Assgnt 1 Shell

8/8/2019 Assgnt 1 Shell

1/18

CENTRE EXECUTIVE EDUCATION

Royal Dutch Shell General

Business PrinciplesBusiness Environment

Rashida Yvonne Campbell10/21/2010


2/18

2

Contents

Royal Dutch Shell Plc ................................ ................................ ................................ ............. 3

Answer the Following Questions ................................ ................................ ....................... 3

Question 1 ................................ ................................ ................................ ........................ 3

Question 2 ................................ ................................ ................................ ........................ 4

Question 3 ................................ ................................ ................................ ........................ 5

Question 4 ................................ ................................ ................................ ........................ 6

Question 5 ................................ ................................ ................................ ........................ 7

Question 6 ................................ ................................ ................................ ...................... 10

Question 7 ................................ ................................ ................................ ...................... 12

Question 8 ................................ ................................ ................................ ...................... 14

To help our customers reduce their emissions we are: ................................ ................ 16

To influence the policy debate we are: ................................ ................................ ........ 16

CONCLUSION ................................ ................................ ................................ ...................... 17

Websites: ................................ ................................ ................................ ........................ 18

Bibliography ................................ ................................ ................................ .................... 18


3/18

3

Royal Dutch Shell Plc

Answer the Following Questions

Question 1Describe Royal Dutch Shell Company in terms of: size, business, and economic sectors in

which it is involved.

According to Fortune Magazine the worlds top 10 largest companies are:

1. Royal Dutch Shell 6. Total

2. Exxon Mobil 7. ConocoPhillips

3. Wal-Mart Stores 8. ING Group

4. BP 9. Sinopec

5. Chevron 10. Toyota Motor

(Source adapted from: http://money.cnn.com/magazines/fortune/global500/2009/)

The companies are ranked in order of the amount of revenue they make per annum.Size can be attributed by number of employees, volume of output, sales, assets, profits and

reserves. For Shell they employ 102,000 employees , revenue $278,188 billion, assets

$292,181 billion, Operate in over 140+ Countries, Barrels per day amount to 3.1 million,

Refineries owned 44, Profit $12,518 billion, Income $19,597 billion and established since

1980. (www.shell.com). These figures when made in comparison to the other petroleum

companies make Shell the largest in its field.

Oil/petroleum is considered a necessary consumable (more of a necessity than luxury in

todays market), petroleum companies therefore operate in an unusual market industry

where competition is focused among a few petroleum companies, demand exceeds supply;

and the organisation covers all three economic sectors:

1. Primarysector: Shell operates in this economic sector, as fossil fuel oils are

extracted from natural resources.

2. Secondary sector: Shell also operates in the secondary economic sector and is

expanding this area of business rapidly. Shell currently owns 44 refineries

manufacturing the process of crude oil into petroleum and the construction of pipe

lines, petrol stations with shops.

3. Tertiary sector: Shell also operates under the economic tertiary sector, as the

organisation is supplying its goods locally, nationally, internationally and globally. It

supplies to governments, nations, international -Business corporations and isresponsible for the logistical distribution of its supplies. Furthermore Shell petrol

stations (in the UK) provide financial services such as fuel -cards and credit to its

consumers. Within Shell organisation there is a consulting department that has

expertise and skills in the technical, chemical -business and provides a consultancy

service to medium and large organisations across the world.


4/18

4

Question 2Explain why Royal Dutch Shell is participating in the search for and development of other

sources of energy?

As Shell stated in their Vision:

THE OBJECTIVES OF THE SHELL GROUP ARE TO PARTICIPATE IN THESEARCH FOR AND DEVELOPMENT OF OTHER SOURCES OF ENERGY TOMEET EVOLVING CUSTOMER NEEDS AND THE WORLDS GROWING DEMANDFOR ENERGY.

