CSR in Shell Nigeria - Case Study Example

CSR in Shell Nigeria Name Institution Tutor Date Introduction Within the last couple of decades, the overall interest in corporate social responsibility has amplified considerably. This is motivated by the reality that it is just not enough for corporations to produce super quality products without incorporating the ethical aspects of employees, the community, the environment, NGO’s and other important stakeholders to the company. Organizations today acknowledge that they do not function in a vacuum, but rather in a society. As a result, the welfare of the society and the people in the organization is considered important. Corporate social responsibility has therefore become important. CSR implies that organizations behave ethically with sensitivity towards cultural, social, economic and environmental issues. 1 Companies in the oil and gas industry such Shell Nigeria have also actively embraced CSR. Shell is a multinational corporation that has been in existence for over 50 years and has closely affected Nigeria’s economy, politics and overall development. The objective of this paper is to examine the CSR activities of the Shell Company in Nigeria. Foremost, the paper will provide an overview of corporate CSR strategies that can be applied to the case of Shell Niger Delta. The scope of the analysis will also be grounded on examining what motivates Shell to participate in various CSR activities. In addition, the report will evaluate how the firms CSR relates to the overall strategy of the firms and how they have influenced the company’s competitive advantage. Overview of the corporate CSR strategy A growing number of companies undertake CSR today. Just like the business strategy is considered important, having a CSR strategy is also equally important. McElhaney (2009) highlights that when devising a CSR strategy the management of an organization should identify the specific business objectives that the developed strategy must support. In context of the oil and gas industry the various frameworks and modes can be applied in order to come up with a corporate CSR strategy. This are mainly derived from the objectives that the company aims to obtain.2 A key model of strategic CSR in the profit maximization and social performance as propagated by Husted and Salazar (2006). The model basically proposes that there are three main investments that an organization should undertake this include; strategic, altruistic and selfish investments. The basic implication of this variables is that the strategic investments that an organization is involved in should result to increasing the profits of the business while at the same time looking after the wellbeing of the society.3 The competitive advantage model is another strategy dimension of CSR that can also be applied to companies such Shell Nigeria. The model is mainly focused on the manner in which a firms competes in order to gain and sustain higher performance than the competitors.4 It can be stated that the objective of this model is to implement strategies that assist in gaining a competitive advantage over other competitors while at the same time meeting social needs. For instance a company can differentiate its products by making them healthier in order to gain a competitive advantage. This strategy on the other hand, is also beneficial to the health of the people. The competitive advantage model is also supported by the Resource based view (RBV) which argues that a company can use its resource to gain a competitive advantage. For instance, a core resource such as the employees can be used to provide better services to the society. The stakeholder theory is another relevant corporate CSR strategy. The theory posits that organizations can display a responsibility towards the stakeholders as an approach to demonstrate good quality management which can further result to lowering the costs of the business.5 For instance; I believe that if a company treats if workforce fairly, they are bound to lower costs essentially in terms of recruitment costs that are associated to hiring new employees all the time. This is because employees will be committed to the organization and the rate turnover will reduced. Corporate social responsibility can also be perceived as a risk mitigation strategy.6 McElhaney, (2009) highlights that mitigation entails reducing the various risks that may be caused by the operations of the business to the society. It involves recognizing that the operations of the business can impact risks to the environment and the society, as a result, it is imperative for the organization to implement CSR initiatives that facilitate risk mitigation. Corporate Social Responsibilities Activities at Shell Niger Delta The Shell Nigeria Company covers an area of 30,000 kilometer square, has 1000 producing wells, 90 oil fields, 10 gas plants, 72 flow stations and two major oil export terminals in Nigeria.7 This data indicates that the company is operating is a vast environment full of people and economic actvitied. The company affects the livelihoods of the people both directly or indirectly through its explorations in the Niger Delta region and other parts of the country. The company therefore believes that it is important for all corporations to take into account the aspects of corporate social responsibility besides contributing to the growth of the economy.8 Some of the key cooperate social responsibility activities that the company has embarked on over the years include; Provision of essential services to the community Shell Nigeria is activity involved in provision of essential services to the community. For instance the company brings electrical power and reliable lighting to the people and small businesses that had never been in a position to access the services. In the process, thousands of jobs are created as well as education opportunities. The company has also funded community development organizations to strengthen education, vocational training, and health care and initiate protected nature reserves. 