Group Assignment SHELL AND PETRONAS GAS BERHAD Name: IRFAN HANDARU I09002963 LAULIANA WIDYA I08002297 PETER I09003243 SHVETS ELENA I09003362 ENSELM LIM I09003104 LIM TUCK MING I07006195 CHEAH WYETAR I08001595 Section: 1K1 Course Code: MKT408 Course Title: CORPORATE SOCIAL RESPONSIBILITY AND
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Group Assignment
SHELL AND PETRONAS GAS BERHAD
Name: IRFAN HANDARU I09002963
LAULIANA WIDYA I08002297
PETER I09003243
SHVETS ELENA I09003362
ENSELM LIM I09003104
LIM TUCK MING I07006195
CHEAH WYETAR I08001595
Section: 1K1
Course Code: MKT408
Course Title: CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY
Program: BMAUH
Lecturer: HAIDER ALI MALIK
Due Date: 4 APRIL 2011
AKNOWLEDGEMENT
We truly and sincerely like to thank the following people. Mr. Haider and Mr. Norman
ismail.
Mr. Haider is our lecturer for MKT408. It has been a great pleasure to attend to his lecture
every week. During his lectures, he introduced us to all interesting facts about CSR
programmes and the potentially beneficial impact of CSR activities on the companies’
business operations. He also motivated us to make us of self – learning; every week
presentations were done by the groups of students. Throughout these lectures and group
presentations, we got a much clearer pincture of how to prepare the group project.
We also would like to thank Mr. Norman Ismail, who is an Executive (Corporate
Communication) Public Affairs & General Service Dept. We were able to conduct interview
(face – to – face) with him. He helped us to understand the involvement of PETRONAS Gas
Berhad in CSR activities.
The team compromising of Irfan Handaru, Lauliana Widya, Peter, Shvets Elena, Enselm Lim,
Lim Tuck Ming and Cheah Wyetar have contributed through extensive research and hard
work have been able to put together this group project.
MKT408: CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY 2
TABLE OF CONTENTS
1.0 INTRODUCTION 4
2.0 SHELL, BEST CSR PRACTICES WORLDWIDE 5
2.1 COMPANY’S PROFILE 5
2.2 SHELL AND CORPORATE SOCIAL RESPONSIBILITY (CSR) 5
2.2.1 CSR IN THE MARKETPLACE 6
2.2.2 CSR IN THE WORKPLACE 7
2.2.3 CSR IN THE ENVIRONMENT 7
2.2.4 CSR IN THE COMMUNITY 10
3.0 PETRONAS GAS BERHAD, MALAYSIA 11
3.1 COMPANY’S PROFILE 11
3.2 PETRONAS GAS AND CORPORATE SOCIAL RESPONSIBILITY (CSR) 12
3.2.1 CSR IN THE MARKETPLACE 12
3.2.2 CSR IN THE WORKPLACE 15
3.2.3 CSR IN THE ENVIRONMENT 18
3.2.4 CSR IN THE COMMUNITY 19
4.0 COMPARISON OF SHELL AND PETRONAS GAS BERHAD 22
5.0 CONCLUSION AND RECOMMENDATION 25
References 27
Appendix 29
MKT408: CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY 3
1.0 INTRODUCTION
CSR is the process of assessing an organization’s impact on society and evaluating their
responsibilities. CSR begins with an assessment of a business and their customers, suppliers,
environment, communities, and employees (Simply CSR, 2008). CSR is more than care to
environment, or so called “green”, but it is more to consider bigger picture of your internal
business processes to your clients, taking in every step that your business takes during day-to-
day operations (Simply CSR, 2008). Therefore in broaden definition CSR is a long-term
action to business that emphasizing the needs of communities, people and the employers.
CSR offers frameworks for successful activity that is also beneficial with its environment.
CSR is assured to be a basic philosophy for business’ fundamental and integral part of its
operation (Sri Urip, 2010).
In recent years, in Malaysia, the focus of CSR has increased rapidly. In 2006, the Malaysian
government has developed of new frameworks for CSR implementation of CSR initiatives
for the country’s business sector. Petronas Gas Berhad (PGB) is a Malaysian company that
involves in oil and gas resources industry. Petronas has grown to be a big international oil
and gas company with business interests in 35 countries. CSR activities have become an
integral part of its business, where it is stated in ther company’s mission statement. Compared
to SHELL, the company’s involvement in CSR activities is significant, and, it covers all
major CSR dimensions, such as marketplace, workplace, environment and community. And
this has been strongly become company’s business strategy.
