Since the early 1990s, Shell’s reputation has been battered by corporate social responsibility problems such as the Brent Spar controversy and the Ken Saro-Wiwa trial in Nigeria. (Ken Saro-Wiwa was the environmentalist who was hanged and whose death some attributed in part to Shell.) Shell gradually realized that dismissing environmental and social issues could seriously hurt its business. It started to develop a company-wide environmental policy in the late 1990s, in spite of its heritage of being a rather decentralized firm with highly autonomous operating companies. As a result of this autonomy, environmental management approaches at Shell’s international subsidiaries varied substantially and depended on the direction chosen by subsidiary managers. Subsidiary discretion led to inconsistencies, especially between operations in developed and developing countries.
As a multinational energy firm with 90,000 people operating in more than 80 countries, Shell had traditionally been viewed as being at the forefront of modern, corporate environmental management, but this record did not prevent the firm from becoming subject to substantial criticism in the 1990s.[i]
Decentralized management
Shell’s history can be traced back to a small, London-based business established by Marcus Samuel in 1833 to import seashells for collectors. Marcus Samuel Jr, the son of Marcus Samuel, when searching for seashells in the Caspian Sea, identified an opportunity to deliver oil to the Far East in the early 1890s. This led to the construction of a fleet of dedicated tankers. During the same period, August Kessler established Royal Dutch in the Netherlands, to develop oil fields in Asia and to deliver oil. In the late 1890s and early 1900s, the fierce competition with Standard Oil ultimately forced Shell and Royal Dutch to merge into the Royal Dutch/Shell Group Companies in 1907, with Royal Dutch controlling 60 per cent of the shares and Shell Transport and Trading Company 40 per cent.
By the late 1990s, Shell consisted of two parent companies, nine servicing companies and around 450 operating companies around the world. The two parent companies, Royal Dutch and Shell Transport and Trading Company, never engaged in operations directly, although they appointed the five members of the Committee of Managing Directors (CMD). The Chairmanship of the CMD rotated with a fixed single term. The CMD identified key issues, set strategies and exercised managerial control within the corporation. However, the operating companies had the operating authority and financial responsibility. With its unique structure directed by multiple executives, and with responsibilities largely allocated to operating companies, Shell was widely viewed as one of the most decentralized companies in the world.
This decentralization was reflected in Shell’s approach to environmental management. Until the late 1990s, Shell maintained that a decentralized structure would allow operating companies to tailor corporate environmental standards/objectives to local needs. Although the firm reviewed environmental performance annually, Shell’s national companies were allowed to focus their environmental efforts according to the requirements of local environmental regulations, even if some of those were not particularly stringent. According to James McArdle, safety and environment coordinator for Shell UK, “While policy guidelines for Shell as a whole are laid down by the committee of managing directors … we have the freedom to adapt these guidelines to suit local needs.”[ii]
Shell argued that such decentralization benefited innovation. One commentator noted: ‘Shell refused to set overall objectives for its subsidiaries. Instead, it allows individual companies to decide their own strategy, “reflecting the national and cultural background in which they work”. Shell portrays this as a strength, arguing that by putting the responsibility on local managers’ shoulders, it encourages a sense of ownership, which in turn provides the most fertile ground for innovation. “Striving for consistency”, said one Shell manager, “would be the kiss of death for continuous improvement.”[iii]
At the corporate level, Shell developed Policy Guidelines on Health, Safety and the Environment as early as 1977. In 1991, Shell had a policy of continuous improvement towards the goal of having no emissions of environmentally harmful substances. Also in 1991, Shell developed a few policies to ensure that products would be recycled or disposed of safely. However, implementation of these guidelines was still made subject to decision making by subsidiary managers.
Environmental management practices at Shell’s operating companies
In the late 1980s and early 1990s, environmental management practices varied strongly across Shell’s international operations, depending on local regulations and institutional requirements. Moreover, environmental activities at Shell were largely passive responses to external pressures, rather than proactive initiatives.
