Research Paper Help on Shell’s Poor Stakeholder Engagement

SHELL AND CORPORATE SOCIAL RESPONSIBILITY IN THE NIGER DELTA CASE STUDY: THE IMPACT OF THE LEGAL, POLITICAL AND CULTURAL ENVIRONMENT ON ENVIRONMENTAL IMPACT ASSESSMENT (EIA) AND STAKEHOLDER MANAGEMENT

Introduction

Organizational decision-making is a matter of organizational behavior (OB), which as an academic discipline draws from various professions, including political science, sociology, psychology, anthropology and economics, among others[1]. What decisions organizations make and how they go about it (such as with intense care or recklessness) is influenced by factors of the wider environment in which it operates. These factors can be cultural, political or legal, among others. Often- if not always-, all these factors influence the decision-making of organizations one way or another[2].

Legal Concept of the Issue

Organizations seek to achieve maximum and sustainable returns from investment and participation in their industries. This implies the need for achieving and maintaining a sufficiently high level of brand popularity in the market such that consumer loyalty is strong to assure continued industrial competitiveness against rivals. In the past 2 decades, organizations’ participation, interest, and active collaboration with the community to assure various socioeconomic welfare advantages has emerged as a critical strategy in securing such industrial advantages for the organization. Individual governments and the international community have recognized the need for active organizational involvement in communities’ social welfare and incorporated the idea in policies and regulations governing industries and business activities. This is the basic framework and idea of CSR – active collaboration with local communities, governments, and other stakeholders to protect, advance, and sustain the interests of the community. Areas of focus in CSR include global warming, environmental pollution, alleviation of poverty and undesirable life conditions, and support for and active participation in socio-economic welfare issues. The purpose of CSR, in legal terms, concerns organizations’ adoption of responsible business models that enable and enhance mutual benefits between their operations and host communities, governments, and stakeholders. 

Ethical Behavior and CSR

In recent decades, governments, through legislations, play a big role in how organizations are run, particularly the attention that organizations pay to ethical behavior[3]. In this respect, we have seen the rise of Corporate Social Responsibility (CSR) as a key concept of management and organizational behavior[4]. Indeed, there are various definitions of CSR. However, most of these definitions agree on these three elements: social, environmental and economic aspects, what Helg[5] refers to as the ‘triple bottom line’. In relation to the environmental aspect, CSR has led to the rise of Environmental Impact Assessment (EIA). The effectiveness of EIA (that is environmentally favorable actions) hinges of stakeholder management: “the interactions, decisions, and actions of individuals, groups and organizations”[6]. In other words, understanding issues relating to human motivations as well as power relationships can contribute to effective EIA management.

However, all these are reliant on the legal environment. In other words, how seriously organizations take and how well organizations take the issues of CSR, particularly (in this case), the environment and stakeholder management (now that it is hard to separate the two), depends on the law. But even then, how operational the law becomes can depend on political and cultural factors, which might overwhelm the law. Unfortunately, the affiliation between the law, politics and culture is not straight-forward. It is a complex relationship in which it is hard to decide where the influence of one begins and the other ends.

Basing its discussions on Shell’s operations in the Niger Delta region (Nigeria), this paper shows this complex relationship between the law, politics and culture, and how this has encouraged Shell’s behavior (largely seen as unethical) in the region.

Shell in Niger Delta: Brief Background Information

Empirical studies show that prospects of oil in Nigeria started before 1914; that is, before the Northern and Southern Nigerian Protectorates came together. However, Shell (back then called Shell D’Arcy) was first involved in the exploration of Nigeria’s crude oil in 1937. It was about the time that the exploration of oil in the region started to take shape. In 1956, Shell discovered crude oil and has since held the largest oil exploration rights in the country. It made the first commercial export in 1958. Of course, there are other oil companies in the country (in the region), including Elf, Amoco, ChevronTexaco Total, Agip and ExxonMobil, among others[7]. But Shell still remains the principal oil company in the country: “the longest and largest holder of state oil exploration concessions in the country”[8].

