Environmentally Sustainable Business: Shell - Essay Example

Sustainability Report Table of Contents Introduction 3 Shell 4 Reflection and Evaluation 6 Knowledge Theory 9 Environmentally Sustainable Business 10Critical Reasoning 13 Conclusions 13 References 14 Bibliography 18 Introduction The experts of the industry rightly observe that the word ‘change’ is the only constant thing in the present world of today. With massive developments in the arena of information technology and communication process, the terms and the trades of the business are changing fast. The world is becoming a small place to live in. Factors like globalisation and liberalisation are having huge impact upon the general life of the people. It can be rightly said that the international geographical borders are almost non – existent today in the fields of trade and commerce with the advent of globalisation. The companies of one country are successfully involved in trade relations with other countries. Also, many of the countries are having their production units in many parts of the world, making them truly multi – national corporations. The one major aspect of the tremendously competitive business world of today has been the flow of information. It is perceived that the right information in the right moment can do the trick. Also, the reach of the end customers have increased by great extent, thanks to the modern methods of communication like that of internet and cellular phones. Analysing the above facts, it can be well accepted that the commercial fraternity across the globe has been experiencing terrific competition like never before. Apart from the core competencies, the companies are always looking for the extra edge that could gain them the advantage. The companies of modern world are no more focusing on increasing only the shareholders’ value. Rather, the concept in contention today is the enhancement of stake holder’s value. Almost all of the major corporate houses are emphasising to create value for all the stake holders namely the customers, the suppliers, the employees, the regulators, the financial institutions and even for the media along with the true owners i.e. the shareholders. The companies are focusing more on sustainable and long term development. It is well accepted today that only those companies that bank upon sustainable development could exist amidst the turbulent times of today. Shell Royal Dutch Shell, popularly known as Shell, has been one of the leading energy and the petro - chemical producing companies of the world. The company aims to meet the energy requirements of the society without compromising the economic, social and environmental factors. The group recognises the fact that resources are scarce and therefore employs every possible measure to use the resources in the best possible way (Shell, n.d.). Shell, the oil major was founded by Marcus Samuel in the year of 1833 in the Eastern London. Samuel had a shop at the eastern end of London and he planned to include oriental shells as the products because shells were very popular during the time. This marked the beginning of Shell (Shell, n.d.). The company faced many ups and downs throughout the 177 year run. Presently, it is a company of repute and is regarded as one of the six ‘supermajors’ in the segments of oil, petroleum and natural gas. The company has many accreditations all throughout its glorious past and in 2009; Shell has been marked as the largest corporation by the Fortune (Fortune, 2009). The company has its registered office at London and its head quarters at Hague, The Netherlands. Listed in the London Stock Exchange and the Amsterdam Stock Exchange, the company operates in more than 140 nations. In the United States of America, the company functions as the subsidiary company with the name of Shell Oil Company. The company has five major businesses namely Exploration and production Gas and power Refining and marketing Chemicals Trading and shipping The oil major also has a very strong human face as the company maintains a strong bonding with the society at large through the measures of corporate social responsibility. It is an active as well as founder member of World Business Council for Sustainable Development. The company has high regards for the qualities like transparency, honesty and integrity among the positions of the company. If any of the employees are found not to adhere the code of conducts or the code of ethics as prescribed by the company, one can blow whistle through the dedicated support of the website and draw attention of the management. Though the management of the company claims to leave no stones unturned for the human face, yet the fact is that the company has not been far from debate for long. There have been various issues like that of health and safety of the employees and the labourers, Canadian oil sands and concerns about human rights that have made the headlines and all for the wrong reasons. Reflection and Evaluation Being one of the largest oil exploring and producing company, Shell is watched by the industry and the world very closely in terms of their performance as well as their abilities of handling the environmental issues. The fact that the company is into the high risk business of oil and gas that has considerable demerits in terms of global warming as well as employee security, makes the matter further tough. The company proudly declared that the strategy of the company is ‘More upstream, Profitable Downstream’ (Shell, n.d.) In simple words, the strategy means that the company focuses more on the exploration and production functions and aims to achieve higher profits from the operations of chemicals. The company seems to be particularly contended with the strong portfolio that it has and so it declares to aim upon delivery and growth banking upon the portfolio. According to Shell, the two pillars to achieve their objectives are the sustainable development and the technological innovation. The performance management system will definitely comprise of the financial depictions