In his column, Professor Jan Bouwens immediately puts his finger on the sore spot: not achieving an environmental target should hurt a company like Shell enough to start behaving differently. The annoying thing about a party like Shell is the colossal shareholder interest – and the thick skin that the company has developed over the years. The business activities and the resulting consequential damage hardly seem to reflect the rules of conduct and values that the company promotes. Despite the fact that sustainable entrepreneurship is becoming increasingly important, the company shows results year after year that are not in line with this. How is that possible?
Companies that work with a business model à la Apple and Shell usually only use “financial incentives” to encourage their people to do “the right thing”. Shell made public its own rules of conduct for doing “right”. At the time, those rules were well thought out. Anyone who reads the General Policy Principles (drawn up in 1976) may still think: sounds good. But it is not going well. About 30 years ago, Shell already recognized that climate change is dangerous to life and our planet. However, this finding did not lead to taking responsibility, nor to setting goals that would have benefited us in 2021. In fact, the company has even actively opposed climate policy. Important projects were cut back, because economic goals are paramount. Take a look at Shell’s “Our Value” document: the “Health, Safety, Security and Environment” item is only number 5 on a list of 8 items – after economic interest, economic competition, integrity in business and political activities. That says something about priorities. And of course: under pressure from public opinion, communication is now being tapped from a different tune. We are working towards sustainable goals. But as long as words aren’t actions, we still have a classic case of sweet talk here.
The example of the safety goals at Shell is clear. Attention to safety has long been ingrained in the company’s codes of conduct. But consider for a moment how these goals came about. Work accidents have killed employees. If you cannot get that under control as a company, you not only have a serious image problem, but you also have to pay out a lot of money and ultimately fewer people will work for you. So the question is what exactly is the driver behind those safety goals: is that a human starting point or is it purely business interest? At the same time, there should also be room for nuances. As British former climate envoy John Ashton wrote in The Guardian, Shell “is populated by people of good will. But they too can make bad choices if they work within an organization that sticks to a bad idea. ”
Incentives for less tangible goals
When it comes to achieving financial goals, a reward system is often an effective means of encouraging people and making the right decisions. But if you shift the focus to other, less tangible goals, it will soon become more difficult to achieve results. In this context, it is also clear that smaller companies, family businesses, need, to a much lesser extent, “incentive programs” to move in a different direction. Because the mutual bond within these types of companies is close (closer than with the large corporates, ed.), It is also easier to reach, motivate and appreciate employees. In this sense, there is a challenge for many (very) large companies: should everything still be subordinated to the interests of stakeholders, or are there other ways to redirect the corporate compass?
Large companies and SMEs
A company like Shell is not going to make it on its own to make a sustainable turnaround, it takes more. The will to transform cannot only come from large companies – this must also be supported in SMEs. However, a major player can determine the speed at which changes take place, if they really focus on sustainable goals. For this, as many signals as possible must be green. In other words: the will to operate more sustainably must be present throughout the company, from the top to the shop floor – and this must also be supported by the shareholders and other stakeholders.
Back to the point in Jan Bouwens’ column: I am convinced that feeling pain is partly an effective stimulus. After all, how much pain does a Shell CEO or manager have if he / she does not achieve the environmental goals (compared to the other major goals)? Does it however provide sleepless nights, structural remorse? No more fascinating stories during birthdays, because some embarrassment has arisen? Or is it all not too bad, because he / she can simply continue to live in a generous way and has come to believe in the story of his employer?
It is impossible to have an oil tanker change course immediately. Shell therefore needs repair power on many fronts in order to reduce the damage of all business activities and to set a more sustainable course. If we look at the bigger picture, we see that Shell is doing its best to present themselves well and to convey this to the public. But if you look at last year’s figures, you will see that the company only invests a mere 4% in sustainability. That does not seem convincing proof of a sustainable ambition. The company should invest 20x more (read the Correspondent’s article “Are Shell employees worried about the climate?).)
“Practice what you preach”
There are two ways in which you can get people moving: provide significant pain or provide a significant benefit (in whatever form). I prefer this second solution, because positivity can be a very powerful source of change, with lasting results. In that case, the culture and purpose of the company must be “right”, aligned. They must provide a supportive environment to achieve the environmental goals in the short and long term. For this it is necessary that there are people at the top who are authentic, fully support the goals and know how to get their people on board. The following applies: “manage by example and authenticity” and “practice what you preach”.
If the issues discussed in this blog are at most a reason for companies like Shell to scratch lightly – because it “just itches” locally – a consistency model of mine may be reinforced many times over. Incidentally, it is not my aim to intentionally bash Shell in this blog. It does make clear how these types of companies make choices that are still far too little in line with the sustainable objectives that society is increasingly demanding.
Patrick De Veer
– this blog is a response to a Dutch blog post, therefore some links refer to Dutch websites –