Memorandum submitted by the Royal Dutch/Shell
Group of Companies
1.1 Royal Dutch/Shell Group, operating in
135 countries, has adopted "contributing to sustainable development"
as one of its core business principles. This means that we will
not only produce efficient and affordable supplies of energy for
heating, light and mobility, and provide the petrochemicals products
and solutions that consumers choose, but we will assess the economic,
environmental and social impact of these activities. By integrating
sustainable development considerations into our key business processes
and maintaining a dialogue with key stakeholders, we seek to create
business value through responsible business conduct.
1.2 Key considerations are:
Shell views the way in which we manage
our business and work with stakeholders as key to achieving success,
while providing a return to shareholders who have invested in
The provision of energy is a major
demand of people in developing countries to provide the basics
of life and to enable development. To provide these products and
services sustainably is a challenge both for developing countries
themselves and the companies that operate within them. Frequently
the demand for affordable energy in the short term can be seen
as a higher national priority than wider environmental or social
We are committed to reducing our
own greenhouse gas emissions and to supporting our customers,
partners and suppliers to reduce theirs by offering fuel alternatives
and by developing new technologies. We also wish to progress projects
under the Kyoto Protocol's Clean Development Mechanism, which
provides credits for those involved in carbon-saving projects
in the developing world.
Substituting gas for coal and other
high carbon sources, which would otherwise continue to play a
major part in energy provision in developing countries, can significantly
reduce greenhouse gas emissions while meeting the demands for
affordable energy. For example, the Shell-led Malampaya gas to
power project inaugurated in October 2001, will produce 25 per
cent of the Phillippines' power, reducing CO2 emissions,
generating substantial revenue for the Philippines and reducing
the country's dependence on imported energy supplies, thereby
saving precious foreign currency previously spent on energy imports.
In the future the Clean Development Mechanism could assist in
pushing these technologies in developing countries.
As the demand for lower-carbon energy
sources and cleaner products grows, we aim to combine our technical
and commercial experience with innovative technologies to aid
the transition from petroleum-based fuels to a portfolio of other
2.1 Business can play a vital role in building
a better future for more of the world's growing populations. The
Shell Group continues to make a substantial contribution to local
economic prosperity through operations in over 135 countries,
employing 90,000 people, the majority of whom are local people,
and through the use of local contractors and suppliers.
2.2 Our operations include investing in
more sustainable technologies that can contribute to sustainable
development and lowering greenhouse gas emissions. Examples include:
Shell Renewables bringing renewable power to remote or non-grid
supplied communities in a sustainable way, at a price our customers
can afford (we currently have schemes in Indonesia, Bolivia, South
Africa and Sri Lanka and are reviewing other business opportunities);
investigating opportunities for geothermal power in El Salvador
and coal gasification in China (a technology which will provide
clean and cost effective feedstock for a chemical plant and could
also be applied to the energy and chemicals fields).
2.3 The heart of our contribution to sustainable
development is the way in which we manage our business based on
our core values of honesty, integrity and respect for people everywhere.
These are embodied in the Shell General Business Principles, which
govern all our business affairs and describe the behaviour expected
of every employee in every Shell company in the conduct of its
2.4 An important part of building confidence
with stakeholders in our values and performance, through openness
and transparency, is the publication of reliable information,
in our annual Shell Report.
These same values led to the establishment of the Shell Foundation
in June 2000, a registered charity, which contributes funds and
expertise to projects that particularly tackle social and environmental
challenges related to energy access and use (page 22 of the Shell
Report). Its work complements the local social investments of
Shell companies around the world and is a further step in Shell's
work to integrate the principles of sustainable development in
all its activities.
2.5 Our actions to reduce our own greenhouse
gas emissions (with a target of reducing 2002 CO2 emissions
by 10 per cent of 1990 levels) include:
Introduction of a strategy to ensure
that our future investments will be robust in a world which will
increasingly reduce carbon use, by considering the effect of a
possible carbon cost in our investment decisions for new projects
that could produce emissions over 100,000 tonnes a year of CO2.
