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Company Profile

Royal Dutch Shell Oil Company was started in 1907. Its main headquarters are based in The Hague, Netherlands and its chief executive officer is Ben Van Beurden, (Shell.com, 2017). The parent company of the Shell group is Royal Dutch Shell Plc. which is based in Wales and England, (Royal Dutch Shell Plc., 2017). This company’s strategy mainly aims at reinforcing its position as a leader in the global oil industry, while helping to meet the international oil demand in a responsible way.

Shell Company falls in the oil and gas industry. It is one of the biggest oil and gas companies in the world, with its revenues ranging from 84% of Netherlands total GDP of 556 billion US dollars, (Enneking, 2014). Shell Company is vertically integrated and operates actively in every area of gas and oil industry, (Ruffin, 2012). These include exploration, refining, marketing and distribution, power generation, trading, and petrochemicals.

Royal Dutch Shell Company is the sixth largest company after Saudi Aramco, Sinopec, China National Petroleum Corporation Exxon Mobil and Petro China, with a revenue of about 265 billion US dollars, (Shell.com, 2017).  It has been in operation for more than 106 years. Its operational bases include China, Pakistan, Australia, United States of America, Denmark, Canada, France, Germany, UK, and Kuwait among other states, (Royal Dutch Shell Plc., 2017). It also has several subsidiaries which include, Shell Oil Company, Shell Gas and Power, Shell Pakistan, Shell Nigeria, and Shell Australia among others.

The main products offered by Shell are oil products and natural gas. These include oil fuel and engine lubricants. Shell Helix is one of the brands of engine lubricants produced by this company, (Shell.com, 2017). This firm also offers several services which can be classified as Shell Fuel technical services, Shell Fuel expert services, and Shell fuel advisor services. Fuel technical services offered by the firm aims at offering the customers with optimized consumption, easier maintenance and lower operating costs (Shell.com, 2017). The fuel advisory service provides customers with expert advice on matters relating to fuel consumption while the fuel expert services aim at providing product training and inspection services to the clients.

A supply chain represents the steps taken by a firm to get its product to the final consumer. Shell Company uses its experts to identify the oil ones, (Ruffin, 2012). The next step is the extraction of the crude oil, which is then piped to the factories for the refinery. In the refineries, oil is separated from natural gas, (Kadafa, 2012). The refined oil is used to make different products such as lubricants. The natural gas is trapped and sold separately. The company then uses its distributors, which consist of different logistic firms, to transport the processed oil and oil products to its stores worldwide, (Kadafa, 2012). The wholesalers then purchase the oil products and natural gas from Shell's stores and distribute them to the retailers. Shell's retailers worldwide, sell the oil products in small and large quantities to the final users, which consist of vehicle owners, motorists marine operators, aircraft owners, and households that utilize natural gas for cooking purposes, (Enneking, 2014).

Operations and Products Offered

As explained by Raufflet, Cruz & Bres, 2014), the oil and gas industry has continued to face several sustainability issues, which include oil spills, explosions leading to deaths and environmental pollution, emission of dangerous gases into the atmosphere and health risks caused by methane gas emitted by the companies. Sustainable marketing requires that businesses respect the corporate social responsibility in all their operations, (Gordon, Carrigan & Hastings, 2011). The triple bottom line model can be used to evaluate the sustainability issues facing oil and gas industry.

The triple bottom line model was introduced by John Elkington in 1994. It mainly seeks to enlarge the financial bottom line of organizations so as to include the environmental and social responsibilities, (McKenzie-Moh, 2011). The model measures the degree of economic value, social responsibility and the environmental impacts of a company’s activities, (Fontaine, 2013). It has three elements- people, profit, and the planet.

People

Organizations do not operate in isolation but use several stakeholders to accomplish their missions. The stakeholders in an organization may include, employees and the community at large, (Asif, Searcy, Santos & Kensah, 2013). In oil and gas industry, the employees and the community may always be exposed to health and safety risks caused by the emission of dangerous gases such as carbon dioxide and methane gas, (Escobar & Vrenburg, 2011). The gases may cause ailments such as chronic disease and lung cancer. The people in an enterprise represents the social aspect of the organization’s surrounding, (Hall, Matos & Silvestre, 2012). Therefore, businesses must take care of their employees and the community in which they operate so as to achieve sustainable marketing.

Shell Company has previously been faced with social sustainability issues. A good example can be extracted from Nigeria’s case. Frequent oil spills in Niger Delta have forced people living in the delta to consume and wash with polluted water, (Oyedepo, 2012). They also consume fish contaminated with oil and other chemicals, (Patzelt & Shepherd, 2011). This is a global environmental concern as water is a vital human need and water pollution not only causes health risks to human beings but also kills the aquatic life.

Planet.

