the company’s purpose. Aside from the environmental concerns the company is addressing, it is worth noting that the company is not limited to that. More importantly, the company takes into consideration the welfare of its people, providing education, health care, and access to resources.

References

Guo, X., & Munteanu, A. M. (2011). The Corporate Sustainability of Royal Dutch Shell: A Green Model Investigation into One of the Most Pollutant Corporations in the world. Retrieved from: https://www.diva-portal.org/smash/get/diva2:422922/ FULLTEXT01.pdf

Shell. (2020a). Community health. Retrieved from: https://www.shell.com/sustainability/communities/community-health.html

Shell. (2020b). Education. Retrieved from: https://www.shell.com/sustainability/communities/education.html

Shell. (2020c). Environmental management. Retrieved from: https://www.shell.com/sustainability/environment/environmental-management.html

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Recommended Additional Initiatives to Shell

While oil remains to be an important resource in the everyday lives of people, the adverse effects of climate change should disincentivize companies like Shell to simply sustain its business operations. Conversely, the growing environmental and societal costs of fossil fuels must serve as an incentive for Big Oil to reallocate its resources to investing in renewable energy. The emergence of solar panels in homes, electric vehicles, and wind turbines to power cities prove that mankind is changing the manner of powering our daily lives. As of 2019, 5 out of 8 of the Big Oil companies are beginning to pursue strategies for renewable energy (Pickl, 2019). However, Shell must introduce a more comprehensive program that aims to increase profitability while helping incentivize society to become more environmentally friendly. In order to maintain its presence in the market, Shell must aggressively pursue such strategies to invest heavily on renewable energy. Specifically, we recommend that a comprehensive plan to transition from fossil fuels to sustainable energy be established by Shell immediately.

Retrieved from https://www.japantimes.co.jp/news/2019/07/29/business/future-japans-energy-environmental-policies/

The comprehensive plan must include a deadline for Shell to make sustainable energy its major source of income. Setting this example to the energy industry would pressure other big companies to create similar plans and embrace these changes for the betterment of the environment. This would also help the Shell to remain ahead in doing business in the 21st century as more nations take drastic measures to cut carbon emissions. Recently, the State of California announced that it will phase out all gasoline powered vehicles by 2035. California is the 5th largest economy in the world. Phasing out gasoline powered vehicles within the next 15 years serves as a threat to the energy industry should they continue to have oil and fossil fuel as its main source of profit (Newsom, 2020).

Retrieved from https://www.solarreviews.com/blog/tesla-charging-stations-everything-you-need-to-know

As the world rapidly shifts towards more environmentally friendly practices, Shell must also evolve from supplying the world with quality gasoline – to providing society with access to clean and sustainable energy. This would not just ensure that its shareholders receive superior returns in the long-run, but would also serve as the way for the company to fulfill its role to society in leading the energy industry to making a long-lasting change for the better.

References

Pickl, M. (2019). The renewable energy strategies of oil majors – From oil to energy? Energy Strategy Reviews. https://doi.org/10.1016/j.esr.2019.100370.

Newsom, G. (2020). Governor Newsom Announces California Will Phase Out Gasoline-Powered Cars & Drastically Reduce Demand for Fossil Fuel in California’s Fight Against Climate Change. Retrieved from https://www.gov.ca.gov/2020/09/23/governor-newsom-announces-california-will-phase-out-gasoline-powered-cars-drastically-reduce-demand-for-fossil-fuel-in-californias-fight-against-climate-change/