Development of the use of market
mechanisms. In 2000 we introduced a pilot internal emissions trading
system (STEPSShell Tradable Emission Permits Scheme), covering
some two-thirds of Group Annex 1 Country emissions. The pilot
has raised the profile and added to the understanding of emissions
trading within the Group and has given Shell the opportunity of
contributing its experience to the various schemes under development,
including the UK Emissions Trading Scheme (UKETS). STEPS has been
established in tandem with our 2002 greenhouse gas target. More
recently, we have started the process of externalising the use
of market mechanisms, through the creation of a specialist Environmental
Products Trading Team within Shell Trading. This team has global
responsibility for the use of these new mechanisms in order to
maximise our capability in this emerging field.
2.6 Governments can support action on climate
change in a number of ways, namely:
Work with the grain of energy markets
and facilitate the longer term transition of energy markets.
Rely wherever possible on international
market mechanisms like emissions trading, minimizing administrative
burdens and transaction costs and protect companies that take
Take a consistent international approach
to addressing this global issue, including making a start at engaging
developing countries. This is critical to avoiding competitive
distortions, containing costs and addressing the needs for growing
energy use in developing countries.
Encourage the development and introduction
of new energy technologies.
Establish a clear and stable policy
regime to allow decisions on long term investments.
2.7 Looking to the future, while longer-term
renewables may offer an emissions-free alternative to fossil fuels
we do not believe it will be possible, or desirable from an overall
sustainable development viewpoint (balancing economic growth,
social development and environmental objectives), to phase out
fossil fuels completely for many decades. Nonetheless technological
advances will continue to make fossil fuels cleaner while alternatives
are developed. Eventually concerns over resource scarcity together
with social and personal priorities, will also drive the mix of
fossil and other fuels over such a period.
2.8 In terms of power generation and heat,
gas is particularly important in offering an environmentally and
economically attractive bridge towards a future where renewable
sources of energy can begin to play a major role in energy supply.
Governments should ensure the benefits of gas are properly recognized
in evolving international policies.
2.9 Oil will remain crucial for transportation
needs in particular, until reliable, convenient and cost competitive
alternatives are developed, for example hydrogen. Through Shell
Hydrogen we are already investing in technological routes to this
goal of a low carbon economy with the economic and environmental
benefits this could bring the developing world.
2.10 Mobility, already poor for most developing
world urban dwellers is declining. Pollution, much of it transport-related,
is in some areas at extremely high levels and is growing worse
in the developing world. Through the World Business Council for
Sustainable Development, Shell is one of a number of companies
to sponsor their Sustainable Mobility Project, which aims to develop
a global vision of sustainable mobility and to suggest possible
pathways towards that goal, and we hope ultimately firm actions.
3.1 We believe therefore that as a business,
Shell can and is making an important global contribution to sustainable
development. However, there is a range of external barriers to
successful private sector involvement in developing economies.
In particular, these barriers are associated with poverty: weak
governance, inappropriate legal and policy frameworks to encourage
private sector investment, and limited developmental capacity.
Governments, donors and civil society, have historically tackled
these challenges but because these issues affect us as a business,
we have also sought to tackle them in a variety of ways. For example
we have advocated change, operating in accordance with our Business
Principles, by working with communities to design and implement
social development programmes, and through the efforts of the
Shell Foundation to increasing access by the poor to energy services.
3.2 Partnership is crucial to tackling these
challenges to sustainable development. While we have already established
partnerships with a range of stakeholders in different countries,
we believe that stronger, wider and mutually benefiical partnerships
between business, governments, inter-governmental agencies, civil
society and donors will need to be established if we are all to
succeed in our efforts to promote sustainable development. A key
challenge for us all is to explore, develop and succeed in creating
such new partnerships.
Royal Dutch/Shell Group of Companies
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