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Capitalism in Synchronicity with Climate Change?

[fa icon="calendar'] Feb 4, 2014 9:02:38 AM / by Carol Pierson Holding

By Carol Pierson Holding

Last Thursday, environmentalists won a major victory when Royal Dutch Shell halted oil ice photodrilling operations in the Chukchi Sea. An environmental coalition successfully sued to reverse the U.S. government’s 2008 decision that opened Alaska to drilling. The decision was only a partial victory, but it was enough to stop Shell’s operation at least through 2014.

Despite the possibility of a reversal, environmentalists are celebrating. In the week after the decision was handed down, Shell determined that drilling in Alaska might not make economic sense after all. At the same time that Shell’s Alaskan equipment failures have cost the company billions, the US market for natural gas and crude markets remain low and refinery margins are being squeezed. Shell spent $2.1 billion investing in drilling licenses and billions more in exploration and legal costs. The company has already written off $1 billion for its Alaskan adventure.

Alaska isn’t the only place Shell has encountered the double rub of environmental adversaries and falling profit potential. Shell’s previous CEO spent $26 billion buying up U.S. shale properties. Now, $2 billion has to be written off to reflect their drop in value.

After Shell announced it would cut spending and sell more assets, its stockholders reacted positively, pushing shares up 2%. As reported in the Seattle Times, Investec analyst Neill Morton predicted further writedowns for Shell in North America.

Still, environmentalists would love to have absolute assurance that Alaska is safe from drilling. "President Obama now has the chance to do right by the Arctic and the planet by keeping oil drilling out of the Chukchi Sea," said Earthjustice attorney Eric Grafe, who represented the groups.

Is Earthjustice realistic? President Obama seems to be positioning himself as the environmental champion. His State of the Union address has been praised for his support of climate change, and his most stirring statement on the subject has been widely quoted: “Climate change is a fact. And when our children's children look us in the eye and ask if we did all we could to leave them a safer, more stable world, with new sources of energy, I want us to be able to say yes, we did.”

However, one of Obama’s achievements to win bi-partisan praise has been to bring America close to energy independence. He’s opened more areas to drilling than his predecessor. And though his address made him sound like a climate change warrior, he failed to mention the Keystone Pipeline decision.

On Friday, we found out why, when his State Department announced its findings that the pipeline, despite releasing between 147 and 168 million metric tons of greenhouse gas emissions annually, would not “significantly increase carbon in the atmosphere.”

Predictions are that Obama will most likely allow the Keystone Pipeline to go through.

Why then would Earthjustice believe that Obama will stop drilling in Alaska?

A far more likely scenario is that other drilling projects in Alaska will be withdrawn for the same reason that Shell pulled out. Operational costs are high and the appetite for fossil fuels is falling, at least in the U.S. Investors are losing their passion for the industry, accusing the extraction industries of lacking capital discipline — investing in new projects even when it’s clear they’re not going to pay out.

And environmentalists are lining up to keep the pressure on, inflicting legal and reputational costs. The next wave of Keystone Pipeline protests starts Monday night. The fossil fuel divestment movement continues to gain support. Just last week, 17 foundations with investments of almost $2 billion joined the movement, citing portfolio risks posed by climate change. A juggernaut of moral imperative has been released, creating a lever that sometimes works in synchronicity with business and investors and definitely leads the government.

Photo courtesy of NASA/Kathryn Hansen via Flickr.

Carol2Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 8,900+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 8,900+ companies from 135 industries in 104 countries. By aggregating and normalizing the information from 300+ data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.


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[fa icon="comment"] 0 Comments posted in Alaska, CSR, energy independence, environmentalists, extraction industries, Uncategorized, Royal Dutch Shell, sustainability, U.S. shale, investment, 17 foundations, Carol Pierson Holding, Chukchi Sea, CSRHub, Earthjustice, Investec, Keystone Pipeline, Neill Morton, oil drilling

Shell’s Lawsuit Against Environmental Organizations Invites Disaster

[fa icon="calendar'] Mar 20, 2012 9:21:00 AM / by Carol Pierson Holding

By Carol Pierson Holding

Shell is suing 12 environmental organizations to preempt legal challenges to exploration in the Arctic Ocean. The environmental groups include, among others, the Center for Biological Diversity, the National Audubon Society, Oceana (full disclosure: Oceana is a source for CSRHub ratings) and the Sierra Club. Crazy isn’t it, Shell, a $378 billion company, attacking the National Audubon Society? It’s a bully image that can only hurt, and Shell should know better because it’s happened to them over and over again.