With lots of environmental problem issues arise these days, and business enterprises have
become more “environmental-conscious”, this paper is prepared to examine how companies
deal with the environmental problems and using CSR as their strategy to run a better business
and beneficial to its surroundings. Interview has been conducted to PETRONAS’
representative in order to get valid information about PETRONAS recent CSR activities and
how they manage the environmental problems into a better business practice.
MKT408: CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY 4
2.0 SHELL, BEST CSR PRACTICES WORLDWIDE
2.1 COMPANY’S PROFILE
Royal Dutch Shell plc commonly known as Shell, it is a global oil and gas company
headquartered in The Hague, Netherlands and with its registered office at the Shell Centre in
London, United Kingdom. It is the largest energy company and also the second – largest
company in the world measured by revenues, and is one of the six oil and gas "super majors".
It is vertically integrated and is active in every area of the oil and gas industry, including
exploration and production, refining, distribution and marketing, petrochemicals, power
generation and trading. It also has major renewable energy activities, including in biofuels,
hydrogen, solar and wind power (Shell, 2010).
The company operates in over 90 countries; with a total number of 93,000 employees; with
48% of company’s production is natural gas; it produces around 3.3 million barrels of oil
equivalent per day and has 44,000 service stations worldwide. Shell Oil Company, its
subsidiary in the United States, is one of its largest businesses (Shell, 2010).
2.2 SHELL AND CORPORATE SOCIAL RESPONSIBILITY (CSR)
Today, the concept of Corporate Social Responsibility (CSR) turned out to be a vital strategy
for companies to survive in a ruthless market environment. In a condition where markets’
shift and customers’ preferences become more unpredictable and complex, adopting CSR
strategy could be a powerful tool for survival. It is a concept whereby companies integrate
social and environmental concerns in their business operations. Many companies all over the
world are now starting to see the benefit of practicing CSR in their bottom lines. European
countries are now seriously engaged in this concept on different levels and even in
interpretation of how the concept works.
Therefore, Shell believes that people matter to your Company. So, company’s sense of
economic, social and environmental responsibility is reflected in its commitment to meeting
today’s needs without compromising the ability of future generations to meet their needs.
MKT408: CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY 5
Furthermore, in nowadays sustainable development does not just involve environmental
preservation and social concern; it must also take into account economic performance. In
order to sustain a healthy bottom – line, we must exhibit strong environmental and social
performance.
2.2.1 CSR IN THE MARKETPLACE
Shell has been prominent in the development and promotion of CSR activities, having made
significant investments in initiatives that address various social issues. Shell reported
expenditures of USD 96 million in 2006 on business integrity programs, while social
investment topped USD 140 million. In the same year, the company shelled out USD 37
million for employees and contractors' health and safety benefits.
The Summit has been designed to facilitate the development of CSR in different
organizations by providing the right tools for various business needs, helping track new
trends and setting up benchmarks in effective CSR program management. With its global
participation, the event will also help position CSR in the market and highlight how CSR
activities can best contribute to the community and environment, particularly on issues
related to global warming and climate change. Other topics of the Summit are CSR's impact
on business, building credibility through effective CSR reporting, implementing CSR
strategy, and the correlation between CSR and financial performance.
"The long – term economic benefits of investing in CSR initiatives are now widely
appreciated and practiced in different sectors. Top executives and corporations have realized
that creating a culture of social and environmental responsibility within the organization can
enhance credibility, strengthen client loyalty and attract new customers or investors. Shell is
proud to be a leading international figure in this aspect in the Middle East and other parts of
the world. It has been Shell’s mission to continue to innovate and fine tune our CSR
programmes being a concerned and proactive member of the society," said Al Qurashi (nd).
Studies showed that about 94 percent of company executives believe that development of
CSR can deliver real business benefits, even as one of three international executives thinks
that social responsibility initiatives increase sales performance. Also, 71 percent of CEOs
said that they are willing to sacrifice short – term profitability for long – term shareholder
value when implementing sustainability programs.
