“Unprecedented Change”? What does a corporation in transition look like? – notes from the Shell AGM 2016

9 Jun 2016 james
Charles 'Chad' Holliday - Chairman of Royal Dutch Shell from May 2015
Charles ‘Chad’ Holliday – Chairman of Royal Dutch Shell from May 2015

“Innovation and care are in our DNA”, says the soft female voice-over that accompanies the new promotional video by Shell. We, the attendees at the corporation’s 2016 Annual General Meeting in the Circus Theater, Scheveningen, sit comfortably in our red velvet seats watching the massive screen above the heads of the Shell directors on the podium.

“…it’s about the seven, and soon to be eight, billion people on the planet … about how the absence of energy destroys choices … about prioviding energy but doing so without contributing to the climate change which threatens our wellbeing … we are here to power progress and to provide more energy and cleaner energy solutions.”

After the video has ended the new Chairman of the company Chad Holliday says: “I’m glad we could show you that video, developed for the employees. It puts climate change right at the front of what we’re doing.” Before mounting the podium Chad had done a walkabout in the auditorium, greeting the shareholders. And now he takes another step that I’ve never seen before at any AGM, he personally introduces each of 12 members of the board and gives them a thumbnail biography. There is quite clearly an attempt here to set a new tone in the way that the company faces the shareholders, the NGOs, and the media that are watching. Right from the off there’s evidence of the desire of the CEO Ben van Beurden, to set a different course for the corporation. In this strategy, likely to be played out over the coming years, Shell presents itself as addressing climate change head on. In spite of my habitual scepticism of the oil corporations, I sense that something is different here. I chat with Charlie Kronick, of Greenpeace UK, who’s attended many an AGM, and he has the same feeling.

Logo of Dutch civil society group Follow This - an image of the greening of Shell?
Logo of Dutch civil society group Follow This – an image of the greening of Shell?

As part of the formal business of the meeting, shareholders are being asked to vote upon a special resolution brought by a Dutch civil society group – Follow This. The resolution requests that the Board sets out to turn Shell into a renewable energy company. Mark van Baal, the spokesperson for the group, introduces Agenda Item 19 towards the end of the four-hour meeting: “It is clear that the end of the fossil fuel era is coming. So what are you going to do about it? … Half your company is at risk from becoming a stranded asset … We want you to sell off assets, to stop investing in exploration for oil, to rise to the challenge of new business models and to start investing for the transition into renewables.” Van Baal makes clear that the mission of Follow This is not to vilify the Board of Shell but to encourage it to reinvent the company: “We want to be proud of Shell. You can change the world.”

Mark van Baal, Director of Follow This and Ben van Beurden, CEO of Shell
Mark van Baal, Director of Follow This and Ben van Beurden, CEO of Shell

How van Beurden responds to van Baal, both in the auditorium and afterwards over the buffet lunch, shows that there is a good rapport between these two middle-aged Dutchmen. From the podium van Beurden thanks the members of Follow This for the copious e-mails that they have sent personally to him. Rather than see it as an annoyance or threat, the Shell Stakeholder Relations team behind the AGM has surely decided to welcome the resolution for it allows the company to set out its views on climate change. The demand from Follow This is far too unrealistic for it ever to get passed at the AGM vote, or indeed to get backing from the key institutional shareholders who have the ‘block votes’ which determine the success or failure of any resolution. The Shell team will have known this weeks in advance of the AGM and it allows the company to assert that its own measured transition path is the only one that is in anyway practical. The Follow This initiative sets up a helpful straw man for the Board and it allows them off the hook, for now.

Van Beuden responds to van Baal: “We believe that the population of the world will grow and that with it so will the demand for energy and that this includes oil and gas…”

“There are calls for us to ‘leave it in the ground’, but this will mean rationing energy and it is not for industry to decided who should be allowed to fly and who should not. It is not for us to ration who we supply fuel to at the pumps. We don’t even turn away Greenpeace when they arrive with their ships.”

Van Beurden is adamant in his defence of Shell’s position:

“To get society to Net Zero Emissions will require industry, government and society to work together as never before. This is an unprecedented change.”

He repeatedly urges the audience to read Shell’s new publication, the ‘Better Life with a Healthy Planet: Pathways to Net-Zero Emissions’ report.

Sir Philip Watts - CEO of Shell until 2004
Sir Philip Watts – CEO of Shell until 2004

I flip back through my memories for previous Shell CEOs – of Vosser, van der Veer, Watts and Moody-Stuart. I cannot recall any of them speaking of the company addressing climate change with anything like this passion. The dance around the Follow This resolution does, as I say, help the company, and I find it hard not to feel cynical about the new mantra of being in business to help the world’s energy poor, about the tone of the promotional videos and about the tiny amount of capital invested in Shell’s New Energy division. But I ask myself the question: when Shell faces the existential challenge that it needs to undergo a shift from fossil fuel extraction or die, what will be the symptoms of its uneasy change? Despite the Follow This manoeuver being only theatre, can moments such as these – where individual shareholders (backed from the microphone by Sylvia van Waveren asset manager Robeco, a Dutch institutional shareholders) force a vote on the complete transformation of the company – be seen as the outward manifestations of a deep structural change? The resolution failed to pass of course – by 97.36% against versus 2.64% for – but in twenty years of studying Shell and BP I’ve never seen such a bold proposal, misguided or not, be tabled.

My cynicism about the potential for Shell to change is strongly influenced by watching previous professions from corporations that they are undergoing profound change. In the late 1990s, John Browne, CEO of BP, signalled a desire to change the company. In July 2000, Browne launched the ‘Beyond Petroleum’ campaign – with the new strapline and logo – alongside BP’s internal carbon emissions trading system, and the push into renewable energy that saw the company become the world’s largest manufacturer of solar panels. But the non-hydrocarbon arm of the company never became more than 1% of BP’s total annual turnover, and within a decade of its launch the ‘Beyond Petroleum’ initiative was quietly being dropped whilst the BP Alternative Energy division was shut down and solar plants sold off. In parallel to BP, Shell also invested heavily in solar and wind. But that too never became more than a speck in the company’s portfolio. (CEO Sir Phil Watts once described it at an investors meeting as being “Smaller than a pencil dot in the company’s accounts”) So why should things be any different this time around?

Perhaps its because when BP launched ‘Beyond Petroleum’, and Shell effectively tried to shadow it, both companies were in very strong capital and political positions, so the move was an ‘assertive’ or ‘aggressive’ act through which they built their ‘social license to operate’ and through which they occupied new space as the creators of ‘the future’? Now Shell is in a relatively weak capital and political position with the low oil price, the aftermath of the Paris Agreement and a very active civil society movement against oil. (And BP is in an even weaker position.) So perhaps this move is now a ‘defensive’ act. Possibly?

Othneil Art Oomittuk - Inupiaq artist from Point Hope, Alaska
Othneil Art Oomittuk – Inupiaq artist from Point Hope, Alaska

Earlier in the meeting Othneil Art Oomittuk rises and speaks to the Board through the microphone. An Inupiaq artist from Point Hope in Alaska he thanks Shell for deciding not to proceed with its plans to drill in the Arctic Ocean: “It is a very scary thought that my culture could be erased by an oil spill. The place I grew up is the longest continuously inhabited community in North America, occupied since before the birth of Christ. If there had been an oil spill we would have lost the first people of the Arctic”. His statement highlights that Shell has drawn back from the Arctic. A year ago van Beurden had asserted the company’s determination to press ahead with drilling in the frozen Chukchi Sea, even in the face of massive international opposition. Now Shell has sold all its leases except the Berger Prospect and, in response to Othneil’s question, van Beurden explains that the company has no intention of drilling on the Berger and will only return to the Arctic Seas to pick up the five anchors that were left on the seabed last summer. What an acute contrast to the AGM twelve months ago when the company was beseiged over the Arctic. With that battle gone, perhaps the Board is using the sense of a hiatus to set the new tone?

Shell's Carmon Creek tar sands project in Alberta, Canada - now abandoned
Shell’s Carmon Creek tar sands project in Alberta, Canada – now abandoned

Charlie Kronick stands to the mic. He reminds the Board that in October 2015 Shell had taken the highly unusual step of cancelling an oil project long after the final investment decision had been taken, for it decided to abandon its Carmon Creek 80,000 barrels a day tar sands project. He enquires as to whether other Shell ventures in the Albertan heavy oil province would be halted, especially in the light of the successful campaign of resistance against the construction of the Keystone XL tar sands export pipeline. Van Beurden’s response is remarkable in being muted. Gone is the long held assertiveness of Shell that they will carry out these tar sands projects whatever the opposition. For a decade Shell and other companies have talked up Canada as being ‘the next Saudi Arabia’, so vast is the promise of its (heavy) oil reserves. Now van Beurden is no longer trumpeting the company’s tar sands assets, and tellingly doesn’t even refer to them as ‘projects’ but rather as ‘ideas’. What were once presented as ‘sure things’ and now being mooted as ‘might have beens’.