(http://www.static.shell.com/static/investor/downloads/financial_information/reports/200

5/2005_annual_review.pdf)

Shells CEO published:

Meeting demand: We are finding innovative ways to help meet rising energy demand, as

we squeeze more from existing resources and develop new and unconventional energy

sources.(http://www.shell.com/home/content/innovation/ )

There are several reasons for the search for alternative sources of energy, however the

three mains reasons are:

y Scarce resources of fossil fuels are predicted to run out in the near future as

populations increase globally and the standards of living rise with more and more

individuals owning vehicles and businesses moving toward more global enterprises

the demand for transportation increases therefore the demand for fuel also

increases. Shell claims: Energy demand is expected to double by 2050 as the worlds

population grows and people get richer. Fossil fuels will provide the bulk of energy for

decades to come but oil and gas is becoming less easily acc essible

(http://www.shell.com/home/content/innovation/meeting_demand/)

y Profitability and sustainability are the major concerns for Shell, should the supply offuel extraction run dry then the business will eventually collapse. To include a long -

term strategic strategy for research and development of alternative sources of

energy will sustain Shell in a profitable business for the future. As stated under

principle one referring to Economic performance Long-term profitability is essential

to achieving our business goals and to our continued growth.

y Political/Government legislations and highly influential pressure groups also have an

impact on Shell to search for alternative sources of energy. Governments rely on

large private sector organisations in innovation and where necessary will provide

funding for them and devise legislation that protects such organisations. With the

fall of such organisations it will have an effect on the Coun tries economy. On the

other hand, government environmental legislation issues stricter control and

regulations on petroleum organisations demanding them to produce cleaner better

quality sources of energy. Over the past decades with the move towards a European

Community the EU has also attacked such organisations and sent directives and

regulations that enforce the organisations to change the way they do business. The

European Commission released a statement Europe's citizens and companies need a


5/18

5

secure supply of energy at affordable prices in order to maintain our standards of

living. At the same time, the negative effects of energy use, particularly fossil fuels,

on the environment must be reduced. That is whyEU policy focuses on creating a

competitive internal energy market offering quality service at low prices, on

developing renewable energy sources, on reducing dependence on imported fuels,

and on doing more with a lower consumption of energy.

(http://ec.europa.eu/energy/index_en.htm)

Question 3Why does Royal Dutch Shell publish a Statement of Business Principles?

Shell Petroleum has been operating since 1890 until present day. Over a century of

operating in business the organisation has had its fair amount of criticisms, attacked by the

media, government, pressure groups (such as Green-Peace and Environmentalists, Eco-

Friendly organisations), workers, consumers and society at large. These critical reports,perspectives and media representation presents a negative image of the organisation.

Should the occurrence of an organisation suffer the loss of its reputation this will lead to

detrimental results. The power to operate the business will start to decline, employees will

view the organisation as a less attractive organisation to work for, investors will withdraw

funding, and consumers will seek alternative products and switch suppliers whom they

believe to be acting in socially responsible ways. Consequences of this would mean

substantial loss of profits and negative company image. To avoid Shell from encountering

such circumstances they need to sustain and transmit that the organisation is upholding an

ethical, legal, moralistic and professional enterprise. The Statement of Businesses

Principles are preaching the commitment and framework in which Shell operates, the

message of the principles is targeting all stakeholders, whether internal, external or

connected. By producing it in a written format and presented to stakeholders adds the

momentum of a contractual binding. This makes its stakeholders believe and trust in the

organisation that they are fully committed to their Principles. The Principles are an

extension of the companys vision detailing more emphasis on their methods and ar eas of

concern. The vision expresses

OUR ROLE IS TO ENSURE THAT WE EXTRACT AND DELIVER THEMPROFITABLY AND IN ENVIRONMENTALLY AND SOCIALLY RESPONSIBLEWAYS MAINTAINING A STRONG LONG-TERM AND GROWING POSITION IN

THE COMPETITIVE ENVIRONMENTS IN WHICH WE CHOOSE TOOPERATE. WE AIM TO WORK CLOSELY WITH OUR CUSTOMERS, OURPARTNERS AND POLICYMAKERS.(http://wwwstatic.shell.com/static/investor/downloads/financial_information/reports/2005/2005_annual_review.pdf)

The vision mentions various stakeholders and the Business Principles elaborates on the

concern of all stakeholders and how Shell aims to satisfy its stakeholders. This method

allows Shell to strengthen customer loyalty, stakeholder awareness, motivate and maintain


6/18

6

employee commitment, gain public and political support, encourage new investments,

sustain current investment, informs potential cust omers/consumers of its operations and

cultural behaviour, expectations of its suppliers and contractors. Finally the Business

Principles target environmental issues to avoid any conflicts from legal environmental

standards, expectations and laws. All these principles and practices will increment and

sustain long-term profitability.

