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Guardian Weekly: A new type of conglomerate?

EXTRACT: In Nigeria a simmering war raging in the oil-producing region of the Niger delta could force Shell, the dominant firm in the region, to pull out of the country altogether, say sources on the ground.

THE ARTICLE

Nick Mathiason

Oil giants foment gang warfare in developing countries; their negligence causes catastrophic environmental disasters. Ruthless mining firms stop at nothing to secure lucrative concessions, bribing officials and even toppling elected governments. Big Pharma obstructs access to vital life-saving medicines for the world’s poorest. Consumer titans douse their unhealthy wares with sugar and salt while buying up burgeoning ethical brands to control the nascent competition. Rich-world agribusinesses suck on the teat of state subsidies while demanding that poor nations allow free access to their markets.

The charge sheet is lengthy and this one is by no means exhaustive. But it is increasingly the case that the forces of capital are portrayed as creepy, ruthless and evil. The business community is, however, responding.

Writing in a recent issue of Foreign Affairs, Samuel Palmisano, chairman and chief executive of computer giant IBM, argues that multinationals are dead. In their wake is emerging a new creature – the “globally integrated enterprise” (GIE) – which does not exploit nations or workers but seeks to “open new possibilities for business growth and social progress”. To this end, the GIEs no longer outsource production to cheap labour in poor regions while retaining the value-creating bits (research and development and product design) in the first-world “home territory”. Rather, the smart new entity knows that inventive talent in Asia, Africa or Latin America must be harnessed for the greater corporate good, because intellectual capital knows no frontiers, he argues.

This approach is made possible by modern communications. At General Motors elite teams in four continents simultaneously refine new car designs using the latest in 3D computer graphics and video conferencing. Palmisano argues that the GIE represents the business model for the 21st century and that failure to embrace it will lead to financial and social meltdown.

“People may ultimately elect governments that impose strict regulations on trade or labour, perhaps of a highly protectionist sort,” he warns. “Worse, they might gravitate toward more extreme nationalism, xenophobia and anti-modernism.”

Such concerns are pressing. The business community is mindful that the president of Bolivia has nationalised his country’s plentiful gas and oil resources. In Nigeria a simmering war raging in the oil-producing region of the Niger delta could force Shell, the dominant firm in the region, to pull out of the country altogether, say sources on the ground. In some Muslim countries and Indian states it is impossible to purchase Coca-Cola.

There are flaws in Palmisano’s thinking. The concept of “knowledge sharing” – capturing the best brains from around the world to maximise financial and social ends – only works in leading-edge industries. In the extractive and commodity sectors, it is hard to see how his model can be appropriated. However, that has not stopped some corporations from trying.

Shell, for instance, is behind some innovative work that is slowly establishing small and medium-sized enterprises in Uganda, Kenya and South Africa. The idea is that, without entrepreneurs, poverty alleviation is impossible. Furthermore, a stable economy is good for business.

In Tanzania, where the population relies on imported powdered milk from the Netherlands, work by the packaging giant Tetra Pak has resuscitated the dairy industry, bringing employment opportunities and better health for children.

Yann Risz, chief executive of the California-based Next Practice, which advises multinationals on how to access markets in emerging economies, said: “Four years ago this was an interesting topic. Now it’s becoming more mainstream. But the fastest-moving are small entrepreneurial companies. They get it. They have models that can be scaled up.”

For multinationals, being a good corporate citizen – being seen to be behaving responsibly – not only keeps first-world consumers happy but is the key to opening a treasure trove of riches. But can the wolves become sheep? Or will sheep’s clothing be enough?

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