9 A factors that motivates the Shell Company to get involved in a non-market social responsibility activity such as providing essential services to the community is the need to manage its external image or perception. McLaughlin and Jawahar (2001) assert that many companies operating in the oil and gas sector participate in CSR in order to develop a positive image to the society especially after a negative image has been developed due to their activities. In my opinion, this factor is actually true based on the fact that the operations of such firms are often very dangerous to the society. Over the years, the reputation of the firms in the industry has been damaged due to disasters such as oil spills. It can therefore be stated that the involvement of Shell in providing essential services is motivated by the need to develop a positive image as argued by McLaughlin and Jawahar (2001). A case in point is when a contractor from Shell Company destroyed a hospital building in the Delta region. Shell promised the village people that the company would construct a new hospital. The project was delayed and very slow. This raised a lot of controversy. Environmental rights groups in Nigeria damaged the company’s reputation as a result of the incident. Shell therefore decided to complete the project as earlier promised. It can be argued by that this incident basically shows that the company adopts CSR initiatives in order develop a positive image to the society or when pushed.10 On the other hand, it can be stated that proving essential services to the society is in line with the company’s overall strategy. Johansen (2009) presents Shell corporate social responsibility strategy where he highlights that the company’s CSR strategy is greatly linked to the overall strategy of the company. In most cases the company has the maintained a strategy of value creation for the stakeholders which is to be done in a responsible manner. As a result, Shell has often tried to integrate the needs of the stakeholders as it tries to meet its objectives. It can be argued that by providing essential services to the community Shell meets its objective of value creating to the stakeholders based on the fact that the reputation of the company is improved therefore promoting its business activities in country which further brings value to the internal stakeholders such as investors. In addition, external stakeholders such as the community also benefit from the services provided. This particular CSR initiative has also been useful in gaining a competitive advantage. In actual sense, the company has invested millions in the NGO projects for the benefit of the community. This implies that the company uses its resources as outlined in the competitive advantage model in order to gain competitive edge over other firms in the industry. Coble (2007) discloses that some of the projects have actually not been successful due to the security and political challenges that the regions experiences. However, a good number have been successful and even gained international recognition.11 For instance in 2015, Shell Nigeria won the global industry awards due to the Bonga North West project that aimed at drilling and connecting new wells in an environment that is highly-challenging more than a kilometre below the ocean’s surface. 12What is evident is that such projects continue to support Shell’s competitive advantage in Nigeria. Environmental Remediation Shell has faced harsh criticism as a result of its exploration and production activities in the past and at present. This has influenced the company to conduct CSR activities that involved environmental remediation. Taking note that the company is operating in a region of tremendous biodiversity and vital natural habitats, its operations are located in an ecosystem that provides the basic necessities of life for millions of people in the Niger Delta Region. The company has however claimed that a large percentage of oil spill incidences, about 75% are as a result of the third party interferences such as sabotage, theft and piracy. 13 Due to the environmental damage resulting from the oil spills, the company has always been committed in conducting clean up exercises that are related to its facilities and operations regardless of the cause. The clean-up techniques used by the company are of high quality and are in line with the government regulations to oil spill hazards and Shell’s own standards for clean-up exercises.14 The company has always achieved its goal of restoring impacted sites to their natural condition in the fastest time possible, hence, reducing the impact of the spills on the local communities. In the event of a spill incident, the company tries to recover as much oil as possible first and begin cleaning up the residual oil. 15In the clean-up process, the company uses recognized methods that are best suited for the tropical climate in which the company operates. The clean-up process is followed by the remediation exercise where necessary and the place is then examined and signed by the regulatory authority to certify the remediation exercise.16 The approach cleaning up the spilled by shell ensures that the effects of the oil on the environment such as the soil are reduced. This approach supports the strategy of the company which is to create value for the stakeholders.17 In my opinion, agriculturalists would be impressed by the firms’ spirit of protecting the land in