Fatima Mansoor Pal, Mahmoud Radwan & Miha Alam
The oil and gas industry plays a pivotal role in reshaping the present and the future of sustainable development given the nature of their operations. Oil and gas companies like Shell are challenged to take proactive actions towards addressing climate change (Bartel et al., 2016). It is reported that the global energy demand is supposed to increase by 30% by 2040 due to increase in population growth, development and rapid urbanization (Bartel et al., 2016). Dramatic rise in CO2 emissions in the last 25 years had to led an increase in concerns regarding anthropogenic degradation (Bartel et al., 2016). Given the fact that the economy is currently transitioning into low-carbon or net-zero emissions, Shell and other oil and gas companies need to make strategic moves in order to accommodate the needs to energy consumers, investors, producers, governments, local communities and environment without disrupting economic growth (Bartel et al., 2016). Shell has received a lot of backlash for its unethical operation by media and international non-governmental organizations (NGOs) like Greenpeace (Bartel et al., 2016). Social pressure from civil society as well as large industry investors has pushed various companies like Walmart, Adidas and FedEX to reduce energy used per square foot in their respective buildings (Bartel et al., 2016). Several buildings have pledged to use 100% renewable energy by 2020 (Bartel et al., 2016, p.7). Big oil and gas companies have made great strides towards investing in R&D for renewable energies, namely, solar, wind, biomass and biofuel energies. To further promote the transition into low-carbon economy, large investors took away their investment worth $2.6 trillion for fossil fuels in 2015 (Bartel et al., 2016, p.7). Additionally, countries like India have removed their subsidies on fossil fuels (Bartel et al., 2016). Many European countries have also started relying on Carbon Capture and Storage (CCS) as a temporary solution to reduce CO2 emissions in the atmosphere. While big carbon footprint companies have come a long way, it is important to note that a lot of the efforts towards sustainable development have been done just to garner a reputable position in the industry and for better public relations. Not to mention, plenty of companies have strong lobbying power to avoid much of the public scrutiny. Similarly, Shell is undertaking various sustainability initiatives; however, are they enough? This paper aims to examines 1) economic, political, social, technological and legal elements of fossil fuels as well as the renewable industry and 2) how can Shell be more transparent, gain social license to operate, and form smoother collaborations with NGOs within the energy sector.
Global Energy Demand
Oil and Gas Companies (O &G) are in a complex position since they need to develop sources of energy to meet the growing global demand. The global energy demand is supposed to increase by 30% by 2040. O& G are facing massive social pressure from NGOs, governments and energy investors to operate responsibly. However, realistically, fossil fuels will be an important part of the energy mix for a while given the increase global demand. Additionally, companies like Shell and governments need to transition to lower carbon future without disrupting economic growth. As mentioned, Shell for example has been under a lot of scrutiny by media and NGOs and needs social license to operate. Shell has to make proactive strides towards lowering CO2 emissions and sustainability initiatives.
Emergent Call for Renewable Energy Substitution
A series of global agreements took place with the goal to stabilize GHG emissions to a level that would prevent dangerous anthropogenic interference with the climate system. At the Paris conference, 119 countries set and shared targets for reducing GHG emissions and created intended nationally determined contributions which outlined how they would achieve them (Bartel et al., 2016). It is debatable whether these commitments were strong enough.
In 2015, in Denmark more than 20% energy was created by renewable sources (majority by wind power), a society was in place that outlines the principles towards sustainability , and cycling by civilians was a means of transport (Bartel et al., 2016) China created an action plan for reducing air pollution by changing the energy mix particularly in major Chinese cities (Bartel et al., 2016). In 2015, 25% of the energy produced in Mexico was through renewable sources, particularly geothermal. Laws were enacted to promote renewable energy resource use and propositions for energy matrix diversification were made (Bartel et al., 2016). Brazil had a thriving economy of biofuels in place which cut CO2 emissions by 600 million tonnes since 1975; an emphasis was laid on restoring large expanses of forests (Bartel et al., 2016).
The case showed a summary about investment of international investment operation certificate in renewable energies at the end of 2015 within the major oil and gas companies since 1970 till late 1990, it also showed some examples that are promoting these industries:
Solar Energy has been promoted heavily by Total, with some contributions from by Shell acquisition of Siemen’s solar company and Chevron acquisition to a solar array company that made them execute some projects to US governments especially in schools, however after 2014 many projects were stopped where they stopped involvement in solar industry.
