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an analysis of shell Nigeria's strategic direction for the next decade
AN EVALUATION OF MANAGEMENTS COMMITMENT TO SOCIAL RESPONSIBILITY, AND ENVIROMENTAL SUSTAINABILITY AND CRISIS
MANAGEMENT: Case of ROYAL DUTCH SHELL NIGERIA.
INTRODUCTIONThe aim of this report is to examine management capability in the areas of corporate social responsibility, social change and environmental issues, using SHELL NIGERIA PLC as case study. A brief introduction into these concepts will be offered and an analysis of previous management efforts within the last decade of the organisations operations will also be examined. Furthermore, the management competence towards social responsibility, social change and environmental sustainability will be examined by pitting their present proficiency in these areas against possible future contextual environments. In no way, will there be an attempt to provide a business report or a market analysis on SHELL NIGERIA in an attempt to successfully achieve the initially declared objective. However, it is crucial to begin with the description of the key concepts under examination and providing a brief background into the SHELL NIGERIA business.
SHELL-BP: Company ProfileThe Royal Dutch/Shell Group founded Shell D’Arcy (Shell Nigeria or "the company") in 1936, the first Shell company in Nigeria. The company gained its licence to operate in Nigeria 2 years later with its first successful drill recorded at Oloibiri, Bayelsa State in 1956. The organisation subsequently changed its name to “Shell-BP Petroleum Company of Nigeria” (or SPDC), with its first successful overseas shipment made in 1958. The company however didn’t commission its first terminal (Bonny Terminal located within the Niger Delta region) till a year after the nation’s independence in 1961. It is of worthy relevance to note that the Nigerian government remain Shells biggest shareholder with an equity share of 80%, with Shell Nigeria owning the remainig 20% (Shell, 2012).
According to the Organisation of Petroleum Exporting Nations (OPEC, 2012); the value of the Nigerian Petroleum exports is currently valued at $ 61.8 billion, with proven crude oil reserves of 37.2 billion barrells, a production capacity of 2 million (b/d) and a refinery capacity of a merger 445,000 (b/d). This places Nigeria as one of the 10th oil-rich nation in the world. Since its arrival into the Nigerian oil scene 76 years ago, the company has established over 90 fields, 1000 producing wells, 10 gas plants and two export terminals (Bonny and Forcados) and a network of flowline pipelines that extend over 6,000km (Burger.A, 2011). Shell currently supplies the Nigerian governement with about 70% of its gas needs
Depite these astoninghing developments, the company has been castigated by Nigerians largely on the effects of its onshore oil exploration and refinement activivities. The criticisms levelled against the company include enviromental degredation/devastation, disregard for human rights and unfair distribution of gained economic reward. The Niger Delta, (which is Shell Nigerias main base of operations) is made up of fertile wetlands which holds approximately 30million inhabitants whose main source of livelihood is farmign and fishing, in a region considered to be one of Africas most densley populated locations (Kate, 2010).
Defining the conceptsPopular belief holds that success in business is largely measured by financial returns, large dividend pay-outs, and incredible liquidity standings. Despite the fact that the fundamental rationale for the
existence of business is to make profit, there has been an increased consciousness on the use of non-financial measures in determinig business performance. Corporate social responsibility is one of these measures, which has grown in relevance both academically and business world in recent times (Barnerjee, 2007).
Several authors in business and academmics have attempted defining CSR as a concept, with little/no consencus given to any particular definition. Authors such as Silberhorn & Warren (2007), suggests that defining CSR could be subjective on an organisational or national level. The UK’s Department for Business innovation and Skill (2012) define CSR as “attempts by companies to address the social, economic and environmental impact of their operations and also help meet sustainable development goals”. Perhaps one of the most comprehensive definitions of CSR which is believed to capture the essence of the concept was suggested by
As highlighted by (Silberhorn & Warren, 2007), the relevance of CSR due to certain internal and external factors, and it evolves due to constant changes in soceital trends. He further sugested that organisations could either practise proactive or reactive CSR, with most companies practising more of the latter than the former.
CSR is now a well-known expression for what, in the past, has been a collection of different and yet related terms: corporate philanthropy, corporate citizenship, business ethics, stakeholding, community involvement, corporate responsibility, socially responsible investment, sustainability, triple-bottom line, corporate accountability and corporate social performance (Silberhorn & Warren, 2007).
There are organisations such as the ISO 26000 from the International Organisation for Standardisation, that cover voluntary guidance o social responsibility (BIS, 2012).
