Royal Dutch Shell Plc’s Sustainability Programs Report

Introducing a Company

The company under investigation is Royal Dutch Shell PLC, commonly known as Shell. It is a multinational corporation specialising in satisfying the global need for energy resources. Operating in more than 70 countries and employing more than 93,000 people all over the globe, Shell incorporates internationally dispersed energy and petrochemical firms involved in gas and oil industry (Shell global: who we are 2016).

The company produces refined gas and oil products such as engine oils, lubricants, liquefied petroleum gas, and wide range of fuels including “standard fuels, Shell FuelSave Unleaded and Shell FuelSave Diesel as well as premium, performance fuels, Shell V-Power Unleaded and Shell V-Power Diesel” (Shell fuels n.d., para. 3). The specificity of Shell is that it offers both synthetic technology and mineral oils (Shell engine oils and lubricants n.d.). Shell’s fuel is used for refuelling cars, motorcycles, and aircraft. For this reason and within the growing green awareness, Shell has faced the need to implement sustainability programs aimed at reducing the impact of its products on the natural environment and solving the climate change issue.

Literature Review

The necessity to introduce the concept of sustainability to the development of businesses derives from the fact that the population of Earth has reached 7,3 billion people, and the further increase is projected (the U.S. and world population clock 2016). Such spectacular increase in population and, respectively, production and consumption rates without the change in the number of available resources resulted in the establishment of catastrophic statistics – while almost 50% of world’s produced food is never eaten but thrown away (Smithers 2013), every one in nine worldwide is starving (World Hunger Education Service 2016).

Moreover, the invention of the Internet and introducing it to everyday life altered the face of consumerism making it more ethical through raising the level of overall green consciousness and bringing up concerns about the current and future condition of the natural environment.

According to the United Nations World Commission on Environment and Development (1987), sustainability is about meeting “the needs of the present without compromising the ability of future generations to meet their own needs” (p. 41). It means that the present generations take care of future ones.

There are three primary dimensions of this concept: social, environmental, and economical. The social feature means that sustainable development is such that requires the society to cooperate to meet its primary needs such as healthcare, shelter, nutrition, education, etc. The economic aspect is limited to the financial feasibility of development. Finally, the environmental dimension is about preserving the natural resources to the maximum possible extent; for example, extracting and using renewable resources at the same rate they are renewed (Avlonas & Nassos 2014).

There are several drivers of sustainability. First, it is the rise of ethical consumerism. Nowadays, customers, for the most part, are seeking to purchase environmentally friendly products. For this reason, they are interested in seeing the companies’ sustainability reports to know that the goods were produced using green technologies and with minimum negative influence on the natural environment. It changes demand, and the firms are forced to follow the tendency of becoming eco-friendly. Second, media and non-governmental organisations significantly contribute to the level of customers’ environmental awareness and, thus, to the shift towards sustainability. Third, what drives eco-friendliness is the change in the environment.

As the population grows, the pressure on finite natural resources increases, raising the companies’ concern regarding the more efficient use of natural resources. Fourth, there is the environmental aspect of laws and regulations. Today, companies are forced to follow particular rules related to the acceptable level of impact on the natural environment, such as gas emission into the atmosphere or the amount of water consumed. Finally, sustainability is driven by business benefits because using resources more efficiently and becoming eco-friendly, companies manage to increase incomes and their overall performance (Sahota 2014).

These drivers turned sustainability into some kind of mainstream. According to recent studies, about 60% of senior managers take sustainability into account when designing and introducing new products and services marketing them as ‘eco-friendly’, ‘ sustainable’, and ‘environmentally friendly’ (Dangelico & Pujari 2010). Among the major steps taken, there are fostering cooperation with suppliers positioning themselves as sustainable, controlling gas emissions into the atmosphere, reducing the amount of water and resources used in the production process as well as falling upon the use of recyclable materials, minimising wastes, etc.

There are various strategies for introducing sustainability to companies’ activities. They can be either based on one of the dimensions of sustainability mentioned above or more comprehensive covering all of them. In fact, they are all divided into four types: introverted, extroverted, conservative, and visionary. Introverted strategies centre on risk mitigation. It is the minimum level of becoming eco-friendly because the primary focus is made on reaching the standards developed by the environmental laws.

This strategy helps the company gain the status of sustainable and operate in the market, but it does not imply the realisation of the firm’s eco potential to the maximum extent. The second strategy is extroverted, and it is primarily referred to as legitimisation. It aims at reaching a little bit higher levels of environmental friendliness if compared to the first one to gain credibility in the eyes of customers and competitors.

This strategy preaches the absence of cartels, corruption, relatively high level of safety standards in the production process, etc. The third strategy is known as conservative. Its primary idea is that the company focuses on preserving natural resources by controlling gas emissions and decreasing the consumption of materials to the maximum possible extent. The primary strategic objective is to increase performance and reaching cleaner production. Finally, there is what is called the visionary strategy that involves becoming market leaders through integrating sustainability at every level of company’s activities from using recyclable materials and following all rules and regulations to involving the newest technologies that would benefit performance (Baumgartner & Ebner 2010).

