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Peter Foster, Financial Post 

Published: Saturday, August 16, 2008

Sustaina-bull: “There is a certain rich irony in Shell being hoist by its own environmental petard.”

This week, petroleum giant Royal Dutch Shell had its knuckles rapped by the U. K.’s Advertising Standards Authority (ASA) over claims that its Canadian oil sands operations were “sustainable.” There is a certain rich irony in Shell being hoist by its own environmental petard. The company’s former CEO, Sir Philip Watts, once claimed that Shell’s commitment to sustainable development and corporate social responsibility were what elevated it above its rivals. That was before he was thrown out of the company for cooking the books.

For years, Shell has been kowtowing to the environmental movement, and has featured a rogues’ gallery of board members and executives who ranged between green radicalism and abject appeasement. Typically, as it groveled to defend itself in the ASA case, it quoted a report by the World Wildlife Fund, the very organization that had challenged its ad in the first place. One can’t help conjuring up the image of a dog licking the hand of its vivisectionist.

The first Shell chairman to go conspicuously native was Sir Mark Moody-Stuart, who was to be seen cavorting with environmental radicals in that anti-corporate snuff flick, The Corporation. Sir Mark also got himself involved in promoting poverty-inducing alternative energy projects in the third world, and was fingered by The Economist as a leading sell-out to CSR.

Then came Lord Oxburgh, an academic geologist who was appointed non-executive chairman and proceeded to rail against markets, preach environmental doom and gloom, and express deep faith in wise and expansive government: the useful idiots’ trifecta. The true Knight of Hypocrisy was the above mentioned Sir Philip Watts, who perpetually bleated about the need to earn a “licence to operate” from “stakeholders” such as the WWF, but neglected to tell the truth to shareholders. Meanwhile he wasn’t just any old hypocrite; he was the chairman of the World Business Council on Sustainable Development, the Round Table of useful idiocy.

Executives at Shell’s Canadian operations have also shown gung ho support for suicidal policies. When Nicholas Stern, author of an appallingly skewed report for the UK government on the economics of climate change, came to Toronto to speak, he was introduced, and lavishly praised, by Clive Mather, the head of Shell Canada.

Sir Philip Watts claimed that sustainable development had become “central to how we do business.” But this week’s ruling indicates that Shell doesn’t actually understand what sustainability means. But then nobody does.

The ASA case was based on an ad in the Financial Times to coincide with the release of Shell’s 2007 financial results. There Shell declared that “the challenge of the 21st century is to meet the growing need for energy in ways that are not only profitable but sustainable. As our 2007 results show, we’re investing heavily in new technology and assets to safeguard the interests of our shareholders and future generations.”

Seems pretty unobjectionable, but the ASA concluded that the ad didn’t meet its standards with respect to two of the examples given: the oil sands and its Port Arthur refinery.

The ASA relied for its assessment of the oil sands on a report by Canada’s National Energy Board that noted that oil sands development has considerable social and environmental impacts. This is hardly a surprise, but the important point is just how considerable compared with the related benefits?

The ASA also objected to Shell’s use of the word sustainable because it contravened British government rules against “vague or ambiguous” language in environmental advertising. It concluded that “Because ‘sustainable’ was an ambiguous term, and because we had not seen data that showed how Shell was effectively managing carbon emissions from its oil sands projects in order to limit climate change, we concluded that on this point the ad was misleading.”

But the ASA report makes major assumptions. The first is that since Shell’s oil sands are big, in the boreal forest, use a lot of water, and emit a substantial portion of Canada’s anthropogenic greenhouse gases, then they are somehow unsustainable. More profouondly — and controversially — the ASA suggests that Shell could somehow affect the climate by curbing its greenhouse gas emissions, which is nonsense.

The oil sands have been a focus of a concerted attack by environmentalists for some time, who have concentrated a good deal of their efforts in the UK. A signal of their success was a stunningly ill-informed editorial in The Times of London earlier this year that described oil sands activity as a “filthy habit” and called on the next U. S. president to clamp down on imports of oil sands oil.

On the bright side, however, this decision might stop companies from flaunting the “S” word which, as has often been stressed in this space, is both operationally meaningless and politically subversive.

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