Corporate Social Responsibility Strategy for Shell Oil in Nigeria - Report Example

Corporate Social Responsibility Strategy for Shell Oil in Nigeria Executive Summary This paper explores corporate social responsibility strategy for Shell in Nigeria that is necessary to deal with the various challenges it faces with the surrounding communities. Among the theories examined that are necessary to analyse CSR strategy for Shell in Nigeria include political, Integrative and ethical theories. These theoretical perspectives are necessary when determining the CSR strategy that can assist the Shell Company deal with various challenges in its relations with the communities and local authorities in the Niger Delta. In addition, there are approaches that the Shell Company can use to fulfil its community responsibilities, and they include, for instance, stakeholder mapping and the three-domain approach. On the other hand, establishing an efficient and effective CSR strategy will require Shell to focus on integrating ecological responsibility into its corporate strategy, improve the community’s social welfare and using strategies geared to attracting, recruiting and retaining of skilled and experienced employees. Introduction Over the years, Shell has faced numerous challenges in its endeavour of extracting oil and gas in different regions across the globe. Among the challenges faced by the company in different regions across the world include, for example, opposition from environmental activists, government and community interference. As such, the company needs to establish a corporate social responsibility strategy that encompasses the interests of the government, environmental activists and the communities around regions where Shell extracts oil and gas. In essence, corporate social responsibility has a role to play in improving the business prospects of the company. Among the benefits of engaging in corporate social responsibility include improving a firm’s competitive advantage; it also plays a role in ensuring that companies behave responsibly. Other benefits that can be derived from CSR include enhancing the company’s reputation, saving costs, improving employee engagement and establishing a working alliance with local authorities and the community in general (Dahlsrud, 2008). In Nigeria, Shell faces a number of challenges in its business of extracting oil and gas in the sense that, there is opposition from environmental activists, personal interests from the political class and regulatory policies that impact negatively on Shell. Other than the aforementioned challenges, Shell in Nigeria is also dealing with a new threat from a terrorist group who from time to time vandalise their equipment, siphon oil and abduct foreign workers. In order to deal with these challenges and ensure the firm does not incur heavy losses, there is need for a corporate social responsibility strategy that can improve Shell’s working relationship with all the parties with an interest in oil and gas extraction in the Niger Delta (Rhukus, 2012). The purpose of this report is to present to the board of directors concerned with CSR a strategy that will help to address the challenges facing the Shell Company in the Niger Delta. Q.1. Explore corporate social responsibility in different organizational and national contexts focusing on the six core characteristics of CSR (i)Voluntary CSR is typically a voluntary initiative taken by organization that goes beyond those stipulated in the law. These voluntary activities are often meant to give back to the communities that contribute to the success of the organization. In Nigeria, Shell Company engages voluntarily in various activities that go beyond its mandate. For instance, the construction of health care centres in the Niger Delta is a voluntary activity taken by the company and not prescribed by the law (Crane, Matten & Spence, 2008). (ii)Managing externalities Externalities involve the actions of the company that tend to affect the local communities that live around the oil fields managed by the Shell Company. For example, externality that Shell needs to manage is the emission of greenhouse gas that causes global warming. Through CSR, Shell can voluntarily embark on managing such an externality by planting trees to help absorb the carbon dioxide coming from the oil fields run by the Shell Company (Crane et al., 2008). (iii)Multiple stakeholder orientation CSR plays a role in considering other stakeholders that have an influence on the company. While the interest of shareholders in a firm is often prioritized, firms also need to consider the interest of other stakeholders such as employees, the community and consumers who also contribute to the success of the business (Crane et al., 2008). (iv)Social and economic alignment CSR ensures that firms engage in socially responsible activity as a way of improving their reputation in the marketplace. In most cases, the socially responsible activities are supposed to align with the economic responsibility of a firm such as profit making. For instance, giving scholarship to bright students who later come back to work for the company benefits both the community and the Shell Company in