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CENTRE EXECUTIVE EDUCATION
Royal Dutch Shell General
Business PrinciplesBusiness Environment
Rashida Yvonne Campbell10/21/2010
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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
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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.
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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
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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
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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.
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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
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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:
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e s e e s jec ves e e e e s e c
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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
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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
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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
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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.
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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.
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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
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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
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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.
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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.
www.thetimes100.co.uk
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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/
www.thetimes100.co.uk
http://www.shell.com/home/content/environment_society/environment/climate_change/
http://www.shell.com/home/content/environment_society/environment/climate_change/
our_approach_to_climate_change/
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Edition: 2nd
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Publisher: Bloomsbury Publishing Plc
Author: Fiona Pike
Title: Complete A-Z Business Studies Handbook
Edition: 5th
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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
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