The planet represents the environment in which a business operates, (McKenzie Mohr, 2011). It consists of the animals, water, air, and soil. Air pollution is one of the global concerns in oil and gas industry, (Gregory, Vidic & Dzombak, 2011). Air pollution by oil and gas companies is caused by the emission of dangerous gases such as carbon dioxide and methane gas into the atmosphere. Emissions in these industries fall in three stages, emissions during extraction of oil and gas, emissions during manufacturing of crude oil and emissions during consumption of processed oil or gas, (Patzett & Shepherd, 2011).

Sustainability Issues

Primitive gas flaring is a major problem faced by Shell Company. Below the surface, crude oil is usually found mixed with natural gas, (Enneking, 2014). However, Shell Company has only established oil pipes and has not made good attempts to trap and utilize the natural gas. It is approximated that 100 gas flares continuously burn in the Niger delta, causing air pollution, (Oyedepo, 2012).

The Nigerians living in the Niger delta have frequently reported several impacts of gas flares such as corrosion of corrugated roofs, constant noise produced by the gas flares and their eyes turning red, (Oyedepo, 2012). These cases from major health and environmental concerns. In sustainable marketing, a company is expected to prioritize the interests of its stakeholders, and environmental concerns that may arise as a result of its activities, (Lii, Wu & Ding, 2013). Therefore, exposing the environment to pollution is against sustainability requirements.

Profits.

Corporate social responsibility may be expensive. It may affect the economic sustainability of a company. Most companies normally shift the burden of corporate social responsibility to their customers, by raising the prices of their products so as to compensate their social expenses, (Hunt, 2011). The rising cost of clean-ups and payment for emissions by the oil and gas companies have always raised the cost of oil and oil products, (Spence, 2011). Financial sustainability may also be threatened by corrupt practices by firms. If a company engages in corrupt practices, then it may be exposed to fines and penalties which may increase its expenditures, (Roper, 2012).

In 2010, Shell Company paid an amount worth 48 million US dollars in fines to settle the investigations on violation of the US. Department of Justice, (Enneking, 2014).

The oil and gas industry can also be analyzed using PESTEL model. PESTEL model has five variables- political, legal, ecological social, economic and technological, (Hurevicius, 2013). These variables affect the whole process of oil extraction, processing, and marketing.

Technology.

Technological improvements in the oil and gas industry aim at reducing emissions during oil extraction and processing. Generally, oil and gas companies have been blamed for air pollution through emission of carbon dioxide, methane, and other poisonous gases into the atmosphere, (Roper, 2012). In response to this, Shell Company has continued to improve in its technological processes by investing in low carbon fuels. A good example can be derived from its Raizen joint venture with Cosan in Brazil it has also strived to explore second-generation bio fuels which are low carbon fuels, (Kadafa, 2012).

Political factors.

Triple Bottom Line Model

Political factors relate to the way of the leadership of a specific state or nation. Due to the emissions caused by oil and gas companies, legal enactments have been made to ensure that these companies pay for such emissions, (Roper, 2012). This is an attempt to increase sustainability by the government. Payment for emissions not only increases the cost of doing business but also makes the companies shift costs to the consumers making oil expensive, (Roper, 2012). Shell Oil Company is not an exemption to this. It pays for emissions caused by its activities.

Ecological factors

Oil and gas companies have faced several ecological issues. These are normally caused by oil spills, which poison and kill animals. For instance, the fish and aquatic animals in Niger delta have always been poisoned by oil spills from the activities of Shell Company, (Oyedepo, 2012).

Economic factors.

Economic factors relate to the prevailing economic conditions of a state where a business operates. Fluctuation in the value of the currency is a major drawback to the oil and gas companies, (Roca & Searcy, 2012). For example, in paying for emissions, the companies have to concur with the currency rates of different states it operates in.

Legal factors.

Legal factors relate to the rules and regulations guiding businesses in different countries, (Hunt, 2011). Since Shell Company operates in several countries, it has to abide by different regulations guiding emission, and general extraction and processing of oil.

Shell Company is forced to pay for emissions.

The company's activities result in emission of gases into the atmosphere, these gases cause global warming, (Singh, Murty, Gupta & Dikshit, 2012). The company is therefore forced to pay some amount of funds as a compensation for the pollution caused. The effect of this is that the profits of the company have continued to dilute, as a portion of the profits is spent in this payment, (Hunt, 2011). In future, the percentage of payment may be increased making the company to pay more. This may limit the company’s profit-making objectives.

Shell Company is forced to spend on cleanups.

Whenever there are oil spills, companies are always forced to carry out cleanup process. This may be expensive, especially if the company did not budget for such expenditures. In the case of Shell Company, in Nigeria, it has continued to pay for cleanups in the Niger delta, (Ekatah, Samy, Bampton & Halabi, 2011). In future, this may be expensive. The pollution in the Niger Delta may also grow into a severe level, causing more health problems to the people living around it.