Nigeria (Crane et al., 2008). (v)Practices and values CSR involves a focus on various practices or strategies that ensures a firm becomes socially responsible. For example, CSR ensures that firms become accountable to the public in terms of being open with their business endeavours. In Nigeria, the Shell Company’s accountability to the public is evident through the publication of annual report regarding its operations in the Niger Delta that is often available for public consumption (Crane et al., 2008). (vi)Beyond Philanthropy In most organizations, CSR mainly focuses on philanthropic mission such as helping the disadvantaged in the community. However, in today’s business environment, CSR is not just about involvement in charity work, but it is part of a firm’s business strategy that helps, for instance, to improve profits (Crane et al., 2008). Fig1: Six core characteristics of CSR Source: Crane et al., 2008 Q2. The theoretical avenues to help Shell Company in Nigeria establish an efficient and effective CSR The oil and gas extraction in Nigeria’s Niger Delta is facing numerous challenges that include corruption of government officials, concerns about pollution, the community demanding for a share of the oil resources and the threat from Boko Haram. As such, it is necessary for the Shell Company to develop a strategy that ensures its relationship with other interested parties in the oil-rich Niger Delta improves (Rhukus, 2012). This will ensure the company conducts its business without interferences that eventually impacts negatively on profits. Relying on the political model to explore its CSR strategy, the Shell Company in Nigeria needs to strengthen its relations or interactions with the society. This involves, for instance, embracing corporate citizenship where the company takes an active role in the community (Jucan, 2011). In Nigeria, the communities around the Niger Delta face numerous challenges that require immediate solutions. As such, the Shell Company can play an active role to help the surrounding communities through a focus on corporate citizenship. On the other hand, an emphasis on the integrative model to help Shell Company develop an efficient and effective CSR involves the firm integrating social demands because the company also relies on the society for its existence and growth. In a globalised business environment, the society interacts with businesses in terms of enhancing their legitimacy and reputation or prestige. As a result, it is important for the CSR established for Shell Company to accommodate social demands or values in the regions that it operates. The ethical model can be used as an avenue to strengthen the relationship between Shell Company and the community in Niger Delta. This is because, ethical theories focus on principles that advocate for the common good in the society (Jucan, 2011). Q3 The strategic approaches used by Shell Company in Nigeria to fulfil its community responsibilities Over the years, the reputation of the Shell Company in Nigeria has been hampered by various allegations that impact negatively on its business. Among the allegations includes the firm’s failure to deal with the oil spill that is contaminating the water used by the community to drink and cook. Further, the company is accused of lacking transparency in terms of ensuring that its pipelines are improved to reduce oil spill. Other than environmental challenges, the company is also under pressure from the communities in the Niger Delta who demand a share of the oil and gas resources. In addition, the unemployment rate in the region is high, and the community largely depends on the oil companies in the Niger Delta to provide them with a source of employment. This corruption by the government is also rife, and this tends to impact negatively on foreign direct investment since most of the firms with the intention to explore oil and gas are exploited by corrupt politicians (Brammer et la. 2007). The Niger Delta also lags behind in terms of infrastructure development and this also places pressure on oil firms in the region to engage in corporate citizenship as a way of improving the livelihoods of the communities in the Niger Delta. Other than infrastructure development, oil companies such as Shell are also under obligation to improve social amenities that include, for instance, setting up healthcare centres and schools within the Niger Delta. In order to meet these obligations, the Shell Company needs to rely on various approaches that include, for example, the Three- Domain Model of CSR and stakeholder mapping (). Through the three-domain model, Shell Company can identify the main issues that impact on both its business and role in the community within the Niger Delta. The issues that the company needs to consider should focus on economic, legal and ethical issues. With regard to the economic domain, the focus of the firm needs to be on activities geared at achieving a positive economic impact (Kotler & Lee, 2005). The impact can be direct or indirectly, but the intention is to ensure that the firm maximises its profits. For instance, direct economic activities of the Shell Company in Nigeria may involve avoiding litigations by improving