According to Cromb (2008), CSR goes by several names such as “stakeholder management” and “business in soceity”. He further suggest that social responsibility by orgnaisations should be a neccesity rather than a voluntary practice, which should be enforced. This view is sahred by some of the worlds top executives as reported by Ioannou and Serafeim (2010) from a UN Global impact study containing 766 participants (CEO’s from all over the world), which revealead that 93% of the participants believed that sustainability was an “important” or “very important” factor for their oranisation, while 81% of them believed that they had fully integrated sustainability issues into their business strategy and operations.
Porter & Kramer (2006) suggest that comapanies are not responsible for all the world problems. However, by identifying the issues they are best suited to handle, they can also gain competitive advantage.
On enviromental isssues and Sustainability,
Over the past decade the genral public, businesses and the govenement have realised the need to embrace the concept of sustianability develeopment, which as become one of the catch phrases in the discussion of enviromental issues (Angell and Klassen, 1999).
According to the UN Global compact (2012) website, there are several key environmental challenges plaguing the earth and its inhabitants and it is the role of business to address these issues based on
certain activities such as research, self-regulation, education, co-operation. Amongst the key environmental issues mentioned include;
Damage to the ecosystem and loss of biodiversity. Atmospheric pollution and the consequence of climate change. Aquatic eco-system degradation. Land degradation. The impact of chemical use and their disposal. Depletions of non-renewable natural resources.
In understanding the concept that is Crisis or catastrophe management, one should first understand what a crisis is. Darling (1994) identified a crisis as a time of instability in which a decisivie change is looming – with either with the high possibility yielding undeserieable outcome(s) or a distincly positiive or a higly desireable outcome(s). He futher suggests that crisis management is identified, it undergoes at least three of four stages which include; (i)The Prelimenary Crisis (identification stage), (ii) the Acute Crisis, (iii) Chronic Crisis and the Crisis Resolution stages. However, authors such as Parsons (1996), suggests that crisis can be identified based on varying time constraints, and as such crsis could either be identified as either as Immediate, emergent or sustained.
In every business, a form of crisis is inevitable (whether existing in full force or having just passed through), and this has taught organisations (regardless of market reach, industry or size) that they occur unexpectedly (Heller & Darling, 2012). This has been likened to a “black swan”, being a very improbable occurrence, with massive impact and after the fact, requires an explanation (Taleb, 2007). Crisis management entails managing an such situations that threaten to affect the existence of the business.
SHELL NIGERIA & CORPORATE SOCIAL RESPONSIBILITY
In Nigeria, we are committed to social responsibility. It is embedded in the way we carry out our day-to-day business. We work with local organisations around our operations to be aware of their concerns and to ensure that the benefits of Shell's resources feed through to local communities and businesses. (Shell, 2012)
The above excertpt from Shell Nigeria’s corporate website indicates the organisations commitment in communicties where it operates. This is echoed by the comment made by SPDC’s MD Mutiu Sunmonu who stated that “We have a strong focus on community development”(Burger, 2011).
Shell Nigeria have continually forged to build rapport with the indigenes of communities where they operate. This is evident from the effort the company continually invests in four major areaas as indicated;
I. Business DevelopmentII. Education
III. HealthIV. GMoU’s
Shell Nigeria’s business development efforts within host communities has largely been aimed at improving the quality of living for youths (as professionals or entrepreneurs), and asssiting small businesses by providing finance facilities for these establishments (Shell, 2012).
The micro-credit and business development programme was started in 1998 to help empower communities and enable entrepreneurs take advantage of the economic opportunities in their locality. This goal is being pursued through three broad categories of service: community-based enterprises, micro-credit schemes and youth business development programmes.
Implementation is by using the group (cooperative) model and the revolving loan approach. The programme is facilitated by local NGOs and mentor beneficiaries. Micro Finance Banks have been introduced for improved monitoring and repayment.
The micro-credit programme has helped more than 30,000 people establish or expand businesses. In 2009, 27 new micro-credit schemes enabled 2,700 women and young people to set up smallscale businesses. These loans typically help small business owners like local market women to buy more goods.
The scheme has received external commendation, with the Delta State Government adopting the model in the implementation of their micro-credit programme.
The Olomoro story
Olomoro community was given N1.6 micro credit seed fund in 2004, from which some 200 people benefitted. The beneficiaries embarked on several income generating projects and successfully repaid the loans. The same seed fund (plus interest) was re-cycled to other groups thereby increasing the total number of beneficiaries.
The seed fund has been re-disbursed about 6 – 7 times among the women in Olomoro community, increasing the total sum to about N3.8m in 2009. The Olomoro example demonstrates accountability and community ownership of the micro credit scheme.
