SHELL STUDY 30/4/10 15:24 Page 1

Balancing stakeholder needs

Curriculum Topics
• Internal stakeholders
• External stakeholders
• Shareholders
• Stakeholder conflict

Introduction challenge – to help meet the needs of the present and future
generations, while creating as little negative impact as possible to
A stakeholder is anyone who has an interest in what a business the environment.
does or an influence upon the business. Large organisations have
many different stakeholder groups. Some are internal to the Shell aims to provide energy in responsible ways and serve all its
business, like employees. Others are external as they are outside stakeholders, customers and investors, effectively. Two key aims
of the business, like government. It is important to identify and of the Shell Group are:
balance the needs and expectations of these groups, and to act 1. to engage efficiently, responsibly and profitably in oil, gas,
responsibly in view of all of them in order to avoid conflict and chemicals and other businesses
ensure the business is as prosperous as possible and keeps its 2. to participate in the search for and development of other
‘licence to operate’. sources of energy to meet evolving customer needs and the
world’s growing demand for energy.
Balancing the needs of all stakeholders is particularly important for
large energy companies like Shell, one of the world’s largest and The case study examines how stakeholders influence the
most profitable multinational companies. It is an Anglo-Dutch achievement of these aims and how Shell seeks to meet the
company with headquarters in the Netherlands. Shell provides needs of all of its stakeholders and balance the social, economic
2.5% of the world’s oil and 3% of its natural gas. Oil and gas are and environmental impacts of its work.
non-renewable resources, but remain essential for powering the
world’s needs and their demand is continuously increasing. Internal stakeholders
Shell sells enough petrol and diesel a day to fuel 16 million cars Internal stakeholders are seen by the wider community as
and enough liquefied natural gas to provide electricity for 34 reflecting Shell and how it works. Shell’s main internal
million homes around the world. However, energy use is increasing stakeholders are its shareholders, employees and suppliers. Large
due to a growing world population and higher standards of living. businesses like Shell, Sainsbury’s, Virgin, and M&S are owned
This means more demand not only for oil and gas but also for by shareholders. Shareholders play a crucial part in the life of the
other energy sources. Shell is therefore faced with an enormous business.
GLOSSARY

Stakeholder: Individual or group with an Multinational: A company or Non-renewable resources: Resources Shareholders: Person owning or
interest in the decisions made by an corporation operating in more than two that are in fixed or limited supply. holding a share or shares of stock in a
organisation. countries. company.
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They provide a sizeable part of the capital required to set up and Suppliers are also internal stakeholders who are Shell’s partners in
run the business. They take a reward from a share of the profits in the chain of production - for example in bringing petrol from the oil
the form of a dividend. This varies according to how many shares well to the petrol pump. Shell has a number of core values that
they own. The shareholders choose a Board of Directors to are central to everything it does.
represent them and provide a direction to the company. This is
set out in a long-term plan which is called a strategy. Shell’s reputation depends on making sure that its business
actions reflect these core values. Shell works with contractors and
other partners in the supply chain who also demonstrate these
The
Shareholders Board of business values. If they do not, Shell will not use them.
Directors strategy
choose who create
External stakeholders –
customers and communities
The business strategy
External stakeholders are not part of the business but have a keen
The directors are responsible for the implementation of the interest in what it does and influence Shell’s decision-making. Shell
strategy. Each year the directors must produce a report for is committed to satisfying the needs of its external stakeholders.
shareholders. This report is presented each year at an Annual
General Meeting of shareholders. Customers
Without customers a business would not exist. One of Shell’s
Another important internal stakeholder group are employees. Shell major objectives therefore is:
employs over 100,000 people worldwide. These include senior ‘To win and maintain customers by developing and providing
international managers specialising in finance, marketing, sales, products and services which offer value in terms of price, quality,
oil and gas exploration and other aspects of the business. Other safety and environmental impact, which are supported by
employees include geologists, market researchers, site engineers, technological, environmental and commercial expertise.’
oil platform workers, office administrators, business analysts and
many more.
s • O pi ni o n
m u n i tie for
om me
As stakeholders, employees are influenced by Shell but also affect lc r
s
ca

how Shell operates. The employees’ standard of work and

s t o m r s • Lo

In t

Internal stakeholders
e r e s t g ro u p s

commitment to health and safety and excellence is vital in order to

e

keep Shell as a leader in the energy field. Mistakes can be costly Shareholders Suppliers
in terms of reputation and the livelihood of other employees.
Cu