For example, by the late 1980s, Shell Canada had consciously incorporated environmental management into its operations, mainly through prevention of potentially negative environmental impacts. J. M. MacLeod, Shell Canada President and CEO, stated in an interview in 1991, “For 20 years, we’ve been consciously managing and minimizing our emissions and our effluents from gas-processing plants and we’ve been reclaiming our drilling sites.”[iv]
However, many of Shell’s environmental strategy actions were primarily a response to exogenous circumstances, rather than a proactive search for environmental improvements. One example of this occurred at Shell’s major gas processing plant in Waterton, Alberta, Canada. Here, Shell had to manage a very difficult relationship with the local community in the early 1970s, as the prevailing view in the community was that the plant emitted excess amounts of sulphur dioxide. Shell Canada spent CAN $25 million to install a new process to increase sulphur recovery, even though “there was no economic return in the way one would normally perceive it; that is, the additional sulphur recovered would not pay for the process”.[v] Except when forced by strong stakeholder pressures, MacLeod’s view was that Shell Canada did not “go beyond regulations to any significant extent, no more than other companies do”.[vi]
In the Netherlands, Shell introduced sulphur emission controls at its Rotterdam factory, supposedly signalling Shell’s commitment to the environment. However, critics viewed such environmentally friendly changes as, again, merely a response to external pressures (governments and environmental NGOs had been pressing for the controls for years), rather than a reflection of a proactive environmental stance. One Greenpeace campaigner, complained that “It (the Rotterdam factory) used to be the number one source of acid rain in the Netherlands. We had to work very hard to get Shell to improve environmental standards there. Finally, they agreed, and then, of course, they claim all the credit.”[vii]
During the same period, Shell’s environmental management in the developing world was less than impressive, as can be seen by its oil spills in Nigeria. According to research by Greenpeace, in the ten years between 1982 and 1992, Shell’s spills in Nigeria accounted for around 40 per cent of Shell’s total spills in the world, releasing 7.3 million litres of oil in the Nigerian Delta Region. Environmental Rights Action, Friends of the Earth and others have estimated that Shell and its partners have spilled around 13 million barrels in the Niger Delta in the past 50 years. This volume is 50 times higher than the spill caused by the Exxon Valdez tanker accident off Alaska. In 2002, Shell admitted that there had been 262 oil spill incidents in Nigeria in that year and that around 548 sites needed actions to avoid contamination.[viii] However, Shell claimed that most of the spills in Nigeria were caused by sabotage to make compensation claims.
Besides spills, Shell also engaged in the controversial practice of flaring off excess natural gas at its oil fields, until a Nigerian court demanded in 2006 that it stop within 12 months.
With their diverse environmental practices around the world, Shell’s companies did bring to the market innovations that benefited the firm both environmentally and financially. One of these innovations was the Shell Coal Gasification Process (SCGP),[ix] which converts coal into syngas and steam. Syngas is a mixture of carbon monoxide and hydrogen. During gasification, the energy loss is only 5 per cent, with 80 per cent of the coal’s energy contained in the syngas and 15 per cent contained in the steam. Byproducts in the process, including sulphur and ash, can be recovered and sold to the chemical industry and the construction industry, respectively. Shell started to develop this technology in 1972.[x] After three pilots in the Netherlands, Germany and the US, and its full-scale adoption in the Buggenum plant in the Netherlands, Shell started to capitalize on the technology with several ongoing projects in China, where SCGP would replace the naphtha-based feedstock at the Sinopec fertilizer plant, thereby reducing feedstock costs.
Shell weathers a media storm in the mid 1990s
Shell’s commitment to environmental issues was actually increasing in the early 1990s, but that progress – however small – was overwhelmed by two events in the mid 1990s that received enormous negative media coverage: the Brent Spar controversy and the Ken Saro-Wiwa affair.
The Brent Spar controversy was a major confrontation between Shell UK and Greenpeace in 1995 over the decommissioning and disposal of a giant oil storage platform called the Brent Spar. While it was one of more than 400 offshore rigs, which belonged to a number of different owners including Shell, it was the first of many to be decommissioned over the next two to three decades. Greenpeace felt that the decision to decommission the platform by sinking it offshore in the North Atlantic would significantly pollute the ocean. It thus decided to oppose the decision using a combination of direct action and savvy manipulation of the media.
The Brent Spar was an oil storage platform used by Shell to help develop one of its concessions in the huge oil fields lying beneath the North Sea.[xi] Oil extracted from the Brent field was stored in it and later transported by tanker for processing in the United Kingdom. Completed in 1976, it was installed in the Brent field in June 1976.
The Brent field was one of many fields located in the oil bearing geologic formation that straddled the offshore jurisdiction of the United Kingdom, Norway, Denmark, the Netherlands and Germany. While the German, Dutch and Danish sectors contained some oil, the bulk of the oil production came from the Norwegian and British sectors. Although oil was first produced in 1971, it was not until the 1980s, with rising oil prices and more sophisticated technology, that the North Sea became a significant source of non-OPEC oil.
As production increased, the infrastructure to collect and transport the oil to onshore processing facilities became more sophisticated. By the early 1990s the Brent Spar had become redundant as the oil field was connected to the mainland by underwater pipelines and collecting systems. The Brent Spar ceased operating in September 1991.
Shell then considered its options for disposing of the Brent Spar. Between 1991 and 1993, the company embarked on a series of internal and external studies centred on finding the best method for the Spar’s disposal. More than 15 separate independent studies on the engineering and environmental dimension were commissioned, detailing a number of options. Two of the options – horizontal onshore dismantling and deep sea disposal – were examined in detail.
Extensive consultation with scientific and technical communities and ongoing discussions with various government departments suggested that the deep sea disposal alternative had significantly lower safety risks and costs, while having a minimal environmental impact. An independent study conducted by Aberdeen University subsequently condoned the deep sea option in February 1994.
