Shell’s move to London: a strategy for sustainability Political update: the coalition and Covid

Shell’s move to London: a strategy for sustainability

On Sunday 14 November, Royal Dutch Shell informed the Dutch government of its intention to move its headquarters to London from The Hague. A shareholder meeting on 10 December will determine the final decision. Shell notes that this move is intended as a way to simplify its share offering, and thereby increase flexibility in regards to raising capital and acquisition efforts. As such, the company will not be moving its entire operation abroad. Rather, only about twelve of the company’s top managers, including the CEO and CFO, are going to be making the physical transition. Nevertheless, this move has far-reaching consequences, both economic and political, leaving many to question why the oil and gas giant has made this decision.

A major concern regarding Shell’s departure from the Netherlands is related to the economic impact of such a large company leaving Dutch territory. However, the limited scale of the transition in terms of staff means that only time will tell what the long-term impact will be. Naturally, another primary concern of the demissionary cabinet was the dividend tax, which was introduced two years ago. On Monday 15 November, Parliament discussed the possibility of scrapping the dividend policy, in reaction to Shell’s announcement. This is not the first time that the cabinet has brought the proposal to abolish this left-leaning policy before Parliament. However, yet again, the idea of doing away with the tax was dismissed almost immediately. GroenLinks MP Tom van der Lee found the idea of scrapping the tax ridiculous, considering the number of jobs actually moving to the UK and the two billion euros in fines that Shell is liable to pay as a ‘vertrekboete’, or departure fine. This fine was introduced in 2020 to prevent multinationals leaving the Netherlands without paying tax on unpaid dividends. This has, however, not been properly debated in Parliament for this case, and attempts to do so have been quickly pressed aside. Subsequently, it remains uncertain if this departure fine will even be applied in this case.

On a more cultural note, Shell has also proposed changing its name by dropping the ‘Royal Dutch’ prefix in ‘Royal Dutch Shell’ alongside the move. Considering the pedigree of the company, which began in 1907 through the amalgamation of the Royal Dutch Petroleum Company and Shell Transport and Trading Company Limited, this change makes sense. The amalgamation of Dutch and British companies created a rather complicated share structure, which this move hopes to simplify by becoming a single British entity. Thus, leaving the name as it is would create an added layer of unnecessary confusion. On the other hand, Shell remains adamant that it will remain very closely connected with the Netherlands, and CEO Ben van Beurden has claimed that the move is a strategic decision for the benefit of the company’s positioning in the process of energy transition.

This statement, however, brings up more questions about the move: how does this move advantage Shell in the energy transition processes? The strategy that Shell has endeavored to take in the pursuit of net-zero emissions follow three base ambitions: the aim to be a worldclass investment case, the desire to thrive in the energy transition to a lower-carbon future, and to maintain a strong societal license to operate. The second ambition specifically may be an important motivating factor here. The 2015 Paris agreement, which committed to limit temperature rises to 2 °C is a commitment to which Shell is bound, as CEO Van Beurden acknowledged in an April 2020 speech. Shell has developed the socalled Sky scenario, that lays out its contributions to this aim that it deems technically possible. However, the EU has committed to the aim of restricting warming to 1.5 °C or less, by no later than 2050. Shell’s Sky scenario is designed only to stimulate its management to consider plausible events. The scenario is intended as a hypothetical case, but does not actually provide any real call to action on the part of the company. However, considering the recent environmentalist concerns that Shell is facing, the inability to adhere to regional goals on the climate front may endanger its third aim, to maintain a strong societal license to operate. As such, leaving the EU may limit the negative public perception of Shell’s environmentalist actions, or lack thereof.

Written by Maurits Seijger

Political update: the coalition and Covid

It seems that just as we start to see the finish line of a very long marathon, there is another 10 kilometers added to the course. This analogy was used by Health Minister Hugo de Jonge to describe the latest wave of Covid infections that has hit the Netherlands and other countries. But this analogy can also be used to describe the state of the coalition formation for the next Dutch government. Well into December and beyond Sinterklaas – when the Dutch do the majority of their holiday gift giving – the political parties have still yet to reach an agreement that will produce a new government. Nine months have passed since the national election and the Netherlands is still operating with the last election’s government, making this the longest coalition formation in Dutch history. While politicians from the current coalition parties let out signals here and there to the media that progress is being made, there is still no concrete evidence of this. Will the new cabinet be a minority cabinet? Will there be compromises between the VVD, D66 or CDA? Or will there be a broad government encompassing many more parties with a hyper-detailed coalition agreement? No one knows for sure.

The tone in recent weeks has not been promising. First, the coalition party members were targeting the Sinterklaas holiday weekend to have the new government formation completed, but with that having passed, they are now shooting for Christmas. Still, Gert-Jan Segers of the Christian Union (CU) said it may take until January. This is an all-too familiar story: shoot for a date; miss the date; move the date; repeat.

And to be honest, at this time, it seems the country has forgotten the lack of agreement, since two other issues are dominating the news and our lives these days: the climate and Covid. The sudden and swift surge in Covid infections almost immediately stole the thunder from other national agenda items that were – and are still – urgent. Outgoing Prime Minister Mark Rutte has not been fully available for the coalition negotiations as he and De Jonge have been meeting with doctors, the Outbreak Management Team, regional health services (GGD) and their counterparts in other countries to figure out what to do about the alarming increase in Covid infections and hospitalizations. On top of that, a fumbling start to the Covid booster shot campaign and a new variant that is creating worldwide alarm make it clear that the Prime Minister and members of the outgoing government have their hands full. Additionally to the spike in Covid cases, the Netherlands is currently under a housing crisis, with house prices and rents increasing to the point where people cannot afford to live, a shortage of student housing in most cities and a general shortage of affordable and social housing across the kingdom. Some cities and municipalities have initiated their own policies to help with the crisis, including point systems on apartments, banning foreign investors from purchasing more than one property and banning Airbnb-type vacation home investments. All of these are steps forward to help with the crisis, but the country needs leadership and policy at a higher level. However, the government is stretched for time and money at the moment due to its response to Covid.

At this time there is no strong indication that the coalition party members will come to an agreement before Christmas, as they still hope they will. Recent history has shown that there is a point where no one is willing to compromise and move forward; it’s uncertain if the roadblocks are anywhere near being cleared. With the coalition negotiations going on behind closed doors, it’s not even entirely certain what the current roadblocks are or what the substance of the negotiation even is. For now, we’ll just have to wait, like we’ve done since the March election. And not to be a pessimist, but preparing for the parties to announce shortly before Christmas that January is now their target end-date for the new government is something the Dutch people should do – and may already have.