British Free Market economy and Shell's CSR - Iloka Benneth Chiemelie

QUESTION 1.1

The British Premier, David Cameron made numerous allegation in reply to the Labour party claims, that they are best positioned to reform the economy and that the Tories should be banned from contributing in debate as they are the party of the capital. The whole argument started with Ed Miliband stating that the economy needs a reformed capitalism as the base for building morality and economic sustainability.

However, David Cameron refuted such claims by saying that the current economic crisis which is a result of corporate excesses was engineered by the past Labour government system under Tony Blair and Gordon Brown that sat back and allowed corporate organisations to develop a business pattern that were entirely for their own profit at the expense of the general populace.

He also went on to argue that responsible capitalism when properly implemented has the potentials of creating sustainable economy, as capitalism is built around performance and rewards. Thus, he believes that the Tories are much better positioned to transform the economy into a responsible capitalism as they have past record of doing so, such as in the case an East Indian company that was forced to provide public accountability by Edward Burke. 

Bases on the above analyses, it is expected that this research paper examine the allegation put on the labour part by David Cameron. As Tom (2012) puts it in his book The Morality of Capitalism, open market economy also known as capitalism refers to a legal, social, economic, and cultural system encourages equal rights and careers, and rejuvenates decentralized innovation and process of trial and error (otherwise known as creative destruction) through voluntarily processes of market exchange.

This is the form of economy which the UK has been operating with since the collapse of the Socialism. Under such circumstances, it can easily be viewed that David Cameron's arguments are arguably true and lesser government control will make the higher powered corporations to have full control of their business dealings, which are naturally not in the interest of the society but for profit maximization.

Ethical theories such as the bases of fundamentalisms developed by(Titus, 2009), also supports Cameron's view that they will be numerous excess due to intensified competition and greedy business transactions of capitalism is allowed to operate at its desired stream later than follow set standards by the government of the nation. Under such notion, it must be said that capitalism is an economic theory and was not responsible on its own for the corporate excess, later the past administrations on Tony Blair and Gordon Brown would be hold responsible for the economic crisis as thy had the power to ensure that boom and bust were eliminated, but they rather transformed it into a debt fuelled boom as Cameron argued.

However, the government alone cannot be held responsible for such acts, as many economic theorist believe that it is also the responsibility of the corporation to structure their business dealings in such a way that all parties involved are benefit (Jones, 2000; Allen, 2005; Doherty et al., 2009).This is true because, while the government can control what is to me marketed and how it is to be marketed, they exercise little influence on the pricing, which corporations can argue to be the cost of production plus expected profit.

Thus, this leaves the whole situation in a state of dilemma, but even Labour members such as Ed Miliband also admitted the past government's failings by suggesting that Cameron should implement new rules to regulate business transactions in order to ensure that the incident that occurred during Kraft's acquisition of Cadbury doesn't repeat itself. This further hints back to incompetency in the past government system as they should have implemented the necessary rules right from the first site of problem.

Kraft's takeover of Cadbury illustrated the unethical and immoral effects that results when capitalism is let to rip. Kraft initially stated that they will keep the Cadbury's Somerdale factory earmarked for closure open. But after gaining control of Cadbury, they went on to close the factory (House of Commons, 2010). This heightened public's feeling of mistrust towards Kraft and was engineered by "let capitalism rip" as they had no rules or regulation that coordinated acquisition or form of operation under the capitalist UK society.

In conclusion, it must be acknowledge that despite the immorality of the capitalist system, David Cameron's allegation that the past government allowed capitalism to rip benefits at the expense of the national economy is true. This is based on the fact that the government should have implemented rules to ensure such never happened. Thus, it is recommended that the best way to combat such tragedy and ensure it never repeat in the future is by implementing rules and regulation that monitors corporate activities, to ensure that all parties involved in business dealing are equally benefit, and also to ensure that their activities is geared towards building a sustainable economy for the future generation. 

QUESTION 1.2

Corporate responsibility deals with a vast range of issues concerning the private sectors. The term "social" was included in reference to the activities of companies and business in relation to the society they exist within. On a theoretical format, corporate social responsibility (CSR) can be defined as a concept whereby private corporations integrate social and environmental concerns in their activities with stakeholders, in particular, and with the society in general, all on a basis of voluntarily action(European Commission, 2001, 2002, 2006).

Neo-liberal economist Milton Friedman viewed CSR as being incongruent with capitalism and that the social responsibility of businesses is to increase its profits (Friedman, 1970).Norman Bowie (1982), supported this idea by stating that the heart of neo-classical view is that corporations should make profit while avoiding harm. By avoiding harm he implies that corporation should make profit while (1) honoring the moral minimum of societies they operate in, and (2) respecting individual perspectives (Bowie, 1982).