By the end of 1994 Shell had prepared and submitted its final Abandonment Plan to the UK Government Department of Trade and Industry. In December 1994 Shell received formal approval. Thus, at this point, the disposal plan had followed the procedures, principles and standards of the UK regulatory regime. All options had been reviewed both internally and externally, taking into account environmental, safety and economic factors. The unique characteristics of the Brent Spar suggested that deep sea disposal was the best option and was in fact the option that the US government had been pursuing in the Gulf of Mexico to create artificial sea reefs for marine life.
While Shell had cleared hurdles linked to regulatory approval by the UK government, the disposal option still needed to be vetted by the so-called OSPAR commissions (see below). Increasing interest in the North Sea by oil and gas interests led to the creation of two conventions covering the protection of the marine environment in the early 1970s: the 1972 Oslo Convention on Waste Dumping at Sea and the 1974 Paris Convention on Pollution of the North Sea and Adjacent Areas from Land-Based Sources. These conventions established an international framework through which to manage industrial activity that could have a negative impact on the marine environment, including the North Sea. These conventions provided guidance to governments concerning disposal of waste in the vicinity of the North Sea. Key features included public disclosure of information regarding activities affecting the state of the North Sea and measures to prevent pollution, and advising member states to the convention regarding compliance.
The conventions were administered through a permanent bureaucracy referred to as the OSPAR commissions. The commissions handled the day-to-day activities generated by the Conventions, including any significant input coming from the political sphere. One such input, which could have far-reaching consequences for policy formation, was the Conferences of Environmental Ministers from countries bordering the North Sea. By 1995 three conferences had been held, while a fourth was scheduled for June 1995 in Esjberg, Denmark.
The UK government announced its decision to the signatories to the Oslo convention in February 1995. It did not receive any objections, thus opening the door for Shell to publicly announce the deep sea disposal plan. Thus, not only was the plan authorized by the British government, but it also conformed to international rules and agreements dealing with ocean pollution.
By April 1995, however, Greenpeace had become actively involved in attempting to reverse the decision. Greenpeace is an international environmental organization with regional and national offices around the world. The regional and national offices are guided by a governing council based in Amsterdam, which sets overall priorities for the organization and identifies issues that will guide the behaviour of the regional and national offices. These offices are largely autonomous in selecting activities on which to focus, though they agree to let global issues determined by the council guide the local level.
While Greenpeace has since expanded the range of issues it gets involved in beyond oceanrelated matters, in the 1980s and early 1990s it was very much focused on marine issues. It had elevated the disposal of man-made waste in the oceans to a key campaigning issue. Although Greenpeace was known to use lobbying and conference attendance in its repertoire of influencing tactics, its preferred method in the 1990s was direct action and media savvy to put pressure on key decision makers. This it elected to do beginning on 30 April 1995 with Brent Spar’s occupation by Greenpeace activists.
Greenpeace relied on the strong environmental ethos in continental Europe that had been on the rise since the environmental activist Green Party won seats in Germany’s national parliament in the mid 1980s. By the mid 1990s, the party had emerged as a significant player on the German political scene, becoming Germany’s third political force in a country that traditionally relied on coalition governments. “Political parties that don’t acknowledge [green policies] will face great difficulties”, said Guenter Albrecht, chief economist at the Association of German Chambers of Commerce.[xii] Thus, the Green Party in Germany was an important mechanism that Greenpeace could use to affect important decision makers.
In May 1995, the German Ministry of the Environment protested against the disposal plan while Greenpeace called for a continental boycott of Shell products. At the fourth North Sea Conference of Environment Ministers in early June, several European countries called for onshore disposal of all oil installations, while Britain and Norway argued for a case-by-case approach. Public opinion in northern Europe grew increasingly opposed to the ocean disposal, leading
Chancellor Kohl of Germany to protest to British Prime Minister John Major at the G7 summit in Canada. Prior to leaving for the meeting he told German television: “My urgent advice is not to do it.”[xiii] During the third week in June, German protesters threatened to damage some of Shell’s 1,700 service stations, with some 50 subsequently damaged, including two that were fire bombed and one that was sprayed with bullets. Dutch consumers boycotted Shell service stations.
Most telling was the reaction of some Shell service station managers themselves: five Shell stations shut their doors for 24 hours in the German town of Koblenz. A confused news conference was convened in Hamburg at which the company’s surprise over the public uproar was evident. At first, Peter Duncan, head of Shell’s German subsidiary, Deutsche Shell AG, announced that the company would defer its decision. However, he was quickly contradicted by officials from Shell’s headquarters in Rotterdam. The collegiate decentralized management structure that Shell had so assiduously cultivated was beginning to fracture, with many Shell managers criticizing the handling of the Brent Spar affair by Shell UK and its failing to recognize the pro-environmental leanings of many of the countries in continental Europe.