In all its years of operation, Shell has been criticized for its unethical behavior in its handling of the environment and the communities in the Delta region. The unsustainable industrial activities that have accompanied oil exploration in the region (manufacturing, chemical, oil and gas industries) have over the years hurt the fragile environment that is at the center of the livelihoods of the communities around. But above this, Shell (most prominently over other oil companies) has been criticized for its poor handling of the grievance of the people, the exploration instead leading to abject poverty, poor infrastructure and generally marked underdevelopment[9].

In about the last two decades, Shell has been under increased pressure for itsunethical behavior in the region. One of the most prominent of Shell’s sins is the execution of Ken Saro Wiwa, a Nigerian writer who was a strong advocate for the plight of the Niger Delta communities against Shell[10].

Environmental Impact Assessment, Stakeholder Management: the Legal and Political Environment and Shell’s Failed CSR

Ereba and Dumpe[11] define Environmental Impact Assessment (EIA) as “the systematic identification and evaluation of the potential impacts of proposed projects, plans, programs, legislative action relative to physic-chemical, biological, cultural, and socio-economic components of the total environment”. The primary rationale of EIA involves encouraging organizations to consider the environment in planning and making decisions with the aim of arriving at more environmentally compatible actions[12].

The legal focus on the environment in Nigeria started as early as 1979, with the passing of the NNPC Act. This Act gave Nigeria’s Department of Petroleum Resources (DPR) the mandate to supervise all operations in the oil industry, including ensuring the protection of the environment. Other tools that guide EIA in Nigeria include the EIA Decree of 1992, as well as “other Federal Ministry of Education regulations, Department of Petroleum Resources (DPR) requirements, State Ministry of Environment/Environmental Protection Agency standards, and applicable international standards”[13].

Need to mitigate Environmental Impact

Responding to the need to mitigate environmental impact of any projects undertaken by both the private and public sectors, the Nigerian government enacted the EIA Decree No.86 in 1992. The Decree gave the Ministry the mandate to regulate EIA in Nigeria, which would involve: setting out procedures and methods that enable the prior consideration of EIA for certain projects (both private and public). The decree covered various areas of operation, including seismic exploration drilling operations, laying of flow lines, among others[14]. This Decree impacted on the operations of all organizations, and Shell Petroleum Development Company (SPDC) was not left behind.

SPDC made some commitments to the Decree, and published its Environmental Impact Assessment (EIA) Process: a Manual for EIA Execution in SPDC. In the publication’s ‘Foreword’, the-then SPDC Managing Director, Ron Van den Berg, wrote that the company must work with its external stakeholders towards managing the impact of the company’s operations on the environment. Berg emphasized the company’s realization that its failure to take this matter seriously would hurt the sustainability of the communities around. But the law has only been clear about what should be done; that is, mitigate environmental impacts of industrial operations and activities. But it does not outline how exactly this should be done. Berg, however, recognized a loophole. He observed that SPDC had only been clear in its definition of the environment, but not on the specific ways to go about curbing the impact of its operations on the environment. This Berg recognized as a gap in the EIAs. Moreover, SPDC had only focused more on the natural environment and not on the human factor. But now starting to pay attention to the human factor, Berg said that the company, through its ‘Enhanced Social Programme’, was shifting its attention from the ‘conventional community assistance’ approach toward the more-sensible ‘sustainable community development’[15].

Ultimately, the SPDC policy called for a study on EIA that would cover all categories of operations regardless of size: seismic survey; exploration drilling; drainage construction; laying of flow lines; dredging, among other activities with potential impact on both the natural and social environments. In this respect, SPDC seemed in line with the overall Royal Dutch Shell policy on sustainable operation and the Nigerian national regulations on environmental management[16]. SPDC was pointing out the very things that the legal and regulatory framework of Nigeria’s EIADecree lacked.