A priority at Shell is to respect people. It seeks to provide its staff

Employees
with good and safe working conditions, and competitive terms of
employment. This has a positive influence on employees as it External Stakeholders
keeps them safe and motivated.

Achieving this objective is challenging. Customers want value for

Honesty money which involves providing the highest quality fuels at
competitive prices. Research drives this process.

Core values Integrity

Market research Product research

Respect for people To find out what To find out the best ways to produce
customers want and provide the best products
GLOSSARY

Dividend: A share of the company’s Strategy: Long-term business plan of Values: What a company stands for. Biofuel: Fuels produced from biomass,
profit paid to shareholders. an organisation. which means recently living organisms,
usually plants.
SHELL STUDY 30/4/10 15:24 Page 3

Safety and environmental impact are key ingredients of the External stakeholders – Interest groups
research and development process. Increasingly customers,
concerned about pollution and environmental damage, require Shell needs to work with a range of interest groups. These are
cleaner, more efficient fuels such as biofuel. decision makers and opinion formers. People and organisations in
positions of influence make decisions and form opinions that can
There is global interest in liquid biofuels for transport as people affect Shell. These include academics, government, media, non-
travel more. Biofuels also offer the potential to slow the rate of governmental organisations (NGOs) business leaders and the
growth in the world’s CO2 emissions. Shell responds to present financial community. They interact with Shell in different ways:
changes in customer views and seeks to anticipate future • governments – Shell has operations in many countries across
customer expectations. It aims to help customers use less energy all regions of the globe. To gain approval to operate in these
and emit less CO2.
countries it has shown the host governments that it is
operating in the right way. This includes creating jobs, paying
Shell products include fuels and lubricants for all forms of
taxes and providing important energy supplies. Shell is also
transport such as, cars, ships, aeroplanes and trains. Shell has a
working with governments to promote the need for more
set of global environmental standards/expectations for all of its
effective regulation on CO2 emissions.
companies. Topics include: managing greenhouse gases, energy
• the business community – Shell supplies to and buys from
efficiency, control of waste and the impact on water.
hundreds of other businesses.
Local communities • other oil companies – Shell works in partnership on projects
Shell’s oil and gas operations aim to create economic and social with many other oil companies. These include both
development while minimising negative impacts. It seeks to invest competitors such as BP and Exxon, and partners such as
in lasting benefits for the community. government owned oil companies in the countries in which it
operates. Partnership activities have included building new oil

Investment in the
or gas supply lines and new refineries.
Development of community e.g. set a
local facilities e.g. health good example of • NGOs are important bodies that influence decision-making. For
& education business practice
example, Shell was considering drilling in 2008 for gas in British
Benefits to the Columbia’s Sacred Headwaters (the source of three important
community
rivers). These rivers provided a source of wild salmon and other
Use local Create jobs natural resources. A number of organisations were set up to
contractors for local people
protect the Headwaters including ‘Friends of Wild Salmon’. Shell
listened to their concerns and postponed further drilling work.
• the media – it is essential for competitive companies like Shell
Local communities living close to oil refineries have raised to continue to operate in ways that receive positive press
concerns over their safety. Shell seeks to overcome these fears by coverage from newspapers, television and magazines. This
earning the trust of people by taking all the necessary safety
reinforces its position in the market and can help to attract
measures. This includes operating the plant safely and making
new customers through a positive reputation.
people aware of plans and emergency procedures. Shell, in its
commitment to improve the wellbeing of local communities, has A pressure group is a group of people with specific aims and
created local partnerships. It has provided health facilities and
interests which tries to influence major decision makers like
supported the development of local schools and universities.
businesses and governments and raise public awareness about
issues. Shell talks regularly with major pressure groups such as
WWF and Greenpeace about key issues such as how best to
dispose of old oil rigs to minimise damage to the environment. It
deals directly with specific pressure groups that are campaigning
on local issues such as the unique ecosystem of the Louisiana
coast in the USA.

