The Environmental And Ecological Factors Business Essay
British Petroleum p.l.c formerly known as Anglo-Persian Oil Company is a registered oil and natural gas industry established on 14th April 1909 in United Kingdom. According to BP ultimate (2012), during the early 1900’s the search for oil was began by the Shah of Iran which was discovered in the mid of 1908 and it was known as the first major find in the Middle East. It’s also say that BP was considered as a subsidiary of Burmah Oil Company under the name of Anglo-Persian Oil Company (APOC). However in 1935 it became as the Anglo-Iranian oil company (AIOC). After 45 years of flourishing services, in 1954 the company got registered by the name today we know which is the British Petroleum p.l.c.
Although BP does not have a specifically labeled mission statement BP has published a statement identifying its core interest is said to be progressive, responsible, innovative and performance driven (About.com retail industry, 2012).Each of these words in the statement being the main target of the company, describes its missions. These in general states that Bp creates a user friendly environment between them and their customers and also Bp would like to ensure that the products that they invent would be environmental friendly.
British Petroleum plc (BP) operates 22,400 gas station over more than 70 countries with more than 80,000 employees.Being the world's third-largest energy companyand fourth-largest in terms of revenues integrated oil concern, It is vertically-integrated and investing on oil and gas industry, including alternative energy like Biofuel wind power and solar energy. Furthermore BP is active in marketingand distributing petrochemicals throughout the global. (Corporate Watch, n.d).
Today BP has invested in 30 countries on oil and gas and it has 18.1 billion barrels of oil reserves equivalent. Moreover, according to Corporate Watch (n.d) BP are the largest oil and gas producer in the US and also process 4 million barrels of crude oil per day.
3.0 METHOD OF INVESTIGATION
This assignment is based on “internet information”,regarding many challenges adopted by BP to overcome the competition and disasterlike;Gulf of Mexico oil spills disasters were acquired through.
BPwebsites, publicationsand International Oil Spill Conferenceserved as the main sources of information on government policies, regulations and laws. Oil drilling regulation and policies are taken from UK, USA and international oil and energy reports published online. Moreover, BP annual reports, articles, journal articles, websites, books and magazines.
In the modern business environment global company like BP has to change and adopts different strategies to achieve its future vision and objectives. To meet the future challenges, its every important to adopt corporate strategy on corporate governance, corporate social responsibilities and ethics. Johnson and Scholes define strategy as follows “ Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations".[online]Available:http://tutor2u.net/business/strategy/what_is_strategy.htm[28th September 2012],Bp is concentrated on those important area as Johnson and Scholes mention on define of strategy to achieve its long term objectives.
OECD 2004 review, explain the importance of corporate governance and its function as follow. “Corporate governance is about the way in which boards oversee the running of a company by its governance weakens a company’s potential and at worst can pave the way for financial difficulties and even fraud. If companies are well governed, they will usually outperform other managers, and how board members are in turn accountable to shareholders and the company. This has implications for company behavior towards employees, shareholders, customers and banks. Good corporate governance plays a vital role in underpinning the integrity and efficiency of financial markets. Poor corporate companies and will be able to attract investors whose support can help to finance further growth’’ (2004 Review of the OECD Principles of Corporate Governance).BP is adopt and following the corporate governance to fulfill all the stakeholder best interest.
Claire Andre, Thomas Shanks, S.J., and Michael J. Meyer, Issues in Ethics IIE V1 N1 (Fall 1987)
Ethics refers to well-founded standards of right and wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues. Ethics, for example, refers to those standards that impose the reasonable obligations to refrain from rape, stealing, murder, assault, slander, and fraud. Ethical standards also include those that enjoin virtues of honesty, compassion, and loyalty. And, ethical standards include standards relating to rights, such as the right to life, the right to freedom from injury, and the right to privacy. Such standards are adequate standards of ethics because they are supported by consistent and well-founded reasons. [Online] Available: http://www.scu.edu/ethics/practicing/decision/whatisethics.html[24september2012].Bp shared many codes of ethics like say no to bribery, no harm for marine life and ecology system.
Therefore corporate strategy, corporate governance and ethics are very important elements in today’s business environment.
Facts, findings, discussion and analysis
The oil industry has shown great resilience in the face of ‘competitive disasters’ and the fast evolving (PESTLE): political, social and economic climates, technological environment, Legal and Ecological. According to Cooper et al 1994, it is state critical that the necessary information about the internal and external environment be gathered before a constructive criticism is made. He also argues that the findings are a very minimum to cover the bases of PESTLE investigation, that is to examine the political, economic, social, technological, legal and Ecological changes that may affect the company and the market. Governments provide and enforce the rules including regulations and policies due to Gulf of Mexico oil spill, “government are drafting more laws and regulations would required that drilling perform independent audits and hazard assessment designed to reduce accidents caused by Technological and human errors”(Alan Levin, USA TODAY Updated 5/10/2010 4:48 PM ).