Neo-Liberalism can be viewed as the set of economic policies that were expanded during the period of Thatcherism and Reaganism (Martinez and Garcia, 2000).Its core value is an idea of competition (Steger, 2002), which implies free trade (Martinez and Garcia, 2000), a perspective of capitalist sector (Tomas Carpi, 1997) or capitalist pole (Nyssens, 1997) where there is no existence of any government imposed restriction. Neo-liberalism can be typified with acronyms like deregulation, cuts in public expenditure on welfare programs, privatization and eradication of community concept (Martinez and Garcia, 2000).

The neo-classical theories above have two views, first is from Friedman who says that businesses should only care about profits and not about the welfare of the society they operate in, while Bowie supported Friedman by saying that businesses should care about profits but should not harm the society they operate in.

Thus, according to Bowies, businesses have responsibility and they should adjust their business dealings in such a way that it meets these responsibilities. The responsibilities are that they should abide by social norm – transaction businesses in a way of mutualistic symbiosis were both parties are benefiting, and respect the individual perspectives of people within the society they operate in.

This was not the case under Gordon Brown and Tony Blair, and it led to such immoral and unethical incident were Kraft promised the general populace that they will keep the Somerdale factory open after acquisition of Cadbury, but went ahead to close the factory immediately they acquired the company. Thus, it implies that they are the type of corporation who doesn't care about people's perspective and social minimum that Friedman discussed about.

Martinez and Garcia (2000), supported the above by stating that an open market such as operated in the UK, can resulted to numerous selfish acts from the corporations as they seek to generate maximum profit. In this case, he is saying that a responsible capitalism can online be achieved through government regulation as it is believed that corporations won't be able to develop a system of market that is beneficial to both parties.

Therefore, it can be concluded that judging with the idea of Friedman, the system is built on socially responsible corporations, as their sole responsibility is to make profit even if it is at the expense of the people. But, Bowie states that this is wrong, as business must return the exact value of what they take from the public. Friedman went on to argue that the business are doing so as they are paying the employee, responsible for utilities and bills and operating under set regulations.

Since the corporations on their own are not likely to implement full responsibility within their system, it is recommended that the government should enforce social responsibility as a rule and regulation all corporations must follow. For instance, it can entrust upon the legislature, the power to oversee, regulate and investigation all business dealings, and bring corporations that are not socially responsible to judgment.

The rate of their social responsibility can be determined by their financial performance, which will be overseen through both internal and external audit of the firm. Thus, a certain percentage of all their profits must be dedicated back to the society that helped them generate those revenues, and the government can publish profiles of companies that are not socially responsible for public criticism. Through this means, corporations will be more socially responsible and adopt more of Bowie's model that proposes making profit without leaving the populace at the mercy of the corporation, and companies will also know that their irresponsible and immoral acts will be published and likely to yield business failure due to customer boycotts. Thus, it is expected that such act where the government regulates and oversees the social responsibility of corporations will lead to a more better sustainable economy. 

CORPORATE SOCIAL RESPONSIBILITY PRACTICES OF SHELL

Corporate social responsibility has been a subject of immense debate amongst practitioners and scholars for decades (Carroll, 1999; Pearce and Doh, 2005). Most of the discussions have generally focused on the roles business play in the society a nature of a firm's social responsibility. How recent studies have shade lights on theory development as well as empirical tests of the relationship between a company's CSR practices and performance (Orlitzky et al., 2003; Aguilera et al., 2007).

Corporate social responsibility can be defined as a way of providing the needs of the present generation without compromising the chances of the future generation to meet their needs (Iloka et al., 2011). Thus, while the business of businesses is business, it is important to ensure that their business today doesn't compromise the chances of the future generations to meet their needs. This is why corporate social responsibility has been view as a very important element of any organization's strategy. For this paper, we will focus on Shell to understand their corporate social responsibility practices in their home country and international countries they operate in.

Shell is a global group of energy and petrochemical companies that is headquartered in Hague, the Netherlands. The parent company of Shell group is Royal Dutch Shell plc, which is incorporated in England and Wales. According to 2011 figures, Shell operates in over 80 countries with 90,000 employees. 45% of its production is natural gas with a production capacity of 3.2 million barrels of gas and oil produced every day in their over 30 refineries and chemical plants worldwide (Shell, 2012).

