Multinational Companies and the Search for Corporate Responsibility - Shell's Statement of General Business Principles

http://schema-root.org/commerce/corporations/petroleum/shell_oil_co/

Shell's statement of general business principles

What is remarkable about Shell’s Business Principles is the degree to which Shell staff around the world are aware of the Principles and the values of the company. This is quite unusual. Gemma Crijns, Nyenrode University and Amnesty International Business Group

Self proclaimed as one of the first global companies to state and share its beliefs, the Shell Oil Company published its ‘General Business Principles’ in 1976.[1] Constituting what Deborah Leipziger calls a ‘living document’ that has and will continue to evolve, the Principles are “derived from values of honesty, integrity and respect for people.”[2] A telling aspect of the Shell’s Principles can be found of in the ‘responsibilities’ section. In this section, Shell details its five key stakeholders. They are: shareholders, customers, employees, those with whom Shell does business, and society. Under ‘responsibility’, Shell states that “It is the duty of management continuously to assess the priorities and discharge these inseparable responsibilities on the basis of that assessment.”[3] The importance of society as a stakeholder and the never overstated inference that business should be conducted by corporations as a responsible member of society, is the hallmark of better business. Having such a widely understood sentiment helps Shell “comply with applicable laws and regulations, to support fundamental human rights in line with the legitimate role of business, and to give proper regard to health, safety, security and the environment.”[4]

The eight Principles that make up the crux of Shells General Business Principles are as follows.

• Principle 1: Economic
• Principle 2: Competition
• Principle 3: Business Integrity
• Principle 4: Political Activities
• Principle 5: Health, Safety, Security and the Environment
• Principle 6: Local Communities
• Principle 7: Communication and Engagement
• Principle 8: Compliance[5]

Principle 1 says that “Long-term profitability is essential to achieving our business goals and to our continued growth. It is a measure both of efficiency and of the value that customers place on Shell products and services. It supplies the necessary corporate resources for the continuing investment that is required to develop and produce future energy supplies to meet customer needs. Without profits and a strong financial foundation, it would not be possible to fulfill our responsibilities. Criteria for investment and divestment decisions include sustainable development considerations (economic, social and environmental) and an appraisal of the risks of the investment.”[6]

Principle 2 states that “Shell companies support free enterprise. We seek to compete fairly and ethically and within the framework of applicable competition laws; we will not prevent others from competing freely with us.”[7]

Principle 3 states that “Shell companies insist on honesty, integrity and fairness in all aspects of our business and expect the same in our relationships with all those with whom we do business. The direct or indirect offer, payment, soliciting or acceptance of bribes in any form is unacceptable. Facilitation payments are also bribes and should not be made. Employees must avoid conflicts of interest between their private activities and their part in the conduct of company business. Employees must also declare to their employing company potential conflicts of interest. All business transactions on behalf of a Shell company must be reflected accurately and fairly in the accounts of the company in accordance with established procedures and are subject to audit and disclosure.

Principle 4 says that “a. Of companies Shell companies act in a socially responsible manner within the laws of the countries in which we operate in pursuit of our legitimate commercial objectives. Shell companies do not make payments to political parties, organizations or their representatives. Shell companies do not take part in party politics. However, when dealing with governments, Shell companies have the right and the responsibility to make our position known on any matters which affect us, our employees, our customers, our shareholders or local communities in a manner which is in accordance with our values and the Business Principles. b. Of employees Where individuals wish to engage in activities in the community, including standing for election to public office, they will be given the opportunity to do so where this is appropriate in the light of local circumstances.”[8]

Principle 5 states that “Shell companies have a systematic approach to health, safety, security and environmental management in order to achieve continuous performance improvement. To this end, Shell companies manage these matters as critical business activities, set standards and targets for improvement, and measure, appraise and report performance externally. We continually look for ways to reduce the environmental impact of our operations, products and services.”[9]

Principle 6 reads, “Shell companies aim to be good neighbors by continuously improving the ways in which we contribute directly or indirectly to the general well-being of the communities within which we work. We manage the social impacts of our business activities carefully and work with others to enhance the benefits to local communities, and to mitigate any negative impacts from our activities. In addition, Shell companies take a constructive interest in societal matters, directly or indirectly related to our business.”[10]

Principe 7 says that “Shell companies recognize that regular dialogue and engagement with our stakeholders is essential. We are committed to reporting of our performance by providing full relevant information to legitimately interested parties, subject to any overriding considerations of business confidentiality. In our interactions with employees, business partners and local communities, we seek to listen and respond to them honestly and responsibly.”[11]

Principle 8 and the last of Shell’s Principles states that very concisely that “We comply with all applicable laws and regulations of the countries in which we operate.”[12]

Key areas of agreement between a multinational company and its global union federation

Ms. Leipziger states that while most sectoral agreements develop “as a result of intense media pressure,”[13] sectoral agreements from media pressure are not enough to meet global needs. According to Ms. Leipziger “corporate responsibility will live or die based on the ability of codes and standards to address industry-specific concerns. To date, much work has been done to build global initiatives within a general context, but more work is needed to build expertise on sectoral and regional dimensions of corporate responsibility.”[14] In general sectoral agreements help “forge partnerships and networks that can build trust and awareness.”[15] Additionally, because they are specifically focused, sectoral tools can “achieve a greater depth than can the more aspirational standards and can achieve a greater sense of cohesion and common purpose.”[16] That is not to say that sectoral agreements are always helpful, indeed, at their worst, “sectoral codes may serve the lowest common denominator within an industry body.”[17] Such a situation is obviously not in keeping with the longevity and growth of any industry.

