Good neighbours are good for business

There are good business reasons why companies should work on improving their social performance.

In June 1769 the potter Josiah Wedgewood opened a new factory, which he called Etruria, near Stoke-on-Trent. Mr Wedgewood’s enterprise brought together the latest technology, classical cultural ideas and a radical view of social responsibility towards his workforce: alongside the factory, he built a village where his workers could live in decent conditions. More than a century later, George Cadbury developed social housing for his chocolate factory workers and their families in the village of Bourneville.

Both men believed that the provision of social welfare was good not only for the workforce and the community, but ultimately good for business. They were pioneers of what we now call corporate social responsibility (CSR), or social performance.

Shell’s approach has developed from that tradition, although in the modern age, the principle is based not on paternalism, but on partnership and responsibility. It is not simply a question of looking after our own employees, but about managing the effects of our business on the communities and societies in which we operate. And a fundamental element of sustainable development is to manage them both in the immediate and the longer term.

While many of those impacts are positive, there are potential negatives, especially at the local level where communities can be directly affected by our operations. So it is important to get it right.

Meeting the needs and demands of all our stakeholders can be tricky in a climate where society’s expectations of where corporate responsibility begins and ends are constantly evolving. Add to this the fact that all communities are essentially unique. There is, however, one principle that holds true in all cases and which guides our approach: that being a good neighbour is good for business.

So, how to be a good neighbour? If we think of neighbouring communities in the same way we think of our domestic neighbours, then a rational approach emerges. You would not presume to paint your neighbour’s front door blue as a gesture of friendship while he was out at work. And equally, you might ask your neighbour what colour to paint your own front door before making your final choice.

This exercise in door painting exemplifies our approach. First, finding out what our neighbours think and want before presuming to act in their best interests. Second, listening to what they think about how we run our business and factoring that into our decisions. To put it simply: listen and respond.

We have learnt from experience that this rule translates into better business decisions and better project design.

Shell Canada has a 60% stake in the Athabasca Oil Sands Project, a large-scale surface mining operation that supplies almost 10% of Canada’s oil requirements. The mine is located near the native North American community of Fort McKay, whose aboriginal ancestors inhabited this area for 8,000 years as part of their seasonal hunting, fishing and gathering cycles. Shell worked closely with the community from the start, giving it full access to project development plans and seeking its feedback on the projected social and environmental impacts of the project.

Early engagement with local stakeholders in the development of this project has paid great dividends both for Shell and for the community. Since production began in 2002, over 600 permanent employees have been hired to work at the mine and over 70% of the people hired for these positions are from Alberta. More than $50 million in contracts has been awarded to aboriginal businesses and this number continues to rise.

Creating economic opportunity for the local population and, at the same time, providing a trained workforce for our own operations aligns both our interests. It is a 21st century partnership, rather than the paternalism of the industrial age. But initiatives do not have to be on a large scale to be of value. Where we face legal issues, on community impacts for instance, we work hard to provide clearer information, via dialogue, setting up hotlines and so on. The approach seems to work, and it reduces costs for all concerned.

Getting it right is not always straightforward and sometimes seems impossible. And those cases where we have not got it right have been well documented. But acting out of mutual self-interest can deliver real value to companies as well as to communities–reducing costs, increasing operational efficiency and reducing wear and tear on corporate reputation.

Shell also works hard to get it right inside the company as well as in the community. Creating a workforce that mirrors the communities in which Shell operates helps us to better understand and build relationships within the communities, reducing the negative and optimising the positive economic and social impact of Shell's presence. About 90% of our operations are carrying out improvement plans and monitoring their performance in line with a diversity and inclusiveness standard. This helps us set up an environment that elicits the very best from our employees. For instance, we have run Women's Career Development Programmes in Shell, and high profile external events on women in business in the Netherlands, the UK and the US.

The whole tenor of the recent debate around corporate social responsibility has been focused on the obligations and responsibilities of companies, which is how it should be in a world where commercial enterprise has such significant effects on communities. But there is another conversation to be had about CSR, which I think for many companies will ultimately prove more persuasive. And that is that being a good neighbour is good for business.

©OECD Observer No 248, March 2005

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