Background of Shell Global
Business ethics is an essential part in the strategies of all organizations in the world. The term “business ethics” refers to the idea of taking the proper and morally correct course of actions while doing a business. The ethics should be present in all sections of the business, such as, production, operations, supply and distribution, customer service, and community services. It is very important to maintain business ethics while running an organization. Business ethics is about taking the right action in every aspect of a company. Corporate social responsibility and sustainability are two such course of actions, which every organization should perform as per the business ethics. These two responsibilities are about giving something back to the environment and to the community in which an organization operates. It is the duty of the businesses to make the environment sustainable for the future generations. The aim or purpose of this report is to critically evaluate the business ethics, corporate social responsibility and/or sustainability issues of Shell Global, the British-Dutch oil and gas company on the basis of two theories of business ethics.
In the global oil industry, Shell or Royal Dutch Shell is one of the major companies. It is a multinational company of oil and gas, which has headquarter in Netherlands and incorporates in UK. With a massive US $233.6 billion of revenue, Shell is the world’s sixth biggest company in 2016. Shell recorded a profit of US $4.57 billion in 2016. It has an employee strength of around 92,000 across 70 countries of the world. Shell is actively involved in all the area of the oil industry, that is, exploration, production, petrochemicals, refining, power generation, distribution, marketing and trading. It is also focusing on energy generation from renewable sources such as, wind and biofuels. The company produces approximately 3.7 million barrels of oil every day and has been maintaining 44,000 gas and service stations across the world. In 1907, it was formed through the amalgamation of the Royal Petroleum Company of Netherlands and the Shell Transport and Trading Company of UK. Shell aims to meet the increasing demand for energy of the world in a socially, environmentally and economically responsible manner. Hence, business ethics and corporate social responsibility are an integral part of the operations of the company. The core values of the company are honesty, respect and integrity. The code of business ethics and general principles act together to make the organization as well as the environment sustainable. The company has committed to contribute in the sustainable development and other developmental activities for the society. It incorporates the social, economic and environmental considerations into the decision making process to fulfill the objectives of corporate social responsibility. The ethical aspect of the company also consists of the code of conduct for the employees, the rules and regulations of business, relations with customers and distributors, and in other practices.
Universalism Theory of Business Ethics
The report will focus on the critical analysis of the business ethics and corporate social responsibility along with sustainability of Shell in regards of two contrasting theories of business ethics. The two theories that will be discussed in this report are Universalism and Utilitarianism. Universalism is a consistency based moral theory and utilitarianism is a consequence based theory. This report will focus on the discussion on the above mentioned theories, business ethics, CSR and how the theories describe the actions of Shell.
Ethics represents the values that are used to interpret if any behavior or action is right or wrong. The actions can be performed by an individual, society or business. The regulations, which govern the actions of organizations and determine if the actions are right or wrong, are termed as business ethics. The sense of right or wrong is always subjective. These regulations are based on many factors such as, religion, tradition, education, laws, and common sense of people. Hence, there is a very thin line between ethical and unethical practices and it is very crucial to determine a benchmark to act accordingly, which would bring benefits to the society and environment.
The Universalism theory of business ethics is formulated by Immanuel Kant. It considers the behavior of businesses in respect to human nature or behavior. This approach is a duty based or deontological approach and focuses on creating an autonomy on the basis of understanding, education, common sense and experiences of the individuals. Hence, self-consciousness is one of the key elements in this approach by Kant. According to Kant, the moral philosophy of one individual should be formulated on the basis of the autonomy. He said that, individuals should independently impose upon themselves a universal moral law and he termed it as categorical imperative.
Categorical imperative refers to the idea that every act performed by an individual should depend on personal values. The rules or values are termed as Maxims by Kant. Thus, maxims represent the causes behind every action of people, and they help to achieve the goals or objectives of any action. When these maxims become one for all, that is, when these become common for almost all people, then it becomes a universal law. According to Weiss, there are two parts of categorical imperative. Firstly, when an individual wants every other individual on earth to be in the same condition as himself and act in the exact same way, then he should choose for an act; and secondly, We should always act in a way that demonstrates respect to others and treats them as ends onto themselves rather than as means toward an end. These two parts lead to the concept of universalism.
Analysis of Shell Global’s Business Ethics and CSR using Universalism
The key strength of this approach is the consistency. The decision to be made should be right for one and for all. It leads to a sense of equality among every person. Another fundamental strength of this approach is that, it concentrates on the motivations of the decision maker, and hence, makes him the moral agent of himself and influences him to respect others whom he interacts with in the process of decision making. Moreover, the reflective factor of this theory evokes a morality and sense of well being of all the parties involved in the actions. Thus, this theory concentrates on well being for all. The universal moral law considers the welfare and respect for all the people, society and the environment of the world. Thus, best of intensions of all the individuals are essential in this approach. The strengths direct the attention towards the weaknesses of the theory. The concept of what is right for one is right for all is ambiguous and is not always applicable. Moreover, the decision making is influenced by many factors, among which, some may not be beneficial for all. If one is benefitted from one factor, the other person might not be benefitted. Hence, the universality of one moral law might not happen always. There is rigidness in this concept.
