A Study on the Environmental Accounting Practice of Shell Essay

This study had listed other alternate Corporate Sustainability Reporting ( CSR ) guidelines to fix an environmental coverage ( ER ) and appraisal on the extent to which The Shell Report 2003 meets the Global Reporting Initiative ( GRI ) standards had been done. The consequence of the research shows that Shell had complied with the GRI standards.

Introduction of ER

Every corporation has environmental impacts. In order to implement sustainability development, corporations are encouraged to supply ER. ER is a procedure of communicating papers sing the environment effects of organisations economic activities. It serves as a tool to place and to diminish the environmental crisis, and aids in communicating with all users ; hence it can increase corporation ‘s repute. In order to run into the challenges of sustainability in the hereafter, corporations must supply a good Erbium by following the appropriate guidelines for covering with environmental dealing.

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1.1 Study aims

I ) To specify the standards of a good external Erbium

two ) To measure the extent of The Shell Group environmental coverage in run intoing the standard enumerated in GRI.

1.2 Methodology used

The information in this study is collected from secondary research. GRI is used as a footing to measure Shell ‘s 2003 sustainability study.

1.3 Restriction of the study

The assessment quality in this survey is limited due to clip restraint and the absence of general accepted sustainability guideline to measure an environmental study.

2.0 Historical background

The Shell Group was established when Royal Dutch from the Netherlands and a British company worked together and they began world-wide operations in 1907. During the early 20th century, Shell Group expanded their concern globally as the oil industry was blossoming due to the mass production of vehicles ( Anon3 ) .

Shell is a planetary company involves in the concerns of energy and petrochemicals. The concern exist ‘in more than 145 states and using about 119,000 people ‘ ; they have involve in other activities such as ‘generating electricity ‘ and ‘developing engineering for H vehicles ‘ but they ‘do non bring forth coal or atomic power ‘ ( Anon1,2003, p.6 ) . Looking at its last three old ages fiscal public presentation, Shell Group recorded its highest net income in 2003 is $ 12,496 million ( Anon6,2003 ) .

Shell started to perpetrate to sustainable development in 1997 and they implemented GRI as a guideline in their environmental coverage in 1999. Shell published ER ‘to meet the planetary energy challenge to construct and keep trust and better their public presentation ‘ ; they besides believe that ‘reporting should cover sustainability public presentation that could present important fiscal hazards, or are of the most involvement to stakeholders ‘ ( Anon1,2003, p.9 ) . In Malaysia, Shell has been the victor of the Malayan Environment Reporting Award ( MERA ) , which was organised by Malaysia ‘s ACCA[ 1 ]for past two old ages ( ACCA,2004a ) .

3.0 Define the standards for a good external Erbium

There is a figure of ER guideline available for fixing environmental study, for case ACCA UK Sustainability Awards 2004 Criteria by ACCA ; Towards a Generally Accepted Framework for ER by FEE[ 2 ]; Sustainability Reporting Guidelines 2002 by GRI and others.

This survey discusses the standards provided by GRI. We choose GRI because based on our researches more than 100 companies have endorsed the GRI guidelines ( Smiddy,2002 ) . Therefore, GRI is the best stake non simply for the intents of describing but besides for ‘building structured theoretical accounts for transparency-driven stakeholder battle ‘ ( Tapscott and Ticoll,2003 ) . When the corporations use the guidelines of standards provided by GRI, a good Erbium can be expected because GRI purpose ‘s to air globally acceptable guidelines of sustainability coverage.

The GRI has outlined 11 standards to organize a good coverage and they are divided into four groups ( GRI,2002 ) , which are as follows:

Transparency, Inclusiveness and Auditability

The standards of transparence, inclusiveness and auditability create the model of a study.