After a protracted battle, Shell eventually backed down. The platform was subsequently moved to Norway, where it was moored waiting for the eventual outcome. Following an extensive public consultation programme, and a request for proposals, the platform was decommissioned and became part of a ferry quay in Norway.
Ken Saro-Wiwa, Nigeria and Shell
Ken Saro-Wiwa was the leader of a Nigeria-based group, The Movement for the Survival of the Ogoni People, created in 1990 as the vehicle through which to channel grievances of the Ogoni people. The movement protested the environmental damage inflicted by Shell and other oil companies in the Niger Delta, as well as the human rights abuses committed by the Nigerian military on the Ogoni people and other ethnic minorities. Following the murder of moderate elements of the movement by more radical members allied with Saro-Wiwa, the Nigerian military arrested Saro-Wiwa and eight followers. After a trial that was widely regarded as a sham, SaroWiwa and eight of his colleagues were executed on 10 November 1995. Shell was widely criticized in the press for contributing to the tragedy and failing to use its influence to obtain clemency.
Shell Petroleum Development Company (SPDC) of Nigeria was the operating company of a joint venture with the Nigerian National Petroleum Corporation, which held a 55 per cent stake, followed by Shell with 30 per cent. The remaining 15 per cent was held by Elf and Agip. SPDC operated in the Niger Delta, in which the Ogoni lands accounted for some 4 per cent of the operating area. Shell began operations on Ogoni land in 1958, and by the time it was forced to leave in 1993 due to the civil unrest, its cumulative production on Ogoni land had amounted to 634 million barrels valued at US $5.2 billion. Of this revenue, 15 per cent went to cover production costs, 79 per cent went to the federal government and 6 per cent went to the private partners, including Shell.[xiv]
Very little of the money allocated to the Nigerian government ever trickled down to Ogoniland. By all accounts, the Ogoni people lived in conditions of extreme poverty. Most villages lacked electricity and piped water. Frequent oil spills had destroyed croplands and polluted streams, severely damaging the Ogoni people’s subsistence lifestyle. In addition to oil spills, flaring of natural gas from the five large pumping stations and 96 wells located in Ogoni ancestral lands created a sooty, eery landscape with uncertain environmental impacts.
Shell’s view on these events could be characterized as distant. While the environmental standards Shell upheld for Nigeria were lower than in Europe or North America, Dick van den Broek, Shell’s Coordinator, Western Hemisphere & Africa, defended that difference, arguing that “It’s a question of priorities. Nigeria is a poor country. How much should it spend on environmental protection? … Shell is a minority partner [in SPDC] and any expenditures must be absorbed on a prorate basis [by all partners].”[xv] Even though social conditions in Ogoni communities could be regarded as primitive, Shell’s policy of limited involvement was defended by Alan Detheridge, Shell’s West African Coordinator, who stated that “We can offer advice and we can point out the consequences of an action. But we do not lecture or try to give orders because we do not interfere in politics or government.”[xvi]
While Shell saw only a small role it performed in the past or could potentially perform in the future regarding the abject poverty in the region, others painted a different picture. Napoleon Agbedetse, a London barrister who returned to Nigeria, observed that Shell’s treatment of one community in the Niger Delta over the previous 27 years had left 3,000 or so villagers in a state of “depression, neglect and poverty”.[xvii]
The campaign against Shell started in 1990 when the Movement for the Survival of the Ogoni People was formed. The objectives of the Movement included gaining more control over local government, better protection of the environment and a greater share of the wealth flowing from the petroleum resources. The movement was originally led by conservative traditional leaders, with the first president being Garrick B. Leton, a former federal minister. Ken Saro-Wiwa, a successful writer and TV producer, became its spokesman.
While the movement initially succeeded in gaining a commitment from the Nigerian federal government for 3 per cent of the total annual oil revenue for Ogoniland, this commitment was never honoured. The social and environmental conditions of the Ogoni people remained brutal and oppressive.
While traditional leaders continued to favour negotiation and dialogue, Saro-Wiwa advocated a more confrontational approach. The rift between the traditional leadership and SaroWiwa grew as he organized additional branches of the movement including the National Youth Council of the Ogoni People. As his influence increased, he allied the movement with the Unrepresented Nations and Peoples Organization in the Hague and carried his story of oppression and abuse, including Shell’s Nigerian environmental legacy, to the United Nations, Europe and the US.
Several respected sources disagreed with Saro-Wiwa’s portrayal of the Niger Delta’s environmental problems, however. For example, a 1995 World Bank study called “Defining an environmental strategy for the Niger Delta”, while agreeing that oil pollution had unquestionably caused environmental damage, indicated that “oil pollution is of moderate priority when compared to the spectrum of environmental problems in the Niger Delta”.[xviii] The report went to conclude that, in fact, most of the region’s problems could be linked to a fourfold increase in the local population since 1958.