Organisations like Shell issuing their business principals are providing an extension and

expansion of their ethical stance and stakeholder commitment. By producing such a

document transmits a message that Shell will uphold to these principals in any country

around the world, regardless of culture and other factors. This helps create a certain image

and trust of the company despite its location and business culture of that count ry that it

operates in. Their Business Principals set the organisations guidelines, code of conduct, day

to day operating practices, it is their criteria for an Ethical principal conduct. The statement

acts as an insurance and guarantee to all those who have an interest and stake in the

business. The existence of Shells Statement of Business Principals can increase ethical

behaviour, clarifies expectations and can prevent the company from damages in the long -

term.

Question 4Discuss whether the responsibilities identified by Royal Dutch Shell may conflict with each

other.

All organisations are affected by the different stakeholder groups that are associated with

the company. As Shell claimed It is the duty of management continuously to assess the

priorities and discharge these inseparable responsibilities on the basis of that assessment.

For Shell there are several different groups of stakeholders related to their organisation:

y Internal Stakeholders concerning Shell are: Employees, ex-employees, Management,

Directors, V.Ps and Board of Directors etc.

y Connected Stakeholders are: Shareholders, joint-ventures, partners, suppliers,

customers, financial corporations, other investors, research establishments

(connected to the R &D divisions) etc.

y External Stakeholders are: the community, media, government, pressure groups,

NGO- Non Government Organisations NGOs are important bodies that influence

decision-making. For example, Shell drilling in 2008 for gas in Briti sh ColumbiasSacred Headwaters. A number of organisations were set up to protect the

Headwaters including Friends of Wild Salmon. Shell listened to their concerns and

postponed further drilling work. Other oil companies are also external stakeholders

Shell works in partnership on projects with many other oil companies. These include

both competitors such as BP and Texaco, and partners such as government owned

oil companies.


7/18

7

The responsibilities may conflict with each in various ways, the most common forms of

conflict are likely to be the unbalance and meeting the objectives of each stakeholder group

through the decision making process in order to meet the organisations vision.

Shareholders play a crucial part in the life of the business. They provide a sizeable part of

the capital required to set up and run the business. They take a reward from a share of the

profits in the form of a dividend. The Shareholders objectives and interests are highly

influential on Shells decisions policies, as shareholders may want as much profit as p ossible

in the form of dividends. Therefore the main interest is profit maximisation.

The government hold other forms of power that can have a direct effect on the business in

the form of licences (to extract), health and safety, taxation and other financi al regulations.

This can therefore have a direct affect on how much profit is calculated for that year and

will determine the amount of dividends to be paid out.

As stakeholders, employees are influenced by Shell but also affect how Shell operates. The

employees standard of work and commitment to health and safety and excellence is vital in

order to keep Shell as a leader in the energy field. Mistakes can be costly in terms of

reputation and the livelihood of other employees. Management and employees seek better

working conditions, employee development and progression, as well as higher wages and

bonuses. This can cause a conflict with shareholder and Board of Directors strategies and

values.

Without customers a business would not exist. One of Shells major objectives therefore is:

To win and maintain customers by developing and providing products and services which

offer value in terms of price, quality, safety and environmental impact, which are supported

by technological, environmental and commercial expertise.

Achieving this objective is challenging. Customers want value for money which involves

providing the highest quality fuels at competitive prices. Research drives this process.Therefore the allocation of resources and re-investing profits in the Research and

Development departments is crucial to satisfy customer demands and expectations. Re-

investing profits is the major conflicting factor among all stakeholders.

Question 5Royal Dutch Shells aim is profit: Long-term profitability is essential to achieving our

business goals and to our continued growth ifthis is the case, explain why Royal Dutch

Shell aim to meetthe objectives of different stakeholder groups?

All stakeholders are inter-connected and have an affect on the organisation. Each different

stakeholder group adds value to the organisation or can also cause negative costly impacts

on the organisation. For example: T he community and society their interests are focused on

health, safety, environmentally responsible and sustainability. Should Shell ignore such

stakeholders values this can affect the long-term profitability of the company, in the year

2009, Shell Board of Directors and Shareholders were expecting to drill and extract oil from

the Gulf of Mexico, due to the neglect of BP (British Petroleum) and the oil spillage, this


8/18

8

raised issues with various Environmentalists, pressure groups, communities, society and

government intervention. As a result Shell was forced to withdraw from the extraction of oil

from the Gulf of Mexico. In turn this will affect Shells profitability with stricter government

regulations and other pressure groups enforcing their powers and authority.