Corporate Social Responsibility

Exposure to legal expenses.

As a result of emissions and oil spills that have faced the company, it has often been forced to pay legal expenses. For instance, in 2009, four Nigerian citizens filed a law suit against the company for negligence, in cleanups and prevention of spills, (Ekatah, Samy, Bampton & Halabi, 2011). They complained that the spills leaked into their farms, making them incur losses. Such legal cases make the company spend more of its profits in paying fines and penalties. The users of oil products such as oil fuel are also forced to pay for emission, (Asif, Searcy, Santos & Kensah, 2013). These include motorists, pilots and other vehicle and factory owners. There has, therefore, been a demand for low carbon fuels and other alternatives that could be used instead of oil fuel by several consumers, (Gimenez, Sierra & Rodon, 2012). Therefore, the company risks losing customers who may migrate to other sources of energy in future.

Death of aquatic life.

The oil spills caused by the company in the Niger delta causes the death of fish and other aquatic animals, (Escobar & Vrenburg, 2011). This may in future incapacitate fishing activities in the delta, as the water in the delta continues to be contaminated. The exploration activities carried out by this company also pose a great threat to biodiversity, (Patzelt & Sheoherd, 2011). This is because of endangered animal species, tend to migrate from these operational areas. Oil leaks also cause the death of plants which make some plant species unavailable, (Hall, 2011).

Exposure of the community to chronic and lung diseases.

The community leaving around the operational areas of the company inhale the poisonous gases, which makes them suffer from lung diseases, (Ekatah, Samy, Bumpton & Halabi, 2011). This causes the poor relationship between the company and the community members living in its operational bases. The oil products also emit gases as they burn exposing the consumers to severe health risks, (Ruffin, 2012). The effect of this is that most customers have now started embracing solar energy. Instead of using oil products, most customers have now adopted solar energy products which make the company continue losing customers, (Roper, 2012).

As the water sources are being poisoned by oil spills, fishing activities are incapacitated, (Kadafa, 2012). The communities living majorly in the Niger delta have also complained that the spills flow into their firms, destroying their crops, (Oyedepo, 2012). This has caused the poor relationship between the firm and the community members. The community members aggrieved would, therefore, opt for other alternatives to oil and gas such as solar energy, making the company lose clients.

PESTEL Model

According to Hall (2011), training of employees enables them to be more equipped with the skills required to operate in the firm. Shell Company spends in training its employees on safety measures and sustainable working procedures, (Royal Dutch Shell Plc., 2017). This is because working at the company exposes the employees to a lot of risks such as the explosion, inhalation of poisonous gases and other accidents. The training of employees is meant to reduce these negative effects so that the employees work safely in the organization.

Emission of gases into the atmosphere is a major issue facing oil and gas companies. In its attempt to curb this menace, Shell Company has continued to venture into more technologically sensitive ways of production, (Asif, Searcy, Santos & Kensah, 2013). It has also ventured in producing low carbon oil, so as to reduce emissions and payments made to compensate for the emissions, (Gimenez, Sierra & Rodon, 2012). In future, it is expected that Shell Company would be on the fore front in curbing environmental pollution through the production of environmentally friendly products. The company has also ventured into natural gas production, so as to replace oil products which cause air pollution, (Gimenez, Sierra & Rodon, 2012).

In its attempts to reduce environmental pollution, the company has developed partnerships with several environmental organizations and community members. These organizations include the International Union for the Conservation of Nature, Mercy Corps, United Nations Development Program, among other firms, (Shell.com, 2017). The company aids these organizations through contribution to their environmental programs, (Shell.com, 2017). The community members, therefore, get motivated, as they also get employed in these programs. This makes them develop loyalty to the company’s products making the company to easily market its oil and gas products globally.

The company works with other Non-Governmental Organizations to enhance access to adequate health care.  It also owns some health care facilities. For example, the Obio Cottage Hospital in Nigeria, which offers the employees with a reliable health insurance scheme, (Shell.com, 2017). In Iraq, the company has partnered with AMAR Icf, which is a charitable organization that helps residents in the Middle East in improving their economic status after the conflicts that happened there, (Royal Dutch Shell Plc., 2017).

Emissions form part of the major environmental sustainability issues facing oil and gas companies, Raufflet, Cruz & Bres, 2014). This is because they cause emissions right from the extraction of oil to its consumption. Therefore global environmental laws require that these companies compensate for the pollution caused. Shell Company abides by these requirements. In this regards, it pays for the pollution caused. This is in line with the requirements of the triple base line model, that companies should protect the planet in their attempts to market their products, (Hall, 2011).

