Stakeholders In Sustainable Business Transformation

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The global environmental problems discussed include climate change and decline of biodiversity. According to this case study, primitive cooking methods generate black carbon and carbon dioxide, all which are causal factors to global warming. Considering that soot remains in the aura for days, significant reduction of the amount of soot by widespread use of clean cook stoves can yield immediate alleviation of global warming by getting rid of open fire cooking in developing countries. Besides, primitive open fire cooking call for massive use of plant as fuel, such as cutting down trees for charcoal production, which greatly damages the biodiversity of different parts of the world. Extensive clean cook stove adoption would greatly cut the consumption of plants hence helping mitigate global loss of biodiversity.

Economic growth and poverty issues mentioned in chapter 9 revolve around economic inequity. Factors such as low income and poor local infrastructure prevent people using primitive cooking methods from enjoying life changing technological advancements that have gained popularity in the developed world. Adopting widespread use of cook stoves, an initiative started with technological help from multinational corporations like Dow Corning would enable these people enjoy benefits of clean cooking technologies already available in developed nations. They would also enjoy a healthier and more fulfilling life hence bridging the gap between the rich and the poor. Furthermore, primitive cooking methods are also tedious and time-consuming. With widespread shift to clean cook stoves, a lot of time spent this practice would be saved for more meaningful activities like education and running businesses all which would improve the economic situation of the populations in less developed countries.

Royal Dutch Shell Transformation to More Sustainable Operations

Considering the growing worldwide population is desiring additional prosperity other than the scarce limited natural resources, the normal way of carrying out business operations is not optional. But there is the challenge of balancing economic growth with conservancy sustainability. On the flick side, it can serve as a business opportunity for entrepreneurs. Since petroleum oil became the main energy source for humans in the 1800s, oil companies have been carrying out their operations without interruptions from outside the industry. But as the public and other stakeholders came to learn of the environmental and societal effect posed by the industry, the petroleum industry was subjected to external influences and regulation to enforce sustainable operations.

Industry-Wide External Factors

Other than external forces affecting Royal Dutch Shell as an individual company, there are general external forces affecting the petroleum oil industry as a whole to become more sustainable and environmentally responsible. Previously, there were limited effective regulations over environmental and social risks posed by the oil industry in the world. In the early years of the oil industry development, laws enforced limited legal liabilities on producers such that authorities were not powerful enough to force them to take reasonable actions to reduce potential threats to the environment and society at large. In the U.S, the legislation controlling environmental damages of oil transportation was the Limitation of Liability Act 1851, which stated that a vessel’s owner can limit damage claims to the value of the vessel if they can prove they did not know about the problem beforehand (Morgan, 2011). Without proper regulation and legislation, oil companies did not make substantial efforts to prevent pollution of avoid environmental disasters.

In 1910, an oil drill in Midway-Sunset Oil Field in California caused a massive blowout of crude oil that overloaded oil tankers and spilled across the landscape, making history of the largest accidental oil spill that released 1.1m tons of crude oil (Harvey, 2010). While the US while considered a nation that upholds the rule of law had not any effective legislation to control the industry’s environmental threats. Therefore, petroleum businesses would wreak havoc to the environment without receiving superficial punishments from governments. Imperial Russia formerly the center of petroleum oil industry was infamous of corruption and mismanagement of the empire. Consequently, the oil rich Absheron Peninsula under the Russian empire came the world’s oldest legacy of oil pollution and environmental negligence. These and many more incidents of oil pollution brought public resentment and widespread protests, calling for a turning point of the regulatory history of the industry.

On the global realm, external forces determining the oil industry operate in a more friendlies and more sustainable way. The international pollution incident, the Torrey Canyon oil spill astonished the whole world with massive destruction and cleanup costs. This and other oil pollution events in the 1960s and 70s influenced the MARPOL 73/78 intervention which addressed issues of prevention of and financial liabilities for oil spills (Perunovic & Vidic-Perunovic, 2012). The convention initiated global efforts of forcing the industry to adapt to environmentally and socially friendly initiatives and sustainability. MARPOL conventions have since become the global standard for regulating mechanisms of the international oil industrial operations.

Many governments around the world and international organizations also joined in helping create a strict scientific world-wide regulation system for the industry. Moreover, there are several international agencies for rating sustainability in top companies that have sustainability problems, most of which belong to the oil industry including Royal Dutch Shell. Some of the rating agencies are Global100, 2009 Corporate Equality index. As one of the top business entities in the industry, Royal Dutch Shell is undoubtedly driven by these external pressures and influences from states and global regulatory bodies to shift to more sustainable behavior.