Although it might not be fair to say that SPDC intentionally set to exploit this failure of the EIA regulations to cover ‘all’ operation categories, there certainly is something notable about it. As it were, it is not possible for the law to dictate everything to the letter. In his book, The Death of Commonsense, for example, Philip Horward[17] argues that it is impossible for the law to dictate everything, and that an attempt to make the law spell out every response to every small issue is in itself a problem as it kills all room for ‘exceptions that may be necessary from time to time. Indeed, there have been attempts to have the law do just that- spell out every problem and solution. However, this attempt has not succeeded and will most probably never come to be in an ever-changing environment. This has been one of the characters of the law; its inability to spell to everything (inability to catch up with change), and which many have exploited for the wrong reasons. By calling for such as legal framework, it seems that SPDC was counting on this weakness to its advantage. True, this may not have been the original intention. But SPDC’s failings in most standards of sustainable management, and its many justifications for those failings makes such a possibility likely.

Other Legislations, Some Changes and SPDC’s Response

For a long time, Shell used high-handedness (usually with the help of the Nigerian state that sent troops to quieten the people). Between 1979 and 1989, the neighborhood and communities of Niger Delta only utilized incongruent, ad hoc protests to articulate their grievances. Often, these protests resulted in blockade of routes leading to oil installations. But these protests provided platform for the mobilization of popular struggle. The 1990s saw a more serious approach. Anti-Shell projects became more sporadic, pronounced and coordinated throughout the region, the collaboration between Shell and the government against the people was uncovered. This exposed Shell’s high-handedness in its efforts to quell the people’s protests against its unsustainable operations. These revelations only fanned the people’s anger and call for a different approach[18].

Prominent civil groups emerged to help bring to attention the plight f the local communities as a result of the operations and activities of Shell. These groups included the Movement for the Survival of the Ogoni Peoples (MOSOP), which was led by Ken Saro Wiwa, a Nigeria writer; the Movement for the Reparation of Ogbia (MORETO); the Ijaw Youth Council (IYC); and the Movement for the Survival of the Ijaw (Izon) Ethnic Nationality in the Niger Delta (MOSIEP), among others. These organizations adopted well-rticulated demands against all oil companies, Shell a major target. MOSOP, for instance, adopted the ‘Ogoni Bill of Rights’ in 1990. Other organizations also did the same, with MORETO drawing the ‘Charter of Demands of the Ogbia People’ in 1992; MOSIEP launching the ‘Izon Peoples Charter’ in 1997; and the IYC launching their ‘Kaiama Declaration’ in 1997. Other such establishments in later years included the Ikwere people’s ‘Ikwerre Rescue Charter’ and Oron people’s ‘Oron Bill of Rights’ in 1999, and Urhobo Foundation’s 2002 ‘Urhobo Bill of Rights’[19].

However, these establishments were of less significance. Rather than making things better, these establishments were not respected and ended up making things worse. It was against this increased agitation that Ken Saro Wiwa, a writer and environmental rights activists (the leader of MOSOP), was arrested on allegations of conspiracy involving the murder of four Chiefs of the Ogoni community. He was executed, alongside eight other activists, despite protestations from both local and international personalities and institutions.

Shell distanced itself from the execution, acting as a foreign entity choosing not to be involved with the internal affairs of Nigeria. But it later emerged that Shell had a direct influence on the arreast and execution of Ken Saro Wiwa and his eight colleagues. To prove that even further, Shell has since agreed to compensate the family of Saro Wiwa and his eight colleagues in millions of shillings ($15.5 million)[20]. Still, it remains notable that Shell did not do much to prevent that execution to begin with. This was as unethical on the part of Shell as it gets.

Attempts towards Change

But there have been many attempts towards change over the years. For example, with the rise of Olosegun Obasanjo to power in 1999, there was introduced a democratic experimentation toward a more amicable solution to the problem. The Obasanjo governed swiftly established the Human Rights Violations Investigation Commission (popular as the ‘Oputa Panel). The commission was expected to investigate the Nigerian Federal government’s human rights violations between 1966 and 1999 (28 May). Many members of the Nigerian Delta communities testified before the panel, and presented much evidence. However, the commission’s report were not released to the public until 2005 through the push of the Civil Society Forum (based in Nigeria) and the Nigerian Democratic Movement (based in the US). The report revealed much involvement of Shell in many of these violations against the Niger Delta communities[21].