Over the years, Shell has come under numerous scrutinies for their unethical practices in different countries across the globe. Therefore, the objective of this paper is to review and evaluate Shell's corporate social responsibility practices in their home country and oversea businesses in relation to ethical theories and sustainability models

SHELL'S CSR PRACTICES ACROSS THE GLOBE

THE UK – HOME COUNTRY (INCORPORATED IN ENGLAND AND WALES)

Figure (1): Shell UK's sustainable development plan

Source as adapted from: Shell (2012)

According to its corporate social responsibility statement, Shell aims to share its benefits and limit its impact on the society by improving its operations systems and producing better products Shell (2012). During its 2011 annual reception, Shell UK highlighted its corporate social responsibility practices within the United Kingdom. These practices include:

Moving towards a secure and sustainable energy supply – Shell hinted on the importance of delivering new energy supplies, due to the swift return of the oil price to the $100 mark as a result of growth in demand. The company pledged to continue investing between $25-24 billion per annum until 2014 in developed new sustainable energy supply. It also pledged an addition $ 1 billion investment in research and developed, which is the most of any international oil company. This heavy investment will also be critical to tackling greenhouse gas emissions, globally and here in the UK (Shell 2011).

Organizational transparency – the company also highlighted that they are aware of the public demand for a more transparent Shell, and they are not shying away from such demands are they are constantly improving ways to make their corporate information available for public criticism. Some of the strategies adopted includes provision of these information on their corporate website for free download and working with NGOs such as the United Nations to ensure that their corporate social responsibility programs are such that provides better life for humanity (Shell 2011).

SHELLS CSR IN SOME OF THEIR INTERNATIONAL BRANCHES

NIGERIA

Niger Delta: Injustice as a Shell Trademark

The Niger Delta region has often been the centre of attention in international media on Nigeria. The Niger Deltas was once considered the breadbasket of Nigeria; sue to its rich ecosystem. However, oil spills from Shell and other oil companies have transformed this rich ecosystem into a virtual wasteland and the inhabitants cannot cultivate nor fish like they used to in the past.

There was a huge public outcry for such an act, but the next stage of action changed everything about Shell in Nigeria. In 1995, poet and human right activist Ken Saro-Wiwa and eight other activists were executed under secret tribunal for their public, based on unsubstantiated allegation and without possibility of appeal for their public uproar that Shell should take full responsibility of the damage they have done to the Ogini land and clear all their oil spillage (Tony and Vera, 2004).

At the time of the execution, Shell exercised significant influence over the Nigerian military dictatorship through the profitable SPDC joint venture between Shell and the Nigerian government.

In the wake of its bad image, Shell launched a corporate social responsibility campaign in 1996 to repair its image in both domestic and international markets. However, Shell returned to their deadly past in 2000s. From 2003 to 2006, they were several oil spills and leaks from Shell pipes and infrastructures.  In 2005, the company stated that it won't be able to meet its 2008 deadline for ending gas flaring (an illegal activity in Nigeria) and this activity continued throughout 2005 polluting airs and causing numerous health diseases (Tony and Vera, 2004).

Until today, Ogoni land and the entire Niger Delta region are still suffering as a results of Shell's unethical activities which have eminently destroy all arable land used for farming, polluted major rivers – leading to water scarcity, death of numerous aquatic lives, causes pipeline related fires which have resulted in death, serious injuries and destruction of properties and polluted the air with gas flaring which have also resulted in numerous health issues. It is projected that it could take up to five decades to fully clear the damages done on the Niger Delta by Shell, but the company is apply little effort in such activities.

BRAZIL

Sao Paulo – Shell workers the most endangered in the country and shell dumping toxic waste in the society they operate in

For over two decades, Shell operations at Vila Carioca and Paulinia in the state of Sao Paulo, Brazil included production of pesticides and oil products. In 2005, the company was forced to submit to government orders that required it to: abstain from its practices of dumping and burying toxic wastes; remediate areas that have been contaminated; monitor water in artesian wells for toxic chemicals and heavy metals; and adapt effective measures to remove highly harmful substances found in the wells (Tony and Vera, 2004).

In addition, local newspapers reported that former Shell workers documented a great number of cancers, neurological disorders, and kidney and intestinal damage together with other sever health issues due to poor working conditions. Such highlights illustrated Shell unethical practices in the country and further stamped a print on the idea that they are more of words and less of actions in relation to ensuring a sustainable environment for future generations.

Notwithstanding the fact that medical issues were sever in relation to Shell's employees, the company avoided and ignored calls for them to take responsibility in locating their former employees for medical treatment. The company does not also guarantee medical coverage for cases when their employees are diagnosed with sever health issues(Tony and Vera, 2004).

