TRANSFORMATION OF SHELL

Transformation of Shell

Transformation of Shell

Introduction

The Shell Petroleum Development Company of Nigeria (Shell Nigeria) was the operating partner of a joint venture with the Nigerian government and two other private firms. Shell Nigeria was a leader in the oil production of this mineral rich region during the early 1990s. During this time, Shell found itself in the middle of political, social and environmental issues that it was not fully prepared to deal with. Many of the issues surrounded the presence and activities of oil corporations making Shell a target for civil disturbances.

The conflicts between a corrupt government and a poverty stricken culture fueled attacks on Shell's operations as well as public disapproval of its actions (or lack thereof) during this crisis. Shell faced much criticism as it struggled to balance other stakeholders' interests with its own economic and financial interests. We will discuss the internal and external factors driving these issues and the resulting crisis. We will also propose a revision to their mission statement and suggest a strategy for regaining Shell's public image and reputation (Rowell, 1994).

Company Overview

Shell Group is one of the world's largest, most fully integrated petroleum companies, and controls about 60 percent of the domestic oil market in Nigeria (Rowell, 1994). This company has ties to the coal mining, forestry, metal mining, as well as oil. The uniqueness of this organization is it controls the oil from beginning to end, starting with exploration, production, pipelines, tankers, refining, marketing, and even distribution. In 1994, Shell made more money than any other company in the world, reporting profits of over 6.3 million dollars.

Environmental Impacts

Of all the players in the Nigerian oil market, land-based petroleum operations were dominated by Shell. To this extent, Shell was in the unique position to have the greatest impact in terms of environmental preservation… or destruction. Unfortunately Shell fell far short of quiescing the indigenous population's outrage as oil spills and gas flaring continued to be environmental hazards. Despite Shell's adherence to local laws and actions to clean oil spills, public perception continued to deteriorate as a result of the continued environmental damage.

Nigeria, however, was not entirely blameless. Political instability created a less-then optimal environment for foreign companies to do business. Civil war, which forced Shell to abandon operations for some time, sparked a number of environmental disasters. Population sprawl resulted in undesirable proximity between the oil producer's infrastructure and local population centers. Nigerian environmental regulations were insufficient to prevent environmental damage from MNCs. Enforcement of these regulations was problematic due to indifference from Nigerian authorities. These factors contributed toward unfavorable international perception towards Shell.

Global Codes of Conduct

Major codes of conduct include the UN Global Compact, OECD Guidelines for Multinational Enterprises, the Global Sullivan Principles, and the Caux Principals. These codes of conduct define acceptable and unacceptable behaviors for international companies in areas such as labor, human rights, and environmental protection. Shell Nigeria met some of the standards defined by these codes, but neglected to meet ...