In terms of legislations, the Obasanjo administration introduced the Niger Delta Development Commission (NDDC) Bill, which was passed in parliament in 2000. This Bill sought to right the legal ‘wrongs’ of the past that had made it possible Shell and other oil companies to carry on as unethically as they had done in their over five decades of operation in the country. In this respect, the Bill aimed to “facilitate the swift, equal and sustainable development of the Niger Delta into a region that is prosperous, stable, regenerative and peaceful”[22]. In particular, section 7 of the Bill mandated the NDDC the responsibility and powers to:

  • Formulate policies and guidelines that would guide development in the Niger Delta region.
  • Identify factors that inhibit development in the region
  • Initiate projects and programs for the region’s sustainable development in accordance with the Bill’s rules on social and infrastructural issues (such as health, roads, electricity, education, water supply, industrialization and telecommunications, among others).
  • Pay attention to sustainable development, particular the protection of the environment, among others.

Once again, despite the goals of the NDDC Bill being well-intentioned, they never came to be met. As Olowu[23] puts it, the ‘Nigerian factor’ caught up with NDDC, and it became embroiled within personality clashes, corruption among some of its key members, political imbroglio, tribalism and nepotism, among others.

For the failings of the NDDC (via the NDDC Bill), the United Nations’ Development Program (UNDP) described Niger Delta as suffering from administrative neglect, abject poverty, endemic conflict, high unemployment, and crumbling social infrastructure, among others.

Regardless of these failures on the part of the government, it is only natural that the legislative steps taken by the government would have some influence on the oil companies in the region. For Shell, the execution of Ken Saro Wiwa became a major blot on its resume in the country. As a result of organizational effort to cleanse itself of past transgressions, as well as in response to the legislative efforts that came with democratic experimentation of the new Obasanjo government, Shell has over the years made efforts towards more ethical decision-making. Since 1999, Shell has openly announced its commitment to eliminate some of its unsustainable operations, such as gas flaring. Moreover, the company has also promised to undertake effective mopping of oil spillages (which, for years, were not mopped first enough, thereby increasing the burden on the environment). The company has conducted reviews of its sustainable community development projects annually, and on which it allows external reviews. Furthermore, since 2002, the company has been publishing reports on the remittances it hand the Federal government to promote transparency and accountability. Also, in its support of the United Nations (UN) Global Impact, the company has been a key contributor to UN discussions on various issues, including business and human rights.

Evidence of a New Direction in Relations

These efforts on the part of the company prove that it has indeed taken a new direction in how it engages with the Niger Delta communities. The company h since helped develop healthcare facilities and schools; helped train the youth and farmers; as well as the promotion of small-scale businesses in the region.

However, these efforts still only seem like mainstream efforts; otherwise, much remains the same on the backgrounds. For instance, one of the most sensitive issues in Niger Delta is the matter of compensation of victims of Shell’s operations and historical transgressions. Shell’s compensatory strategy has taken the approach of extra-judicial monetary awards to various Niger Delta communities. Indeed, Section 77 of the Nigerian Petroleum Act gives an exploiter of oil resources the right to pay the owners of lands on which they operate

“such sum as may be a fair and reasonable compensation for any disturbance of the surface of the land upon which his prospecting or mining is being or has been carried on and shall in addition pay to the owner of any crops, economic trees, buildings or works damaged removed or destroyed by him or by any agent or servant of his compensation for such damage, removal or destruction”[24].

However, the same way that the EIA does not provide specificities on how to go about sustainable development, the law remains elusive on the yardsticks of assessing damages against the compensation amount to pay. This situation means that the evaluation of damages and compensations remains a matter of whim for Shell, and which the company has exploited to its advantage. The Amnesty International believes this is not transparent or fail on the part of Shell; leaving compensation as a matter of negotiation and not necessarily justice[25].

On a similar note, Shell termed its payment to the family of Wiwa and the eight other activities as a ‘humanitarian gesture’. However, the move is still very much in the culture of institutionalized corruption. That Shell gets away with it should come as a surprise, but not really in the Nigerian political context.

Discussion & Conclusion

This paper aimed to show the complexity of law, particularly in a context of unfavorable political climate. What this paper shows is that Corporate Social Responsibility (CSR) is embedded within the socio-cultural context of a country. Evidence on Nigeria shows a clear connection between CSR and the legal, political and cultural aspects in the country.