Furthermore, medical examinations showed presence of heavy metals and pesticides in the blood of people living within the location but not working for Shell. It is clear illustration of an act of neglect on the environment and inhabitants of the society they operate in. While Sao Paulo have done a great deal to generate billions of dollars for Shell, the company have replied the favor with billions of damages in health and environmental issues.

OTHER COUNTRIES IN GENERAL

Unfortunately, Shell is easily associated with negative image in most countries they operate in due to certain unethical practices. For instance, their decision to maintain its hazardous depot in the densely populated Pandacan city of Manila in the Philippines, threatening of marine environment with its Sakhalin II in Russia and bullying of locals in Ireland with their construction of raw processing plan in the most sensitive area of the society that flourishes with beautiful plans and wildlife etc. (Tony and Vera, 2004).

EVALUATION OF SHELL'S CSR PRACTICES

Overall, Shell have faced numerous issues in relation to corporate social responsibility and ensuring a sustainable environment for the future generations of the society operate in. besides its home country, Shell have applied little effort in ensuring a sustainable environment for the future generation. Thus, it can be argued that they are compromising the possibility of future generations to meet their potentials. In order to further illustrate this, we will take a lot as the sustainability model.

Figure (2): Pictorial model of sustainability

Source as adapted from: Newman and Kenworthy (1999)

The pictorial model of sustainability states that it is important that companies integrate their economic benefits in relation to the environment and society they operate in, in order to ensure a sustainable future. The model emphasis on the need for interdisciplinary and trans disciplinary (for instance, Marinova and McGrath, 2005) approach to understanding sustainability by stating that sustainability is only achievable if decisions are made with the future of humanity in mind. Accoridng to the bufer model of grlobal system, humanity should be at the core of every decision made with all organisations (Giannetti, 1993). This implies that human life are more improtant than the economic achaivement of the company.

From the above argments, it can be seen that Shell have not be able to undertake necessary actions to ensure a sustainable future. Some of their damage such as in Nigeria is projected to be cleared within the next 50 years and it must be understood that they have a posibility of doing extra damages before then. The company is more focued on organisationa profit which Friedman (1970) highlighted as the corporate social responsibility of any organistaion. But this is unjustifiable as tehy are doing so at the expense of the people who inhabit the society they work in.

RECONEMNDATION

Currently, Shell is widely associated with its unethical and irresponsible practices in many of the countries they operate in. As highlighted above, the company is more of profit oriented than environmentally responsible. They are willing to undertake any measure that will generate profit for the company, even if it is at the expense of the environment they operate in.

Although they claim to have invested and will continue to invest billions in research and development and creating sustainable energy, it can be argued that such activities while they can ensure a more sustainable environment are not geared towards improving the society they live in but because of the potential profit associated with the success of such activity.

Thus, it is recommended that Shell should refocus by adopting the 5R's of waste management as discussed below in order to improve the lives of people in the society where they operate. This 5R and how to adopt it is illustrated below

Figure (3): 5Rs of waste management

Source as adapted from: MetroVancovuer (2012)

Reduce – the company should reduce their carbon and hazardous waste emissions, as well as improving their workplace safety by ensuring that each employee is provided with necessary guidelines on reducing the associated waste from their productions.

Reuse – shell should also reuse their materials to ensure that there is no associated environmental hazard from manufacturing a new product for every production process within the company.

Recycle – this is a common trend amongst companies nowadays, as shell should adopt recycling as the core value of the company. It will help to provide a sustainable future for the next generation but ensuring that the already depredating natural resources will be maintained for the use of the future generations.

Recover – a recovery process is necessary to recover energy or materials from waste that cannot be used anymore.

Residual management - is the final treatment and/or disposal of a waste that cannot be used in any other way. Shell should ensure that all toxic wastes are treated with necessary caution and disposed properly.

Their activities have resulted in billions of dollars of damages in most of the countries they exits. Only if Shell is able to undertake the recommended actions justly, by considering that the billions they are making are as a result of the opportunity given to them by these societies, then only will Shell be said to have been ethical, created a sustainable environment for the future and is a socially responsible citizen. There is little doubt to the fact that shell is financial capable of ensuring a sustainable future as they are one of the biggest oil company in the world.

The truth is that Shell is not solely responsible for their unethical practices, as these highlighted countries have been known in the past for their corrupt government system, and it can also be the reason why Shell is bolding violating set government standards without being dually punished by the governments of the highlighted countries. Thus, it is also recommended that the government of these countries should be open, dedicated and take the lives of its citizens serious and in so doing ensure that Shell is punished for all unethical actions.

In so doing, both Shell and the governments of these countries will develop a stream of understanding for successful operations, economic improvement and sustainable development that is built around mutual understanding, respect for the society and environment and care for the future generations.

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