Wind Energy that had huge investments from British Petroleum in the US with $3.1 billion, with also many funds that were flowed from Shell in several companies especially their projects in Denmark, adding to that some small involvements from Statoil with world’s first floating wind farm in Scotland with 30 MW project (Isaksen, 2018). Also, BP and Total shared with other projects starting 2009.
Biomass and Biofuel have the most investments from oil and gas companies as it succeeded to show it huge return with Methanol and Ethanol production. Exxon Mobile made a plan to invest more than $600 million over 10 years in biomass produced from algae, also Shell managed to invest many funds into Ethanol production from sugarcane with collaboration to Raizen company in Brazil. However also biomass energy suffered from divesting through oil and gas companies due to low returns in investments compared to oil and gas.
Challenges Facing Renewable Energy Domination
In light of recent climate change debates, a large number of investors are taking away their investment for fossil fuels; a 2015 report indicates that 430 investors withdrew investments valuing $2.6 trillion (Bartel et al., 2016). Furthermore, different companies introduced various sustainable energy programs within their company; Walmart pledged to use 100% renewable energy by 2020 and to reduce energy used per square foot in its buildings; Adidas used an internally created Green Energy Fund to install LED lighting and smart building controls in all their buildings, and also used the Fund to fund projects that reduce carbon emissions; FedEX pledged to use alternative jet fuel created through forest waste material and reduce aircraft emissions by 30% in 2020 (Bartel et al., 2016).
While there haven’t been substantial changes in the subsidies for fossil fuels on a global level, some countries such as India have removed their subsidies on fossil fuels (Bartel et al., 2016). This shows that there is a global trend where countries are thinking about the epidemic of CO2 emissions and changing their attitudes towards it. However, subsidies for fossil fuels are four times greater than those for renewable sources. The mix of subsidies needs to undergo change in order to promote renewable energy (Bartel et al., 2016).
Through the past few years, Carbon Capture and Storage was introduced as a temporary solution to contain carbon emissions, many European countries has adopted this technology, that includes capturing most of carbon dioxide emissions from large point sources as in coal powered plants of heavy industries, which aiming to prevent the release of carbon dioxide into the atmosphere. Germany, at first started small pilot projects but recently they stopped using them as they claim, it is alleviating the intense building of air polluting industries, however CCS is to be considered only as a temporary resolution. Moreover, Shell company started a project for CCS in last of 2016 in Alberta, Canada to capture more than one million Carbon Dioxide per year, by constructing 28 kilometers of pipes to capture CO2 emissions.
Shell after being a part of energy transition commission, started their low carbon research and development investment to promote using cleaner energies as natural gas and advanced CCS technologies. And according to exhibit 3, it showed their plan starting from research and development stage, engineering and design phase till reaching the final investing decision in all fields of natural gas, carbon storage, biofuels usage, with other renewable systems incubation as for the hydrogen power, solar and wind energies. In order for Shell to set themselves within the transparency, they became the first oil company ever to produce an annual report for External Review Committee (ERC) on sustainability, were they were mentioning sustainability performance since 2005, where stating more about environmental impacts, human rights, climate change, information on socially sensitive areas, sustainable energy development with positive and negative sustainability performance.
Recently a call for carbon pricing has been adopted from major oil and gas companies, Shell and British Petroleum, is it to be also called carbon tax, which is prices of oil to be priced upon amount of carbon dioxide is emitted in the atmosphere.