For the analysis in this report, secondary data was used. Various theories on universalism have been focused on for literature review and to analyze the business ethics and CSR policies of Shell Global. The performance report of the company will be extracted from the annual reports of Shell for the years 2014 to 2016 for the analysis on the basis of the literatures.
Shell’s business ethics and CSR activities would be critically analyzed on the basis of the universalism. All the ethical and CSR activities of Shell focus on the benefits of the societies and environment. However, how much the policies are following the right course and right intentions would determine if the company follows universalism theory of ethics. If the company focuses only on the good intentions of doing the right thing for the communities and environment, then it is expected to follow the universal moral law.
This approach is based on consequences. It is the modern approach on business ethics. This approach represents consequentialism, which describes that, the final result of any action implemented should be considered as most important. In this approach, the consequences of the actions are most important rather than the intentions of the actions. Hence, it is a contrasting approach to universalism, where intentions are more important than the results, while utilitarianism focuses on results than on the intentions. Whether an act is right or wrong, it depends on the outcomes or consequences in this approach of business ethics.
Utilitarianism Theory of Business Ethics
According to utilitarianism, if an action produces welfare for a large number of people or to a greater environment, then it is considered to be a morally or ethically right one. Hence, it is considered that in this approach, one should not only consider the overall good, but should also think about his own good. According to Barrow (2015), utilitarianism is the relative measure of satisfaction or happiness of a group or society, when the allocation of limited resources to a greater population is concerned. Jeremy Bentham and John Stuart Mill, the two classical Utilitarians, advocated that, the good should be maximized so that maximum possible number of stakeholders is benefitted. The happiness level of a bigger group is more important, which is achieved at the end of the beneficial activities. Hence, the quality of any action determines the outcomes and that is the determining factor for the happiness of a community. Thus, the basic difference between the two approaches is that, in universalism, an action or policy might be beneficial for all, but under utilitarianism, the same policy might incur negative externality in the end.
The major strength of utilitarianism is that, it focuses on the welfare of a majority, hence, ensures a broadminded approach towards any problem. This policy overrules any selfish intentions, and the process of decision making is fair. This approach also has flexibility, which is essential in today’s world. It helps in meeting the needs of stakeholders along with the needs of the company itself. This way good for a larger group is achieved.
The weakness of this theory is that, to achieve the general welfare, people often have to forego their personal moral principles and integrity, when those do not align with the overall good. In many cases, the common greater good involves many decisions on part of the organization, which is conflicting with the personal moral beliefs of the employees, but, they have to participate in those activities and decision making as per the company rules.
The other problem in this approach is the focus on outcome. The end outcome might lead to admiration or appreciation, but no one can guarantee that the final outcome would be the desired one. There are many factors that influence the actions and its outcomes. Hence, even if the focus is on achieving a greater good, the outcome generated might not reflect that initial focus and it becomes an undesired outcome. Moreover, it is a perception based concept. Different utilitarian decision makers may consider the welfare issues from different angles and make decisions accordingly, which would lead to different outcomes. Lack of consistency is also another problem.
Analysis of Shell Global’s Business Ethics and CSR using Utilitarianism
Literature review on the various aspects of the utilitarianism theory has been done in the above section. The approaches of various authors were followed to throw light on this theory and analyze the activities and performances of the company. Annual reports and sustainability reports of Shell were consulted to get the data on the company’s activities.
As the theory of utilitarianism focuses on the consequences, it is often seen that, the organizations follow this theory of business ethics in their operations. Shell’s business activities consist of CSR and sustainability. It is necessary to analyze those activities in the light of utilitarianism theory of ethics to make a comparison with the universalism theory. This approach might be relevant as all the ethical activities have effects in the long term and their consequences are mostly important. Thus, if the utilitarianism theory is analyzed, then it can be found that Shell follows this theory of ethics.
The universalism theory focuses on the good intentions, while utilitarian theory focuses on the good outcomes. The first approach maintains consistency in its actions, and the latter one is considers the consequences of the actions. The utilitarianism approach is more flexible and hence, dependent of different needs and situations. However, both the theories avoid the selfish intentions and decision making in different ways. Under universalism, the selfish motives are avoided through refraining using others as a means to achieve the personal objectives, while the other theory does so by considering greater good for a larger group. However, the weakness of both the theories is the chance of undesirable outcome. In the universalism, good intentions might not always lead to good outcomes, and in utilitarianism, the focus is on outcomes, although the actions might not generate a positive outcome than the desired one. The uncertainties in life, business, society or economy can be the possible causes for such outcomes.
