Royal Dutch Shell

Royal Dutch Shell

OVERVIEW

Shell’s progressive management practices—notably including the cost of greenhouse-gas emissions in its accounting—make it the least-risky Big Oil investment over the long haul in terms of sustainability exposure. Counting the cost of carbon is currently voluntary; companies that do it now are better positioned for the day when carbon is taxed (or is subject to cap-and-trade regulations). However, like all of Big Oil, Shell is still heavily reliant on a dirty hydrocarbon fuel mix, and while its workplace accident record has improved in recent years, 2006 was a disastrous year, with 35 contractor deaths.

MANAGEMENT SCORE: 15 out of 25

Shell—like many European companies, but unlike many American ones—counts the cost of greenhouse-gas emissions in the real price of its product for internal planning purposes, budget forecasts, and income statements. Mark Weintraub, the company’s senior adviser for sustainable development, won’t disclose the dollar amount but says it is significant and influences which projects get done as well as how they’re designed. Progress toward sustainable development, weighted at 10% of all performance measures, is counted in managers’ reviews and compensation.

Sustainability Shell’s sustainability committee, led by former Netherlands Prime Minister Wim Kok, reviews projected major expansions monthly and assesses overall performance annually. While projects are rarely rejected, the process has forced design changes and encouraged conversation with critics.

Openness Shell's willingness to dialogue with community groups and environmental organizations has resulted in faster approvals of major projects by local governments. For example, input from indigenous tribes prior to the 2003 approval of Shell’s Alberta, Canada, oil-sands extraction program led the company to add jobs, reduce water usage, and improve energy efficiency.

IMPACT SCORE: 47 out of 100

Environment Shell produces the equivalent of 1.3 billion barrels of oil per year (this measure includes natural gas), releasing 10.8 million tons of polluting CO2 equivalents (e.g., carbon dioxide, methane)—more than all but ExxonMobil and Eni.

Alternative energy Shell is one of the few companies to report R&D investment in renewables and CO2 at more than 1% of capital expenditures.

Exploration More than half of the countries in which Shell explores for oil are rated poorly on governance and human rights by Transparency International. The company has gotten a lot of heat for its operations in Nigeria, where it represents a substantial portion of the country’s oil industry.

Safety Increasing violence in Nigeria is responsible for many of Shell’s 37 workplace fatalities in 2006.

Compensation and diversity In 2006 the CEO’s $6.9 million salary was 125 times the average entry-level salary of $55,000. While Shell has just three women on its 14-member board (21%) and no members from Asia, Africa, or Latin America, the most-recent employee-satisfaction survey (from 2004) found that 64% of staffers were “positive about inclusiveness in their part of Shell.”