Shell International Ltd Shell Centre London SE1 7NA Number of complaints: 1

Date: 13 August 2008 Media: National press Sector: Business

Ad
A national press ad for Shell had the headline "We invest today's profits in tomorrow's solutions". Text at the top of the ad, attributed to Shell's Chief Executive, stated "A growing world needs more energy, but at the same time we need to find new ways of managing carbon emissions to limit climate change. Continued investment in technology is one of the key ways we are able to address this challenge, and continue to secure a profitable and sustainable future". Further text at the bottom of the ad stated "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. In Canada we're harnessing our global network of technical and financial expertise to unlock the potential of the vast Canadian oil sands deposit. In the USA we're helping to build what will be the nation's largest refinery. And we're exploring a new generation of biofuels made from non-food sources. Difficult yes, impossible no". The ad then directed readers to full details of Shell's 2007 results on their website.

Issue
World Wildlife Fund UK challenged whether:

1. by harnessing the potential of the Canadian oil sands deposit, Shell was helping to provide a sustainable future; and

2. by helping to build the largest refinery in the US, Shell was helping sustainable energy production.

Investigated under CAP Code clauses 3.1 (Substantiation), 7.1 (Truthfulness) and 49.1 and 49.3 (Environmental claims).

The CAP Code:

3.1;7.1;49.1;49.3

Response
Shell International Ltd (Shell) said the aim of the ad was to highlight their investment in technology that would help them to meet the global energy challenge in a responsible way, at the same time as their 2007 final quarter financial results were published. They said the ad was a one-off and would not be repeated.

Shell explained that the concept of sustainable development was introduced in a 1987 report by the World Commission on Environment and Development (the Brundtland Commission), which defined the term as "development which meets the needs of the present generation without compromising the ability of future generations to meet their own needs". They said that definition supported strong economic and social development over time, and recognised the importance of affordable and convenient energy in achieving that, whilst underlining the importance of protecting the environment.

Shell said the Brundtland definition had become the recognised definition of 'sustainable development' and would be understood by readers of the Financial Times. Shell explained that, for them, contributing towards sustainable development meant helping to meet the world's growing energy needs in economic, social and environmentally responsible ways, and that in all their operations they integrated economic, environmental and social considerations into their business decision making. They said their commitment to doing so was formally recognised in Shell's General Business Principles and that their efforts were recorded in their annual Shell Sustainability Reports, both of which were available on their website.

Shell said, according to a report by the International Energy Agency (IEA), global energy demand was projected to grow by 55% between 2005 and 2030. They explained that, as the IEA and other energy experts had made clear, even with a substantial growth in renewable energies and big improvements in energy efficiency, oil and gas would still be a major part of the energy mix by mid century. Shell argued that meeting the energy needs of future generations would require not only conventional sources of oil and gas, but also the development of vast resources of unconventional oil and gas, such as oil sands, and the expansion of today's refining and distribution infrastructures. Shell said the two projects featured in the ad showed how they were finding ways to ensure that energy production was undertaken in a responsible, economic and environmentally aware manner both now and in the future. They said they had set a voluntary CO2 emissions target to reduce emissions from Shell's operations by 2010 to a level at least 5% lower than in 1990.

1. They explained that Shell Canada worked in the oil sands business as a sole owner and operator of in situ oil sands operation, and as a 60% owner of the Athabasca Oil Sands Project (AOSP), which included the Muskeg River Mine and the Scotford Upgrader. They said they were committed to developing those resources responsibly. For example, the AOSP has a voluntary Green House Gas (GHG) reduction target, which was to make the combined CO2 emissions from producing and using its petrol lower than those for petrol from the imported oil it replaced by 2010. They explained that those reductions were sought from energy efficiency improvements and CO2 capture and storage at their oil sands facilities, as well as in mitigation measures outside the project that offset its emissions.

They said Shell Canada's external Climate Change Panel had provided independent advice on the reduction programme for the project, and that the first expansion at Athabasca would use the new Shell Enhance technology. The new technology would reduce the energy and CO2 emissions, in the part of the production process where the oil was separated from the sand, by 10% compared to previous technology.