In the context of Shell, the code of ethics and business values would be critically analyzed on the basis of the two theories. The company operates on the core values of honesty, respect and integrity. Along with the code of conduct and business ethics, the company has also focused on the sustainability issue. Shell believes in providing a sustainable environment to the world. For that, Shell contributes in the community through safety, efficient and responsible business. Shell commits to provide necessary energy to the growing population and at the same time maintain the respect towards people, the environment and the safety. For the improvement of the global community, the company has involved in projects for energy transition and climate change in a sustainable way, for improving the air quality and fresh water, and biodiversity. Shell works with many organizations across the world to reduce the societal and environmental impact and benefit the local and global communities. Shell foundation was established in 2000 to look after the corporate social responsibility. They make annual donations of $15 million every year to bring changes to the environment and towards the development of the society. With many projects and initiatives, Shell contributes to the society and environment for a better future.
Strengths and Weaknesses of Universalism and Utilitarianism
According to the sustainability report of 2016, the sustainable development goals of the company are to provide clean water, sanitation, ensuring access to reliable, affordable, modern and sustainable energy from the renewable sources such as, wind, solar power, biofuels etc., to contribute towards economic growth, provide investments to develop sustainable cities and communities, contribute in actions against the climate change, improve the life on land and under water, promote peace, and justice and stronger relationships. For the developmental actions, the company has invested in the new technologies. That has not only created jobs, but also improved the communities and the environment. Shell has focused on creating sustainable development in the area of energy production in different regions across the world. For example, in Philippines, Shell uses solar and hydropower for providing energy to an off-grid society. It has invested in low carbon technologies; and signed the ‘Zero Routine Flaring by 2030’, an initiative by the World Bank. It is committed to reduce oil spills, GHG emissions significantly in the next few years.
Figure 1: Sustainable Development Goals by Shell
(Source: Shell.com 2017)
From the above goals and objectives, it can be inferred that, all the developmental goals of Shell are ethical as well as long term. The objectives cannot be achieved in short term, thus, the course of actions generate outcomes at every step. The intention behind these activities is a good intention of generating a better future for the next generation, at the same time, in the end, these goals might not generate the desired outcomes. On the other hand, while doing a profit making business, all the actions taken in the process, may not have a universal moral intention. The company thinks about its own profit first and then thinks about the sustainability.
The philosophy of Shell does not align with the theory of Kant. According to the theory, Shell’s approach towards sustainability is consistent. However, the idea of what is right for one individual or society is right for all, is not followed in its CSR objectives. The company does not believe that what is good for the organization is good for the society. Shell has a profit making objective, thus, its intensions would not always be right. Hence, the basic concept of universalism does not hold for Shell.
Conclusion
It has launched projects such as, Shell Project Better World on sustainable development, and has partnership with Earthwatch to monitor the activities. Other projects are Embarq, Excelerate and Breathing Space, founded in different locations to provide eco friendly solutions and reduce greenhouse gas emissions.
Shell follows the utilitarianism approach of business ethics. They believe in greater good. All the CSR policies of Shell are ultimately focused on the consequences. The company wants to achieve greater good through various CSR policies and projects; hence, the policies are designed as the long term goals. As the company is a profit making one, hence, they do not follow the universalism. Rather, their policies are consequence based. They design and formulate projects and CSR activities in a way so that the final result is beneficial for the overall society. Although, Shell’s intention is do the right thing for the world is present in its CSR activities, but the company primarily focuses on the consequences. The outcomes of the CSR activities and sustainable development process are achieved in the long run. However, the activities, which are conducted for the society, have short term goals of developing the underprivileged communities in some countries through the provision of safety, basic energy and economic development.
However, an example of the negative outcome is the Nigeria controversy of Shell. The company faced a case in Supreme Court for violating human rights in Nigeria. Along with damage to the Niger delta, the human rights were also violated when the protestors of this policy were harassed. It was alleged that Shell did not do much to ease the human rights issues in Nigeria and on the other hand, Shell argued that, poverty was the main cause of problems in that country. Hence, even after efforts were given by the company, the quality of life of the Niger delta people would not have improved. Furthermore, any new effort by the company towards the achievement of sustainability is expensive, which would not be beneficial for the company in the early years. People also oppose to any new ideas and create uncertainties.
Conclusion
Thus, it can be said, that both the theories of business ethics are relevant, however, the utilitarianism approach is the modern approach, which is more evident in the ethical practices of Shell. The company has taken policies to achieve sustainability, which are more consequence based. Although the intention is good, but the CSR activities are performed simultaneously with the usual business of the company, where negative externalities are generated during the actions and greater good is not achieved. The company focuses on the final outcome of its policies and activities, and thus, follows utilitarianism approach of business ethics.
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