ANALYSIS AND DISCUSSION
Energy is not a solely demand-driven, or supply-driven industry; rather it is interdependent on both supply actors and demand actors. The idea is made more complex because each actor in the energy economy has different goals in mind. Consumers desire a stable energy supply at low prices, suppliers want to maximize profits whilst minimizing their production costs, investors want to gain more per unit invested. In this scenario, if we consider the economy to be operating under a self-interest model, neither of the actors would go for renewable energy transition, because for consumers it would make energy more expensive in the short run, and for suppliers it means they have to give up some profits and face additional costs of investing in alternative technologies. Investors would be unwilling to invest if they cannot see profits in the near future. In this light, the role of the media in creating awareness amongst the general public about the lasting global impacts of continuing with business as usual would be imperative; similarly, the governments’ role in creating and backing these goals through regulations would also be important. However, even the government could have goals of economic development of a country, or at its worse, ensuring re-electability by pushing for costly and environmentally unsustainable projects that gather public attention. The case study shows that the transformation into renewable energy sources has key actors that affect the transition. The analysis will show the main contributors and supporters and their roles for this industry, especially oil and gas companies which provide both pros and cons to the process itself, and finally the role of NGOs as a key factor for adopting such transformation.
PESTEL Analysis to Renewable Energy Transformation
Transitions into renewable energies has a complex, integrated matrix with many relevant stakeholders and in order to provide a clear picture of circumstances of adopting new policies towards the new changes, identification of the several factors is significant to support policy makers while taking decisions, and that could be done by a holistic PESTEL analysis of the fossil fuels industry. Renewable Energies started to take place after many global conventions calling for the necessity to reduce carbon emissions; otherwise planet earth would face climatic troubles in the next few decades which was shown in most of the climatic prediction simulations of carbon dioxide concentrations till 2050, which supports the renewable energy transitions environmentally (Martin Heimann, 2008).
Electricity generation companies as contributors with 37.5% of annual global CO2 emissions, seek to provide more sustainable solutions, but only if cost effective, emissions reducing technologies were introduced. The key point is that there is an opportunity to increase profitability, where economics plays a vital role in the transition process (Ralph E.H. Simsa, 2003).
Politically, governments could be a key contributor to clean transitions by enabling environmental policies, as carbon taxation or trade tariffs that could significantly affect the business ecosystem. These can be integrated with the legal arm when firm policies and laws are applied regarding safety standards, and an emissions scope locally and globally (SatyaWidya Yudha 1, 2018)
Furthermore, innovation in technological sectors to enhance automation, fund flowing in R & D in renewable energies and boosting the technological awareness in this field will maintain the transition of the ecosystem. Ultimately, social perception will be always the toughest piece to alter in the transition. Public acceptance can increase or diminish the progress in many projects because the public creates demands according to their understanding and awareness of the entire pros and cons of any applied projects; and this in turn affects the industry’s willingness to invest in projects.
Main Key Stakeholders to Sustainability Debate
Oil and Gas Companies: With Shell at the top as it is a major energy company that operates in over 70 countries (Bartel et al., 2016). Shell is in a steep position since it needs to cater to the increasing global energy demand (Bartel et al., 2016). Shell has been under a lot of scrutiny since it has not been able to achieve a balance between supplying energy while being cognizant of sustainable development. Additionally, Shell is dealing with the challenge of surviving as the world transitions into lower-carbon energy. Hence, in terms of energy debate, Shell is in a complex position of achieving business excellence while managing risks in terms of transitioning to a low-carbon energy system as well as achieving society sustainable goals (Bartel et al., 2016). That being said, Shell is a major actor in the oil and gas industry and is rooted in a capitalistic framework (Bartel et al., 2016).
Media: Shell has been under much scrutiny by the media since it has not made proper efforts towards lowering CO2 emissions. The media has extensively reported oil spills in Scotland, Artic and unethical operations in Ireland (Bartel et al., 2016). The main motive of the media in highlighting improper practices of Shell operations is to garner the government’s attention to stop capitalistic firms like Shell from exploiting resources and take proactive measurements towards sustainable goals (Bartel et al., 2016). The media has been successful in creating awareness amongst the general public about the lasting impact of climate change (Bartel et al., 2016).
NGOs: NGOs like Greenpeace have played a major role in impacting Shell’s unethical initiatives and telling Shell to address climate change (Bartel et al., 2016). Greenpeace created a polar bear spectacle in front of the Shell headquarters as a form of protest. Shell announced in September that they would discard their plans for exploring the Arctic because there wasn’t enough evidence to warrant it; they decided to cease exploration (Bartel et al., 2016). International and local NGOs are huge game changers in mobilizing the civil society and telling big firms like Shell to take proactive sustainability initiatives.
