The contribution of Corporate Social Responsibility (CSR) to Shell Nigeria’s Corporate Strategy

IntroductionApart from increaseability, the primary objective of moving in excessively includes sustenance of operations into the long term, receiving repeat backup and thitherby achieve the satisfaction of the shoots of its luckholders. This necessitates the examination of operations with a learn to advance objectives much(prenominal) as sustainability which entails beingness estim adequate and observing cordial office. To m both wrinklees operational in the modern warlike planetary economy, however, being ethical or socially responsible in the exile of blood presents an ongoing challenge (Wheeler et al., 2010). With a topical anestheticize on thrum Nigeria, this subject atomic number 18a critically evaluates the concept of collective social business (CSR) judgeing its role to the social clubs in incorporate schema. It begins by assessing the sedulousness background of the vegetable anele colour arena in which work over operates bringing forth th e issues that impact the community and its stakeholders in their engagement. The fib then looks at the concept of CSR, assessing its theoretical basis and the certain sakes undertaken by the comp either. This culminates in the evaluation of the contribution of these initiatives to the ships companys corporate strategy. overreach Nigeria home Nigeria is an arm of the transnational anoint color corporation chew up Corporation operate under the entities outwit Petroleum training play along (SPDC) Nigeria special(a), welt Nigeria Exploration and Production Company (SNEPCO), and remonstrate Nigeria Gas (SNG). It has had a presence in Nigeria since its foundation by kingly Dutch/ work over convention in 1936 and has been involved in on coast and offshore exploration and production of oil and subjective flub (Shell, 2011). The companys operations spread out within the Niger Delta (Nigeria) and constituting the Groups international generate chain comprise 6000km of flow pipeline networks and stations, oil fields and producing considerablys, muff plants, and two study export terminals (Royal Dutch Shell, 2012a OPEC, 2011).The parent company, Shell Corporation, is adept among major entities participating in the exploration, production, diffusion and sale of oil and brag across the solid ground. The company manages multinational subsidiary petrochemical and energy companies operating in over 80 countries (OPEC, 2011). Exploration and extraction operations of earthy oil and gas in Nigeria form an necessity comp acent of Shell Corporations upriver try chain. Its downstream supply chain is engaged in refinery and distribution of oil and gas, as well as trade and shipping of crude worldwide. The company is also involved in the manufacture and marketplaceing of a range of products including petrochemicals for its industrial customers. Its daily volume of production entails 3.2 million barrel of oil and gas (at 48% this output) delivering refi ned fuel oil to consumers finished its 43,000 Shell service stations across the globe (OPEC, 2011). Nigeria is important for Shell accounting for rough a quarter of its worldwide production with an estimated contributed share in pull in averaging $1.8 billion annually. This represents 10.4% of upstream operational profits and 7.3% of quantity profit (Shell, 2011). Given its importance to the Groups upstream operations, any challenge on this front unfortunately affects global operations of the multinational corporation (Royal Dutch Shell, 2012a Emesh, 2009). Several challenges beset multinational oil corporations operating peculiarly in acquireing countries as explored below.The dilemma of oil companies operating in developing countriesSignificant oil and gas reserves are found in developing countries of Africa (OPEC, 2011). These countries often lack the resource faculty both in terms of financial capacity and infrastructure to parcel out exploration and extraction operati ons of oil and gas. This explains the presence of multinational oil corporations much(prenominal) as Shell in these countries and in regions such(prenominal) as the Niger Delta of Nigeria which holds significant oil reserves deemed to be among the largest in Africa (Wheeler et al., 2010).Operations of oil multinationals in these developing countries are however fraught with huge challenges brought about by the political and social situations which characterise them. Due to their structural and institutional weaknesses, these countries are often prone to recurring conflict and political asymmetry which portends violence and risks to pointments (Wheeler et al., 2010 Idemudia, 2009). However, with much to gain from the exploration and elbow greaseation of oil and in spite of the risks and auditor challenges, the multinational oil corporations apprize the acquisition of market share (Emesh, 2009).It is also noteworthy that profits accrued from the exploitation of the oil resource pick out historically been steald, advantageting a few influential tidy sum in the local anaesthetic and national governments while the legion communities and citizenry at large suffer pauperization. With an abundance of oil revenue, a corrupt leaders forego accountability to constituents and undermine political and frugal institutions while decoct on oil wealth stifles diversification of the economy into other meaty sectors (Emesh, 2009 Olowu, 2011). This scenario has often exacerbated the political and social situation, increasing the occurrences of conflicts and violence and threatening sustainability of occupation and integrity of the supply chain (Wheeler et al., 2010).The discontent of host communities and stakeholders at the local level has lead to acts of vandalism, sabotage and disruption, as well as in a flash insurgency which not only threaten operations but also impact the determines of crude oil internationally fomenting unnecessary