its effort to deal with the oil spill. As such, the firm will be in a position to avoid a situation where its profits are affected negatively. Conversely, the indirect economic activities for the Shell Company in Nigeria can involve, for example, creating employment opportunities for the communities in the Niger Delta as an appreciation of their contribution to the success of the Shell Company in the Niger Delta (Brammer et al. 2007). This helps to improve the morale and worker involvement thus ensuring that the firm improves in terms of performance and productivity. In terms of considering the legal domain relates to the actions taken by the firm that are regarded as legitimate by the society. In this sense, the firm can avoid a potential lawsuit for undertaking actions that are not considered legitimate by the society. On the same note, the Shell Company can avoid corrupt dealings that are influenced by the political elite in Nigeria. This is possible by adopting a legal framework recognised by law when engaging in any deals with a third party (Kotler & Lee, 2005). On the other hand, the ethical domain plays a role in ensuring that the firm fulfils its obligations or expectations from the community and other key stakeholders. In this regard, it is important for the firm to establish ethical standards that guide its dealings with the society in general. Such standards can be conventional, consequential or deontological. From the conventional perspective, the company establishes standards that are acceptable and reflect on societal norms. Consequential standards, on the other hand, need to consider the actions or factors that add value for the stakeholders. Deontological standard on its part can be established by the company as an avenue for describing the activities that reflect on the duties or responsibility of the company (Kotler & Lee, 2005). Fig 1: The Three-Domain Approach to CSR Source: Ngambeket, 2013 With regard to stakeholder mapping as a strategy for Shell Company to fulfill its commitment or responsibilities to the communities in the Niger Delta, the firm needs to understand the internal and external stakeholders of the Shell Company in Nigeria. The oil and gas exploration in Nigeria is hampered by numerous challenges that require the Shell Company to understand its key stakeholders. For example, the company needs to understand how to deal with local authorities and the community at large. This entails understanding their needs or interests and coming up with a plan that can address their concerns in an effective manner. Other groups encompassed in the stakeholder map include employees of the firm, shareholders and prospective investors. Understanding their concerns and interest has an influencing in establishing an efficient and effective corporate strategy (Colbert & Kuruzc, 2007). Fig 2: Stakeholder Map Source: Edraw, 2015 Q4 Recommendation for efficient and effective CSR strategy for Shell Company in Nigeria 4.1 Integrating ecological responsibility into the corporate strategy At present, the reputation of the Shell Company in Nigeria is faltering due to allegations it has failed to deal with the oil spill in regions such as Goi, Ogoniland. As such, the firm can improve its reputation in the public domain by a focus on environmental management. The extraction of oil and gas degrades the environment and thus the need for action to minimise its ecological impact. As such, programmes targeting environmental protection should be included in the firm’s corporate strategy. This will ensure that the company plans on how to deal with such issues in the event that they emerge such as the oil spill in Goi, Ogoniland that has attracted legal suits from environmental activists (Wheeler et al., 2001). Integrating ecological responsibility into the corporate strategy also requires creating awareness within the organisation of the need to be responsible with regard to how they handle waste products. Such awareness ensures that the company can avoid affecting the livelihood of the communities around the oil and gas extraction fields. Such interference can occur as a result of neglect in terms discharging effluent to Niger River from the oil field. The community depends on the same water source for their domestic use and such neglect can impact negatively on the health of the locals. On the other hand, consequences for the firm can also be severe and include heavy penalties that eventually affect profits (Jucan, 2011). The firm can also involve community participation in environmental programmes geared at ensuring that the activities of Shell Company in the region are eco-friendly. Such participation involves ensuring the community becomes aware of the dangers oil and gas to the environment and their health. This ensures that the community can take precautionary measures and save the firm against legal suits (Jucan, 2011). The firm can also start projects geared at protecting the environment such as planting of trees to minimise the uptake of carbon dioxide that contributes towards greenhouse gas emission (Kotler & Lee, 2005). 