Investors: The case study mentioned that large number of investors took away their investments worth $2.6 trillion for fossil fuels (Bartel et al., 2016). Investors also play a huge role in pivoting the energy debate. In this case, many investors such as Stanford University, Norwegian GPFG, Rockefeller Brothers Fund and World Council of Churches, and the California Public Employees Retirement System have been able to significantly contribute towards achieving low-carbon economy and catalyzing research in renewable energy (Bartel et al., 2016). The aim of investors is to help drive research and development and help big firms work towards zero-emissions.
UNFCCC/ Policy Makers (COP1 & COP21): The role of UNFCCC is to lead a global movement towards stabilizing greenhouse emissions that caters to climate change and prevents the anthropogenic disturbances (Bartel et al., 2016). At the Paris Conference 119 countries set and shared targets for reducing GHG emissions in the form of intended nationally determined contributions (INDC) (Bartel et al., 2016). Since developed and developing countries operate at different capacities, policy makers needs to implement localized policies that will allow countries to manage greenhouse gases (Bartel et al., 2016).
Oil and Gas Companies Sustainability Initiatives
It is believed that transparency in the oil and gas industry would “reduce corruption and mismanagement, and increased accountability would engender the more development-oriented conduct of industry affairs” (Gillies, 2010). Gillies argues that increased scrutiny of big oil and gas companies by third-party actors posed a threat to their reputation, hence the norm of transparency was adopted in order to mitigate the threat to reputation (Gillies, 2010). The act of transparency and promoting sustainability agendas would serve as a means of diffusing criticism from the harshest opponents (Gillies, 2010) although this is a norm for Western oil and gas industries, and not for Chinese or Russian industries who refuse transparency. This is especially because it is assumed that a negative public opinion would deter customers, shareholders and employees, while also opening room for legal inquiries (Gillies, 2010), However, transparency in the oil and gas industry is not a two-way communication, rather it is a marketing effort that serves to improve public image.
Shell has gained a reputation as a company that cares about CSR and has won awards such as the British-American Business Channing Corporate Citizenship Award in 2011 (Hennchen, 2014). Furthermore, it has advocated transparency, CCS technology and other sustainable technology innovations, and has funded research in the Arctic for understanding the biodiversity (Bartel et al. et al., 2016). Shell’s approach towards sustainability is described as follows:
“The world needs to produce enough energy to keep economies growing, while reducing the impact of energy use on a planet threatened by climate change. Shell works to help meet rising energy demand in a responsible way. That means operating safely, minimizing our impact on the environment and building trust with the communities who are our neighbors. If we fall short of the standards society expects of us, we learn from our experiences to improve the way we operate.” (Hennchen, 2014)
However, there are discrepancies in Shell’s goals and aims and what it achieves on the ground. Taking the example of Nigeria, as exemplified by Hennchen (2014), we find that despite the programs that Shell was running, Nigeria saw little economic development as a result. “Leaked US embassy and company reports, and legal proceedings revealed a gap between the company’s formal CSR agenda and its practices on the ground” (Hennchen, 2014). Interviews with locals and other research found that Shell was using its CSR as a means of getting oil, and that Shell would participate and propagate only those projects that were visible and would fit the social requirements (Hennchen, 2014). Furthermore, Shell would work with NGOs to create these development projects for the community, but the NGOs were hired to fulfill Shell’s interests and agendas (Hennchen, 2014). While the federal governments received revenues from taxation, the local communities suffered, such that rural and oil producing communities were poorer after the extraction of oil had begun, than they had been prior to it (Hennchen, 2014). Furthermore, while Shell claims to support EITI, it was supporting a legislation that could weaken the EITI standard (Henchenn, 2014). Another aspect of Shell’s policies that shows a lack of commitment to its sustainability drive is its selling of Solar Energy investment to Solar World in 2006 (Bartel et al. et al., 2016). This seems to suggest that Shell gave up investing in renewable energy as it wasn’t as profitable.
Another aspect that could reduce the public’s trust in Shell, despite the transparency it claims, is the potential for lobbying. Since oil companies generate a lot of revenue, they have the potential to become very powerful, especially in countries where the economy largely depends on oil. In the case of Nigeria for example, the Royal Dutch Shell company was responsible for a majority of the economy, and therefore held a lot of power (Hennchen, 2014). Shell was able to use its lobbying power to manipulate tax laws in its favor, and even to fund military and other factions in Nigeria which caused violence (Hennchen, 2014).
