A Full Service Global Management Consulting and Executive Training Firm
by Kent F. Moors, Ph.D.
Executive Managing Partner:
Risk Management Associates, International, LLP
In 1995, international crude oil and natural gas giant Royal Dutch/Shell was roasted by environmentalists and the media for its decision to tow the outmoded Brent Spa into the North Sea and sink it. The company had conducted extensive analysis which concluded that the sinking was both the most environmentally friendly approach and the most cost effective. Shell requested and received the permission of the both the British and Norwegian governmental authorities for the approach.
Unfortunately, the company neglected to consider that other interested parties may have an impact. The outraged environmental community started a very public and high-profile attack. The Greenpeace NGO led the effort to portray Shell as an uncaring multinational interested only in maintaining profit. That international television also broadcast video of Shell using water canon to prevent Greenpeace activists from boarding the platform did not help with the corporate image.
Public interest groups organized boycotts of Shell products in several European countries, especially an effective nationwide effort n Germany. The boycotts drew the attention of local politicians and national parliaments, several members of which saw an opportunity to enhance their image by supporting what was characterized as the general community against the ruthless corporation.
After several months of such confrontation, Shell relented and opted for a more expensive remedy. The Brent Spa was towed into shore, ultimately to be cut up for scrap. Most of that scrap was used to construct a Norwegian dock. The company exercised good judgment initially, recognizing that the plan without environmental study and governmental regulatory support would prove difficult. But its risk management approach did not consider broader social impact. The plan provided opponents a ready opportunity to portray a corporation putting share holder interests (least costly solution) over the interests of broader social stake holders. Shell, by the way, has learned a very expensive lesson. It is now regarded as an international leader in emphasizing CSR (corporate social responsibility) issues. Greenpeace representatives are even sitting on corporate committees. The company recognizes that its bottom line remains heavily dependent upon consumer sales. And that requires a reputational risk management approach that provides for inclusion of outside input. A company that is perceived as being socially responsible has greater leverage in dealing with a crisis to its reputational integrity.