Corporate Social Responsibility British Petroleum Management Essay
The business environment has long been characterized with complex interrelationships among and between companies belonging to the same industry. With the internationalization trend in the business community in different countries all over the world, the observing good ethical practices is paramount to every business transaction and deals in successfully operating in the global market. The trust, honesty, responsibility, integrity and accountability between transacting business firms and organizations are values which serve as the key foundation of gaining credibility and good position in the international arena. Hence, standardization of the code of ethics in the corporate world was realized and enacted through the legalization and enforcement of laws and policies that will protect the interests of business establishments. Such legal move resulted to the proper attitude and behavior among business organizations with business transactions thereby decreasing the number of business-related cases filed.
According to Mohr (1996), corporate responsibility is supported by the concepts of multidimensional definitions and social marketing. In the multidimensional definitions concept, the focus is on the major responsibilities expected from companies. These major responsibilities include economic, legal, ethical and philanthropic dimensions (Carroll, 1991). These responsibilities must be performed in order to benefit not only the company operators but also their employees, customers, the community and the general public. Kotler (1991) notes that the social marketing concept of corporate responsibility stresses those companies should operate in a way that maintains or enhances the well-being of its customers as well as its society.
Petkus and Woodruff (1992) supported this concept further by stating that CSR is the avoidance of harm and the provision of good services. The definition given by the authors on corporate social responsibility may vary to a certain degree. However, the meanings of these definitions emphasize on one matter, and that is, a socially responsible organization must have priorities other that short-term profitability (Mohr, 1996). Other authors have been able to provide definitions of corporate social responsibilities. According to Paluszkek (1976), CSR is about the consideration of the impact of the actions or operations of the company within the society. According to Davis and Blomstrom (1975), social responsibility is the obligation of the decision makers in an organisation to take actions that protects and enhances the welfare of the society as a whole along with the organization’s own interest. In addition, Carroll (1979) have noted that social responsibility of business encompasses the legal ethical, economic and discretionary (philanthropic) expectations in which society expects from organisation at a given point in time. With these definitions, some believed that the management role is to generate profit while conforming to the basic rules of society, both those embodied in law and those embodied in ethical aspects.
Primarily, the main goal of this report is to analyse the corporate social responsibility of British petroleum. Herein, the analysis will discuss how the company has been able to adhere to their responsibilities in the society which they operate. In addition, this paper will also discuss the comparison on the CSR approach of BP and The CO-OP. Furthermore this paper will also discuss the CSR theory that can be applied with British petroleum
Evaluation Corporate Social Responsibility of BP (Stakeholder Model)
The corporate social responsibility of British petroleum will be evaluated through the use of social or stakeholder corporate social responsibility model. The oil industry are said to be criticised by different stakeholders for different reasons which include the context of political lobbying, environmental factors, marketing expenditures, excessive executive salary levels and other safety and health issues among their workers. Herein, the oil industry, particularly, British Petroleum has been chosen as the case study for this paper since it is deemed t be a unique industry for various reasons. First given the nature of the British Petroleum products (oils and other related products), the industry operates in a greatly regulated market environment.
Secondly, having a very high level of profits of oil industry and their extreme concentration of power seen in the business, which has been considered as having achieved staggering proportions and lastly, the reasons that the profits that the business makes are derived from a product which is very dangerous o the environment. Undoubtedly, for various types of business, how an industry is viewed and assessed by stakeholders is likely to have major implications in its interactions and relations with its stakeholders and can be considered as a matter of significant corporate social responsibility interest. However, with oil industries like British petroleum, who commonly faced informed, active and critical stakeholder attention from the international organizations, federal or national government, the media, the Non-government organization as well as the public at large, the nature of British Petroleum’s relationships and communication with stakeholders as well as their adherence with stakeholders are specifically essentially.
The major issue for any oil company which has been easily seen by various stakeholders is the environmental issues which are based on its oil reserves. