Sustainable Development and Management

Test $1$: Case Study

December $12,2024$

Source: Hahn, R$$diger$.$ Sustainability Management: Global Perspectives on Concepts, Instruments, and Stakeholders.

Sustainability in business $11$: Strategic stakeholder management at Shell

Philippines

In $2002,$ the Malampaya Deep Water Gas$-$to$-$Power Project of Shell Philippines

Exploration $($SPEX$),$ Chevron Texaco, and the Philippine National Oil Company began its

operation. The plans to extract natural gas off the coast of Palawan Island had an

impact on local fishermen and pearl divers and part of the local population had to be

relocated. SPEX was responsible for bringing the project to completion and for its

subsequent operation. In $1996,$ two years ahead of construction, SPEX engaged with

the affected local stakeholders and integrated them throughout the project also after

its completion. The company organized consultations, public events, and met with

opinion leaders of the various interest groups. The local population was included in

planning the environmental management of the facility, and together with SPEX they

developed a pipeline route with the least possible impact on the natural environment.

Those parts of the population that had to be relocated or had suffered from loss of

business were compensated. The company also tried to establish perspectives for the

population by offering microcredits or by educating and training locals so that they

could engage in the development of the project. Furthermore, the training aimed at

offering job perspectives once the facility started operating.

The entire project was a USD $4\mathrm{.}5$ billion joint venture. The various activities to consult

and engage with the local stakeholder groups cost about USD $6$ million. However, the

company calculated that the benefits far outweigh the costs as it resulted in cost

savings of USD $50$ to $72$ million due to avoided penalties, avoided delays, and the

construction being finished even ahead of schedule.

This example shows how an integrated stakeholder approach cannot only satisfy

ethical and moral obligations but also results in economic benefits such as increased

reputation and reduced costs. Nevertheless, the entire operation of the Malampaya

Project still aimed at the extraction of natural raw materials which contribute to global

warming, despite the fact that natural gas is regarded as potentially less harmful

compared to crude oil. Furthermore, Shell itself remained under critique for various

other activities.

Source: Herz et al$.(2007)$

Questions:

$1.$How did SPEX involve local people in the project, and how does this show the ideas

of Integrative Stakeholder Theory? What actions made this approach successful?

$2.$How did SPEX gain trust and legitimacy by working with and compensating local

people? Why is this important for large projects like this?

$3.$What activities did SPEX do to gain the local people$$s approval? How did this help the

project finish on time and save money?Sustainable Development and Management

Test $1$: Case Study

December $12,2024$

Source: Hahn, R$$diger$.$ Sustainability Management: Global Perspectives on Concepts, Instruments, and Stakeholders.

$4.$How does SPEX$$s way of saving costs and avoiding problems show the business case

for sustainability? What can other companies learn from this example?

$5.$How do actions like offering loans and training programs match the ideas of

Integrative Stakeholder Theory? How do they help gain long$-$term approval from the

community?

$6.$How does SPEX$$s effort to gain trust through consultations support the business case

for sustainability? How does this balance both ethical and business goals?

$7.$SPEX reduced local environmental damage but still extracted natural resources. How

can Integrative Stakeholder Theory help balance environmental concerns and the need

to gain trust and approval?

$8.$Was SPEX$$s work with local people more about doing the right thing or about saving

money? How does this affect how people see the project?