In the modern world, big companies have the potential to use their lobbying power to ‘remove’ negative press and articles of their company from the web-search. Companies create fake blogs, or screen Wikipedia articles in order to push positive search results higher up on search engine returns (Rowell, 2014) In light of this information, it can be assumed that transparency could serve the dual purpose of online lobbying. Furthermore, “oil sector transparency lacks direct and visible links with the human costs of corruption and bad governance.” (Gillies, 2010). This is seen by the low HDI indices that are found in countries like Nigeria. Additionally, there is the argument that transparency alone is too little to lead to any significant changes in the industry; transparency can only have a great effect when used in tandem with governmental reform (Gillies, 2010).
In order to improve the public image that Shell has, it should take steps to involve the local community in decisions, and allow them to have consent. The projects it undertakes should not be for short term reputation boosts, but they should be something that the community really needs in order to improve its economic or social status. This will lead to long term positive image creation.
While big oil and gas companies are generally viewed as the ones responsible for causing great damage, it also the very same companies which – in the public’s view – hold the key to the solutions to these problems; especially in the cases where “public institutions are neither able nor willing to administer citizenships rights or contribute to the public good.” (Hennchen, 2014). Therefore, it falls to the companies to ensure that they do not lose public favor altogether.
The World Economic Forum asserts that fossil fuel companies lack trust in the general public, and therefore would need to build that trust in order to gain society’s license to operate (Kolaczkowski and Weller, 2016). It suggested a series of actions that companies can take in order to do so.
One of the main shortcomings of the fossil fuel industry is that the public expects the industry to function efficiently without causing major environmental damage, and at times the industry is unable to deliver that promise. This contributes massively to the negative view that the public holds of the industry. The oil and gas companies should create industry-wide standards for environmental performance and hold other competitors and actors accountable for any failings (Kolaczkowski and Weller, 2016). It is also suggested that the companies create a platform of transparency, which in the case of Shell is already underway (Bartel et al., 2016, p.12). Systems to mutualize risk could also be created so that companies would be in a better position to act collectively to perform more responsibly (Kolaczkowski and Weller, 2016).
Another factor that affects the public opinion of the industry is the perception of the industry being corrupt, or of using lobbying as a means of pushing unethical agendas. While transparency is a good first step towards decreasing the impact of that perception, the creation of an “international industry watchdog to improve reporting and verify claims of corruption among its members” (Kolaczkowski and Weller, 2016) can act as a means of further convincing the public of the industry’s intent to act responsibly. Furthermore, engaging the community in decision making processes could act as a means of gaining trust and fostering long term positive outcomes. Finally, the industry should develop standards for ethical lobbying that could be enforced by an external organization (Kolaczkowski and Weller, 2016).
A study conducted by Belk, Painter and Semenik suggested that consumer perception on who holds the responsibility for an energy crisis affects the consumer response to the crisis as being either personal or impersonal (Belk et al., 1981). The findings show that the public holds a “just world” view such that it considers the one responsible for the causing an energy related crisis to be the one to solve it (Belk et al., 1981). As such, if the public were to view itself as a cause for the energy crises, they would take a more personal solution such as conserving energy and calling for more environmentally friendly solutions (and the opposite would hold in the case that the public did not hold itself as the culprit of energy crises) (Belk et al., 1981). This implies that another way for oil and gas companies to improve public standing would be to create a narrative that shifts the blame for energy crises from themselves to the public, in order to reduce pressures on themselves to bring about a solution (Belk et al. 1981, p.7). However, this does not exonerate the companies from their role in acting responsibly; it should only be used as a means to reach a more holistic approach towards solving the energy problem in the world, wherein the community and the company work towards a common goal, rather than the companies facing undue censure from the public.