Corporate-Specific External Factors Influencing

Royal Dutch Shell has had operations in the oil rich Niger delta for many years, for which it was considered socially and environmentally responsible. Topic 1 Module 3 of the course material mentions that Community Economic Development (CED) is necessary for the local population to get their share of global economic development. therefore, adherence to CED must be part of a multinational company’s plan to maintain social responsibility and sustainability. Hennchen (2014) states that the World Business Council for Sustainable Development presented Royal Dutch Shell’s community development schemes in Nigeria as a positive CSR case study, and in 2011 it was voted the best company in innovative CSR. The corporation donated $18m to social development operations and $53m to the Niger Delta Development Commission though the latter was a regulatory requirement (Datamonitor, 2010). However, there are several problems realized in the past years, followed by the major controversy concerning company engagement in local political wrangles, which created doubts about the company’s real sustainability performance in Nigeria.

In February 2010, Royal Dutch Shell received a 17-page from its employees from the US, the UK and Netherlands stating their shock on hearing about the speculated damage the company operations are posing in Nigeria (Datamonitor, 2010). According to Datamonitor, Royal Dutch Shell Nigeria has bad health reports, environmentally unfriendly high rates of oil spills into the Niger delta, for example the 8,800-ton oil spill resulting from an explosion, and many corruption cases (2010). The company has also engaged in numerous shady deals involving government officials on different levels, and while it uses large chunks to satisfy politicians and influential individuals, many massive oil spills have taken place as a result of malfunctions of old pipes and equipment.

Another controversy regarding death of a local activist further ignited international condemnation and criticism of Royal Dutch shell operations. in 1994, the Nigerian military government incarcerated members of a non-violent activist group including their leader Saro-Wiwa who had initially disclosed environmental harms resulting from Shell’s operations, and were all hanged in 1995. While Shell denies having had any involvement in the incident, many sources hint that the firm cooperated in the hunt and arrest of the activists (Hennchen, 2014). Because of the mentioned issues, Royal Dutch Shell is singled out in global criticism and protests for their operations. the management receives pressure to take action to cope with the external factors, practices such as disclosure of degree of alleged effect of their oil projects, replacing old corroded pipes, hiring NGO individuals as full time employees to campaign for change in corporate activities, and a $15m out-of-court settlement with the deceased activists’ families.

The problems involving poor operational management at Royal Dutch Shell in Nigeria is not the only source of external pressure for the corporation. Having many different projects going on around the world many environmental and social concerns contribute to external factors forcing the company to engage more in CSR and sustainability. In 2006 for instance, the company’s Sakhalin project faced criticism for its damages to the local whale population, which the company denied at the onset of the project (Hennchen, 2015). The event imposed huge pressure from Russia and from marine ecosystem protection institutions, demanding the company management to execute interventions for restoring the population of protected animals.

Internal Forces

As part of world’s biggest companies, Royal Dutch Shell has always tried maintaining a competitive edge over their competitors and surviving all economic, social and technological changes. In their corporate history, Royal Dutch Shell, in the attempt to remain competitive has laid investments in its corporate strategy setting and fine-tuning, emerging top among leading companies that effectively employ scenario planning technique. that enabled the firm stay ahead of competitors in adapting to the regularly changing business environment. Due to the mastery of scenario planning, the corporations has developed strong influences from within to allow improvement of operational sustainability.

The corporation’s slogan stated on the website is that Shell is an integrated company aiming to meet the global increasing demands of energy in economical ways. the slogan possibly represents more than a vision. Due to the early effective implementation of scenario planning, Royal Dutch Shell long discovered issues concerning sustainable development, social and environmental responsibility cannot be trade off problems of economic growth but rather critical aspects of prolonged business profitability. Through scenario planning, Royal Dutch Shell emerged as the one of the industry veterans to identify that oil producers cannot survive if they do not indulge together or give emphasis to external factors (Wilkinson & Kupers, 2013). By focusing on historical and premeditated future external influences and suggestions from the management, the company as early as the 1980s concluded that their future petroleum oil business would have to survive in a sustainable world in which the environment tops the agenda. A focus on clean fuels contributed to industry reconstruction and developing nations brought on board in the world global economic system (Wilkinson & Kupers, 2013). For over a decade now, the company has been taking measures to become more sustainable.

Global Impacts of Sustainable Development Initiatives

In the 1990s, sustainable development emerged as the central concept due to its connections to lack of resources and environmental pollution. The World Commission on Environment and Development in 1987 published a Brundtland report seeking to persuade countries to work together to curb poverty in developing countries and conserving the environment. Shell heeded to this appeal by becoming a member of several committees that followed up on recommendations stated in the report. It also translated sustainable development goals into feasible instructions for the company operations. by enforcing a systematic environmental management system, the corporation could invigilate the progress towards achieving these guidelines. In fact, Shell highlighted the issue of global warming and called for promotion of energy efficiency.

