Can Shell survive reserves affair?

Last week, the FSA imposed the largest fine in its history on Shell for market abuse over the oil reserves scandal.

In 1997, advertising legend Maurice Saatchi was called in by the Royal Dutch/Shell Group to help it improve its image. Saatchi produced a number of adman slogans – but among all the hyperbole he said one very wise thing: ‘No communication can work effectively unless backed by real action.’

The years that followed Saatchi’s brief involvement with Shell were characterised by a plethora of comms initiatives – but also by actions at the top that have mortally wounded its reputation.

Quasi-ideological values

Society’s expectation of what is required of businesses generally (and multinationals in particular) underwent a major change in the last two decades of the 20th century, and Shell was not alone in neither fully anticipating these changes nor in developing a strategy to cope with them. Shell has always been essentially unideological, which is why when it was persuaded of the need to create a set of quasi-ideological values and business principles, it struggled.

An organisation run by technocrats (for whom the processing of a series of inputs in a structured way always leads to entirely predictable outputs) was suddenly confronted by new stakeholders. The NGOs were active and the media relished stories about the insensitivity or amorality of big business. It became clear that firms operating in the energy sector were going to have to act if they were to protect reputations.

Shell was initially slow to move. The group’s technological imperative was so powerful that there was a presumption that decision making would lead always to the best technical/environmental solution. And there was also a strong belief within Shell that, because it had operated in more than 100 countries for over 100 years, it was culturally understanding and caring.

n 1995, two events blew Shell’s presumptions of superiority out of the water. The extensive protests against Shell’s plans to dump redundant oil platform Brent Spar in the North Atlantic caused much heart-searching. Around the same time, in Nigeria, the political activist Ken Saro-Wiwa implicated Shell during his ‘treason’ trial: ‘The ecological war that [Shell] has waged… against the Ogoni people will… be punished.’ When he was executed, some of the global condemnation of it was aimed at Shell.

In 1996/97, in response to Brent Spar and Nigeria, the then group chairman Cor Herkstroter became obsessed with the need to protect Shell from the type of vitriolic criticism it was then receiving. It was at this time that Saatchi became involved in the project. He had befriended Herkstroter and persuaded him that Shell needed more ‘value-based’ communications.

Saatchi told Shell that it needed to define its ‘core purpose’ as a corporation and, under his guidance, senior management was convinced that it should define its corporate raison d’être as being ‘to help people build a better world’. Shell staff were told that this ‘core purpose’ would be a ‘foundation for all our activities and communications’.

By the end of 1997, this was launched externally, along with a declaration of Shell’s belief ‘that the future is a better place’. But although there was a need for a moral and behavioural underpinning for the business, surely it was not credible to claim that Shell’s principal purpose was anything other than the pursuit of growth, reliable future profit streams and the need to offer shareholders good returns. To do this with due regard for all stakeholders was desirable, admirable and necessary. But to claim that its core purpose was to ‘help people build a better world’ made it sound like the United Nations.

Reputation enhancement

To manage the reputation enhancement process, many professionals were externally recruited to produce both the multimedia communications material and a shelf-bending series of manuals for employees. Shell was soon to launch a series of ads and other comms that were arguably deceptive.

For example, by the 1990s, Shell was dipping a toe in the water of non-traditional energy (wind, solar and forestry), a business for which it coined the descriptor ‘renewables’. Much of the advertising and other communications launched in the reputation campaign focused on this area despite the fact that ‘renewables’ was a very small business.

A raft of other comms initiatives were also launched – including the publication of the ‘Shell Report’, which itemised how Shell said that it contributed to sustainable development. Shell introduced a positioning that it had a ‘triple bottom line’, which included the need to take account of the social and environmental aspects of business as well as the economic consequences. There was also the publication of a seemingly unequivocal commitment to human rights – but where such a commitment might be frowned upon (such as in Saudi Arabia) it was not promoted at all.

The intellectual rigour with which the reputation management systems and processes were developed was exemplary and a huge effort was put into this attempt to secure the moral high ground – but other forces were at work that would ultimately make such an ambition unattainable.

Shell managers’ primary challenges were not concerned with Shell’s reputation but with the more prosaic need to achieve short-term business targets. Although the comms rhetoric said differently, the reality was that Shell’s actual behaviour, particularly in the era of Phil Watts’s chairmanship, was as single-mindedly commercial as ever.

This became suddenly and shockingly clear in early 2004 when it was revealed not only that Shell had been systematically overstating its oil reserves for some time but that senior execs recognised that they had been false. Heads rolled – including that of Watts – and the resultant crisis was far greater than anything in the 1990s. Saatchi had warned that comms need to be backed up by real action – but that warning was ignored when the going got tough.

The reserves issue has shown beyond doubt that there was no connection between the reputation enhancement and comms activity on the one hand, and the reality of top management behaviour on the other. While the Financial Services Authority’s £17m fine will be only a pinprick on its balance sheet, the reputation of Shell has been destroyed by hypocrisy, mendacity and deceit. Whether we will ever be able to be ‘sure of Shell’ again is very doubtful indeed.

Paddy Briggs retired from Shell in 2002 after 37 years. He is writing a book, The Changing Face of Shell, to be published in 2005, about the group and its public image.

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