of the company. It aims to protect share holders’ investments and trusts and also aim to provide higher return than the competing corporations. With respect to the customers, the performance tracker would be the price, quality and safety of the products and services that Shell offers. The strategy in terms of environment would be to manage the precious human capital effectively and comply with other social norms, laws and responsibilities along with human rights and justice. The company seeks to support the employees through standard working conditions, attractive pay and scope of developing their skills and talents (Veer, 2005). Analysisng the financial performance, it can be observed that the company had revenue of US $ 458,361 million in the year of 2008 which was flat increase of 29% from the previous year of 2007. Though, the income for the period decreased for the company by 17% (year – on – year basis) along with the basic earnings per share by 15% from 2007 to 2008, it should be kept in mind that the entire world economy was experiencing very rough phase in those period because of economic recession and global meltdown. The increase in revenue was a major achievement by the company (Shell, 2008). Along with strong financial performance with earnings of $ 26.5 billion in the year of 2008, the company also provided with better working conditions to the employees. The number of accidents considerably reduced. The customers were also offered better deals as the increase of revenue substantiates the fact. It is only when they receive better products with competitive price; the customers contribute towards increase in revenue. The company initiated number of measures towards environment and society. It promoted safe working among its employees, tried to maintain previous commitments and actively contributed against the climate change. The company proudly declared that “In 1998, we set ourselves voluntary targets for reducing greenhouse gas (GHG) emissions from our operations. In 2008, Shell-operated facilities emitted around 75 million tons of GHGs (measured on a CO2-equivalent basis), about 30% below the 1990 level” (Shell, 2008). Analysing the above facts it can be said without much doubt that the company is on the right track as per as the initial strategies are concerned. Though there are much larger expectations from the company being one of the largest corporations of the world, yet the measures initiated by the company are praiseworthy and are aimed towards achievement of their declared strategy. The effective allocation of resources is instrumental to the success of the business. It is truer for the kind of business into which Shell is. Shell basically depends upon the natural resources and therefore the company has to adopt efficient methodologies with respect to marketing, operations and supply chain so that the valuable resources does not get wasted. The company has collaborated with PTT Aromatics and Refining Public Company Limited (PTTAR) in order to manage the supply chain requirement of the company. Using a mathematical model, PTTAR can choose if the product can be beneficial for the usage. In this regard, the company says, “They use a mathematical linear programming model that represents the different options for processing a crude oil through a refinery to the finished product and a condensate through an aromatics process to the finished product. The models are complex owing to the thousands of different variants and constraints, and the many different types of crude available for processing” (Shell, n.d.). The company has also been initiating number of initiatives to make the processes of marketing and operations efficient. For the purpose, Shell has been investing quite a large sum of amount into research and development. Being the global leader with an employee base of more than 102,000 employees and presence in 140 nations, the onus lies upon the company to find out effective ways of business as there are not many examples for such a scale of operations. With sustainable processes involved, the company can make a positive impact among the customers, stakeholders and society at large which can definitely contribute towards enhanced revenue of the company. Knowledge Theory The concept of sustainable development of the companies is very recent. Therefore, the theories and the literature are also very recent. The major concept in this regard is the Triple Bottom Line, known as TBL. The term was coined by John Elkington in the year of 1994. It focuses on the three vital pillars of the earth namely people, planet and profit and not just financial performance. The idea captures the fact that for the long term sustainable development of the company, the organisational success should be measured upon economic, ecological as well as social goals. The United Nations has ratified the concept and companies of today are providing due importance to the idea (Elkington, 1994). The companies of today are inculcating various competent measures to reduce the social cost. The multinational corporations are getting involved with the community development programs, establishing schools for education and providing non – technical, non – traditional jobs to the locals of the area where they operate. Authorities like Department for Environment Food and Rural Affairs (Defra) are providing detailed guidance to enhance environmental quality and safety of air, water, land and also of other variables like local environment, environmental risk and genetic modifications (Defra, n.d.). The company chosen for the analysis of the sustainability i.e. Shell, is into the heavy engineering industry. The company explores and drills oil and natural gas along with other functions. Therefore, various matters that the company has to take into considerations are the sound pressure levels, mud and cutting discharges, the drilling phase during explorations, seismic effects on fish and marine mammals and ecosystem impacts. The company involved should be ready to amend the social loss that takes place