Licence to grow: In the 21st century, successful energy companies will need to pay more attention to what I term the “licence to grow.”
In the past, it was enough for companies to meet minimum standards, to provide customer choice and to secure their “licence to operate.” But the world has changed.
Today, one of the measures of business success is the extent to which companies can earn “trusted partner” status by working with others to develop new approaches for addressing key social and environmental concerns.
As for instance, on climate change. I believe that it is the role of people in business to work with governments, NGOs and others to address important global issues, to identify common ground, to share information, and to help to find practical cost-effective solutions.
In the long-term, this partnership approach is essential to ensure our licence to grow.
Of course there are some in business who still argue that this debate has nothing to do with them. But if for no other reason, the sceptics should consider the likely bottom line impact on their reputation if they continue to ignore this emerging agenda.
In recent years, public concern over the environment, human rights, and ethical issues has affected a wide range of household name companies, including Shell.
Consumer boycotts, NGO campaigns and political pressure are all facts of business life, and increasingly, shareholders are beginning to take notice. Environmental, social and ethical issues are therefore central to building brand loyalty and to ensuring long-term competitive advantage.
Real dilemmas: What does this mean in practice for an organisation such as the Royal Dutch/Shell Group? It’s our view that good business and sustainable development go hand in hand.
But Shell managers face real dilemmas in responding to the conflicting demands of different stakeholders and of balancing our economic, environmental and social responsibilities. No-one pretends that getting the balance right is easy. Nor do we claim to get it right every time.
Nowhere is this question of balance more important than in decisions relating to major new investments. Shell’s involvement in the Athabasca oil sands project in Canada illustrates the point.
On the face of it, this project may appear to be inconsistent with our commitment to sustainable development. Oil sands has historically been a high cost and environmentally unfriendly source of energy.
But new technology has reduced the cost and environmental impacts considerably.
Our approach to the Athabasca project, which is supported by the local community, takes an integrated view of economic, environmental and social needs.
This includes widespread local, national and international consultation, a commitment to deliver a 40 percent reduction in the project’s greenhouse gas emissions, the creation of 1000 permanent jobs, and rehabilitation of mined land.
We are also looking to set up an independent panel of local community and NGO representatives which will help to ensure these commitments are met.
Shell’s commitment to sustainable development is helping to make a practical difference in other ways. In particular, it is reflected in our approach to new business opportunities.
Shell Renewables: Shell Renewables for example is investing half a billion dollars over five years in commercial renewable energy resources: wind, solar, biomass and forestry.
This is not being done for philanthropic reasons, but because we believe that there is a real business opportunity out there. Over the next twenty years, customer demand in this area is going to grow significantly.
And Shell Renewables five year investment programme is already beginning to bear fruit. Just before Christmas, Siemens Solar GmbH and Shell Renewables announced negotiations on closer co-operation in solar energy.
For over 10 years Siemens Solar and Shell have been linked through two joint ventures in Asia. Now, exclusive discussions are being held to determine how the co-operation can be expanded through a joint venture of their respective global solar businesses.
Innovation and partnership in the energy industry hold the key to future success. The 20th century has seen massive human advance based on the carbon economies of coal, oil and gas.
Today, technical advance, government and stakeholder pressure at least in the developed world, and the emergence of new cleaner alternatives will inevitably lead to fundamental changes in the energy mix in the 21st century.
For the Royal Dutch/Shell Group for example, that means that while oil and gas remain essential for the health and wealth of modern economies, our steady progress towards developing viable renewable projects and building a broader energy strategy must continue.
Our long-term investment in commercially viable renewables, in new energy solutions such as hydrogen and fuel cells, and in cleaner fuels are all helping us to meet new customer and stakeholder expectations.
They’re helping us to earn our licence to grow, and helping us to contribute to a more responsible, sustainable and successful future.
A balanced approach: But we also need to keep a sense of perspective. At one extreme, sit the environmental activists who write to Shell regularly urging us to end our core oil and gas business.
At the other, sit those in business who refuse to contemplate any change at all. We need a balanced approach which challenges the view that you can either make money or do more to protect the environment – but you can’t do both.
We also need to keep a sense of perspective in one other important sense. Even the most optimistic scenarios for renewables suggest by 2050, at least half of the world’s energy will still come from conventional fossil fuels.
Governments and regulators must be careful therefore not to put at risk the economic and social benefits generated by cheap and reliable supplies of energy – and for the foreseeable future, that means a significant contribution from oil and gas, in both the developed and developing worlds.
A secure future: There’s no point in the oil industry developing innovative and profitable solutions for tomorrow’s environmental concerns if we forget about the immediate business challenges of today.
It’s my firm belief that the future of this industry is secure but only if we continue to make the tough decisions. This means keeping up the pressure on costs. It means responding quickly to the demands and expectations of our customers and stakeholders.
At Shell, we believe that a sustainable and successful company can only be built on the solid foundations of economic success.
But in the long-term, that economic success depends on improvements in our financial, environmental and social performance. Only in that way, can we be confident of earning our licence to grow into the next century and of not going “back to the future.”
Jerome van der Veer, Managing Director of Royal Dutch Petroleum Company and Group Managing Director of the Royal Dutch/Shell Group at the 20th CERA Annual Executive Conference, Houston, Texas, USA
Source:Shell.com.
© 2001 Mena Report (www.menareport.com)