Shell referred to a recent joint report by WWF and the Pembina Institute, which attempted to rate the environmental performance of all ten of Canada's operating, approved and applied for oil sands mines. They said the report rated the oil sands mines according to criteria determined by WWF and the Pembina Institute, which went beyond the Canadian government's and the province of Alberta's regulatory requirements. Shell said, despite being critical of all the projects it reviewed, the leading operation according to the report was their own Muskeg River Mine, which was given a higher rating than other existing or proposed operations. Shell said it received its high rating in the report for being an environmental leader in a number of areas, including being one of only two companies to have an independently accredited environmental management system; having the lowest emissions of nitrogen oxide (NOx), sulpher dioxide (SO2) and volatile organic compounds (VOC) pollutants per barrel of bitumen, and setting a voluntary goal of reducing or offsetting emissions from the existing AOSP by 50%, making crude from the oil of sands in line with, or better than, the alternative crude import.

Shell said, as the oil sands industry grew, government policy was responding to the cumulative effects of those industrial activities, for example the Canadian and Albertan governments had recently introduced a Water Management Framework for the Athabasca River. Shell explained that that regulation was "designed to protect the ecological integrity of the lower Athabasca River during oil sands development". They said that Framework had been developed in consultation with a multi-stakeholder group that included environmental groups, First Nations, industry and regulators.

2. Shell explained that they were not building a new oil refinery from scratch in the US, rather they were expanding their existing refinery at Port Arthur. Shell argued the expansion of the Port Arthur refinery was being carried out in accordance with the underlying principles of sustainable development, integrating social, economic and environmental considerations.

Shell said the US Department of Energy (DOE) estimated that domestic demand for petrol, diesel and aviation fuel was growing faster than projected refining capacity, and that the US imported around one million barrels of gasoline every day in order to meet that demand. Shell said the expansion of the Port Arthur refinery would increase the refinery's capacity by 325,000 barrels per day (b/d), making it the largest refinery in the US at 600,000 b/d, and would produce petrol, diesel, aviation fuels and high quality base oils. Shell argued that, whilst the expansion of the Port Arthur refinery would notably increase refining capacity, its modern design and technology would minimise emissions. They said the expansion would lower most types of emissions on a per-barrel basis by utilizing advanced technology in all new systems of installations and replacing existing systems.

Shell explained that they worked towards improving their environmental performance under the International Standard for Environmental Management ISO 14001. They said that, over the last five years, the refinery had reduced flaring incidents by 78%, leading to significantly less pollution, odours, noise and light. They said they were awarded the Texas Commission on Environmental Quality's Gold Award in 2006 in recognition of the Port Arthur refinery's environmental performance. They explained that in order to win that award they had demonstrated environmental performance that went beyond that required under environmental laws.

Shell said the social and economic needs of the community had been integrated into their expansion plans. They said 4,500 construction jobs and 300 permanent jobs, as well as more than $17 billion, would be generated by the expansion. They said the expansion of the refinery had received the endorsement of the local community, and Shell submitted a copy of a proclamation from the City of Port Arthur from 2007, in which they said they were described as "an outstanding corporate neighbour".

Assessment
1. Upheld
The ASA noted Shell's argument that they were committed to meeting the world's energy needs in social, economic and environmentally responsible ways. We understood that oil sands were composed of sand, silt, clay, water and bitumen, which could be upgraded into synthetic crude oil. We also understood that the Canadian oil sands covered over 140,000 square kilometres of Alberta, with each individual mine ranging from 150 to 200 square kilometres, and contained 173 billion barrels of recoverable bitumen. We further understood that the oil sands were either strip-mined from open pits or, where the oil sands were deeper, bitumen was heated so it could flow to a well and be pumped to the surface for in situ extraction.

We noted that a 2006 report by Canada's National Energy Board, the independent federal agency that regulates Canada's energy industry, stated that the large scale of the oil sands developments had considerable social and environmental impacts, including those on water conservation, greenhouse gas emissions (GHG), land disturbance and waste management. We understood from that report that approved oil sands mining projects were licensed to divert 370 million cubic meters of fresh water per year from the Athabasca River, but that despite some recycling, almost all of the water withdrawn for oil sands operations ended up in waste tailing ponds.  We also understood that demand for freshwater for in situ projects was projected to more than double between 2004 and 2015. We noted the report stated that the mining of bitumen and synthetic crude oil from oil sands produced higher GHG emissions than from the production of conventional crude oil, and had been identified as the largest contributor to GHG emissions growth in Canada. We also noted the report concluded that, although oil sands operators had taken steps to significantly reduce the emissions intensity of their operations on a per barrel basis, total emissions had still increased due to higher production levels. We understood from the report that the AOSP was situated wholly within Canada's boreal forest, and that the proposed future reclaimed landscape of the forest would be significantly different than before the AOSP, with 10% fewer wetlands, more lakes and no peatlands. We understood that the report concluded that the cumulative environmental impact of the oil sands projects was of major concern, and that it was uncertain whether the balance between resource development and environmental protection could be maintained.