During the same period, the climate change debate was trending in the media and among the public. There was the question of whether the world was becoming warmer and whether the trend resulted from human action. Some oil companies accepted the likelihood of a connection between carbon dioxide emissions and global warming. Shell embarked on a sustainable development initiative of developing programs to eradicate the utilization of chlorofluorocarbon (CFC) to minimize the blazing of natural gas and to enhance efficiency of energy use, an initiative of the Kyoto agreement. The firm embarked on three main areas namely improving energy efficiency, encouraging use of lower carbon fuels and building commercial renewable business. The company especially established commitment to cutting 10 percent of own greenhouse gas emissions from its local operations. it met this target and in 2002 extended the goal of achieving additional reduction of 5 percent (Sluyterman, 2010). The corporation embarked on small scale production of renewable energy to move ahead with technologies which would transform renewables into commercial feasibility.

Shell’s support of the Kyoto agreement was not only a gesture, but also generated a huge global impact. The symbolic action taken by royal Dutch Shell, with its ally British Petroleum set up numerous initiatives to control its greenhouse emissions, becoming the industry’s leader in reducing greenhouse pollution. Consequently, more than half of the world’s 100 largest corporations reduced their annual emissions between 2010 and 2015 with a percentage decline of 12 percent (Hirtenstein, 2017). That means many other petroleum oil producers followed the footsteps of these two companies in the motive to reduce greenhouse emissions.

Harnessing Technology for Sustainable Development

Royal Dutch Shell has been at the forefront of adopting new technologies for its scenario planning and strategic setting capabilities, which led it into becoming the first in the oil industry to realize the future of a sustainable world and take actions towards becoming more sustainable. Since 1965, Royal Dutch Shell developed the Unified Planning Machinery (UPM), a computer driven system aiding in the firm’s future decision making (Hirtenstein, 2017). Since then, the company has constantly invested resources in scenario planning, which ultimately became the company’s internal driving force for sustainability. Shell’s 1995 scenario claimed success goes to those who harness latest technological innovations to grab fast moving opportunities in the world of hyper competition, tailoring and informal networking.

Through the use of available technologies, the company by the 1980s had begun several scenario initiatives for energy sustainable development, which further led to the 1998 endeavor to establish global scenarios for 2000-2050 World Business Council for Sustainable Development that accentuated alternative models of propagating progress (Wilkinson & Kupers, 2013). Currently, Shell is working on new technologies including carbon dioxide capture and storage to compensate for the increased carbon dioxide emissions. However, these methods have not yet been tested.

Based on Shell 2015 report, the company has made investments towards carbon capture and storage (CCS) technology. The company organized renewable energy investments into distinct business enterprises named New Energies which receive an annual budget of $200M (Lu, Guo & Zhang, 2019). the business units cover investments in biofuel, hydrogen, and wind and solar energy. Quest, one of the company’s CCS joint ventures acquired C$865 from the government of Canada and began operations in alberta (Lu, Guo & Zhang, 2019). Since the initiation, Quest has managed to reduce CO2 emissions by 315 kilotons. The company still has high potential of continually innovating CCS technology and renewable energies by scaling up its efforts. There is room to increase Shell’s long term dominance in the energy sector as forecasted by their energy scenarios and this will have great impact on global outcomes.

References

Datamonitor (2010). Royal Dutch Shell Plc Sustainability Case Study: How is Shell responding to the challenges of sustainability? Royal Dutch Shell Plc Sustainability Case Study, 1-59.
Harvey, S. 2010). California’s legendary oil spill. Los Angeles Times. Retrieved 20 September 2017.
Hennchen, E. (2015). Royal Dutch Shell in Nigeria: where do responsibilities end? Journal of Business Ethics, 129(1), 1-25.
Hirtenstein, A. (2017). Big oil becomes greener with progress in cutting pollution. Bloomberg. Retrieved from bloomberg.com 20 September 2017.
Lu, H., Guo, L., & Zhang, Y. (2019). Oil and gas companies’ low-carbon emission transition to integrated energy companies. Science of the total environment, 686, 1202-1209.
Morgan, Jeffery (2011). The oil pollution act of 1990. Fordham Environmental Law Review. 6 (1): 1–27.
Perunović, Z., & Vidić-Perunović, J. (2012). Environmental regulation and innovation dynamics in the oil tanker industry. California Management Review, 55(1), 130-148.
Sluyterman, K. (2010). Royal Dutch Shell: company strategies for dealing with environmental issues. Business History Review, 84(2), 203-226.
Wilkinson, A., & Kupers, R. (2013). Living in the futures. Harvard Business Review, 91(5), 118-127.

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