Shell employs over 100,000 people worldwide. These include senior international managers

specialising in finance, marketing, sales, oil and gas exploration and other aspects of the

business. Other employees include geologists, market researchers, site engineers, oil

platform workers, office administrators, business analysts and many more. Meeting the

objectives of its employees should be one of their priorities; they must provide good

working conditions, good competitive rates of pay and the opportunity to progress.

Consequences would result in lack of employee motivation and the loss of key expertise for

the survival of Shell, eventually causing an impact of profitability.

Local communities living close to oil refineries have raised concerns over their safety . Other

safety issues affecting different stakeholders can be noted i n 2009, 13,900 metric tons of oi l

was spilled into the Niger Delta, more than double the 2008 total and four times the 2007

figure, Shell said in its annual sustainability report. Shell also quadrupled its estimate of the

amount of oil it spilled in the region due to accidents in 2008 to 8,800 tons following the

completion of investigations. Source: http://royaldutchshellplc.com/category/total/

Failure to meet safety standards leads to media coverage advertising oil companies

negatively and creating bad public relations. The effect of this will also result in the loss of

profits.

Shell aims to meet the objectives and satisfy all its stakeholders objectives, this strategy

and belief will ensure the survival of the business and its long-term profitability. There has

to be a balance of the needs of different stakeholders, without customers there is no

business activity, disregard for stakeholders no matter the extent of influential power theymay possess will cause a long term effect on the organisations profitability. Each

stakeholder group has a functional part that makes up the whole corporation.

For balancing the needs of all stakeholders is particularly important for large energy

companies like Shell, one of the worlds larg est and most profitable multinational

companies. The oil manufacturer like Shell also needs to expand their record of stakeholders

as far as the Transportation Industry/Manufacturing businesses too. Shell sells enough

petrol and diesel a day to fuel 16 mil lion cars. These businesses are also vital to the survival

of the business and long-term profitability, creating and developing new sources of energy

for the transportation market requires close relationships with the various manufacturers

and partnerships to devise such vehicles that will support the cleaner fuel efficient product,

especially with the establishment of bio-fuels.

It is essential to meet the objectives in order of priority of different stakeholders, as the

diagram below demonstrates that all stakeholders are key elements that work together in

creating and sustaining the organisation, there exist a two-way benefit once profits are

generated they are then redistributed in various ways to the different stakeholders.

See diagram below:


9/18

9

e s e e s jec ves e e e e s e c

ey

v

e

e

s

e c

c

c

e

s

e

e

s

e

s

e

e

e

e

s

c

e

e

S

e

e

e

s

s

e s

e

e

s

v

s

F

e

! e

"

y Profits re # istribute # to the government in forms of taxation.

y Profits provided salaries and bonuses

y Profits issued to shareholders who may also beemployees$ supplies and customers

etc

y Profits are used in building more refineries thuscreating morejobs for the

community

y Profits reinvested in research and development to search for morevalue for money

for products%

service therefore benefiting theconsumer.

The neglect of one function leads to a dysfunctional organisation allowing competitors to

dominate the market. Therefore Stakeholder Mapping is recommended for Shell to decide

SHELL

Produces Products&

Services Generates

P & OFITS

STAKEHOLDERS

Economic Impact

Shareholders&Customers

STAKEHOLDERS

EnvironmentalImpact

Government &Pressure Groups

STAKEHOLDERSSuppliers'

Competitors' Partners

STAKEHOLDERSMedia Educational

Institutes'

TransportationManufacturers

STAKEHOLDER

Social Impact

Employees&Communities

SHELL PROFITS ARE THEN

REDISTRIB(

TED TO ALL

STAKEHOLDERS


10/18

10

how to respond to the different concerns. A successful business will be the one that

properly balances the requirements of all its stakeholders.

Question 6In terms ofthe Royal Dutch Shell Company, state and describe three areas of business

activity which may be affected by business legislation.