use by the other sectors. The agricultural sector can find it easy to work with a company that takes keen of the measures to protect the soil in protecting the general environment. In essence, the firm’s publicity in the other sectors would be of positive gains resulting to more customers. The initiative would also attract other sectors such as the motor vehicle industry the uses oil to run the engines in vehicles and tractors.18 Environmental radiation supports the organizations strategy of continues improvement.19 Shell uses corporate social responsibility as an approach of renewing its operations over the years. The company produces suitability reports each year that aim at improving how the company’s operations impact on the society. For instance, the company constantly produces CSR reports concerning the manner in which its operations affect the environment and how remediation can assist. The company has since produced more publications that validate its willpower to protect the interests of its stakeholders by protecting the environment. 20 It can also be argued that remediation is another way of shell gaining competitive advantage over other oil companies that do not take care of the environment and are affected by the harmful wastes or hazards of the company. As outlined by the competitive advantage model an organization can implement strategies that assist in gaining a competitive advantage over other competitors while at the same time meeting social needs.21 Additionally as stated by the profit maximization and social performance model environmental remediation can be perceived as an approach of profit maximization and social performance. Shell is indeed able to increase the use of this corporate social responsibility aspect as a means of not only protecting the environment, but also a way of building its reputation to the outside world, making profits and gaining competitive advantage while meeting the environmental needs of the society such as a water body free oil spills. For instance; Coble, (2006) discloses that after many oil and gas exploring companies flee the Delta region as a result of a government directive and the Nigerian Oil crisis, Shell actually remained to clean up the environmental damage that existed in the area. Currently, the company still operates in the region an implication it has over the years maintained a competitive advantage. Elimination of the Natural Gas Flaring Most of the oil deposits in Nigeria are capped by large volumes of associated gas referred to as natural gas. This gas is usually lighter than petroleum and in order to reach the oil, the gas is burnt in the air in a condition called flaring. During this process, this gas is usually released into the atmosphere. Shell Nigeria has committed itself to eliminating the natural gas flaring in an initiative that was launched in the year 2000. The initiative was to be accomplished by 2008 but faced several delays due to financial problems. The delays were also as a result of civil unrests and clashes in the Niger Delta region. 22Despite the financial problems and the civil unrests, the company has in the same period done a lot of work that covered constituted 60% of SPDC production potential. But in the wake of 2010, many projects that faced delays began resuming indicating that the company has done much in trying to eliminate flaring of the natural gas. 23Currently, the company is employing computer modeling techniques to analyze and better understand the impacts of flaring to the environment. This analysis together with the ongoing projects on flaring are estimated to will cover about 90% of SPDC production potential on their completion. 24 The elimination of the natural gas flaring is actually motivated by the need to maintain a stable work environment. According to Wood and Frynas (2001) the need to uphold a stable environment for conducting operations is an influential factor that motivates oil and gas companies to participate in CSR activities.25 In my opinion , Shell Nigeria has received criticism due to the implications of its activities on the environment for instance oil spills have instigated lot protests by the local community essentially fishermen. As a result, the involvement in elimination of the natural gas flaring acts as a strategy of developing a conducive work environment for the company where protests do not constantly occur. The elimination of gas flaring can be perceived as a risk mitigation strategy of corporate social responsibility. The risk management model of CSR asserts that there is need for organization to mitigate risk that result out of their operations. Consequently the elimination of gas flaring is definitely a positive CSR initiative by the company that indicates that the company is aware of the implications of its activities to the environment. This CSR activity is also in line with Shells overall strategy. A key oral strategy of Shell Nigeria is to meet the increasing demand of energy globally while at the same time reducing social and environmental challenges that are linked to the global energy industry. The strategy is also coupled with the development of technologies and research that can assist in reducing the negative effects associated to the company’s operations. 