Is the slowing down of its production in Alberta an example of how structural shift in Shell is – or would – take place? Is it, together with the US Arctic decision, part of a piecemeal drawing back from the frontiers of oil & gas exploration, partly driven by the historically low oil price but also hinting at a new lack of confidence?

Monique Verdin - photographer & activist, United Houma Nation, Louisiana, USA
Monique Verdin – photographer & activist, United Houma Nation, Louisiana, USA

“Shell has been a pioneer of deepwater exploration and carbon colonisation in the Gulf of Mexico for a long time.” Monique Verdin from Louisiana speaks with dignified force on the impact of oil & gas extraction in the Gulf of Mexico especially on her peoples, the United Houma Nation. She explains the seas are under threat from spills (such as the 13 mile wide slick from a Shell pipeline on 12th May 2016 at the Glider Field ninety-odd miles off the coast) and the land is under attack from erosion and flooding caused by energy infrastructure and climate change. The communities who live by the beaches and the bayous, some of the poorest in the USA, are being forced to retreat to higher ground. She concludes:

“If Shell is wanting to reduce carbon emissions, one way to do that is to abstain from participating in the bidding for any new leases in the Gulf of Mexico. Climate science has warned us, we must keep it in the ground.”

Monique is part of a movement in the States along the Gulf Coast to stop the granting of new leases by the US Federal Government, licenses which would entitle companies to explore for oil & gas beneath the seabed of the Gulf of Mexico. There are currently 4,300 active leases, but the campaign aims to stop the sale of more drilling rights. The demand ‘No New Leases’ is a manifestation of the strength and confidence of this resistance movement at the heart of the USA, a state which has arguably been the nation most wedded to oil for the past 150 years. Is this part of what Ben van Beurden unwittingly means when he talks about the ‘unprecedented change’? Is this also part of what that change does – or will – look like?

Henri Deterding, Chairman of Royal Dutch Shell who signed the oil concession for all of Nigeria in 1936
Henri Deterding, Chairman of Royal Dutch Shell who signed the oil concession for all of Nigeria in 1936

When my turn comes to speak, I draw attention to the situation in the Niger Delta. There are only nine days to go before the long awaited United Nations programme to Clean Up in Ogoniland is due to start. I explain that Platform and our friends and allies in Nigeria are looking forward to the commencement of this intiative after nearly five years of delay. However it will take far more than this one scheme to repair the damage that Shell, in collaboration with other oil companies, has wreaked on the Niger Delta.

Shell started work in the Delta soon after 1936, having signed in London a concession with the British Foreign & Imperial Office to drill across the whole of Nigeria (possibly the largest lease ever granted). Thus the company has had an environmental and social impact on the lands and peoples of the Ogoni, Ibibio, Ijaw, Igbo, Edo, Andoni, Nembe, Ikwere, Isoko, Uruhobo, Ilaje and Itsekiri for eigthy years. I remind the Board that the promotional video that had opened the AGM asserted that ‘care and innvovation’ are ‘in the DNA of the company’, and state that tragically so too is the destruction of the Delta. This process has gone on so long, so unrelentingly, that it has twisted the body of the corporation. It will take not just a few years, but decades, for the Delta to be remediated from the damage that has been done. It will take a similar length of time for the company to deal with the impact of this legacy upon itself.

Celestine Akpobari - activist in Port Harcourt, Nigeria central to the campaign to get the Ogoni Clean Up
Celestine Akpobari – activist in Port Harcourt, Nigeria central to the campaign to get the Ogoni Clean Up

Perhaps the Ogoni Clean Up is what deep structural change in Shell will – does – look like? The corporation recognising the damage that has been done, and attempting to clean it up – not only in the Delta, but also in Alaska, in Alberta, in the Gulf of Mexico and indeed anywhere that it has extracted fossil fuels in order to generate return on capital invested. Might this be the shape of the future of a corporation like Shell? If its shareholders refuse to vote for it to turn into a renewables company, might the Board be forced to evolve Shell into an institution of reparations? Or maybe the ‘unprecedented change’ within civil society will force it to do both?

Thanks to: Suzanne Dhaliwal, Monique Verdin & Charlie Kronick

Focus Areas