MKT408: CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY 6
2.2.2 CSR IN THE WORKPLACE
Shell, undoubtedly, has contributed immensely to the economic growth of Nigeria and
contributed to the development of local communities in its areas of operation. As a major
employer of labour, about 12,000 persons (skilled and unskilled) are employed in Shell’s
activities. Perhaps the greatest evidence of Shell’s CSR activities is in its community
development programmes in the local development programmes, Shell contributes to the
development of education. It does so by giving scholarships (primary, post – primary and
university) to local people, building classrooms, providing equipment and sometimes paying
the allowances of post – primary school teachers. For some communities, training in basic
skills – craftsmanship, joinery, mechanics, tailoring, etc – for indigenes is provided or
sponsored by Shell (Shell, nd).
Shell Bulgaria has biannual Shell People Survey to measure employees’ attitude and
satisfaction. There is a policy of open internal re – sourcing that gives opportunity to every
employee to apply for jobs within the Shell Group of Companies for all businesses across the
world, based only on competency requirements (Shell, nd).
There are different programs focused on upgrading individual skills – for example, people
management skills, change management, recognizing and encouraging a culture of
appreciation and enabling individual effectiveness.
Shell Bulgaria offers opportunities for its employees, both from head offices and its retail
network sites for training and development. Shell Bulgaria also implements new and
contemporary ways of working, such as flexible working hours, home based work and virtual
team work.
2.2.3 CSR IN THE ENVIRONMENT
Cleaner Air: It is a known fact that burning fuels cause air pollution. Shell is trying their best
to reduce the emissions of local pollutants from their factory operations and help their
customers to reduce emissions by offering cleaner transport fuels, lubricants and cleaner fuels
and innovative technologies for electricity generation (Shell, nd).
MKT408: CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY 7
Based on improved technology and tougher regulations, the company has managed to reduce
local pollution in the past 20 years. But further reductions are desperately needed in the
future, especially in congested cities of the developing world (Shell, nd).
It is a must to reduce the emissions of local pollutants – like nitrous oxide (NOx), sulphur
dioxide (SO2) and volatile organic compounds (VOCs) – from company’s factory operations.
Shell has invested heavily to improve their facilities, factories, installed cleaner – burning
equipment and SO2 capture technology, for example:
Air monitoring at Motiva Enterprises, LCC in USA (Shell joint venture with Saudi
Refining Inc that refines distributes, and markets oil products in the eastern and
southern USA).
Emissions update if SAPREF refinery at South Africa (50/50 joint venture between
Shell SA Energy and BP Southern Africa) (Shell, nd).
By this action, Shell finally reduced their total SO2 emissions from operations by over 40%,
reduced VOC emissions by over 70% and cut NOx emissions by over 20% between 2000 and
2009 – despite using more energy to refine cleaner lower sulphur fuels (Shell, nd).
Reducing Water Use: The energy sectors is becoming more concerned about water because
water has become scarcer globally. The latest advanced technologies are helping Shell
companies to reduce the amount of water they need to spend in their daily operations (Shell,
nd).
In some of the countries, fresh water is reserved and being used up or polluted faster than
they can be replenished. From now until 2050, the world’s clean water resources will become
limited due to population growth (Shell, nd).
Oil and gas operations use huge quantities of water, leading to issues in water stressed areas.
Growing crops to make biofuels and mining bitumen from oil sands are water intensive. In
Year 2009 Shell operations used around 198 million m3 of fresh water, down from 224
million m3 in 2008 (Shell, nd).
The company is working on how to reduce the water usage through the implementation of
new technologies. For example, Their Pearl GTL plant, which will convert natural gas to
MKT408: CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY 8
liquid products, has been designed to take no fresh water from its arid surroundings (Shell,
nd).
At the SAPREF refinery (Shell share 37.5%) in South Africa, they have been using recycled
household water, and similarly at their Clyde refinery in Australia. Moreover, Shell also has
launched a campaign to conserve water. In the Netherlands, the Schoonebeek project will
reuse municipal wastewater to make steam (Shell, nd).
In Oman, Shell is trying out using reed beds to clean water produced with oil. This action
saves the energy needed to pump water back into the ground and the local community can
reuse the water for crops.
Animal Testing: Shell recognises the dilemma of balancing potential animal suffering and the
need for the testing (needed because of the lack of a reliable alternative to ensure that new
products are safe for people and the environment). Shell is working to reduce the number of
animals used to test their products, to make test methods as humane as possible, and to
replace animal tests wherever possible (Shell, nd).