26 It is evident that the elimination of natural gas flaring has assisted the company in gaining more competitive advantage over other firms. The legitimacy of shell has improved due to its observance of the environmental preservation regulations by the government.27 Polluted air not only affects the respiratory system but also changes the weather and climate patterns of a particular place due to the greenhouse effect. Since the greenhouse effect is a major problem that affects the whole sector, trying to reduce the effects has improved the image of the company essential in the eyes of the government therefore increasing its competitive advantage. Environmental Conservation Shell, has, for many years, been active in the environmental conservation measures in the Niger delta region. In the recognition of the Niger Delta biodiversity, the company collaborated with the government, forest communities and NGO’s to develop the so called Biodiversity Action Plan (BAP).The plan incorporates international unions for conservation of nature so that its assists the company in conducting its environmental conservation plans. In 2007, NGO’s partnered with shell and enacted biodiversity laws by the state government and formed the first laws of that king in the country’s history. Shell has an ambition of reducing carbon related pollutions by 2050. 28 This is aimed at reducing over 10 billion cones of carbon dioxide emissions. Shell has also developed Sulphur Concrete generates 30-50% less carbon dioxide emissions as compared to the traditional production of concrete which helps to preserve areas that are rich in biodiversity.29 A key motivation that influences Shells involvement to participate in environmental conservation is the need to develop a positive image. In the corporate world, many investors would like to be associated with the company that has not only earned reputation to its customers but also to the society and the government. Most would fear investing in companies that face much criticism on issues such of environmental degradation for fear of the negative implications on their investment. A company that attracts investor’s gains more returns and can expand to more places within a shorter time as compared to the other companies. 30 Environmental conservation can be associated the risk mitigation strategy of CSR. A key aspect to take note of when examining shells environmental conservation practices is the fact that despite of the fact that the company has constantly adapted initiatives to conserve the environment for many years, what is evident is that most of this initiatives are actually not acknowledged by environmentalists and law enforcement agencies. An article Telesur (2015) named ‘’ She still hasn’t cleaned up Nigerian spills,’’ discloses the fact that Shell Nigeria has not done much in environmental conservation and complaints still exist . 31 Such findings therefore disclose the fact that although the company’s business strategy is aimed at increasing demand of energy globally while at the same time reducing social and environmental challenges that are linked to the global energy industry, the actual fact on the ground is that this is not happening. This is because environmental degradation and not conservation continues to take place in Nigeria essentially within the Ogoni regions. Recent studies disclose that oil spills continue to take place and there are so many petroleum leaks and massive contamination of drinking and fishing water as indicated in image 1.0 below (Telesur (2015). Shell has long been accused of failing to clean up oil spills in Nigeria. | Photo: Reuters Employees’ Environment Integrating the employees as part of the firms CSR is instigated by the need to keep employees contented. 32 While companies have the objective of generating a positive perspective for the external stakeholders, internal stakeholders like the personnel should also have a positive perspective towards the company. Research has disclosed that organizations in the industry adopted CSR to display to their own workforce that the organization is focused on supporting the society and implementing development. Furthermore, CSR has been used instigate a positive feelings towards the organization. The business may also sometimes adopt development initiatives that favor the employee more than the community. This will make the employee to develop a positive image of the business. Shell also puts into consideration the employees work environment in order to keep them happy.33 Ascertaining that the employees environment is safe is linked to Shells’ overall strategy of the organization of ensuring that its workforce are motivated to work and are safe even in the hazardous environments ( Shell, 2015). The strategy ascertains that accidents are prevented in a safe way through the introduction of clearer and simpler requirements that are easier for the workforce to follow and understand. The company is also highly dedicated to the Commitment and Policy on Health which offers a set or mandatory requirements that should be followed to ascertain process, personal and road safety. In addition the employees are provided with training on safety leadership and successful performance in the adherence to safety regulations is rewarded. The Resource Based View of the competitive advantage model propagates the use of the organizations key resources in order to gain a competitive advantage. It can be argued that Shell Nigeria has effectively used the employees as a key resources in order to gain a competitive advantage. The various projects that the company undertakes providing an outstanding opportunity for the company to be recognized. A case in point is the when employees come up with quality projects such as the Bonga North West project that lead to the winning of the 2015 Global industry awards. 34 Human Rights Protection There has been greater public scrutiny by international civil societies that has raised awareness about corporate misbehaviors on the issues of Corporate Social responsibility. Multinational Corporations in Nigeria have been knocking the news headlines over the issues of complexity with regards to the observance of human rights and environmental abuses. Much criticism, both domestically and internationally has faced Shell the largest oil producer in Nigeria. 