As companies’ integrate sustainability into their operations, choosing one of the above-mentioned strategies, what gains extreme value is sharing information with the consumers. That said, firms are highly recommended to design roadmaps for sustainable development in which they would highlight their plans and expectations regarding the changes in their sustainable policies. Moreover, they are suggested to issue sustainability reports so that the community knows of their progress in following the provisions of their roadmaps and on their way towards eco-friendliness (Kashmanian, Wells & Keenan 2011). Taking these steps would help companies improve their reputation in the eyes of both consumers and competitors and inevitably lead to generating higher levels of income and improving performance.

Climate Change Issue and Sustainability

The link between climate change issue and sustainability is extremely strong. In fact, it is one of its pillars that can be devoted to all three dimensions of the concept – environmental, social, and economical. From the economic perspective, addressing the challenge of climate change through manufacturing eco-friendly products and using recycled materials for packaging is a guarantee of winning new customers, i.e. increasing incomes and improving performance.

From the social standpoint, if the company positions itself as such that minimises its influence on the natural environment, it leads to the customers’ psychological satisfaction because they believe that they help save the planet spending money on this particular company’s goods. Finally, it is most related to the environmental aspect of sustainability because of the desire to guarantee a safe and healthy future for the coming generations.

Climate change might have numerous potential risks for the wellbeing of the global community. The specific hazard of this issue is that it has both long-term effects and, in fact, happens right now. What is the most significant about this issue is that it will lead to changes in the global economy. Because of the climate change, the countries traditionally specifying in agriculture will suffer losses because they will have either to switch to growing new cultures or adapt plants to new climate falling upon breeding and changing their genes. It will inevitably entail health concerns and poverty if a country fails to implement the needed alterations.

Moreover, climate change is characterized by the increase of temperatures. It means that winters are becoming warmer and shorter. It might not have been a matter of concern if it had not led to deglaciation that, in turn, results in global sea level rise. It implies shortages of fresh water and potential environmental catastrophes, e.g. coastal floods and island inundations (Yohe et al. 2007).

The only solution to the climate change issue is promoting sustainability programs and global cooperation. For the sake of guaranteeing the safe future, every country and internationally influential company should determine the areas of responsibility and steps it can take to handle the problem. It can only be done through the transition towards renewable sources of energy, decreasing gas emissions into the atmosphere, and further development of green technologies.

Cost-Benefit Analysis

Bearing in mind everything that was said about the nature and implications of sustainable development, it is possible to conduct cost-benefit analysis. At the beginning of this transition, it will require vast amounts of investments focused on involving the newest technologies into the process of production, hiring teams that would work on developing sustainability programs and issue sustainability reports, upgrading offices and fulfilment centres with energy-efficient technologies and purchasing fuel-efficient vehicles, etc. Nevertheless, the potential benefits undoubtedly outweigh the costs.

There are several justifications for such statement: most companies have already become sustainable and produce eco-friendly products, so, it is vital to follow the overall tendency, especially in the case of global corporations; it helps reduce production and operation costs and increase incomes and performance in the long run; sustainability is beneficial for winning new customers and retaining existing because of the propaganda of green consciousness.

Future of the Subject of Sustainability

I believe that the subject of sustainability will gain further development in the future. I think that significant attention will be paid to tightening environmental rules and regulations in the area of transparency of sustainability reports that would be compulsive for every company, especially if it operates at the international scale. I find this step justifiable and possible because, nevertheless there have been numerous initiatives designed to reduce the influence of industries on the natural environment, the challenge of pollution and deterioration of the state of environment remains, as the extraction of raw material continues and the transition towards recycling and sustainability is not widespread enough.

References

Avlonas, N & Nassos, G P 2014, Practical sustainability strategies: how to gain a competitive advantage, John Wiley & Sons, Hoboken, New Jersey.

Baumgartner, R J & Ebner, D 2010, ‘Corporate sustainability strategies: sustainability profiles and maturity levels’, Sustainable Development, vol. 18, no. 2, pp. 76-89.

Dangelico, R M & Pujari, D 2010, ‘Mainstreaming green product innovation: why and how companies integrate environmental sustainability’, Journal of Business Ethics, vol. 95, no. 3, pp. 471-486.

Kashmanian, R M, Wells R P & Keenan, C 2011, ‘Corporate environmental sustainability strategy’, The Journal of Corporate Citizenship, vol. 44, no. 1, pp. 107-130.

Sahota, A 2014, Sustainability: how the cosmetics industry is greening up, John Wiley & Sons, West Sussex, United Kingdom.

Shell engine oils and lubricants n.d. Web.

Shell fuels n.d. Web.

Shell global: who we are. 2016. Web.

Smithers, R 2013, ‘Almost half of the world’s food thrown away, report finds,’ The Guardian. Web.

U.S. and world population clock . 2016. Web.

United Nations World Commission on Environment and Development, 1987, Our common future, Oxford University Press, New York, New York.

World Hunger Education Service 2016, 2015 world hunger and poverty facts. Web.

Yohe, G W, Lasco, R D, Ahmad, Q K, Arnell, N W, Cohen, S J, Hope, C, Janetos A C & Perez, R T 2007, ‘Perspectives on climate change and sustainability’, in M L Parry, O F Canziani, J P Palutikof, P J van der Linden & C E Hanson (eds), Climate Change 2007: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, Cambridge University Press, Cambridge, UK, pp. 811-841.