See in Appendix 1.
5.1 Political factors:
"It was a combination of a lack of transparency, a lack of straight talking and a lack of sensitivity to the victims. When you're managing an environmental disaster of this magnitude you not only have to manage the problem but also manage all the stakeholders."
Dispute on Iran and other Middle East countries causes instability on Stock market prices and the crude oil price will.
Pressure group like Greenpeace and environment protecting agency are influencing and creating bad image of the company.
5.4 Legal factors:
Bp is facing many law sue due to oil spill in Gulf of Mexico, this is affecting the company image and reputation.
Offshore oil drilling is banned many countries.
Most challenging legal factors might be Carbon tax and climate changes
5.2 Economic factors:
These include interest rates, taxation changes, economic growth, inflation and exchange rates. As you will see throughout the "Foundations of Economics" book economic change can have a major impact on a firm's behavior.
Higher interest rates may deter investment because it costs more to borrow.
A strong currency may make exporting more difficult because it may raise the price in terms of other currency.
Inflation and deprecation of currency is affecting the investment cost and operational cost.
Economic crises and Euro crises is affecting the BP business in terms of cash flow as well as investment
Due to inflation employees are demanding more wages.
Economic growth and development on BRIC increased demand for oil. This creates opportunity to BP to supply its oil or invest on those countries.
Opening up market like India, China will creates opportunities for global company like Bp
Current economic crisis and Euro zone, economic crisis is affecting the BP corporative objective of the company
5.3 Technological factors:
Latest technologies brought new processes to drills deep sea. This will increase efficiency and cost effective way to carried out BP business. This improves BP production and environmental friendly way to operate its business.
Due advancement of technology Alternative energy usage are increasing. This will create more opportunities to Bp. Because BP is one the world larges alternative energy producers.
Due to technology BP now can reduce its operation cost.
Reduce exploring oil and setup cost for new market like India.
5.4 Environmental and Ecological factors:
When an oil slick from a large oil spill reaches the beach, the oil coats and clings to every rock and grain of sand. If the oil washes into coastal marshes, mangrove forests or other wetlands, fibrous plants and grasses absorb the oil, which can damage the plants and make the whole area unsuitable as wildlife habitat.
Ecological factors include the wildlife animal, marine environment, High Dolphin Deaths, fishing birds and lots of fishes move from that area.
BP operation on deep sea is affecting the Marine life.
Imposing carbon taxes and other environment protect law and regulation isaffecting the business.
6.0 CORPORATE SOCIAL RESPONSIBILITY
According to Mallen Baker Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large (8 Jun 2004 [online] Available: http://www.mallenbaker.net/csr/definition.php [September2012]. Bp is actively engaging welfare activities like:
After the Gulf of Mexico oil spilling incident BP image had been damage. To gain back its reputation and public truest BP is investing on Corporate Social Responsibility (CSR).According to BP [online] Available: http://www.bp.com/sectiongenericarticle.do?categoryId=9026901&contentId=7049221) [24th September 2012]. Over $96 million had invested on CSR and many other community programs around the world.
To had compensated more than $14billion on response Gulf of Mexico incident. [online] Available:http://www.bp.com/sectiongenericarticle800.do?categoryId=9036575&contentId=7067541[24th September2012].
To tackle and the response on climate change problem BP as a company set a target to reduce internal emissions by 10% adopting alternative and latest technologies.
BP is engaging, encouraging and investing on many social activities around the world. acuities like, building schools, helping natural disaster victims, awareness programs on AIDS and sponsoring event like Landon Olympic 2012
[Online]Available:http://www.bp.com/genericarticle.do?categoryId=98&contentId=2000340 [25th Sepetember2012].
Today’s business environment, Corporate Social Responsibility (CSR) is the new modal or structure of the business. Therefore BP is investing and engaging on CSR.
7.0 CORPORATE GOVERNANCE
According to Lisa Mary Thomson, Corporate governance refers to the set of systems, principles and processes by which a company is governed. They provide the guidelines as to how the company can be directed or controlled such that it can fulfill its goals and objectives in a manner that adds to the value of the company and is also beneficial for all stakeholders in the long term. Stakeholders in this case would include everyone ranging from the board of directors, management, shareholders to customers, employees and society.