LiveWIRE a Shell global community initiative was launched in Nigeria in 2003 to encourage young people to see starting a business as a desirable and viable career option. The programme exposes undergraduates and postsecondary school leavers to basic business principles and start up funds for business establishment. The programme has trained 3408 young people since 2003, of which 908 have received awards .
The LiveWIRE programme is another way we support entrepreneurs. It gives young people the skills they need to start a business. In Nigeria, this programme has trained more than 3,000 young people since 2003. With the support of the Delta State government, they had established more than 519 businesses by the end of 2009. In addition, the regional LiveWIRE programme helped 39 young entrepreneurs set up, expand or manage their businesses in 2009.
Agriculture is one of the main sources of income for Nigerians. SPDC is partnering with USAID Nigeria and the International Institute of Tropical Agriculture in an $11.3 million project ($2.25 million Shell share) over five years to develop cassava farming. In 2009, more than 3,400 farmers received training under this programme. It has also provided technical and business skills training for 11,000 farmers and has created 3,600 full-time and 9,000 part-time jobs.
By the end of 2010, 3000 candidates were trained of which 588 received business start up awards. As at February 2012, a total of 3408 young people had been trained, of which 908 received awards.
LiveWire Nigeria produced two recipients of the Central Bank of Nigeria's "Young Entrepreneur of the Year" Award.
To encourage and support youth development specifically to help young people Become interested in setting up businesses and working for themselves. To provide foundation (attitude re-orientation) and business training for youths aged between 18 and
30 years. To facilitate viable business choices, preparation of business plans and business start ups by youths. To create employment opportunities from the establishment of businesses. To identify and link beneficiaries with mentors
Value and Organize Yourself Workshop (VOY); Focus – Attitudinal reorientation for youths Bright Ideas Workshop; Focus – Exploration / development of viable business ideas
Become a Successful Owner Manager (BSOM); Focus – Development of enterprise management skills in youths.
Business Start Up Awards; Focus – financial support for business start-upsMentoring and Business Counselling support.
Resource Centres where business information are displayed free of charge
Empowering Niger Delta YouthsAt Shell, we recognise that the youths of the Niger Delta are the promise of tomorrow. They represent the collective dreams of a stable and prosperous society where commerce and industry thrive, and people develop their fullest potentials in peace and security.Reducing unemployment among the young is a top priority for Shell Companies in Nigeria. The oil industry is key to the Nigerian economy and the disruption of it by those who are disaffected is a matter of great concern. The young are Nigeria’s greatest hope for the future and it is essential that they have real job opportunities through vocational training and job creation programmes. Managed in partnership with local NGOs, this scheme continues to offer training to young people in skills sets including welding, sewing, auto mechanics, electrical work, computer technology, hairdressing, building, baking, soap making, plumbing and fitting.
A key aspect of our youth development scheme is enabling the youths to gain useful skills with which they can gainfully be self-employed. In 2000, SPDC commenced a comprehensive youth empowerment scheme targeted at youths in Rivers, Bayelsa, Delta, Imo, Abia, Akwa Ibom and Edo states. The programme comprises four main components:
Youth Training & Enterprise Programme (YTEP) Work Force Training (WFT) Youth Apprenticeship Training and Enterprise Scheme (YATES) Non Violence and Conflict Management TrainingTraining can help young people acquire the skills they need in life. During 2009, the SPDC-operated joint venture spent more than $2.3 million ($710,000 Shell share) to train 306 youths in a range of skills including welding, pipefitting and carpentry, enterprise and leadership development, and conflict management.
The Shell Petroleum Development Company of Nigeria Limited (SPDC) has inaugurated the second edition of its Niger Delta Postgraduate Scholarship Scheme in a continuing effort to develop indigenous manpower for the oil and gas industry
he courses are Petroleum Engineering, Petroleum Geoscience, Petroleum Geophysics, Engineering Geology, Exploration Geophysics, Oilfield Corrosion Engineering, Chemical Process Engineering, Mechanical Engineering and Civil Engineering.
Potential beneficiaries must possess a Bachelor’s degree in the relevant field of study at the Upper Second Class Level and have confirmed admission for any of the specified courses. The scholarship will cover tuition fees, one return flight from Nigeria to the United Kingdom and a contribution towards living expenses.
As in the pilot edition last year, 10 students from Rivers, Delta and Bayelsa states will be sponsored to three British institutions - Imperial College, London, University College, London and University of Leeds for one-year Masters’ programmes.