Role of NGOs in the Working Scheme
In the recent years, criticism from non-governmental organizations has had a measurable impact on a company’s corporate reputation, profits and operations (Wolters, 2014). Shell has been a victim of NGO scrutiny and is the five of the ten (10) most criticized firms since 2010 (Wolters, 2014). The company announced an 86% decline in annual profits in 2016 (Wolters, 2014). While Shell’s plummeting profits are partially due to fall in oil prices, it is also because of the build-up of negative publicity. To state the obvious, much of this scrutiny is rooted in the fact that Shell’s basic operation of extracting and supplying oil and gas preempts the concept of sustainable development (Wolters, 2014). While it is hard to expect Shell to take the lead in environmental stewardship, the company still needs to drill in a safe and considerate manner, perform renewable research and development, improve social performance, and overall invest in low carbon technologies, natural gas, and carbon capture storage systems, manage methane emissions, and prepare for low-carbon energy system during the transition phase (Wolters, 2014).
It’s no doubt that Shell faces tremendous challenge of not only meeting the global economic and energy needs but also, performing under strict environmental regulations in the interest of climate change. In 2015, Shell emitted 72 million tons of CO2 from its facilities, 55% of total emission from downstream operations and 40% from upstream oil and gas production and lastly, 5% from shipping functions (Wolters, 2014).
For Shell and NGOs to have fruitful collaboration, Shell needs to make operational changes as well as pursue power-sharing collaboration structures when partnering with NGOs.
Since Shell is one of the large footprint industries, it needs to make great strides towards reducing environmental impact and conserving biodiversity. This requires making operation changes within the corporate strategy. It requires the following:
1) Climate Strategy (low carbon fuels and renewables): Shell claims to be investing heavily in low carbon fuels and asserts that it is one of the world’s largest distributors of biofuels (Wolters, 2014). It also reports that it is one of the world’s largest distributors of liquefied natural gas (Wolters, 2014).
2) Operational Eco-friendly Efficiency: Shell clearly understands its responsibility in mitigating effects of climate change and reducing negative environmental footprint through technological breakthroughs due to its oil sands operations in Alberta, Canada (Wolters, 2014). Hence, Shell has initiated research on Carbon Capture and Storage (CCS) with the funding support of C$865 million from the Canadian Government (Wolters, 2014). This project aims to annually capture one million tons of CO2, which is equivalent to removing 175,000 cars from the road (Wolters, 2014).
3) Occupational Health and Safety: Shell has implemented training and accident prevention programs in all its plants and building for safety measures (Wolters, 2014).
4) Social Impact on Communities: Shell has committed to sustain lives of impoverished communities by providing livelihood as well as clean energy solutions (Wolters, 2014). For instance, the company has committed to electrify a rural state called Bihar in India by generating electricity from rice husk (Wolters, 2014). The Husk Power plant can provide up to 8-10 hours of affordable electricity to 1,600 residents (Wolters, 2014). Further, shell employed 350 people to operate the Husk power plant (Wolters, 2014).
MANAGEMENT STRATEGIES WITH NGOS
Over the past decades, partnerships between corporates, government and civil society has become a strategy to reach sustainable development goals (Wolters, 2014). Interactions between businesses and NGOs have become more prominent and frequent. Formally, business-NGO partnerships are defined as “collaborative agreements in which actors from market and civil society are involved in a non-hierarchical process, through which these actors strive for a sustainability goal” (Wolters, 2014). Many business-NGO partnerships have moved away from being confrontational to now being collaborative (Wolters, 2014). Unequal power imbalances, inter-organizational communication, differing cultures and languages, mistrust and lack of transparency are examples of collaboration challenges. There are several ways in which Shell and local NGOs can work together towards the common goal of sustainable development.
Agree to Work Towards Common goal: Partnership between business and NGOs has not flowed naturally or positively in the past given the nature of operations. Both generally have conflicting core mission and motives (Wolters, 2014). When cooperating, both actors need to find a common ground to work on. Both actors should form a “Collaborative Partnership Agreement” where they both formulate objectives of partnership (Wolters, 2014). These objectives include strategies that will enhance the sustainability performance of Shell, improve business knowledge of NGOs, and lastly, set realistic goals that are valuable for both actors (Wolters, 2014).