The management of the company hence assumes the role of a trustee for all the stakeholders [online] Available: http://articles.economictimes.indiatimes.com/2009-01-18/news/28462497_1_corporate-governance-satyam-books-fraud-by-satyam-founder [24th Sepetember2012]. To ensure corporate governance BP following one tier board system. This system promotes transparency and accountabilities on its responsible activities. According to (Cited in 2004, OECD review p.58) the corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the shareholders.
To ensure the corporate governance PB is accepting and encourage to internal and external auditing on environmental impact and social performance.
BP as well as individual employees, transparency, responsibility and accountability on their action will be taken to consideration with global stander.
BP codes of conduct clearly mentioned any bribery and facilitation payments are not allowed.
BP board promotes and encourage ethical, environment friendly and risk management operation throughout.
BP board and management believe in the modern business world, corporate governance strategy will give an answer for fraudulent trading and corruption. Therefore BP encourages and promotes transparency, responsibility and accountability for every action.
According to David B. Resnik, Ethicsis the “set of beliefs” or “norms for conduct” that distinguish between acceptable and unacceptable behavior in the society. Therefore, ethics is very important for company like BP to adopt and followed. Because BP is a global company operates almost every corner of the globe. “Our Code also includes key points from new BP standards related to anti-bribery and corruption, anti-money laundering, competition and antitrust law, and trade sanctions” [online] Available:http://www.bp.com/sectiongenericarticle.do?categoryId=9038306&contentId=7006600[24th Sepetember2012].
BP faced biggest environmental disasters and ethical question due to Gulf of Mexico oil spills. Many critics BP has had a questionable safety standard and materials used to build oil rig. Due to BP’s action, coastal communities, marine life, ecosystems and climates are affecting so badly. This entire question is about BP moral ethics. Therefore, BP has to consider all these problems and make strategy to fulfill shareholdersas well asstakes. According to Bp [online] Available: http://www.bp.com/sectiongenericarticle800.do?categoryId=9040290&contentId=7073463 [25th September2012] ethical compliance from its employees, contractors and suppliers. “In 2011, our businesses reported 529 dismissals for non-compliance or unethical behavior, compared to 552 in 2010. Violations of health, safety, security and environmental requirements accounted for about 46% of these dismissals, reflecting our emphasis on holding people accountable for safe operating’’. Due unethical behaviors BP terminated 14 suppliers and contracts last year. Bp codes of ethics ensure that its operation should fit for global as well as local communities.
Despite local and global competition PB has managed and retains its position into the market through implementing Corporative governance, CSR/PR and other major changes necessary to overcome the challenges faced by Gulf of Mexico. Second factor is even after this unexpected incident BP had certain exclusivities like market position, investing alternative energy, investing CSR, changing its safety standards, improving corporate governance, taking blames and paying off damages to local and international community might improve its business image.
Due to Gulf of Mexico incident BP had faced many challenges from all around world. Due to high risk and marine life ecosystem affecting some country is banned off shore drilling. Russia and most of the Middle East Countries over changes in political and economic condition BP is face many challenges as well as opportunities. To tackle these opportunities and threat to adopt good corporate strategy, CSR and good governance will overcome and make advantages those opportunities. To maintain oil price and Alternative energy BP has to invest on (BRIC). Because these countries oil and alternative energy demand are higher. Alternative energy demand will increase the next generation. So BP has to invest on alternative energy will get competitive advantages.
According to OECD report 2011,there are perceived threats to the BP need to be more environmental friendly and well understand on business environment as a whole. This can be achieving through:
Increase investment on alternative energy like biofuels, wind and keep close tie on Middle East countries may achieve its corporate strategies.
Investing on emerging economies like India, chain and Brazil will give competitive advantages in the near future.
To meet these challenges BP is changing its strategy towards on ethics, CSR and improving its corporate governance.
After facing unexpected loss due to oil spill BP has to adapt in risk management strategy to reduce the damages for an incidents.
BP has to make strategies and policies towards on environmentally friendly way drill to reduce the damages ecosystems.
Transparency and good governance need promotes all its business partners.
BP has to take extra care on environment and safety especially high risk area like Gulf coast.
Corporate strategy, corporate governance and ethics on business environment assignment I came across difficulties and the risk of operating business in global prospective, especially in field of oil business. Most importantly, how well ethical and corporate governance will help to overcome the challenges facing modern business world.
In my research I came to know ethics and corporate governance differ from country to country. So this will be very difficult followed same standard. Therefore I got an idea and knowledge on these important issues and how to overcome those issues facing today business environment. I’m quite confidence I can apply these theories into practical business on my own.
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