1. UK introduces landmark C)

2 emissions legislation. The British governmentintroduced a progressive new draft environmental bill that could control greenhouse gas

emissions until as far as the year 2050 the bill will focus on four items: cutting CO2

emissions by 60 percent by 2050, improving CO2 monitoring and reporting, creating new

governmental powers to ensure success, and creating a committee to oversee the

implementation of new measures.Wednesday, March 14, 2007htt

p://ju

rist

.law.pitt

.edu

/paperchase/2007/03/u

k-int

rodu

ces-landmark-co2-emissions.php

Shell is also working with governments to promote the need for more effective regulation

on CO2 emissions. Shell is helping to meet the growing need for energy in economically,

socially and environmentally responsible ways. With the current threat of climate change,

they are developing technologies to help reduce carbon fo otprints and researching

measures to help customers reduce CO2 emissions. In order to help deliver such benefits

Shell has also developed Shell Diesel Extra with fuel economy formula, which has been

shown in internal Shell tests to reduce fuel consumption by up to 3%. This also means

further research and development in creating fuel that will meet such standards and

working closely together with car manufacturers to devise such products. Furthermore thislegislation will also affect the refineries output and t his will prove challenging for Shell. Shell

petroleum is a key provider of the energy in the UK, producing one tenth of the UKs oil and

gas and operating almost a fifth. Shells Stanlow refinery in Cheshire has a refining capacity

of 12 million tons per year and produces a range of transport fuels. The business plan for

2008-2010 has a challenging target for CO2 reductions. The targets will be achieved

through a number of measures.

(http://www.shell.co.uk/home/content/gbr/products_services/on_the_road/card_services/

shell_fuel_card_for_business/trucks_and_coaches_tpkg/euroshell_card_offer )

2. The Health and Safety atWork Act 1974, and EU Directives issuing employers

additional rules and duties toward the safety standards at work . Three companies have

been fined a total of 283,332 after a man was paralysed from the waist down while

working at a Shell oil refinery in Cheshire. The case related to an incident on 9 February

2007. The company was removing part of the concrete lining of the 'cracker' unit, where

crude oil is turned into various chemical components. Mr Rizzotti, who is a f ather of three,

suffered a broken back, two broken legs, a broken pelvis and other injuries when a container


11/18

11

carrying 500kg of waste materials fell 30 feet on top of him. The 42 year old has to use a

wheelchair and is rebuilding his life after being seriou sly injured at the oil refinery.Shell was

fined 116,666 and ordered to pay costs of 16,204 . Other incidences include oil spillage in

Niger Delta. Such laws enforce businesses to adapt and improve health and safety standards

at work. This may be costly to the organisation but not costly in the long term should

company image and reputation be ruined. Shell has been affected by such laws and has

devised strategies and incorporated the importance of safety into their mission statements

and business principals. Shell Bitumen is dedicated to maintaining excellent standards of

health and safety, specifically we are committed to:

y pursue the goal of no harm to people

y protect the environment

y use material and energy efficiently to provide our products and services

y develop energy resources, products and services consistent with these aims

y share openly information on our HSE performance

y play a leading role in promoting best practice in our industry etc

Source adapted from: http://www.shell.com/home/content/bitumen/health_safety/

3. Illegal transactions and laws against bribery , such business legislation will affect

Shell Corporation, the publicity and reputation that the organisation has built over the years

can be damaged by such illegal practices. A news report by The West online newspaper

produced an article announcing Royal Dutch Shell PLC, a big Swiss freight company, four oil

service companies and a US shipping firm - have agreed to pay $US236.5 million to settle

criminal and civil charges that they bribed foreign official the government announced . The

companies were accused of paying customs officials in a dozen countries millions of dollars

in exchange for favourable treatment in customs duties, imports and taxes. In addition, they

allegedly also paid bribes to get phony documents enabling oil drilling rigs to be broug ht in

to countries

http://au.news.yahoo.com/thewest/a/-/world/8266236/shell-others-pay-236m-in-us-bribe-

cases/(Article produced by: Marcy Gordon, AAP November 5, 2010)

The settlements marked the latest action in the government's efforts to combat overseas

corruption in international business. The bribery charges were brought under the Foreign

Corrupt Practices Act, which makes it unlawful to bribe foreign government officials or

company executives to secure or retain business. A number ofUS and foreign companies

have been charged with violating the law in recent years .

Shell clearly states in their Business Principles:

Shell companies insist on honesty, integrity and fairness in all aspects of our businessThe

direct or indirect offer, payment, soliciting or acceptance of bribes in any form is

unacceptable


12/18

12

This principal acts as an alibi for Shell, allowing all stakeholders and legal authoritie s to be

informed that as a corporation Shell will not encourage or prohibit such actions, and the

principal acts as a disclaimer.