We acknowledged that Shell had set voluntary GHG reduction targets for the AOSP, and that Shell Canada had also sought advice from their external climate change panel on the reduction programme for the oil sands project. We also acknowledged that the joint report by WWF and the Pembina Institute on the environmental performance of oil sands companies in Canada, referred to by Shell, gave their Muskeg River Mine a higher overall rating than the other oil sands operations featured in the report. We considered, however, that whilst Shell had scored well in some areas, as described above, they had scored less well in areas such as emission reduction targets and fresh water consumption and withdrawal, and that the report suggested that the proposed expansion to the Muskeg River Mine was set to perform to lower standards than the existing operation. We also noted that we had not seen data from Shell that showed that their various voluntary emissions projects had, or were in the process of, reducing the levels of GHG produced by their oil sands projects, or that demonstrated that their advanced technology would reduce CO2 emissions by 10% compared with the previous technology.

We recognised that the term 'sustainable' was used and understood in a variety of ways by governmental and non-governmental organisations, researchers, public and corporate bodies and members of the public. We acknowledged that Shell had taken their definition of 'sustainable' from the 1987 Brundtland Commission report, and that for them the term supported economic and social development over time through the development of affordable and convenient energy, whilst recognising the importance of protecting the environment in doing so. We noted their argument that that definition would be recognised by the target audience for the ad, and that it was contextualised by the publication of their 2007 final quarter results.

We considered, however, that the statement from Shell's Chief Executive at the top of the ad, that "A growing world needs more energy, but at the same time we need to find new ways of managing carbon emissions to limit climate change. Continued investment in technology is one of the key ways we are able to address this challenge, and continue to secure a profitable and sustainable future", implied that the term sustainable used throughout the ad was defined primarily in environmental terms, and we considered that it would be understood as such by readers. We also considered that the Department for Environment, Food and Rural Affairs' (Defra) best practice guidance on environmental claims stated that green claims should not "be vague or ambiguous, for instance by simply trying to give a good impression about general concern for the environment. Claims should always avoid the vague use of terms such as 'sustainable', 'green', 'non-polluting' and so on". We understood that Defra had made that recommendation because, although 'sustainable' was a widely used term, the lack of a universally agreed definition meant that it was likely to be ambiguous and unclear to consumers. 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.

On this point the ad breached CAP Code clauses 3.1 (Substantiation), 7.1 (Truthfulness) and 49.1 and 49.3 (Environmental claims).

2. Upheld
We acknowledged that Shell worked towards improving their environmental performance under ISO 14001. We understood that ISO 14001 specified requirements for an environmental management system, and that it was currently the only ISO standard against which it was possible to be certified by an external certification authority. However, we also understood that ISO 14001 did not itself state any specific environmental performance criteria. We therefore considered that we had not seen evidence relating to the criteria that Shell had set under their environmental management system or that that had been externally certified.

We noted Shell's argument that the social and economic needs of the Port Arthur community had been taken into account when planning the expansion of the refinery, and we understood that Shell defined sustainable in terms of social and economic, as well as environmental, development. However, we considered that the emphasis of the ad was on environmental sustainability and the need to find new ways of limiting climate change and managing carbon emissions, and we considered that 'sustainable' would be understood by readers within that context.

We noted Shell's explanation that they were expanding their existing refinery at Port Arthur, rather than building a new refinery. We also noted their argument that, whilst the expansion of the refinery would increase refining capacity by 325,000 b/d, its modern design would lower most types of emissions on a per barrel basis.  We considered, however, that although emissions might be reduced on a per barrel basis, the increased production of the refinery by 325,000 barrels per day would increase the total overall emissions from the Port Arthur refinery. We understood that the types of emissions that would be lowered by Shell's new technology were NOx and VOC. However we noted that we had not seen data that showed the extent to which those emissions would be lowered, or that measured the effect of expansion on the production of other GHG emissions, such as CO2. Because of that, and because 'sustainable' was an ambiguous and unclear term, we concluded that the ad was misleading.

On this point the ad breached CAP Code clauses 3.1 (Substantiation), 7.1 (Truthfulness) and 49.1 and 49.3 (Environmental claims).

Action
The ad must not appear again in its current form. We acknowledged Shell's assurance that the ad was a one-off and would not be repeated. We advised them to contact the CAP Copy Advice team for guidance when preparing future similar ads.

Adjudication of the ASA Council (Non-broadcast)