Nonetheless, vandalism against Shell facilities continued to increase to such an extent that in late 1992 the firm asked the government to send in troops to protect its operations. When the local conditions continued to deteriorate, Shell eventually left, asking that federal forces continue to protect the installations it had left behind. Detheridge, Shell’s West African Coordinator, said that the company would not return until it had the local community’s support.[xix]
Soon after Shell left, the five pumping stations on Ogoni land were either damaged or destroyed, though it was unclear who was culpable – the military or the Ogoni leaders. In June 1993, in a disagreement over strategic direction and tactics, the conservative wing of the Ogoni movement resigned. In early 1994, Shell reportedly requested that the government deploy its mobile police to protect its assets.
The response by the authorities was quick and ruthless. An internal memo written in May 1994 by the commander of the internal security force called for “wasting targets cutting across communities and leadership cadres, especially vocal individuals” and suggested “putting pressure on oil companies” to help pay for the costs of the operation.[xx]
On 21 May 1994, Saro-Wiwa was detained by federal forces while campaigning in Ogoniland and taken to Port Harcourt. Meanwhile, conservative elements of the movement were meeting elsewhere in Ogoniland. Members of the more radical youth movement set upon the small gathering of elders and chiefs, brutally killing four. Saro-Wiwa and eight other MOSOP leaders were arrested, charged with incitement to murder, and subsequently convicted in what was widely regarded as a sham of justice.
Shell was only one of a number of actors that were asked to seek clemency for Ken Saro-Wiwa. President Clinton’s special envoy to Nigeria, Ambassador Donald T. McHenry, met with American companies, including Exxon and Mobil, to mobilize their support for clemency, but to no avail.
Widespread pleas for a stay of execution from the international community fell on deaf ears. Saro-Wiwa and his eight alleged co-conspirators were executed on 10 November 1996.
Outrage was nearly universal. Nigeria was expelled from the Commonwealth, while the EU instigated an embargo on arms and aid. Calls for tough economic sanctions, though, went unheeded. Britain was the largest exporter to Nigeria, enjoying a significant trade surplus based on machinery and machine tools. Furthermore, British companies including Guinness, Glaxo and Cadbury-Schweppes had non-oil investments of GBP 1.4 billion. With oil accounting for nearly 80 per cent of Nigeria’s revenues, the oil sector was seen as the most effective way to apply sanctions. Shell, accounting for nearly 50 per cent of the Nigerian oil industry, seemed to have the ability to give teeth to an embargo.
However, the Nigerian operations had been strategically important to Shell, which lacked sufficient high-quality crude elsewhere to meet the requirements of its refineries and gasoline stations. Of the nearly one million barrels of oil the company had pumped daily, it took a quarter for its own use. The rest was given to Nigeria. Furthermore, according to Nick Antill, an analyst with the London securities firm Barclay, de Zoete, Wedd, Shell’s Nigerian operations accounted for 10 per cent of Shell’s worldwide production and exploration profits, or US $170–190 million a year. Despite calls for Shell to stop its massive GBP 2.6 billion Niger Liquid Natural Gas project, the project planning continued even though the International Finance Corporation (part of the World Bank group) declined to participate.
Withdrawing from Nigeria would not promote a shift to democracy, according to Mark Moody-Stewart, one of the four managing directors of Royal Dutch/Shell at the time. “All we can pull out are our 270 expatriate staff. The Nigerians can run the oil industry on their own and buy help on the market”, in which case “the French would replace us in a flash”.[xxi]
While the EU stopped short of banning Nigerian oil sales, it reaffirmed measures adopted in 1993, including suspension of military cooperation following the military coup, which brought General Abacha to power in 1993.
Nigeria remains a dangerous place for Shell to conduct its operations. Attacks, kidnappings and theft occur on a consistent basis as the Movement for the Emancipation of the Niger Delta continues its actions.[xxii] Spills continue to be frequent, but Shell is working with local governments, businesses and communities to develop online tools to track problems and assist in response procedures. Unfortunately, two spills in 2008 affected the rural settlement of Bodo and some 11,000 residents, who were dependent on farming and fishing in the community.[xxiii] Shell has accepted responsibility but claims that the majority of spills are the result of outside foul play. It was estimated that in 2010, 98 per cent of the spills that Shell reported were the result of theft attempts or intentional attacks.[xxiv]
Shell still has plans to continue operations in the Niger Delta; however, it divested its stake in several onshore assets in 2010 and 2011. With violence still prevalent in Nigeria, Shell is aiming to ease tensions and leave exploration to local companies. CEO Peter Voser has stated that “Nigeria is still a heartland for Shell, but we no longer depend on it for our growth aspirations.”[xxv]
Although Shell never accepted responsibility for the death of Ken Saro-Wiwa, it offered to set up a US $15.5 million trust fund for the Ogoni people in 2009, 15 years after his death.[xxvi] Although this positive gesture has eased some pains, the Ogoni people continue to suffer from – and fight against – the damage from oil spills they are still experiencing today.[xxvii]
Shell’s responses
Continuous stakeholder pressures as well as events such as the Brent Spar controversy and the Ken Saro-Wiwa affair drove Shell to respond by hiring new environmental scientists, developing new environmental policies and auditing the environmental performance of Shell’s operations. Shell also launched innovative and environmentally friendly products (e.g., cleaner diesel) and technologies (e.g., capturing and using surplus sulphur).
By 1997, Shell set corporate standards for the environmental management systems for all its companies. Each company wrote its own policies based on the corporate standard.[xxviii] Since 1998, Shell has published an annual Shell Sustainability Report, covering details from renewable energies to disputes with local communities. In the next ten years, Shell will continue to add guidance and policies. For example, in 2006, Shell launched the first Shell-wide Code of Conduct, and revised the guidance for new upstream projects to integrate environmental considerations into major decisions.[xxix]
However, Shell’s environmental approach is still widely challenged, especially its operations in environmentally sensitive and complex areas. In the Arctic, Shell has been forced to halt exploratory drilling by a US court as the result of a court challenge from green groups and indigenous Alaskans who maintained that Shell’s drilling would threaten western grey whales and polar bears;[xxx] Shell has also been criticized for its decision to build a production pipeline at Corrib, Ireland; and it has been continuously criticized over its pollution in Nigeria.[xxxi] In the North Sea, Shell has been warned repeatedly by the British Health and Safety Executive about the poor state of its platforms.[xxxii] In addition, after a spill in 2011, Shell was criticized for being slow to release information to the public. However, the company eventually apologized and released daily feeds on the progress of the spill.[xxxiii]
There seem to be two major challenges that Shell has to face internationally. First, Shell has to deal with accusations of using a double standard, “one that often provides cleaner facilities in areas around the world with predominantly Caucasian populations as compared to dirtier and more hazardous facilities located in places where people of color live”.[xxxiv] Shell has responded as follows: “We apply the same Shell standards worldwide and all our assets in Nigeria are certified to ISO 14001 standard by external assessors.”[xxxv] Shell did admit that its operation in Nigeria had “a substantial backlog of asset integrity work to reduce spills and flaring”,[xxxvi] but then quickly explained that the delay was due to “under-funding by partners over many years, operational problems and, more recently, the lack of safe access to facilities”.[xxxvii] Shell also argued that it had invested over US $3 billion to reduce continuous flaring in Nigeria since 2000, and that Shell’s flaring had been reduced by 30 per cent as of 2005.
An often-cited example suggesting Shell’s double standard is the comparison between the South African Petroleum Refinery (SAPREF) in Durban, South Africa, and Shell’s refinery in Denmark. Friends of the Earth maintains that SAPREF emits 19 tons of sulphur dioxide into the air every day, six times more than that released by the Danish refinery.[xxxviii] Shell replies that it has taken steps to improve its environmental performance at the South African refinery.
Activities from Friends of the Earth have pushed the British government to “reform company law so overseas communities can seek redress and compensation in the UK for human rights and environmental abuses carried out by British companies and their subsidiaries”.[xxxix]
Second, Shell has to deal with criticisms that its commitment to renewable energy projects has been limited. Interestingly, while Shell has estimated that by 2050, 20 per cent of energy will be derived from alternative sources only 1 per cent per year of spending is invested back into developing these alternative energy sources.[xl] Jeroen van der Veer, Shell’s former CEO, suggested “that the investment in renewable was small, saying it would be ‘throwing money away’ to invest in alternative energy projects that were uncommercial and people could not buy”.[xli] In 2009, Shell announced that it would no longer be investing in solar, wind and hydropower as it saw stronger potential in biofuels. This has raised criticism from environmentalists who claim that biofuels often have high emission levels. However, current CEO, Peter Voser agrees that alternative energy sources are not one of Shell’s priorities and has indicated that in 2012, Shell is dedicated to discovering energy efficient technology.[xlii] With the potential for energy demand to triple by 2050, Voser believes that it will be more important for people to focus on becoming more energy efficient.[xliii] The company plans to invest in carbon capture and sequestration technologies to help reduce the amount of carbon dioxide that is released when burning fossil fuels.
In 2004, Shell merged Royal Dutch and Shell Transport and Trading into a single company called Royal Dutch Shell plc with one board, one chairman and one chief executive. The new structure should lead to better accountability for shareholders, but it has not been easy to shake off the criticisms of its environmental approach. Moreover, getting the necessary consistency in environmental strategy implementation across Shell’s operations has not been easy, though Shell expects that more training and reinforcement will help.[xliv]
Shell is not alone in terms of having a less than favourable reputation in environmental performance, as most other large energy firms, including ExxonMobil, Chevron, Total and PetroChina, have similar, tainted reputations.[xlv] Even BP, which before the Deep Horizon oil spill in 2010, was often considered in the developed world as one of the cleaner players in the energy industry, does not have a clean reputation everywhere. As one example, as early as 1998, it was accused of water contamination, illegal deforestation and the dumping of untreated toxic waste in Colombia, according to an investigation by the Colombian government’s independent ombudsman into BP’s environmental record.[xlvi]
Impacts of the Deep Horizon oil spill
On 20 April 2010, the Deep Horizon oil rig operated for BP suffered a severe explosion. The damage from the explosion and ensuing fire caused an acute leak, which released millions of gallons of crude oil into the Gulf of Mexico. It took almost three months and numerous attempts before BP was finally able to cap the leak and control the spill. The disaster caused severe environmental damage, which is still noticeable two years later. It is now considered the largest oil spill in history and has inexorably tarnished BP’s reputation.[xlvii] Numerous investigations were conducted to analyse the cause and handling of the spill by BP. One report stated that “[the] disaster was preventable if existing progressive guidelines and practices had been followed”.[xlviii] Public outcry was inevitable given the stature of BP and the severity of the damage.
The impact of the spill has brought much needed attention to oil companies and their environmental practices. Firms now face intense scrutiny from the public, which is pressuring governments to enforce stricter environmental controls. Shell has responded to the spill by signing the UN Global Compact LEAD, to signify its commitment to leadership in sustainable practices. In Nigeria, Shell’s Chairman has described the impact as follows: “As soon as the BP thing happened, of course we had to go back to reassess our entire well-management processes, procedures and techniques.”[xlix] In the Netherlands, Shell was required to go through hearings to discuss the impact the company had in Nigeria. The purpose of the hearings was to gain a better understanding of the situation in the Niger Delta, and to help implement potential courses of action. It is estimated that nine million barrels of oil have spilled in the Niger Delta from all oil exploration, which is more than what was released from the Deep Horizon spill in the Gulf of Mexico.[l]
A year after the disaster, Shell gained approval from the American government to be the first company to continue deepwater exploration. A statement released by the Bureau of Ocean Energy Management, Regulation and Enforcement argued: “Shell’s submission has satisfied the heightened environmental standards that we are now applying and I am confident that other operators can satisfy the same standards.”[li]
QUESTIONS
- What has been Shell’s traditional managerial style? How did Shell manage environmental issues across different countries?
- Did regulation/lack of regulation drive environmental initiatives? Did Shell improve economic and environmental performance simultaneously in some cases? How did Shell achieve this?
- Did Shell develop any FSAs in environmental management? Did it try to transfer any practices or technologies across borders?
- Use the information in the case as the background for assessing the latest Shell Sustainability Report, available on the Web.
- Should MNEs apply a globally consistent standard for environmental management or adapt to local regulations?
- Could a proactive environmental strategy on the part of Shell have prevented the tragedy of Ken Saro-Wiwa?
- How did Shell’s administrative heritage contribute to the Brent Spar debacle?
- How is the social licence to operate linked to the court of public opinion?
- Could a proactive environmental strategy on the part of Shell UK have prevented the Brent Spar debacle?
- How did Ken Saro-Wiwa and the Brent Spar contribute to the greening of Shell?
- Can you provide an update on Shell’s recent responses to environmental criticism and activism? For the most recent updates, please use materials available on the Web.
Notes
[i] Shell company information (2007), www.shell.com.
[ii] Anne Ferguson, ‘Good to be green’, Management Today (February 1989), 46–51.
[iii] Wright (1995), cited in Peter Thayer Robbins, Greening the Corporation (London: Earthscan Publication Ltd, 2001), 84.
[iv] ‘Environmental stewardship at Shell’, Canadian Business Review 18 (1991), 7–13.
[v] Ibid.
[vi] Ibid.
[vii] Wright (1995), cited in Peter Thayer Robbins, Greening the Corporation (London: Earthscan Publication Ltd, 2001), 83.
[viii] ‘Shell hit by $1.5bn Nigeria spill claim: senate action on pollution adds to damage from reserves scandal’, The Guardian (26 August 2004), 26
[ix] Shell company information, www.shell.com/home/content/shellgasandpower-en/products_ and_services/coal_gasification/coalgasification_1106_1655.html, accessed on 31 August 2007.
[x] Shell company information, www.shell.com/static/globalsolutions-en/downloads/industries/ gas_and_lng/brochures/coal_gasification_brochure.pdf, accessed on 31 August 2007.
[xi] www.shell.com/home/content/uk-en/about_shell/brentspardossier/brentsparstory/history_09101005.html, accessed on 29 September 2007.
[xii] Cacilie Rohwedder and Peter Gumbel, ‘Shell bows to German Greens’ muscle – reversal of plan to sink rig shows growing clout of environmentalists’, The Wall Street Journal (21 June 1995), A15.
[xiii] Nathaniel Nash, ‘Oil companies face boycott over sinking of rig’, The New York Times (17 June 1995), A3.