Question 7Why and how might Royal Dutch Shells ethical stance conflict with responsibilities to

shareholders and stakeholders?

Organisations must operate under the law of the country in which they choose to do

business in. However they also confront Ethical concerns, as ethics are the driving force that

can damage a companys reputation and image. Within the organisation a compliance-

based approach is implemented with consideration towards legal aspects. Shell has also

developed an integrity-based approach giving a broader and highlighted code of conduct

incorporating ethics into the organisations values, culture and expected behaviour. Ethical

practices on three levels have been addressed according to Shell. They demonstrate social

responsibility to national and international societies, corporate level strategies must comply

with their business principal statements and the in dividual is expected to conduct behaviour

and business practices according to the legal and ethical framework and culture of Shell.

There are many issues at the work place that come under the umbrella of Ethics. The views

and opinions of individuals and st akeholders etc, will decide if the organisation has behaved

ethically or not. Ethics are influenced by laws, experience, culture, stakeholders, individuals

and society.

The types of conflicting ethical problems a Manager will confront are many. For

Shareholders and top Managers objectives are profit margins. To achieve and increase

profits for Managers to satisfy their shareholders could lead to developing organisationalstrategies that cut costs. So cost cutting strategies are implemented to increase profits so

that the organisation can fulfil its responsibilities to its shareholders. Such strategies may

involve the reduction of safety standards at work especially in those countries where legal

safety standards are not implemented. This creates conflicts among middle-level managers,

supervisors and employees subject to the reduction in safety standards. In the Western

parts of the world (especially European countries under the EU), comply to Minimum Wages

Act, where workers/employees will receive at least the minimum wage as stipulated by the

EU Directive. The same job description in another part of the world may not receive the

same rate of pay e.g. in the UAE the rates of pay are far below the minimum wage

requirements of Europe. This is another form of sa ving and cutting costs. This conflicts with

responsibilities and duties of Shell as an organisation. The Statement of Business Principals

therefore sets these standards and makes it homogeneous irrespective of location.

Shareholders may disapprove of this standardized setting as it reduces the impact of profit

margins. Legally if Shell paid the employees in the host country the lower level rate of pay

they are not committing any illegal acts, but according ethics and their business principals

this action would be viewed as socially irresponsible.


13/18

13

Other conflicts that have occurred within Shell are between corporate directors,

sales/account manager responsible for large portfolios of millions of dollars, have resulted

in extortion and bribery. This conflic ts with the board of directors and all other stakeholders,

as clearly stated in the Business Principals bribes of any form are not acceptable.

Shell operates in certain Countries where corruption is normal and part of everyday life such

as countries in Africa and South America etc It is possible that the countries officials will

offer to provide the exchange of business pending such payments. Sh ell has a responsibility

towards its stakeholders for continued business in the search for energy, and at the same

time building on social responsibility the opportunity to conduct business in such countries

will create jobs for the local market. These obj ectives can be met, but to meet these

objectives Shell needs to access if the paying off of Officials is ethical business practices?

Weighing the advantages and disadvantages, in some cases certain employee members of

Shell have been subject to issue such payments of bribery. Cases such as the one previously

mentioned above.

Responsibilities to Suppliers is another area where ethical stance may conflict, powerful and

large organisations such as Shell have considerable bargaining power over their suppliers

and can compel suppliers to reduce their prices, thus generating more profits for the

organisation, this act would not be considered illegal, but rather un -ethical. Shareholders

and customers would perhaps value and approve of the technique as this will red uce the

output price and allow customers to benefit as well as shareholders generating more

profits. However due to Shells ethical practices such power is not to be exerted.

A more factual and realistic question to address is to consider the scenario: if there are no

laws to enforce businesses to behave social responsible and if profits are not affected.

Would the organisation still uphold and honour its ethical practices?

Management and owners of the organisation have responsibilities to all those who are incontact either directly or in-directly with the organisation, their ethical stance is setting

further boundaries which may conflict among various stakeholders, such as the safety and

welfare of employees, responsibility to customers, shareholders an d their investments,

corporate governance and financial dealings, responsibility to the general public,

environmental concerns etc each stakeholder will have different expectations, either

profit, safety, value, sustainability etc, not one stakeholder gro up can be expected to adopt

concern for all these areas. It is therefore the responsibility of the corporation to balance,

express and practice their Business Ethical Principals. As a consequence this will generate a

good corporate image.