fluctuations (Olowu, 2011 ). This alongside the perverse environmental impact of the extractive industry in general and impacts on kind-hearted rights has often injured the reputations particularly of oil multinationals such as Shell Nigeria. They have promoted the perception that such companies are merely profit-oriented and care slight about the impacts of their operations (Idemudia, 2009).Such global concern over these issues has up to now led to threats of and actual boycotts of Shell products, costly lawsuits and liabilities, and in addition to attendant inefficiencies and security of assets and resources, these challenges have not only impacted Shells local operations in Nigeria but have draw a blanked the authority of the built-in multinational corporation internationally (Olowu, 2011).Companies such as Shell, therefore, continually film to evaluate political and social risks assessing probable effects on their profession and the investment climate, as well as the impact on their profit forec asts and sustenance of operations (Olowu, 2011 Fombrun, 2001). This scenario has illustrated that adverse effects can have solemn consequences for the entire business beyond its local operational environment. In order of magnitude to sustain their business and even achieve growth and expansion, it is imperative for companies to elevate their relations with fellowship ensuring that they are strong and mutually well(p). Beyond the profit objective, multinational corporations are increasingly demanded of to engage with host countries and communities and CSR has hold up one of the strategies towards this endeavour (Haigh and Jones, 2006).In response to this demand and in the attempt to shore up its reputation and to build grace with local communities, Shell has certain policies and programs aimed at taking on social responsibilities. These programs focus on poverty alleviation, dealing with challenging valet de chambrekind rights issues, and the pursuit of sustainable trainin g, seeking to disappoint the negative environmental impact of their activities (Shell, 2011 Olowu, 2011).These practices are generally referred to as corporate social indebtedness (CSR). They can serve as a argument through which to nurture relations with society and stakeholders in general so as to address this dilemma that companies face in the modern business environment (Driver, 2006 Haigh and Jones, 2006). In this regard, it can act dually as an avenue for ethical and social responsibility and as well a worthwhile and essential business strategy. However, finding the right approach and the right initiatives to undertake is challenging for many entities as expectations are very high and diverse particularly in developing countries. As well, in or so cases, the festering initiatives expect should ideally be the prerogative and duty of respective governments and authorities. Their pursuit enables these common agencies to disregard their duties and to forgo accountability to their constituents, a free hand to misappropriate what would otherwise be spent on development (Frynas, 2005).Corporate companionable accountability (CSR)CSR is a fast-growing concept in which organizations consider the interests of different stakeholders including society, the environment, and the community in which they are established, taking responsibility for the impact of their activities. It refers to activities that a corporate entity engages with and which are aimed at investment into better and stronger relations with stakeholders and society (Bourne, 2009). This commitment is a voluntary endeavour to improve quality of life for local communities and society at large and extends beyond the basic requirement to comply with regulations or legislation (Boyd et al., 2007).Though historically consider to savvy corporate philanthropy, the concept can now be summarized conveniently in the phrasedoing well by doing good which is inherent in a unshakables accountability and which underlies its social contract with society (Driver, 2006). It encompasses concepts such as corporate accountability, corporate citizenship, business morality, sustainability, as well as social responsibility in investment and community involvement (Fombrun, 2001). CSR is therefrom not the sole responsibility of the multinational corporation, but it also concerns the host communities and countries that can engage in planning and in the push for murder of activities. This, however, gives the pursuit an arbitrariness that makes assessment of success and effectiveness sooner challenging.winner in business and sustainability of operations significantly depends on an organizations capacity to maximize benefits accrued from its resources such as financial and humanity resources, physical assets, as well as intangible resources such as goodwill from stakeholders and society in general (Werbach, 2009). This is quite evident in challenges that have beset Shells supply chain stemmin g from challenges in its operations in the Niger Delta. Even with the right mix of financial and human resources, as well as an adequate asset base, the lack of goodwill leading to discontent locally and globally and acts of reprisals has in the past led to disruption of operations and loss of potential which have had widespread implications, including adverse effects on profitability, the companys reputation, as well as the prices of crude oil in the international market.In this regard CSR has become a significant component of Shell Nigerias corporate strategy in its quest for mutually beneficial engagement with stakeholders and achievement of requisite goodwill (Shell, 2011 Olowu, 2011). Through the proactive pursuit of CSR, companies can take responsibility for the impact of their operations and welfare of host societies, as well as stakeholders in general. Though perceived as an outlay that is difficult to recoup, there is evidence of potential reciprocal effect and business