35 Indeed Shell has implemented various initiatives in order to deal with human rights violations. This include honoring the various court sermons that have faced the company in terms of human rights violations. Additionally, the company has engaged in talks with the government in order to find a way forward concerning the existing crisis. Shell also supported the prosecution of individuals involved in human rights violations . 36 It can be argued that what motivates Shell to be involved in such initiatives is to regain positive publicity. Also it can be stated that the involvement in activities to protect human rights can be linked to self-interest. According to Spence (2011) there is no uncertainty that many CSR activities that are implemented by companies are usually driven by self-interest as opposed to the candid interests of the society. In some cases, corporations adopt CSR as a strategy of countering the pressure that arises from activists and government regulation. 37 What is evident is that although Shell has been actively involved in trying to alleviate the human rights abuses linked to the company, yet the crisis still continues. One can therefore simply state that the initiative to protect human rights are just actions aimed at gaining positive publicity and self-interest. This is because more violations continue to be reported over the years. A Forbes Magazine report by Mehra (2012) discloses that Shell was brought to the U.S. Supreme Court due to human rights violation charges that take place in Ogoniland, Nigeria. The Kiobel plaintiffs argued that the company was actually complicit with human rights violations that have taken place in the region which include extrajudicial murders of peaceful protesters, rape and torture essentially for those who oppose the existence of the company in the region. When examining Shells CRS even in the recent years, it evident that the Orgoni issue is not going away any time soon. As a result the company has to deal with it. In the year 2015 Nigerian farmers sued Shell Company for human rights violations essentially those linked to pollution. Corder (2015) highlights that the farmers sued the company for negligence which affects their land and economic activities. It can be stated that the allegations against the company concerning human rights violations have so far not ascertained a sustainable competitive advantage of the company in the region. What is evident is that although the company continues to operate in the region, negative publicity is an impediment to promoting a sustainable competitive advantage. It is therefore essential for company to devise more strategic ways in dealing with the issue of human rights violations and the constant protests by the Ogoni people in the bid to evict the company out of the region. Product Quality For most people Shell has been considered as a brand that denotes product quality. The products can actually be rated as the most technologically advanced products in the marketplace. In most cases the products are geared towards meeting the current needs of the customers. Additionally, the products are geared towards meeting the needs of businesses in other industrial such as the aviation and construction industry. 38 Maintaining product quality is motivated by the need to maintain a competitive advantage over other firms. As proposed by the competitive advantage model a business can use its key resources in order to come up with differentiated products that can outperform those of the competitors. Additionally it can also be linked to the social responsibility and profit maximization where the company maximizes profits while and the same time serving the society by offering quality products. Ascertaining product quality can be linked to Shell’s overall strategy of being a global leader in the provision of oil and gas products. In the Nigerian market Shell continues be one of the leading oil and gas manufacturing companies. This indicates that the company has a competitive over other companies such oil Libya and BP and ExxonMobil. Shell has actually managed to maintain this dominant position. Ventures Africa (2015) rated the top 100 companies in the Nigerian market. Among the oil and gas industry Shell was rated as the best. 39 Conclusion The above discussion has examine corporate social responsibility initiatives at Shell Nigeria. The paper identified the fact that the company has indeed directed its efforts towards implementing CSR initiatives. The initiatives have been motivated by various factors such as the need to gain a competitive advantage, image building, self-interest and developing a conducive operational environment. The paper takes note of the fact that despite the increased efforts to implement corporate social responsibility, the company still experiences challenges essentially in terms of the inability to fully care for the society as proposed by the stakeholder theory. This paper concludes by stating that CSR in oil and gas companies is indeed a challenge. This is mainly attributed to the dangers exhibited by the products associated to the industry. There is therefore need to reexamine the definition and scope of CSR in this particular industry. Word Count 5056 References Buchholz, R and Alexander, G. (1982) “Corporate social responsibility and stock market Performance”, Academy of Management Journal, 21(3), pp. 479-86 Boele, R., Fabig, H. and Wheeler, D.( 2001). Shell, Nigeria and the Ogoni. A study in Unsustainable development: II. Corporate social responsibility and ‘stakeholder management ‘versus a rights‐based approach to sustainable development. 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