First, it is worth noting that Shells activities in Nigeria have been received more attention and criticism than its oil exploration endeavors in other places. That is not to say that Shell has acted absolutely ethically in all its operations. However, that Nigerian is the epitome of Shell’s unethicality cannot be doubted.

Clearly, what has made it possible for Shell to act as it has in Nigeria and get away with it for so long has to do with the lack of a comprehensive and clear legislative framework that effectively governs its operations. The EIA, for example, does not provide a clear outline of what sustainable development operations looks like. Of course, it is not possible for the law to spell out everything. Still, it cannot be ignored that these gaps in the AIA have left it in the hands of companies or organization to decide how to go about sustainable development, which might also mean that these organizations can fail to act ethically in the name of ‘now knowing what to do because said it’. The same thing is evident with Section 77 of the Nigerian Petroleum Act on compensation of victims of companies’ operations. The lack of clear criteria on who to assess damage against compensation means that Shell gets away with much of its transgressions, but still hoodwinking the public on changed tactics.

There is also the lack of executive capacity to ensure that legal and regulatory frameworks are successfully operational. Rather, there seems to be an institutional corruption that makes it had for any laws to do what they are established for. This is a matter of culture. Raymond Williams[26] defined culture as a “the relations and true interaction between learned patterns created in the mind of a people, as well as patterns communicated and made active in not only relationships, but also conventions and institutions”. On the basis of this definition, it can be inferred that the cultural aspects of Nigeria as a country, and its influences on politics (including how the people view the individual against the community, as well as the future) has played a big role in Shell’s behavior in the country (in a way that is different from its behavior in its oil explorations behaviors in other countries). In other words, depending on the culture (and its influence of people’s minds and politics, among others), the law and its capacity to perform its roles becomes highly complex.

Bibliography

Ereba, Patrick. & Boniface Dumpe. Shell’s Poor Stakeholder Engagement. In The

Ecumenical Council for Corporate Responsibility, Shell in the Niger Delta: a Framework for Change. Feb. 2010, 28-39

Helg, Asa. Corporate Social Responsibility from a Nigerian Perspective. Master

Thesis: Handelshogskolan Vid Goteborgs Universitet, 2007

Horward, Philip. The Death of Common Sense: How Law is Suffocating America, (New

York: Random House Trade Paperbacks, 2011)

Nwagbara, Uzoechi. “Dimensionalizing Cultural Implications of The Multinationals in the

Niger Delta: a Consequentialist Approach to Resistance.” Africana 5, no.3 (2011): 143-161

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Conflict Resolution in the Niger Delta.” (2011): 75-100

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EA Context(2009): 93-115


[1]Paula Posas & Thomas Fischer. Organizational Behavior and Public Decision Making in the EA Context. (2009),93

[2]Asa Helg. Corporate Social Responsibility from a Nigerian Perspective. Master Thesis: Handelshogskolan Vid Goteborgs Universitet, 2007, 24

[3]Helg, 19

[4]Ibid, 19

[5]Ibid, 21

[6]Posas and Fischer 93

[7]Dejo Olowu. “From Defiance to Engagement: an Evaluation of Shell’s Approach to Conflict Resolution in the Niger Delta.” (2011),77-81

[8]Olowu, 78

[9] Ibid, 79

[10] Ibid, 77-81

[11] Patrick Ereba& Boniface Dumpe. Shell’s Poor Stakeholder Engagement. In The Ecumenical Council for Corporate Responsibility, Shell in the Niger Delta: a Framework for Change. Feb. 2010,30

[12]Ereba & Dumpe, 30

[13]Ibid, 30

[14] Ereba & Dumpe, 31

[15] Ibid, 31

[16] Ibid, 31

[17]Philip Horward. The Death of Common Sense: How Law is Suffocating America, (New York: Random House Trade Paperbacks, 2011), 7

[18] Olowu, 81

[19] Osaghae, 97, cited in Olowu, 82

[20] Olowu, 91

[21] Olowu, 84

[22] Olowu, 84

[23] Ibid, 86

[24] Olowu, 91

[25] Ibid, 91

[26] Raymond Williams, quoted in Nwagbara, 145