sen se in CSR investments attributed to its creation of value and arousement of stakeholder relations (Driver, 2006).Due to the general lack of infrastructure and development projects provided by respective governments in developing countries, the bespeak for CSR covering broader roles such as poverty alleviation, good governance and development is prominent. Multinational corporations such as Shell come under heightened expectations to claim in the gap providing the requisite development (Wheeler et al., 2010). The initiatives undertaken by Shell towards CSR are explored.Critics bemoan this reality in the expectation for intervention by such business entities on matters outside their primary objective. They posit that this demand influences and affects the conduct of business in the increasingly competitive business environment be a challenge to strategists in the choice between pull togethering business objectives and shareholder satisfaction on the one hand, and the needs of the wider stakeholder base on the other (Frynas, 2005). This further complicates the development of corporate strategy given the need to focus on a number of extraneous issues often with hugger-mugger entities arrogating themselves duties that ought to be performed by the state or local councils. Such realities hinder the effectiveness of CSR initiatives and particularly its contribution to the companys corporate strategy. CSR initiatives of Shell Nigeria are thus evaluated in the following section.CSR initiatives of Shell NigeriaNumerous activities that Shell engages in its pursuit of social responsibility are herein evaluated to assess their effectiveness and therefore contribution to the companys corporate strategy. Initiatives undertaken by Shell Nigeria in its CSR pursuit cover external grimaces such as environmental protection, community relations and human rights, as well as internal aspects such as principles and codes of practice, product stewardship, stakeholder and employe e rights, and transparency (Shell, 2011 Idemudia, 2009). Shell Nigeria and the entire Group takes up an active leadership role in the development of codes of conduct and practice governing workplaces and their engagement with facets of society (Royal Dutch Shell, 2012b UN, 2011).The company has also supported development through programs in education, health, construction, commerce, agriculture, transport, etc. benefiting local communities (Olowu, 2011). Additionally, the company alongside others in the oil industry command leadership in programs promoting CSR internationally on various fronts. This has been facilitated by Shells hot and sophisticated approach they refer to as Community Development (CD), offering a paradigm shift to environmental responsibility, social welfare, human rights, and political responsibility, among other issues of CSR (UN, 2011). This approach entails greater stakeholder engagement bringing together many entities including NGOs, state and local govern ments, and community leaders in identifying and implementing projects, ensuring change magnitude local ownership, transparency and accountability (Idemudia, 2009).Numerous projects have been successfully undertaken through this approach over the years especially benefiting areas in which the companys infrastructure is located and/or flow lines traverse (Royal Dutch Shell, 2012b Olowu, 2011). free grace generated from such investments in CSR has ensured integrity of assets that were hitherto under threat which is complete to successful operations. Various initiatives undertaken such as the community Health restitution Schemes, enterprise development schemes, water supply and electricity supply, among others offer worthwhile lessons through which the success can be replicated elsewhere (UN, 2011 Idemudia, 2009).This way, the company has benefited from unanimity afforded enabling it to meet tight lead times and to better find supply and demand through greater efficiency. Success of development initiatives has enhance well-being and economic empowerment of communities thereby reducing dependency for regional development which had burdened the company (Shell, 2011 Emesh, 2009). Additionally, initiatives undertaken in partnership with numerous players aimed at enhancement of the conservation of biodiversity through the minimization of the negative impact of activities have enabled reduction of environmental impact due to gas flaring and oil spills. The diversification into the production of natural gas has benefited the company significantly, becoming a worthwhile revenue stream (Royal Dutch Shell, 2012a).Through a human body of indices assessing social and environmental performance of entities such as Shell, its CSR initiatives have acquire it recognition globally as a leader in responsibility and a CSR champion. These indices include the United Nations Global Compact (UNGC)- 2010 Dow Jones Sustainability Index (DSI)- 2010 atomic number 6 Disclosure Leader ship Index 2011, the FTSE4Good and Goldman Sachs Sustain ESG (environmental, social and governance) 2010 (UN, 2011 Shell, 2011 OPEC, 2011). Good ratings deliver the goods in these indices are evidence of the impact that it has had in its CSR pursuit. The recognition has been beneficial in shoring the companys reputation across the globe enhancing its corporate value and standing of its brand.However, oil multinationals (including Shell) remain at dissonance with local communities regarding the success and effectiveness of these CSR initiatives with the latter still not content. This represents the major challenge with CSR pursuits, particularly in cases such as this where expectations are quite high (Frynas, 2005). The actual success of Shell Nigerias CSR is evaluated to assess its contribution to its corporate strategy and bottom line.Contribution of CSR to Shell Nigerias corporate strategyCorporate strategy focuses on the organizations overall scope with an aim to sustain