Transparency is a cardinal standard to any coverage criterions. Transparency implements the answerability of full revelation of public presentation and facts consequently with credibleness. For case, revelation for the manage hazard and positive and negative impact of facts. Additionally, Sawers ( 2004 ) argue that ‘a clear transparence study is an indispensable portion of the concerns ‘ . To better transparence, describing must place the cardinal environmental impacts. ( Smiddy,2002 )


Inclusiveness means acquiring the engagement of stakeholder and reflects this in coverage. The consideration of stakeholder is of import because it means sing describing value to the houses ( Jorgensen,2000 ) as ‘stakeholder audience will heighten the understanding ‘s credibleness of describing ‘ ( EPA,2003 ) . Therefore, it is heightening the quality and guaranting that study is reflecting the demands of varied users.


Auditability is the revelation in the direction systems and besides communicating patterns that must be able to certify dependability, truth completeness and consistence by the internal or external confidence parties. Minimum demand addressed by the Forum on Environmental Reporting ( Anon7,1994 ) states that describing should be dependable and comprehensive in order to guarantee the qualitative and quantitative facet are present.

Completeness, Relevance and Sustainability context

The standards of completeness, relevancy, and sustainability trade with the determinations about the study ‘s contents.


Completeness with respects to describe agencies unwraping a complete position of the company ‘s operational boundary, range and clip period. ACCA ( 2001 ) mentioned that ‘the balanced revelation of positive and negative information makes for a more ‘complete ‘ study and hence enables the users to organize a complete position of corporation ‘s operations and environmental impacts ‘ . Besides that, they besides argue that ‘an first-class ER should enable the users to organize a complete position in organisation operation and impact ‘ ( 2004b ) .


Information relevancy enables users to measure in decision-making. To heighten relevancy, it is considered as a first rate making for guaranting concern environment making ( Sawers,2004 ) .

Sustainability context

Sustainability context discusses the public presentation of the corporations in the context of the bound and demands placed on economic, environmental or societal resources in the coverage. Harmonizing to the ACCA UK Environmental Reporting Awards Category ( Smiddy,2002 ) , describing must unwrap and explicate the sustainability development.

Accuracy, Neutrality and Comparability

Report ‘s quality and dependability are assured by these three standards.


Accuracy information is recorded in proper sum and period while minimized the mistakes for users to do determinations with high confidence. The information from qualitative facet should response in elaborate with quantitative measurings to accomplish satisfactory degrees of truth and credibleness of study.


Neutrality is the 1 of the of import qualitative features in ER of FEE ( FEE,2000 ) . Information should be presented free from prejudice in choices, skips, over or understatement of history, which could act upon the determination by the users. Both favorable and inauspicious consequences must be included in the study.

3.3.3 Comparison

Report should be consistent in the range and boundary, where alterations must re-stated and disclosed for comparison with similar corporation from one period to the following. Smiddy ( 2002 ) stated that if coverage shows merely one twelvemonth acting day of the month, it will neglect to state the users how good or hapless is the organisation. Therefore, comparison enables users to measure and benchmark the public presentation and activities for decision-making.

Clarity and Seasonableness

Standards of lucidity and seasonableness relate to describe users ‘ appraisal to describe.


Clarity information is encountered by the house for varied users to exert and easy understand. Adequate proficient and scientific footings are used to show within the study. Reporting must be easy to read and brings sensible understanding to users, which is one the classs under ACCA awards ( Smiddy, 2002 ) .


Seasonableness to guarantee maximal consumption and public-service corporation of the most valuable information to help users efficaciously in their decision-making. It should find the frequence of the coverage in the ER ( FEE,2000 ) .

Evaluation on the extent to which The Shell Report 2003 meets GRI standards

Shell adopted the GRI Guidelines in their CSR in 2003 to heighten the coverage standardisation and comparison, and acknowledge advanced sustainability indexs ( Anon2,2003, p1 ) . Jeroen new wave der Veer, Chairman of the Committee of Managing Directors had stated that the Shell Report is being provided in conformity to GRI Guidelines in footings of transparence, by exposing their public presentation, and meeting for their stakeholders ‘ demands ( Anon1,2003p.2 ) .