[xiv] www.shell.com/home/content/nigeria/news_and_library/press_releases/2001/2001_2301_01031504.html, accessed 29 September 2007.
[xv] Paul Lewis, ‘Blood and oil: after Nigeria represses, Shell defends its record’, The New York Times (13 February 1996), A1.
[xvi] Ibid.
[xvii] Robert Corzine, ‘Shell faces distrust in the Delta’, The Financial Times (6 July 1996), 18.
[xviii] Paul Lewis, ‘Blood and oil’, A1.
[xix] Ibid.
[xx] Ibid.
[xxi] Ibid.
[xxii] ‘Will Shell pull out of Nigeria?’, African Business 362 (March 2010), 42.
[xxiii] Guy Chazan and Jane Croft, ‘Shell sued in UK over Nigeria spills’, Financial Times (23 March 2012), 22.
[xxiv] Tom Burgis and William Wallis, ‘Shell faces tougher scrutiny of Nigeria drilling’, Financial Times (18 June 2008), 3.
[xxv] ‘Will Shell pull out of Nigeria?’, African Business 362 (March 2010), 42.
[xxvi] Guy Chazan, ‘World news: Shell faces query on Nigeria – Dutch parliament hearing expected to touch on corruption in oil-rich delta, as spills spur concerns’, Wall Street Journal (Eastern Edition) (4 January 2011), A.10.
[xxvii] International: Spilling over; Shell in Nigeria’, The Economist 319 (13 June 2009), 8635–51.
[xxviii] Malcolm Brown, ‘Shell environmental policy’, Business Date 5 (July 1997), 1–4.
[xxix] Shell, ‘Meeting the energy challenge: the Shell Sustainability Report 2006’ (2007), 5, www. shell.com/static/investor-en/downloads/publications/2007/shell_sustainability_re port_2006.pdf, accessed on 31 August 2007.
[xxx] Terry Macalister, ‘Wildlife claims stop Shell drilling in Arctic’, The Guardian (24 July 2007), 21.
[xxxi] Terry Macalister, ‘Shell faces ecological assault on three fronts at general meeting’, The Guardian (15 May 2006), 26.
[xxxii] Terry Macalister, ‘Shell safety record in North Sea takes a hammering’, The Guardian (5 March 2007), 23.
[xxxiii] ‘Oil and trouble: North Sea spill’, The Economist (Online) (17 August 2011).
[xxxiv] Friends of the Earth et al., ‘Behind the shine: the other Shell report 2003’ (2004), 8, www. foe.co.uk/resource/reports/behind_shine.pdf, accessed on 31 August 2007.
[xxxv] Shell, ‘The Shell Sustainability Report 2006 – Nigeria’ (2007), http://sustainabilityreport. shell.com/workinginchallenginglocations/nigeria.html, accessed on 28 August 2007.
[xxxvi] Ibid.
[xxxvii] Ibid.
[xxxviii] Friends of the Earth et al., ‘The other Shell report 2003’ (2004), 8.
[xxxix] David Cow, ‘Flare-up over Shell’s “double standards”: FoE report questions oil group’s green credentials’, The Guardian (24 June 2004), 26.
[xl] Tim Webb, ‘Shell dumps wind, solar and hydro power in favour of biofuels’, The Guardian (17 March 2009).
[xli] Terry Macalister, ‘Renewables: profits up a fifth but Shell emits more CO2 than most countries’, The Guardian (2 Feburary 2007), 28.
[xlii] Ucilia Wang, ‘Shell CEO: Energy efficiency, not clean power is key’, GigaOM (22 March 2012).
[xliii] Ibid.
[xliv] Shell, ‘Meeting the energy challenge: the Shell Sustainability Report 2006’ (2007), 5, www. shell.com/static/investor-en/downloads/publications/2007/shell_sustainability_report_2006. pdf, accessed on 31 August 2007.
[xlv] Mandy Turner, ‘Environment: scramble for Africa’, The Guardian (2 May 2007), 9.
[xlvi] Michael Sean Gillard, Melissa Jones, Andrew Rowell and John Vidal, ‘BP in Colombia: a tale of death, pollution and deforestation’, The Guardian (15 August 1998), 4.
[xlvii] Campbell Robertson and Clifford Krauss, ‘Gulf spill is the largest of its kind’, The New York Times (2 August 2010), A.14.
[xlviii] Deepwater Horizon Study Group, ‘The final report on the investigation of the Macondo well blowout’ (1 March 2011).
[xlix] Tom Burgis and William Wallis, ‘Shell faces tougher scrutiny of Nigeria drilling’, Financial Times (18 June 2008), 3.
[l] Guy Chazan, ‘World news: Shell faces query on Nigeria – Dutch parliament hearing expected to touch on corruption in oil-rich delta, as spills spur concerns’, Wall Street Journal (Eastern Edition) (4 January 2011), A.10.
[li] ‘First deepwater oil drilling plan approved since BP spill’, Environment News Service (22 March 2011).