Conclusion

The sustainability issues facing Shell Company have impacted severely on the profitability of the company. This is because, as most of the community members continue to complain about pollution, health risks and incapacitation of their economic activities, they develop a negative attitude towards the products of the company. Good relations between customers and the industry serves as a major determinant of profitability.  However, the company has tried to control the level of pollution through the production of low carbon products, capitalization in the production of natural gases, developing partnerships in environmental maintenance and use of proper technology to reduce gas flaring.  All these attempts clearly indicate that the company is committed to achieving sustainability in its production and marketing operations.

References

Asif, M., Searcy, C., Santos, P. D., & Kensah, D. (2013). A Review of Dutch Corporate Sustainable Development Reports. Corporate Social Responsibility and Environmental  Management, 20(6), 321-339. 

Ekatah, I., Samy, M., Bampton, R., & Halabi, A. (2011). The Relationship between Corporate Social Responsibility and Profitability: The Case of Royal Dutch Shell Plc. Corporate  Reputation Review, 14(4), 249-261. 

Enneking, L. (2014). The Future of Foreign Direct Liability: Exploring the International Relevance Of the Dutch Shell Nigeria Case. Utrecht L. Rev., 10, 44.

Escobar, L. F., & Vredenburg, H. (2011). Multinational oil Companies and the Adoption of Sustainable Development: A Resource-based and Institutional Theory Interpretation of Adoption Heterogeneity. Journal of Business Ethics, 98(1), 39-65.

Fontaine, M. (2013). Corporate Social Responsibility and Sustainability: the New Bottom line?. International Journal of Business and Social Science, 4(4). 

Gimenez, C., Sierra, V., & Rodon, J. (2012). Sustainable Operations: Their Impact on the Triple Bottom line. International Journal of Production Economics, 140(1), 149-159. 

Gordon, R., Carrigan, M., & Hastings, G. (2011). A Framework for Sustainable Marketing. Marketing Theory, 11(2), 143-163. 

Gregory, K. B., Vidic, R. D., & Dzombak, D. A. (2011). Water Management Challenges Associated with the Production of Shale gas by Hydraulic Fracturing. Elements, 7(3), 181-186.

Hall, J., Matos, S., & Silvestre, B. (2012). Understanding why Firms Should Invest in Sustainable Supply Chains: a Complexity Approach. International Journal of Production Research, 50(5), 1332-1348.

Hall, T. J. (2011). The Triple Bottom Line: What is it and how does it Work? Indiana business  Review, 86(1), 4. 

Hunt, S. D. (2011). Sustainable Marketing, Equity, and Economic Growth: a Resource-advantage, Economic Freedom Approach. Journal of the Academy of Marketing Science, 39(1), 7-20. 

Jurevicius, O. (2013). PEST & PESTEL Analysis. Strategic Management Insight, 13, 2013.

Kadafa, A. A. (2012). Oil Exploration and Spillage in the Niger Delta of Nigeria. Civil and  Environmental Research, 2(3), 38-51. 

Lii, Y. S., Wu, K. W., & Ding, M. C. (2013). Doing Good does Good? Sustainable Marketing of CSR and Consumer Evaluations. Corporate Social Responsibility and Environmental  Management, 20(1), 15-28. 

McKenzie-Mohr, D. (2011). Fostering Sustainable Behavior: An Introduction to Community- Based Social Marketing. New Society Publishers. 

Oyedepo, S. O. (2012). Energy and Sustainable Development in Nigeria: the way forward.

Energy, Sustainability, and Society, 2(1), 15. 

Patzelt, H., & Shepherd, D. A. (2011). Recognizing Opportunities for Sustainable Development.

Entrepreneurship Theory and Practice, 35(4), 631-652. 

Raufflet, E., Cruz, L. B., & Bres, L. (2014). An Assessment of Corporate Social Responsibility Practices in the Mining and Oil and Gas Industries. Journal of Cleaner Production, 84, 256-270. 

Roca, L. C., & Searcy, C. (2012). An Analysis of Indicators Disclosed in Corporate Sustainability Reports. Journal of Cleaner Production, 20(1), 103-118.

Roper, J. (2012). Environmental Risk, Sustainability Discourses, and Public Relations. Public  Relations Inquiry, 1(1), 69-87. 

Royal Dutch Shell Plc. (2017, September 14). Royal Dutch Shell Corporation. Retrieved from Royal Dutch Shell Website: https://royaldutchshellplc.com/

Ruffin, S. (2012). Royal Dutch Shell Environmentally Degrades Nigeria's Niger Delta region: A Land of blacks. Environmental Justice, 5(3), 140-152. 

Singh, R. K., Murty, H. R., Gupta, S. K., & Dikshit, A. K. (2012). An Overview of Sustainability Assessment Methodologies. Ecological Indicators, 15(1), 281-299. 

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