SPDC’s General Manager Nigerian Content Development, Simbi Wabote said: “We are expecting the first batch of beneficiaries to finish later this year, and feedback from the universities has been very positive. We look forward to their returning home and contributing to the development of the oil and gas industry and their communities.”
The SPDC Joint Venture commenced scholarship awards in the 1960s for programmes in Nigerian and foreign institutions. At any one time, SPDC scholarships support more than 17,000 secondary school and university students. In addition, SPDC runs the Shell Intensive Training programme (SITP) for graduate employees.
Support for education is just one aspect of SPDC’s social investments in the Niger Delta, and these range from small business development, agriculture and education to training, health care, micro credit and capacity building.
Godson Njoku A. Mukydodo - I agree that youth development is critical to the development of Nigeria's
economy. Shell supports various activities which involve youth development under our GMoU umbrella. We specifically have a programme called LIVEWIRE geared towards supporting young people in the Niger Delta.
Hi Raf, St Iyke here. As you may be aware, over 90% of SPDC staff are Nigerians and Shell is the only IOC in Nigeria with Nigerians as MDs (in SPDC, SNEPCO, SNG ). This is really great progress. More work is still underway to ensure that positions that can be filled by Nigerians are so filled. Having said that, Nigerian SPDC staff are on postings all over the world to ensure that Nigerian staff continue have cross-posting opportunities to obtain breadth and international exposure and to make that possible we will continue to exchange Nigerian personnel with expatriates in some positions in Nigeria. There is also the need to utilise high calibre expertise possessed by non-Nigerians in SPDC. This also applies to expert Nigerians contributing extensively on their own merit in many specialist roles abroad.
Mutiu Sunmonu A. Dear Saha, we have a strong focus on community development. Over the past ten years we
have scaled up our community development budget from $50m in 1999 to $250m in 2009. In the past we were heavily involved in the provision of infrastructure in the communities. we were building roads, schools, clinics and providing portable water. Though these are typical areas for government intervention, we stepped into the gap to help in improving the standard of living of local communities. we are now involving more and more development partners to help in addressing community needs. Specific community development programs include our micro credit scheme, health scheme - we have about 27 clinics in the delta. we are a major supporter of education of young children with over 17000 children on shell scholarship at any point in time.
(Shell LiveWire – Abia Imo Story, 2012) Shell & Corporate Social Responsibility in Nigeria
SPDC’s community development focus has shifted in recent years, he continued. “In the past we were heavily involved in the provision of infrastructure in the communities. We were building roads, schools, clinics and providing portable water. Though these are typical areas for government intervention, we stepped into the gap to help in improving the standard of living of local communities.
“We are now involving more and more development partners to help in addressing community needs. Specific community development programs include our micro credit scheme and health scheme. We have about 27 clinics in the delta. we are a major supporter of education of young children, with over 17,000 children on Shell scholarship at any point in time.”
- As of year-end 2010, Shell companies in Nigeria had trained some 1,900 service providers in general contracting, developed eight local dredging companies, awarded 10 UK scholarships and trained more than 3,000 people in entrepreneurship, scaffolding, project management, welding, catering, and other vocations.- In 2010 SPDC and SNEPCo provided more than $22.85 million of a total $71 million to local community projects.
“We are encouraging the community to own and drive development themselves while we provide financial assistance to them and technical assistance through development NGOs. We have established operating procedures and guidelines to help make the process accountable and
transparent. We still carry out major infrastructure in partnership with government, and other local and international partners,” social development specialist Gloria Udoh added.
Nevertheless, as one dialogue participant said, although Shell has ‘widely circulated publications and policies regarding your developmental activities in the host communities, the perception in such communities about your CSR approach remains unsavory.’
“A lot of work has been done in the last couple of years to enhance alignment and learning across the various countries that we operate,” Udoh responded. “In 2010, a new global social investment strategy was approved by Shell and the process of embedding this is ongoing. The perception in our host communities are monitored annually through an independent reputation tracker, and we glad to report that the 2010 results showed improvements.”
In 2006, SPDC introduced a new means of involving communities directly in their own development. The Global Memorandum of Understanding program (GMoU) entails communities proposing development projects and SPDC, on behalf of its JV partners, providing secure funding for five years. SPDC also provides community project leaders with access to development experts and NGOs that can assist them realize their aims.
Twenty-four GMoUs had been been established as year-end 2010, with over 400 projects completed by “clusters” with the SPDC joint venture investing $65 million in them. Six of the clusters have gone on to become registered community development foundations. (Burger.A; 2011)
SHELLS ENVIROMENTALSUSTAINABILITY ISSUES
Environmental Pollution & Degradation & Remediation
Shell has been harshly criticized for the effects its exploration and production have had, and continue to have, in a region of tremendous biodiversity and critical natural habitat, an ecosystem that continues to provide the basic necessities of life for millions in the Delta region.