because of the functioning of the company (Lincoln, 2002). Environmentally Sustainable Business The world is changing and so are the terms and the tricks of the trade changing too. Therefore, in order to remain into the business and ensure all round development, the companies of the present days need to continuously upgrade themselves. It has been observed that large numbers of organisations are providing added emphasis upon the factors of social, economic and environmental (The Six Sigma Project, n.d.). Shell has also been part of similar schemes. The company has initiated 8 major goals under the project of ‘millennium development goals’ that includes the following: Food safety Universal education Gender equality Reducing child mortality Improving maternal health Combating HIV/AIDS and Malaria Global partnership for development Ensuring environmentally sustainability As it appears that the company provides due emphasis in having sustainable environment, it has well studied course of plan and action so that the goal is maintained. Shell divides its initiatives of sustainable environment into three broad heads namely core businesses, social investments and partnerships, collaborations and that of advocacy. In the core business activities, Shell is trying to reduce environmental impacts of their operations. It is trying to maintain the global standards on environment laid by United Nations and other apex bodies. The company has set targets in order to address all major impact upon environment and publish their performance in the annual reports. The company is keeping no stones unturned to manage the green house gas emissions and has been one of the first company to draw attention of the concerned quarters because of the change in climate. Shell has been the initiator in adopting the biodiversity standard and also has been trying to handle fresh water in a sustainable manner. This projects falls under the social investment category as the company has been investing quite a hefty sum for such environmental sustainable ways. The company not only reduced the emissions of green house gas themselves but also helps the customer to reduce those. It is dedicated towards sponsoring other non conventional sources of energy like bio fuels, wind and solar energy along with hydrogen based options (Shell, n.d.). It is the fact that environmental issues are too big to be handled by any company single handedly. Shell understands the reality and the company has been involved with number of collaborations and partnerships to promote friendly environment. The company has been the active members of International Petroleum Industry Environmental Conservation Association (IPIECA), World Business Council for Sustainable Development (WBCSD) and The International Marine Forum for the Oil Companies. The company has been mitigating their responsibilities in terms of environmental sustainability with United Nations Global Impact, ICC Business Charter and OECD. Shell is having ‘Clean Air Initiative’ in the Asian continent in collaboration with many of the national governments, World Bank and NGOs. To bring down air pollution, it has ventured with ‘Partnership for Clean Fuel and Vehicles’ with governments and industries. Energy and biodiversity initiatives and the global gas reduction plan have already been discussed earlier. These are also initiated as Public Private Partnership along with the REEEP (Renewable Energy and Energy Efficiency Partnership). With so many measures initiated, there cannot be doubt regarding Shell’s intentions of having sustainable environment. The company acts as the torch bearer in the segment of sustainability. Critical Reasoning There is little doubt that in order to ensure long term success of the company sustainable development is must. The changing trends among the companies of today can be observed with respect to the measures initiated by them. The companies are increasingly inclined towards creating greater value for the stake holders as a whole that includes the customers, the employees, the suppliers, the regulators, the bankers along with the shareholders. This shift in change in the objective of the top companies like Shell or BP is worth mentioning. Today, in this highly competitive industry, the products and the services offered by most of the companies of similar field are identical. The companies, in order to ensure sustained profitability, have to find out some other ways to attract new clients or retain the existing customers. With increased awareness about the social costs, the companies like Shell are trying to penetrate into the zone so that a positive outlook can be created about the company and the stakeholders feel pride to remain associated with the company. The concepts like TBL (Triple Bottom Line) or Carbon – Zero and calculations of social cost augments the companies’ willingness. Conclusions Royal Dutch Shell has been a company with huge experience. The employee strength of the company has crossed 102,000 and with the presence in around 140 countries, it can be said without doubt that the company is hugely successful. The sustainability of the company is assessed to be fine and also it found that the company adheres to the initial strategy that it has set. The financial performance of the company is stable amidst credit crunch. The company is acquiring newer fields and investing into research and development. In order to safeguard the employees of the company, the company has been improving the working condition which has reduced the number of accidents considerably. Shell also has initiated number of community development programs that aim to reduce the carbon emissions and social costs of the company. It was one of the prominent companies to vouch against global warming. It can be said with valid justifications that the company has been keenly following its strategy of sustainable development through technological innovation. References Defra, No Date. Environmental Quality and Safety. The Environment. 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