Interest groups: An organised Non-governmental organisations Pressure group: An organisation

GLOSSARY

collection of people who seek to (NGOs): Legally constituted, non-profit formed by people with a common
influence political decisions. making groups organised on a local, interest who get together to further that
national or international level, created by interest.
persons with no participation in or
representation of any government.
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Shell has committed over two million dollars on research and was previously used
restoration of Breton Sound in Louisiana what will monitor the for other purposes
actual changes that occur in this area while the wetland is being such as timber, or Economic impact
• Shareholders
restored. agriculture, Shell
looks to see if the
Shell is dedicated to protecting human rights and helping longer term social or
communities. The search for oil and gas can take energy environmental Social impact Environmental
• Employees impact
companies to places with poor human rights records. It treats impacts do not • Communities • The planet
each case separately using decision-making methods set out by outweigh the financial
the Danish Institute for Human Rights. If Shell chooses not to return on that activity.
operate in these areas, this opens the door for less principled
competitors to exploit workers in these countries. If it stays then it Conclusion
can be seen to be part of the problem. Shell will only operate in
countries where it is able to follow its business principles. These It is not easy to balance the needs of stakeholders. In order to
principles set out what Shell stands for and define its behaviour best achieve this balance Shell recognises five areas of
and are published on its website. responsibility to: shareholders, customers, employees, suppliers
and society.
Shareholders and resolving conflicts
Ongoing communication with all of these groups is essential. In
The start of the case study focussed on the importance of this way it is possible to take account of everyone’s needs and
shareholders. Shell’s main shareholders consist of large expectations in making decisions for today and the future.
institutional stockholders, employees and the general public. Shell
believes that it has a key responsibility to protect shareholders’ Shell has resolved and minimised conflicts between its activities
investment, and provide a long-term return competitive with those and its stakeholders through its clear strategies and commitment
of other leading companies in the industry. Shell, as one of the to corporate values. By setting minimum thresholds for decision
world’s major companies has consistently made healthy profits. making, it is able to balance its impact in economic, social and
These profits have then been used productively to reward environmental terms. This ensures that no decision will affect one
shareholders in the form of dividends and to plough back into stakeholder group more than others.
developing new research, new products, new forms of energy for
the future and better ways of managing fuel reserves.
1. Using a diagram, illustrate the main internal and external
stakeholders for IBA and identify them by specific names and
Shell believes that it will continue to exist and grow if it can
groupings.
balance the needs of stakeholder groups.
2. Choose any two groups of stakeholders of an organization and
Shell employs three criteria in making such decisions. It assesses explain how their objectives can conflict. Then describe ways in which
QUESTIONS

whether: that company can meet the needs of these two groups. Illustrate your
answer with examples.
1. the economic impact of the activity is likely to yield a good
return for shareholders 3. Why does any reputed firm find out about the views of interest
2. the social impact will be suitable for employees and groups and pressure groups? How can this information help them
communities make better decisions?
3. the long-term effect of its activity will harm the environment.
4. How can a balance of interests be achieved amongst stakeholders?

To avoid conflict, Shell sets minimum levels that must be met for 5. What is the role of the promotion mix in managing stakeholders.
all three areas before making a major decision or investment in Illustrate with examples from outside Shell.
any one. For example, when planning new activity on land that
GLOSSARY

Business principles: Standards set

by companies that guide how they
behave.