The basic approach in this area is governed by the 3Rs which is Reduce, Refine and Replace:
Reduce: Reduce the number of animals used in product safety testing, without compromising
safety, working with other companies whenever possible and by sharing of results.
Refine: refine test methods to make them as humane as possible. In tests they commission
mainly use laboratory – bred rats, mice and fish and do not involve cats, dogs or monkeys.
Furthermore, they also commission safety testing only at licensed or accredited research
facilities. Laboratories must also comply with the internationally accepted operating
principles of good laboratory practice.
Replace: Replace animal tests with alternative methods wherever possible. Shell never
commission animal testing where there are other reliable establishing the safety of products.
They belong to several organizations that promote the development of new animal – free
testing methods: for instance, the Fund for the Replacement of Animals in Medical
Experiments in the UK and the Centre for Alternatives to Animal Testing in the USA (Shell,
nd).
MKT408: CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY 9
A team of external experts, assisted by Shell representatives will review and comment on
their animal testing standards, management processes and progress, their aim been to reduce
the amount of animal testing (Shell, nd).
2.2.4 CSR IN THE COMMUNITY
Protecting People from HIV/AIDS: Shell companies not only supply energy, but the company
also address social concerns. The company is genuinely helping communities and at the same
time building its brand awareness amongst them. Therefore, Shell is working to helping
protect people from HIV/AIDS and to slow its spread (Shell, nd).
Shell companies are also taking actions to protect their employees and their customers,
suppliers and contractors from HIV/AIDS, to care for those infected and working with
partners to fight the spread of HIV. Their HIV/AIDS program means that they will not
discriminate against anyone who was affected by HIV/AIDS. Not only that, the program also
includes providing or arranging medical treatment for employees who affected by HIV/AIDS,
as well as participating in education and prevention program for employees and their families
(Shell, nd).
In addition, company look forward to enhance long – term relationships going forward with
relevant local and global organizations or other companies to fight the HIV/AIDS epidemic
together, usually, in the places where their business operations take place (Shell, nd).
Support and Finance in Nigeria: Shell companies in Nigeria support on finance a wide range
of community developments initiatives in the Niger Delta to bring benefits to local
communities where they operate. The most important contribution Shell companies in
Nigeria make to society are through the money they pay to the federal government
(approximately $39 billion in taxes and royalties from 2005 – 2009). These funds can be used
by federal government to promote development in the country, reduce the poverty rate and
support economic growth (Shell, nd).
In year 2009, the operations run by the Shell Petroleum Development Company of Nigeria
(SPDC) contributed a further $57.7 million (Shell share $18 million) to community
development projects focusing on a diversity of activities such as to promote and support
MKT408: CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY 10
small businesses, developing agriculture, skills training, education, healthcare, micro lending
and capacity building (Shell, nd).
Respecting Human Rights: Shell Companies believe in the support of fundamental human
rights in line with the legitimate role of business. Shell’s General Business Principles include
respecting the rights of their employees and to support fundamental human rights in line with
the legitimate role of business. They work to achieve this by training their staff, as well as co
– operating with governments and other organizations (Shell, nd).
Shell look for direct ways to support human rights that relate to their business activities, by
encouraging and helping governments to improve their human rights. For example, Professor
John Ruggie, the UN special representative on business and human rights, as he seeks to put
into practice a framework whereby governments should protect human rights and business
should respect the human rights.
Furthermore, they respect the rights of those working for them in line with the International
Labour Organization Declaration on Fundamental Principles and Rights at Work, including:
• Freedom of Association – employees can join a union wherever permitted by national law
• Freedom from discrimination in the workplace, through equal opportunities.
• Freedom from forced labour
• The abolition of child labour (Shell, nd).
3.0 PETRONAS GAS BERHAD, MALAYSIA
3.1 COMPANY’S PROFILE
PETRONAS or Petroliam Nasional Berhad, was incorporated on 17 August 1974 under the
Companies Act, 1965. It is entirely owned by the Malaysian government and is vested with
the entire ownership and control of the petroleum resources in Malaysia through the
Petroleum Development Act 1974 (PETRONAS Annual Report, 2008).
MKT408: CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY 11