14/18

14

Question 8Evaluate the extentto which Shell achieves the objectives of any three stakeholders

The three stakeholders to be discussed are

y Customer demands and needs

y Local communities

y Government environmental issues

1. Customers demand products that are good quality, value for money and available

through unlimited supply. Customers are stakeholders that pay for the very existence of the

organisation, without customers there would be no business. Shell is unusual in the sense

that petroleum is more of a need than a want and little effort needs to be addressed in

creating a demand. Although Shell is not acting as a monopoly and has large competitors

within the petroleum industry, therefore achieving the objectives of its customers are

paramount. The future natural resource of fossil fuels is predicted to run out and with

added pressure of sustainability issues both are concerns to customers and potential

customers in their need for energy supplies. Shell seeks to accomplish this through research

and innovation; this is also mentioned in their vision participate in the search for and

development of other sources of energy to meet evolving customer needs and the worlds

growing demand for energy.

(http://www.shell.com/home/content/innovation/about_us/ ).

Shell uses innovative technology to shape the energy future. At Shell they are unlocking new

resources and squeezing more from existing resources to power the world. Shell employs

30,000 technical staff in centres across the world. From scientists to business experts, our

employees and contractors work to deliver our research and development programme.Shell has a global network of technical centres, located close to their main markets and

production sites. Partnerships with universities, companies and institutes help drive forward

research and development through sharing ideas and technical know -how. Shell has already

started to produce bio-fuels and Liquid compressed gas. All of these strategies and practices

entail large sums of financial support which Shell is investing in.

2. Local Communities are external stakeholders but have an affect on the organisation

and some local communities form pressure groups that can later impact the business . Some

local communities living close to oil refineries have raised concerns over their safety. While

other communities that Shell operate in are under -developed and poor. Objectives of such

stakeholders would be to improve safety and raise living standards for the community. Shell

aims to be good neighbours to the communities close to their projects and facilities. They

claim Earning and maintaining the trust of local communities is vital to the success of our

projects. We listen to community concerns and respond appropriately. We use the results of

our impact assessments, community surveys and discussions to draw up social performance

plans for all of our refineries and chemicals facilities, and upstream operations with a

potentially high impact on the co mmunity. Our employees implement the plans to help


15/18

15

reduce negative social effects and bring benefits to communities. Every three to four years

our social performance representatives from other locations review this process. We also

carry out social performance reviews at storage depots in our distribution business to check

we are considering relevant social issues.

http://www.shell.com/home/content/environment_society/society/our_neighbours/trust/

Shells oil and gas operations aim to create economic and social development while

minimising negative impacts. It seeks to invest in lasting benefits for the community . Shell

seeks to overcome these fears by earning the trust of people by taking all the necessary

safety measures. This includes operating the plant safely and making people aware of plans

and emergency procedures. (See diagram of Shells commitment)

www.thetimes100.co.uk

Shell, in its commitment to improve the wellbeing of local communities, has created local

partnerships. It has provided health facilities and supported the development of local

schools and universities. It treats each case separately using decision-making methods set

out by the Danish Institute for Human Rights.

3. GovernmentEnvironmental Issues (one government environmental issues will be

discussed), Co2 emissions has been a major concern for most European countries since the

assembly of the EU. In the UK vehicles must be tested and measured for each amount of

Co2 emission is being released by vehicles. As energy demand increases governments

search and depend on organisations to find ways to cut local pollution and the greenhouse

gases linked to climate change. Shell was one of the first companys to recognise the need

to reduce CO2 and work closely with governments. We continue to develop technologies to

reduce CO2 from our operations and to produce more efficient fuels and lubrican ts for

customers. We are calling on governments to establish policies that will encourage a

reduction in CO2 emissions.http://www.shell.com/home/content/environment_society/environment/climate_change/

Emissions from fossil fuels are currently responsible for 60% of the worlds total greenhouse

gas emissions. The International Energy Agency predicts that fossil fuels will continue to

meet the bulk of rising energy demand for decades to come. So managing CO 2 emissions

from coal, oil and natural gas is crucial in tackling climate change. Shell has implemented


16/18

16

several ways of meeting the objectives of government environmental concerns over CO2

emissions:

1. Increasing the efficiency of our operations.

2. Establishing a substantial capability in CO2 capture and storage (CCS)

3. Continuing to research and develop technologies that increase efficiency and reduce

emissions in hydrocarbon production.

