Shell aims to ensure investment proposals compete for internal funding as opposed to external, thus reducing the groups’ liabilities and retaining control of key developmental projects, although external funding will still be used in cases where internal funds are either unavailable or inappropriate. Investment proposals will also be assessed as to their resilience to low oil prices, with the objective of bringing stability to the group.
Portfolio management: Shell aims to be in the right business at the right time by constantly challenging assumptions and staying alert to opportunities. Operational excellence and cost leadership: Shell aims to maximise value from all assets through professionalism and reliability, delivering both industry leading unit costs and improved health, safety and environmental performance.
Personal accountability: Shell aims to ensure all its leaders are accountable and empowered to deliver results and develop talent Since the late 90’s shell has adopted a more ethical approach to business with the consideration of how the business succeeds (in terms of environmental, social, ethical and political issues) as well as what it achieves. This has developed into a corporate commitment to sustainable development embodied in the core principles of the organisation.
Shell has had to bear the cost of reputation damage that had occurred from the Brent Spar disaster (see article 3). This is a Gap that is obvious as Shell’s aims at maintaining operational excellence and to be leaders in environmental performance were not considered when disposing of the abandoned oil storage unit. They could have approached this situation in a number of ways, but the way they went about the disposal of this unit caused huge environmental effects to the surrounding areas. Shells approach didn’t consider the stakeholder which in there strategies, are valued highly. This is an evident Gap between there policies and what actually is going on.
Competitive strategy Over the last five to ten years Shell has established five main areas of competitive advantage: Constantly innovating to meet changing customer needs: By developing strong links between research and development departments and market research departments shell can identify future trends and needs and develop and refine research and development to cater for future needs.
If all these aspects are generally being sustained and performance is strong in some of the areas a company will promote there business to, customers employees, shareholders, suppliers, and other potential partners. This promotion is a form of self promotion which will only occur when the business is maintaining sustained performance in the area identified above; this sustained performance will in turn lead to positive corporate images passed to the customers, employees shareholders etc. This in all will raise the company’s corporate reputation.
If a company doesn’t maintain sustained performance in their product and service quality social accountability etc. there corporate identity will not be improved but may have a negative impact. Images portrayed to the media, interest groups/NGOs, outside Investors etc can have a negative impact on the company’s corporate image. This can and will lead to a company’s reputation being ruined.
Environmental disasters and ethical dilemmas for Shell petroleum will affect their business in different ways. Their identity is an important part of their mission as a business and pressure groups and environmental activists are constantly trying to portray them as unethical corporations. Although Shell are constantly trying to maintain sustained performance in the key aspects of their business, and are doing this well they could try and improve their environmental performance and try and give a more positive view of its goals to interest groups and NGO’s etc. This will help maintain Shells corporate image in the future.
Another evident Gap is Shells constant troubles with adhering to local laws and chemical regulations. In 1990 the chemical dieldrin, a toxic substance used in the production of pesticides was banned from use for crop cleansing. On the 01/28/03 Shell were given a courts summons regarding 156 locals being exposed to this toxic pesticide. This doesn’t show there commitment to the environment or to there employees working in this region. Oil spills and environmental liabilities clean up costs for Shell are extremely low as you can see, but the cost of reputation damage occurred is immeasurable. After disaster like this, Shells pressure groups will be working against them and drumming up negative images for the company. This is something that can be avoided by Shell if they operate with more integrity and consider the environmental liabilities that are apparent when using chemicals that are harmful.
In 2001 forty-two people lost their lives working for Shell. Although figures are not available Shell states that this is significantly less than in 2000. Indeed Shell states that this is the lowest number of fatalities ever recorded for the organisation. 76% of incidents resulting in fatalities were associated with road accidents, mainly in developing countries with poor driving conditions. On a broader base Shell uses total reportable case frequency (TRCF) to monitor accidents and incidents. In 2001 TRCF improved a further 9% from 2000 to 2.9 cases per million hours worked.
The lowest paid employee of Shell in 2001 earned $50 per month, plus $18 transport allowance and medical and life insurance benefits, in an African country where the statutory minimum is $28 per month. No Shell employee receives less than the legal minimum, or has a standard contractual week of more than 48 hours. However, many Shell employees say that they find it difficult to maintain a healthy balance between work and home life.
Equal opportunity procedures are adopted in all of the one hundred and twenty four countries that Shell operates in. By the end of 2001 only 7.9% of Shells senior executives were women. This is only marginally better than 2000’s figure of 7.8% and still some way from the organisations target of 20% by 2008. 46% of country chair positions (senior representative in a country or group of countries) are currently held by people from that country. This is an improvement on 2000’s figure of 40%.
Shell uses total reportable occupational illness frequency (TROIF) as the parameter to monitor health performance of its employees. During 2001 Shell implemented a set of minimum health management standards and currently achieves a TROIF of 2.3 illnesses per million hours worked.
On the 20th of March 2003 Shell petroleum UK decided to let 350 people on its North Sea Oil rig go. This is about a third of the work force on this rig and there are serious health and safety implications to this. Is this really going to motivate the rest of the work force on this rig? Probably not, are others in the company going to be worried about job security, probably so. This is a problem that Shell needs to fix, they have stated that they want to recruit the best employees, but is this going to attract potential employees or worry them.
Environmental policies Shells commitment to sustainable development and its leadership in research and development has lead to the organisations prime position in the development and production of bio-fuels. Bio-fuels are carbon free and are derived either from vegetable oils for use in diesel engines or from fermented and distilled products of crops such as corn or sugar beet for use in gasoline engines.
As with any intensive agriculture, there are environmental issues such as the use of agrochemicals and the effects of mono-crops on biodiversity. The use of bio-fuels creates less greenhouse gas emissions than traditional fuels. However, their production is up to four times more expensive than conventional fuels. The European Union has recommended that all fuels should contain a 2% minimum bio-content from 2005 and nearly 6% from 2010. Shell currently markets bio-fuels in Brazil, Sweden, USA and France.
Total waste produced by Shell in 2001 was 897 000 tonnes, an increase of 0.79% on 2000’s figure of 890 000 tonnes. Around half of this (@ 448 500 tonnes) is classified as hazardous waste, mainly oil-based and synthetic mud and cuttings, sludges from water treatment and tank cleaning and spent catalysts, which are disposed of to landfill or incineration. Many of Shells operating units set local programmes for waste reduction but there are no group-wide programmes or targets.