Managing Expectations: It is highly important for both the business and the NGO to discuss what expectations they both have for each other. Mistrust and misunderstanding between business-NGO partnerships are fairly common (Wolters, 2014). Cause of mistrust and misunderstandings can occur because of diverging objective and management of confidential information (Wolters, 2014). Additionally, NGOs usually enter the partnership with preconceived notion that the business partner’s objective is limited to better public relations instead of social betterment (Wolters, 2014). Local NGOs should be more open-minded and give Shell the benefit of doubt despite Shell’s history (Wolters, 2014).
Understand Each Other Company Culture, Values and Mission: Both business and NGOs need to take active effort in leaning and understanding each other’s language and culture in order to ensure smooth communication lines within the partnership (Wolters, 2014). These discussions are highly important in order to secure trust between the partners. This becomes difficult due to the fact that business’ interest is limited to earning profits whereas NGOs represent wider community interest (Wolters, 2014).
Balance of Power: Prior to business-NGO partnerships becoming mainstream, the nature of the relationship between business and NGO was regarded as charitable donor – recipient relationship (Wolters, 2014). However, this has slowly transitioned into more power-sharing relationship. Now, business-NGO partnerships are interactive and require “exchange of mission, people, resources for collective action and organizational integration” (Austin, 2000, p. 71). For collaborative agreements to be smooth, both actors need to engage in a non-hierarchical process (Wolters, 2014). Power imbalances in business-NGO partnerships usually occur due to the fact that businesses have higher brand equity and financial resources (Wolters, 2014). Here, businesses need to realize that NGOs can really help them improve their credibility and legitimacy (Wolters, 2014). Additionally, NGOs, being an outsider, can help point out risks that are often overlooked from a business perspective (Wolters, 2014). Shell should also realize that NGO’s have sound knowledge about sustainability policies that gives it competitive advantage over other companies in the sector (Wolters, 2014). Lastly, many employees would take pride in the fact that they are associated with a company that expresses sustainability concerns (Wolters, 2014). Similarly, NGOs need to also recognize the copious business knowledge, experience in running efficient organizations and project management skills that they can gain from working with businesses (Wolters, 2014).
Corporate Social Responsibility and Partnership Evaluation: The concept of corporate social responsibility (CSR) has now become mainstream and provides positive reputational benefits to businesses (Wolters, 2014). The reputational benefit is a huge factor that Shell should leverage when partnering with NGOs (of course keeping sustainable development as the main goal in mind). Shell should recognize that with NGOs, Shell would be able to design better projects and achieve better social result (Wolters, 2014).
Transparency: A lot of times mistrust and misunderstanding can be removed if businesses are transparent have report accurately (Wolters, 2014). Businesses can meet community and NGO expectations via ensuring transparency. Shell releases an annual report, which includes environmental and social performance information. They further hire third party to evaluate and monitor their economic, environmental and social performance (Wolters, 2014). In order to improve collaborations with NGOs, Shell should work on being more transparent and provide consistent data on environmental and social performance (Wolters, 2014).
In conclusion, companies like Shell contribute approximately 37.5% towards global CO2 emissions and will only move to sustainable initiatives if sustainable initiatives are cost-effective. There is an incentive for oil and gas companies to use cleaner energies if it results in increase in profitability. That being said, there are several other key stakeholders such as the government, media, non-governmental organizations (NGOs), UNFCCC, and legal jurisdictions that can enable oil and gas companies to make significant sustainable shifts. With regards to Shell’s transparency and smooth NGO partnerships, Shell has used its lobbying power to remove negative reputation and manipulate tax laws in the past. Moving forward, in order to improve public image, Shell has to involve local community in its decision-making and give value to the concept of consent. The projects should be long term focused and should be in the interest of building economic and social status of the community instead of just making profit.
In order to gain society’s license to operate, oil and gas companies should create industry wide standards for environmental performance and hold other competitors accountable for any failings. Companies should also set high transparency standards and hire a third party to do monitoring and evaluation of the projects in order to ensure sustainable operations within the company. In order to ensure smooth collaborations with NGOs, Shell should agree to work towards common goals, learn to manage expectations, understand each others company culture, values and missions, move towards power-sharing hierarchical structure and lastly, carry out corporate social responsibility and partnership evaluations. Ultimately, a joint effort between corporates, government and civil society actors will result in amore collaborative partnership. In this way, all key stakeholders can work towards the common goal of achieving sustainable development and transition into low-carbon or zero emissions future.
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