Shell studies had covered most of the company ‘s profiles to ease stakeholders ‘ apprehension and rating on the company ‘s information. The completeness of information had enhanced its comparison position to stakeholders and its repute had increased in related industry.

Besides, the good presentation in the sustainability study has resulted in Jurgens ( 2004 ) saying that ‘Shell has been pioneer in corporate duty describing ‘ and the U.S. Oil Company is catching up to make so. Compared to 1997, it is merely a narrative relation and no graph or informations tabular array on the environmental consequence was given ( Anon4,1998 ) . However, Shell ‘s 2003 Report shows deficient crystalline revelation, where they did non to the full unwrap their environmental consequence in stuff and indirect energy used and wasted. The ground they are non disclosed is there is deficiency of sufficient clear counsel to describe on those elements, but it does non intend that they can wholly disregard such important information, which can impact the environment.

Shell Report 2003 has been verified by external professional organic structure ( KPMG and PricewaterhouseCoopers LLP ) to guarantee its auditability and dependability position. However, the related houses province that merely certain informations, graphs and statements were audited, and there is no confidence and verification on the study cogency due to the deficiency of by and large accepted international environmental, societal and economic coverage criterions. This indicates that even when Shell had disclosed all the information, the truth and inclusiveness of study are questionable. Consequently, study users may be misled and do wrong determination and comparings.

Furthermore, the image of Shell could be affected because they overstated the oil militias in the fiscal statement of 2003 ( Williams,2004 ) . The dishonest figure non merely affects the genuine of the one-year study, it besides affects the quantitative facets stated in the sustainability study. Therefore, the transparence and auditability in the coverage are non dependable at all ; it fails to certify truth, neutrality and comparison in the coverage.

Besides, Business in the Environment ( 1990, cited in Maltby,1997, p.83 ) mentioned that companies need the support from the stakeholders because demand from stakeholders ‘provides a clear concern instance for actions ‘ . Whereas, Shell coverage does non state who the stakeholders are. The inclusiveness has failed to back up in the coverage. Therefore, it can be assumed that the coverage does non fulfill stakeholders ‘ demands. ( Smiddy,2002 )

Shell ‘s vision and scheme have fulfilled the standards of sustainability context and to demo their committedness they disclosed economic, environmental, and societal in the study. The part to sustainable development activities has been reported. Nevertheless, the study shows more accent in fiscal public presentation compared to environmental impacts and societal impacts ( Anon1,2003, p.8 ) .

Additionally, the company published environmental public presentation, wellness and safety since 1997. Nevertheless, activity degree and energy efficiency started to be reported in 1998 and they have continuously disclosed them until today, which have fulfilled the standards of seasonableness. In fact, they start to unwrap them in a quantitative information tabular array, which is easier to understand than showed in chart format as in 2001 study.

On the other manus, the web-link provided in the Internet enhanced the lucidity, where the users can read in specific issues ( Smiddy,2002 ) . However, in finding the lucidity of quantitative informations, the study does non demo a clear quantitative informations tabular arraies comparing 2002 with 2003 ( Anon5,2002 ) .

The study has stated their committedness to develop the environmental public presentation and cut down the inauspicious impacts. But, elaborate information is non disclosed in the study to demo their enterprises. Friends of Earth reported that Shell had violated the societal and environment in some countries of their operations such as air, H2O and dirts. This environmental pollution had affected the people ‘s wellness and supports ( Jackson,2004 ) .

Furthermore, with respects to neutrality Shell had reported its good and bad things, react to stakeholders through ‘Tell Shell ‘ , reader analysis and media study ( Anon1,2003 ) . Shell besides acts impartial by bring forthing values for stockholders through lower production cost ( eco-efficiency ) and fulfils clients ‘ demands by making close relationships.