To help our customers reduce their emissions we are:

4. Developing low-CO2 sources of energy, including natural gas and low-CO2 fuels

5. Providing products and services that help customers use less energy and emit less CO 2.

To influence the policy debate we are:

6. Working with governments and advocating the need for more effective CO 2 regulation.

http://www.shell.com/home/content/environment_society/environment/climate_change/

our_approach_to_climate_change/

Question 9

In your opinion, should expend resources on improving stakeholder value or focus

resources on rewarding shareholders?

Shells main shareholders consist of large institutional stockholders, employees and the

general public. Shell believes that it has a key responsibility to protect shareholders

investment, and provide a long-term return competitive with those of other leading

companies in the industry. Shell, as one of the worlds major companies has consistently

made healthy profits. These profits have then been used productively to reward

shareholders in the form of dividends and to plough back into developing new research,

new products, and new forms of energy for the future and better ways of managing fuel

reserves. Shell believes that it will continue to exist and grow if it can balance the needs of

stakeholder groups. Shell employs three criteria in making such decisions. It assesses

whether:

1. The economic impact of the activity is likely to yield a good return for shareholders2. The social impact will be suitable for employees and communities

3. The long-term effect of its activity will harm the environment.

To avoid conflict, Shell sets minimum levels that must be met for all three areas before

making a major decision or investment in any one.


17/18

17

CONCLUSION

It is not easy to balance the needs of stakeholders. In order to best achieve this balance

Shell recognises five areas of responsibility to: shareholders, customers, employees,

suppliers and society. Ongoing communication with all of these groups is essential. In this

way it is possible to take account of everyones needs and expectations in making decisions

for today and the future. Shell has resolved and minimised conflicts between its activities

and its stakeholders through its clear strategies and commitment to corporate values. By

setting minimum thresholds for decision making, it is able to balance its impact in economic,

social and environmental terms. This ensures that no decision will affect one stakeholder

group more than others.

Therefore in my opinion not just for the case of Shell plc but for any organisation, it is

important to satisfy and expend resources on improving stakeholder value as this will lead

to long term steady increases in profit and ultimately this will reward sh areholders. Shell

have produced a diagram illustrating that all stakeholders/shareholders all make-up the

whole organisation for it operate effectively and generate profits.



18/18

18

Websites:

http://money.cnn.com/magazines/fortune/global500/2009/)

www.shell.com

http://www.static.shell.com/static/investor/downloads/financial_information/reports/2005/2005_annual_review.pdf

http://www.shell.com/home/content/innovation/

http://www.shell.com/home/content/innovation/meeting_demand/ http://ec.europa.eu/energy/index_en.htmhttp://wwwstatic.shell.com/static/investor/downloads/financial_information/reports/2005/2005_annual_revi

ew.pdf

http://royaldutchshellplc.com/category/total/

http://jurist.law.pitt.edu/paperchase/2007/03/uk-introduces-landmark-co2-

emissions.php

http://www.shell.co.uk/home/content/gbr/products_services/on_the_road/card_services/s

hell_fuel_card_for_business/trucks_and_coaches_tpkg/euroshell_card_offer

http://www.shell.com/home/content/bitumen/health_safety/

http://au.news.yahoo.com/thewest/a/-/world/8266236/shell-others-pay-236m-in-us-bribe-

cases/(Article produced by: Marcy Gordon, AAP November 5, 2010)

(http://www.shell.com/home/content/innovation/about_us/

http://www.shell.com/home/content/environment_society/society/our_neighbours/trust/




our_approach_to_climate_change/

BibliographyTitle: Dictionary Business & Management

Edition: 2nd

, 2004

Publisher: Bloomsbury Publishing Plc

Author: Fiona Pike

Title: Complete A-Z Business Studies Handbook

Edition: 5th

, 2006

Publisher: Hodder Education

Author: Professor David Lines, Ian Marcouse, Barry Martin

Title: Business Studies for Advanced Level

Edition: 3rd, 2008

Publisher: Hodder Education

Author: Ian Marcouse, Malcolm Surridge, Andrew Gillespie

Documents

Assgnt 1 Shell