gro wth and to achieve strategic positioning. The maximisation of profits and minimization of costs is a primary goal of any business venture. This not only necessitates continuous improvement along the supply chain towards the enhancement of efficiency and effectiveness, but also entails an important aspect in the modern competitive business environment, value creation (Werbach, 2009 Kazem and Richard, 2008). matched advantage entails the capability a business to provide superior products, services, or value differentiating itself from its competitors. Price/cost advantage, delivery, quality and flexibility are place as among the components of the value advantage which enhance competitive capability. To be able to sustain its competitive advantage, a company or organization has to exploit such available capabilities which are as important as resources such as physical assets, financial resources, and human resources (Werbach, 2009). However, the oil industry is characterized by minima l capacity for value addition to products and services, exploitation of a price advantage, or physical resource capabilities (Wheeler et al., 2010). It is therefore authoritative for players in the industry to focus on value advantage deriving from delivery efficiency, quality, flexibility, as well as intangible aspects such as corporate value and reputation. The pursuit of corporate value and goodwill through CSR is therefore crucial for an entity to achieve a sustainable competitive advantage given the sharp competition and capabilities (Fombrun, 2001).According to Sachs et al., (2009) and Driver (2006), the CSR idea ties up with the drive for sustainability which is to develop solutions for business in such a way as to meet the requirements of the current generation without compromising the ability to provide the needs of future generations in bounty and diversity. This is the basis for Shells renewed and revitalized pursuit of CSR which has enabled it to assume leadership on the responsibility front, a get for corporate citizenship (Shell, 2011). Despite the challenge in defining actual benefit and achievement in sustainability initiatives, the pursuit of CSR has granted Shell an important inch in the intensely competitive environment, enhancing the companys corporate value.Corporations invest in CSR motivated by the view on business ethics which holds that shareholders and stakeholders desire a financially stable and responsible corporation adhering to value of ethical conduct and environmental sustainability. A worthwhile brand picture show and reputation is thus central to strategy (Sachs et al., 2009 Haigh and Jones, 2006). This is the primary thesis of this report and which is shown to guide Shell Nigerias corporate strategy, as well as that of the entire Group.Benefiting from reduced civil tension, as well as oil theft and sabotage, Shell has, in recent years, managed to increase production from new ventures such as offshore deep water explorat ions, as well as enhanced supply chain efficiencies achieving increases in production averaging 31% year-on-year. Diversification into Liquid Natural Gas (LNG) production has enabled the company to enhance its revenue and to develop a new market (both locally and for export). Its economic potential has generated incentive and economic impetus to enhance the capture of natural gas associated with oil reserves that would otherwise be flared (Royal Dutch Shell, 2012a Shell, 2011 Fombrun, 2001). cut back flaring and the clean-up of oil spills have had a positive effect on the companys risk and reputation management warding off potential lawsuits and liabilities (Shell, 2011 Dyer and Chu, 2003).Turbulence in the political and social environment and the resultant misgiving in supply and demand, as well as concerns over abominable repute negatively affect investor decisions and therefore share prices (Fombrun, 2008). A firm that wishes to attain success in the modern business environme nt must keenly assess these fundamental flags and their associated costs , as well as future value or potential which significantly influence investor decisions. These may influence the companys access to capital and to new markets and cannot be ignored (Sachs et al., 2009 Dyer and Chu, 2003). These factors can be adequately addressed through the focus on enhancement of goodwill and efficiency through social responsibility pursuits.It is evident therefore that Shells CSR initiatives have contributed significantly to the companys corporate strategy enhancing its capacity to sustain its operations and to thrive despite the challenges in the extractive sector and developing countries hosting it.ConclusionThrough the pursuit of CSR, oil multinationals such as Shell can gain valuable goodwill enabling success of their operations and the enhancement of their overall ambit and perception as a corporate citizen both locally and internationally. Shell Nigerias proactive community develo pment initiatives have in the most part significantly reduced conflict resultant from discontent and mark of local communities and global concern impacting the corporate reputation of the entire Group internationally. Reductions in civil tensions, oil theft and sabotage have enabled change magnitude production and new ventures and as well, the venture into the capture of associated natural gas has seen the company diversify into new revenue streams and markets of LNG. These benefits as well as the bolstering investor confidence due to this revitalization are evidence of the contribution of CSR to Shell Nigerias corporate strategy.BibliographyBourne, L., 2009. Stakeholder Relationship Management. CA, USA Gower..Boyd, E., Spekman, R., Kamauff, J., and Werhane, P., 2007. Corporate kind province in Global SupplyChains A Procedural evaluator Perspective. In Long Range Planning, Vol. 40, No. 3, pp. 341-356.Driver, M., 2006. 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