Additionally, the company aims ‘to run into the planetary energy challenge to construct and keep trust and better their public presentation ‘ ( Anon1,2003, p.7 & A ; 9 ) . To verify relevancy, Shell has established the commentary channels such as ‘Tell Shell ‘ to run into society ‘s demands. This society ‘s feedback and recommendation helped Shell improves its study.

Furthermore, Shell has provided few old ages ‘ information on its environmental cardinal public presentation indexs to enable comparison over clip. They aimed to establish EnergiseTM programme at more than 40 major Chemicals and Oil merchandises installations. But there is no information demoing that Shell has benchmarked with equal industries to convert study users it had done good within the industry.

4.1 Drumhead determination

In order to keep sustainable development ; The Shell Group realized that it is of import to fix a sustainability study. Therefore, they have disclosed economic, environmental, and societal issues in their study. Based on our research, Shell Report 2003 has covered all the standards enumerated in GRI Sustainability Reporting Guidelines 2002. However, the transparence of the 2003 study is disputed because the exaggerated figures reported in the one-year study. It affects the genuine of the figures presented in the study.


The Shell Group voluntaries to unwrap ER and they have chosen GRI as their ER guidelines. The environmental accounting of the company had complied with the standards in GRI. However, the exaggerated oil militias in the one-year study have affected the dependability of both the one-year and sustainability study. Conversely, there is an betterment in their environmental coverage between 1997 and 2003, which is merely narrative relation and quantitative informations or graph is non given. Additionally, the environmental and societal impacts are less emphatic in the study.


Mentions to journal articles

Maltby J. , 1997, Puting Its Own Standards and Meeting Those Standards: Voluntarism Versus Regulation In Environmental coverage, Business Strategy And The Environment, Vol. 6, pp. 83-91.

Mentions to electronic paperss

ACCA, 2001. An Introduction to Environmental Reporting [ online ] . Available from:

hypertext transfer protocol: //www.accaglobal.com/pdfs/environment/ACCA-RJ1-002.pdf [ Accessed on 20 August 2004 ]

ACCA, 2004a. The ACCA Malaysia Environmental and Social Reporting Awards [ online ] . Available from: –

hypertext transfer protocol: //www.accaglobal.com/sustainability/awards/mera/ ? session=fffffffeffffffffc28288ca414aa80f9b0ea1d7bbfd3791a7400c48814f0122 [ Accessed on 24 August 2004 ]

ACCA, 2004b. ACCA UK Sustainability Awards 2004 Criteria [ online ] . Available from:

hypertext transfer protocol: //www.accaglobal.com/pdfs/environment/susra/uk04_cri.pdf [ Accessed on 25 August 2004 ]

Anon 1, 2003. The Shell Report 2003: Meeting the energy challenge – our advancement in lending to sustainable development [ online ] . Available from: hypertext transfer protocol: //www.shell.com/home/Framework? siteId=shellreport2003-en [ Accessed on 12 August 2004 ]

Anon 2, 2003. Reporting against the Global Reporting Initiative [ online ] . Available from:

hypertext transfer protocol: //www.shell.com/home/Framework? siteId=royal-en & amp ; FC2=/royal-en/html/iwgen/leftnavs/zzz_lhn7_0_0.html & A ; FC3=/royal-en/html/iwgen/environment_and_society/dir_environment_and_society.html [ Accessed on 19 August 2004 ]

Anon 3. History of Shell [ online ] . Available from: hypertext transfer protocol: //www.shell.com/home/Framework? siteId=royal-en [ Accessed on 18 August 2004 ]

Anon 4, 1998. The Shell Report 1998: Net incomes and Principles – does at that place hold to be a pick? [ online ] . Available from:

hypertext transfer protocol: //www.shell.com/home/Framework? siteId=shellreport2003-en & amp ; FC2=/shellreport2003-en/html/iwgen/leftnavs/zzz_lhn12_0_0.html & A ; FC3=/shellreport2003-en/html/iwgen/downloads/downloads.html [ Accessed on 2 October 2004 ]