In an interview that Ms. Leipziger conducted with Jane Nelson, a scholar at the John F. Kennedy school of Harvard University, Ms. Nelson notes that sectoral codes are “becoming more and more significant.”[18] This assertion is based on the specific nature of sectoral agreements. They “cover a more narrowly defined group, regional and sectoral initiatives can develop common protocols, accreditation and certification systems, product labels and cases of best practice. The specificity of sectoral agreements can lead to standards that are prescriptive and specific.”[19]

An example of a sectoral agreement is Responsible Care. First conceived in Canada in 1985 to address public concern about the manufacture, distribution and use of chemicals, the focus of Responsible Care in the US is to “minimize by addressing environment, health and safety issues in an industry characterized as high-risk from a social and environmental perspective.”[20] Approved by over “50 national chemical manufacturing associations – and through them, thousands of chemical sites around the world – Responsible Care forms an essential part of ICCA’s contribution to the United Nations’ Strategic Approach to International Chemicals Management (SAICM).”[21]  As the world’s “leading voluntary industry initiative and has been adopted in 60 countries whose combined chemical industries account for more than 70% of global chemicals production”[22], Responsible Care has positioned itself as an important and powerful sectoral agreement that has global implications.

Are there measures an industry can take to promote corporate responsibility? What type of mechanisms can institutionalize these measures such as reporting requirements, etc.?

There are countless international frameworks and case studies in various industries that speak to the power and ability of various industries around the world to share in and promote efforts toward greater corporate responsibility. In 2005 United Nations Secretary-General “invited a group of the world's largest institutional investors to join a process in developing the Principles for Responsible Investment.”[23] The Responsible Investment Initiative (PRI) is a network of international investors working together to put the six Principles for Responsible Investment into practice. Devised by the investment community, the principles reflect the view that environmental, social and corporate governance (ESG) issues can “affect the performance of investment portfolios and therefore must be given appropriate consideration by investors if they are to fulfill their fiduciary (or equivalent) duty. The Principles provide a voluntary framework by which all investors can incorporate ESG issues into their decision-making and ownership practices and so better align their objectives with those of society at large.”[24] The six Principles of the PRI are:

1. We will incorporate ESG issues into investment analysis and decision-making processes.
2. We will be active owners and incorporate ESG issues into our ownership policies and practices.
3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.
4. We will promote acceptance and implementation of the Principles within the investment industry.
5. We will work together to enhance our effectiveness in implementing the Principles.
6. We will each report on our activities and progress towards implementing the Principles.[25]

The fourth Principle is perhaps very important as a measure for promoting corporate responsibility within the investment industry. While the PRI program is voluntary, Ms. Leipziger notes that PRI “has been very transparent, providing data on how the PRI signatories are implementing the principles.”[26] While the PRI does not have binding reporting requirements, it also does not exclude or divest companies that are not socially and environmentally responsible either. The initial focus of the PRI is on innovation, collaboration and learning by doing.[27] Toward that end, all signatories must report on progress made toward innovation, collaboration and learning by doing. Notably, the PRI’s “structure allows for a wide range of complementary and innovative ventures.”[28]

Overall, the PRI provides an “excellent example of how a voluntary initiative can allow for systemic change and how principles can provide clarity and momentum. The PRI have beneficiated from the experiences of other initiatives and created a very good model for change management within a sector. It provides an excellent example of how an initiative can deliver results through collaboration by pooling resources and sharing pest practices. Engagement across a wide spectrum of investors is far more effective than within a country or sector.”[29]

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[1] http://www.shell.com/home/content/aboutshell/who_we_are/our_values/sgbp/[2] Leipziger, Deborah. The Corporate Responsibility Code Book. Sheffield: Greenleaf Publishing Limited, 2003. Page 410.[3] https://docs.google.com/viewer?a=v&q=cache:N1HIp8DQTZgJ:www-static.shell.com/static/public/downloads/corporate_pkg/sgbp_english.pdf+Shell's+statement+of+general+business+principles&hl=en&gl=us&pid=bl&srcid=ADGEESj-UtUeeQxL1tKrgxST9Y82lCeP2Gy9lwbksljj07KiTIGk5ZkcecHPEZhLHu4kegCStQ9Dsu_qTAXmaOSwBKGcqCUYbackCNL-UFju5VVMmu7bpIRdnFbK_3tjXb4hfRbBggdx&sig=AHIEtbQgX4kbIWAOrXZQ9r-aRD3ZHMSZXA[4] Ibid.[5] Ibid.[6] Ibid.[7] Ibid.[8] Ibid.[9] Ibid.[10] Ibid.[11] Ibid.[12] Ibid.[13] Leipziger, Deborah. The Corporate Responsibility Code Book. Sheffield: Greenleaf Publishing Limited, 2003. Page 436.[14] Ibid.[15] Ibid. Page 437.[16] Ibid.[17] Ibid.[18] Interview with Jane Nelson, John F. Kenedy school, Harvard University, Cambridge, MA, 9 April 2003.Leipziger, Deborah. The Corporate Responsibility Code Book. Sheffield: Greenleaf Publishing Limited, 2003. Page 437.[19] Leipziger, Deborah. The Corporate Responsibility Code Book. Sheffield: Greenleaf Publishing Limited, 2003. Page 437.[20] Ibid, Page 441.[21] http://www.icca-chem.org/en/Home/Responsible-care/[22] http://www.icca-chem.org/en/Home/Responsible-care/What-we-do/[23] http://www.unpri.org/about/[24] http://www.unpri.org/about/[25] http://www.unpri.org/principles/[26] Leipziger, Deborah. The Corporate Responsibility Code Book. Sheffield: Greenleaf Publishing Limited, 2003. Page 458.[27] Ibid.[28] Ibid. page 458.[29] Ibid.