Seventy-five percent of oil spill incidents have been caused by third-party interference: sabotage and oil theft, however; a large majority are the result of oil theft and piracy, according to Shell. “The bulk of the spills in the Delta are due to criminal acts,” MD Sunmonu said.
“However we are committed to cleaning up the spill related to our facilities regardless of the cause. The quality of clean up is very high, and it is in accordance with very strict government regulations and Shell standards, which are comparable to other places in Europe and America. We have always achieved our goal of restoring impacted sites to their natural state in the fastest possible way and by so doing we are able to minimize impact on local livelihoods.”
When an incident occurs, “First we recover as much oil as possible – then residual oil is cleaned up,” regional communication manager for West Africa Jonathan Barnden explained. “This is followed by remediation of the site where needed, and finally this is signed off by the regulatory authorities. I don’t think I can get into the technicalities of remediation processes here, but SPDC uses recognized methods which are suitable for the tropical climate in which it operates.”
SPDC intends to publish its monitoring data for the public to see, added CX Upstream International’s Nick Wood. “It shows compliance with international standards most of the time.” (Buger, 2011)
Eliminating Natural Gas flaring
Most of the oil deposits in the Niger Delta are “capped” by large volumes of natural gas, termed “associated gas” in the industry. Much lighter than petroleum, it was, and to varying degrees remains
common industry practice to burn off, or flare, this gas into the atmosphere in order to get to the underlying oil. When Shell first started producing oil in Nigeria in the 1950s, there was no market for natural gas. It’s estimated that some 95% of Nigerian natural gas was burned off during this period.
Times have changed. Not only are local and regional markets for natural gas, billions of dollars are being invested in developing liquefied natural gas (LNG) facilities and an international market.In addition, there is now an economic impetus and incentive to capture natural gas associated with oil reserves, as well as government and internationally accepted regulations aimed at improving air quality and mitigating climate change. These, along with lawsuits, add to the economic cost of continuing the practice.
Shell Nigeria is committed to eliminating natural gas flaring, according to panel members. In 2000, SPDC launched an initiative to accomplish this by 2008. Delayed at various times by lack of funding from its government-owned majority partner, NNPC, and civil unrest in the Delta, to date, SPDC has reduced flaring more than 50%, said Alice Ajeh, international relations manager for Shell Nigeria.
SPDC is also using computer modeling to analyze and better understand the impact of flaring. This specifically covers possible impacts farther from the flaring itself, CVX Upstream’s Wood added.
“Despite delays due to security, safety and other factors in the Niger Delta, between 2000 and 2009 a lot of work was done which covered 60% of SPDC production potential,” Ajeh continued. “However, with improved security in 2010, many of the delayed projects have resumed.”
When completed, the program will cover 90% of SPDC production potential at an estimated cost of some $6 billion (Buger, 2011).
Shell has also become active in environmental conservation in the Delta. In recognition of the importance of the Niger Delta’s rich biodiversity, SPDC in 2006 joined with the government, forest communities and NGOs to develop Biodiversity Action Plans (BAPs) for two forest reserves: Gele-Gele and Urhonigbe in Nigeria’s Edo State.
“These are International Union for Conservation of Nature (IUCN) designated category I-IV protected areas,” Ajeh explained.
In 2007, SPDC and NGO partners “contributed to the passing of a biodiversity law by the Edo State government, one of the first such laws by a state government,” she added.(Burger, 2011)
Previous M&S efforts (past 7years)a. Study the past performance of the company through the last decade in the
areas of your choice. You should use a wide variety of sources, validating each source for quality.
b. Critique the management’s performance, synthesise the critiques and draw conclusions about the style of management.
Future scenarios and implicationsa. Using the steps of scenario planning, build a picture of the world in which the
company must operate in the 2018 – 2020 time frame, in each of the three
areas you have chosen. (Not for the marketplace). understanding of the drivers of change and the imperatives on them
b. Assess the requirements of management in the scenario that you have developed.
Looking towards the futurec. Compare the requirements that you have developed against the competence
that you have analysed and draw a conclusion.
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Carroll, A.B. (1999), "Corporate social responsibility", Business and Society, Vol. 38 No.3, pp.268-95.
Taleb, N. (2007), The Black Swan, Random House, New York; NY.
Shell LiveWire Nigeria – Abia Imo’s Story, 2012, online video, Shell Nigeria, accessed 17 June 2012,