ShellTwenty years after the fact, people are still talking about Brent Spar, the 14,500 ton North Sea oil platform Shell was all set to dump into the Atlantic Ocean until protests inspired by Greenpeace ignited a citizen fury so intense that according to one poll, the oil industry’s public acceptance declined from 70 percent in the 1970s to 32 percent in 1996 post-Brent Spar. The protests hurt sales too: Shell gas stations lost sales, as high as 50 percent in Germany.

Another example: in 2005, Shell took a serious hit to its reputation when it overstated its oil reserves, screwing its shareholders and government allies, and was forced to restructure. New management began addressing its environmental mistakes with gusto. CEO James Smith led the company to invest in renewable energy sources such as plant-based biofuels and offshore wind energy, embodying a caring, environmentally friendly image. (Shell has since pulled out of all alternative energy projects except biofuels).

Under Smith’s watch, Shell also cleaned up its legal messes. In 2009, the company settled legal cases in Niger stemming from the 7,000 oil leaks from pipes installed starting in the 1960s. The pipes had life-spans of only 20 to 25 years. Shell also settled a case charging them with collaborating with the Niger military to kill environmental activists who led the protests.

That same year, Shell settled a case in California over leaks in gas storage tanks at its stations. Shell had “disregarded the state's underground fuel storage and hazardous waste laws,” as California Attorney General Jerry Brown stated.

So confident was Shell that it had cleaned up its image that when the BP oil spill happened in April 2010, Shell launched an aggressive campaign to claim the alternative energy positioning once owned by BP/Beyond Petroleum. As reported in Ad Age:

“The effort touts the dawn of a future that will be powered by new and multiple energy sources and cleaner fossil fuels that Shell is ‘unlocking.’ It also expresses the notion the world will soon be on the road to sustainable mobility and that Shell is ‘ready to help tackle the challenges of the new energy future.’"

With this new lawsuit against environmental organizations, Shell believes that it has found a way at last to forestall consumer activism. Really? The Arctic has become a symbol of unspoiled nature. Nature series run specials on the Arctic. Polar bears are beloved.

Greenpeace has already geared up to repeat its success with Brent Spar.

What led Shell on this foolhardy course? Perhaps it is well aware of its vulnerabilities. As noted by Oceana’s advisor Whit Sheard, who last month filed a challenge to Shell’s exploration plan, “This cleanup plan, just like their previous cleanup plans, is woefully inadequate, based on technology that has never been proven.”

The weirdest thing is that Shell is known for its ability to forecast correctly. It was the “only oil company to anticipate both 1973’s oil-price boom and 1986’s bust.” Its scenario-planning group famously predicted the collapse of the Soviet Union and the opening of its oil fields. How can the company continue to be so myopic when it comes to assessing consumer power?

One guess is that its legal department doesn’t talk to its brand reputation group. Too bad for Shell. Even the legal profession has its environmental activists and climate justice organizations are on the case. As Jennifer Marlow, Co-founder of the Three Degrees Project says, “Shell insulated itself from the oil price shocks in the 70s by planning ahead and outsmarting its competitors. Now, it's applying the same anticipatory tactics to prevent public interest environmental groups from obstructing ‘justice’ at some point in the future.  While future thinking helped Shell gain the market during the oil crisis, the same tactics won't work here.”

Even if the Alaskan courts do rule in Shell’s favor, it is the court of public opinion that wields the most power, as Shell will have to learn all over again.

Photo published under Creative Commons license. Courtesy of Longhorndave on Flickr.

Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 5,000 companies worldwide. Carol holds degrees from Smith College and Harvard University.


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[fa icon="comment"] 0 Comments posted in Arctic drilling, environmental pollution, Shell, Uncategorized, Brent Spar, Carol Pierson Holding, corporate brand, corporate PR, corporate reputation, oil drilling

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