4.2 Enhancing social welfare Nigeria as a country suffers from high levels of poverty due to long-term unemployment of its citizens. As such, the foreign firms extracting oil and gas in the region such as Shell should provide assistance geared at improving the lives of the locals. Such help provided by the Shell Company may include: Introducing programmes geared at improving living standards. Such programmes include providing health care to the locals, building of schools, sponsoring various developmental projects that create employment opportunities and helping the locals to improve food security through sustainable agriculture (Rhukus, 2012). Assist in infrastructure development, for example, opening up roads to increase the movement goods and services. Since most of the oil fields are in the interior, the firm can assist the local communities by opening up trading routes. This is in turn can lead to the development of trading centres where the locals in the Delta region can buy and sell their produce thus improving their economic status (Rhukus, 2012). The firm can also introduce scholarship programmes for bright students from the region to pursue further studies and later contribute towards the development of their communities (Brammer et al. 2007). The company also can involve itself in poverty alleviation projects in the Delta region. Such projects may include for instance, providing assistance to local farmers on how to improve food security through better farming methods. The company can also provide employment opportunity for the locals (Brammer et al. 2007) 4.3 According to Collier and Esteban (2007), CSR can be used for recruitment and retention of employees. The Shell Company in Nigeria can use CSR to recruit and retain employees by Training the locals and absorbing them into to the firm Improving the incentives for locals working in the firm Embracing socially responsible practices at the workplace Improving its working relationship with the local communities in the Niger Delta Conclusion The oil and gas extraction by Shell in Nigeria has faced numerous challenges that also impacts negatively on its profits. Nigeria as a country is experiencing other challenges that include, for instance, terror attacks, corruption and high unemployment rate. As a result, the economy is affected, and the ripple effect is also felt in the oil industry that is the major foreign earner in the country. On the part of the Shell Company, focus on CSR is necessary to deal with some of the challenges it is experiencing at the moment. For example, the company is facing legal suit with regard to its failure to deal with the oil spill in the Goi, Ogoniland. Such suits are bound to cause the company millions in terms of compensation fee, and this also affects the company’s profits. A focus on CSR will ensure that the company embrace responsible practices and avoid incurring losses as a result of neglect. The reputation of the firm in Nigeria also depends on how it relates to the surrounding community. As such, CSR plays a role in ensuring that the firm establishes a working relationship with the community. Such a relationship is necessary to ensure that the activities of the Shell Company are not interrupted by the community in case they feel marginalised in the share of their country’s oil wealth. Other than improving the relationship with the community, developing an efficient and effective CSR strategy will ensure the firm maintains a competitive edge as a result of integrating its business with societal values. References Brammer, S., Millington, A., & Rayton, B., 2007. The contribution of corporate social responsibility to organizational commitment. International Journal of Human Resource Management, 18 (10), 1701-1719. Colbert, B. A., & Kuruzc, E. C., 2007. Three conceptions of triple bottom line business sustainability and the role for HRM. People and Strategy, 30(1), 21-29. Collier, J., & Esteban, R. 2007. Corporate social responsibility and employee commitment. Business Ethics: A European Review, 16(1), 25-38. Crane, A., Matten, D., & Spence,L.J. 2008. Corporatee Social Responsibility: Readings and Cases in a Global Context. London: Routledge Dahlsrud, A., 2008. How corporate social responsibility is defined: An analysis of 37 definitions. Corporate Social Responsibility and Environmental Management, 15(1), 1-13. Edraw., 2015. Basic Steps of Creating Stakeholder Map. [Online] Available from: http://www. https://www.edrawsoft.com/mapping-stakeholder-map.php Jucan, C. N., 2011. Social responsibility, crisis and sustainable development. The Business Review, 17(1), 149-156. Kotler, P. & Lee, N. 2005. Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause. Hoboken: John Wiley & Sons. Ngambeket, G.H. 2013. The Extent of Corporate Social Responsibility. [pdf] Availlable at: http://www. isaca.org/Journal/archives/2013/Volume-2/Documents/jol13v2-The-Extent.pdf Rhukus, T.A. 2012.Re-defining corporate social responsibility (CSR) in Nigerias post-amnesty oil industry. African Journal of Economic and Management Studies,3 (1), 9-22. Wheeler, D., Rechtman, R., Fabig, H., & Boele, R.2001. Shell, Nigeria and the Ogoni. A study in unsustainable development: III. Analysis and implications of Royal Dutch/Shell group strategy. Sustainable Development, 9 (4), 177. . Read More