Anon 5, 2002. The Shell Report 2002: Meeting the energy challenge [ online ] . Available from:

hypertext transfer protocol: //www.shell.com/home/Framework? siteId=shellreport2003-en & amp ; FC2=/shellreport2003-en/html/iwgen/leftnavs/zzz_lhn12_0_0.html & A ; FC3=/shellreport2003-en/html/iwgen/downloads/downloads.html [ Accessed on 2 October 2004 ]

Anon 6. 2003. Annual Report and Accounts 2003: Royal Dutch Petroleum Company –

N.V. Koninklijke Nederlandsche Petroleum Maatschappij [ online ] . Available from:

hypertext transfer protocol: //www.shell.com/home/Framework? siteId=investor-en & amp ; FC3=/investor-en/html/iwgen/publications/annual_reports/2004/dir_2004_annualreport.html & A ; FC2=/investor-en/html/iwgen/leftnavs/zzz_lhn11_0_0.html [ Accessed on 24 August 2004 ]

Anon 7, 1994, Forum on Environmental Reporting: Company Environmental Reports: Guidelines for Preparation [ online ] . Available from:

hypertext transfer protocol: //www.enviroreporting.com/others/feem.htm [ Accessed on 3 September 2004 ]

EPA ( Environment public presentation understanding ) , 2003. Policy Model for Environmental Performance Agreements [ online ] . Available from:

hypertext transfer protocol: //www.ec.gc.ca/epa-epe/pol/en/framewk5.cfm [ Accessed on 24 August 2004 ]

FEE, 2000. Towards a Generally Accepted Framework for Environment Reporting [ online ] . Available from:

hypertext transfer protocol: //www.fee.be/publications/fullpublications/2000b.pdf [ Accessed on 24 August 2004 ]

GRI, 2002. Sustainability Reporting Guidelines [ online ] . Available from:

hypertext transfer protocol: //www.globalreporting.org/guidelines/2002/gri_2002_guidelines.pdf Accessed on 12 August 2004 ]

Jackson, R. , 2004. Not Just Nigeria [ online ] . Available from:

hypertext transfer protocol: //www.euapps3.shell.com/TellShell/ts_thread.jsp? forum=32 & A ; thread=66 & A ; start=30 & A ; msRange=10 [ Accessed on 28 August 2004 ]

Jorgensen, H.B. , 2000. Sustainability Reporting [ online ] . Available from:

hypertext transfer protocol: //www.pwc.com/extweb/newcolth.nsf/docid/6F6B45C33E4E208F85256949006A0346 [ Accessed on 24 August 2004 ]

Jurgens, R. , 2004. Chevron touts societal duty [ online ] Available from:

hypertext transfer protocol: //www.contracostatimes.com/mld/cctimes/9787995.htm [ Accessed on 3 October 2004 ]

Sawers, A. , 2004. The Financial Director interview – The Guv’nors [ online ] . Available from:

hypertext transfer protocol: //www.financialdirector.co.uk/Features/1138011 [ Accessed on 3 October 2004 ]

Smiddy, N. , 2002. ACCA UK Sustainability Reporting Awards 2001: Report of the Judgess: HTML Version [ online ] . Available from:

hypertext transfer protocol: //www.acca.co.uk/sustainability/awards/susra/report2001 [ Accessed on 3 October 2004 ]

Tapscott D. , Ticoll, D. , 2003. What Others Say: Civil Society [ online ] . Available from:

hypertext transfer protocol: //www.globalreporting.org/about/otherres.asp? StakCategory_pk=4 [ Accessed on 20 August 2004 ]

Williams, P. , 2004. The bigger they are… . [ on-line ] . Available from:

hypertext transfer protocol: //www.accountancyage.com/Features/1138272 [ Accessed on 3 October 2004 ]


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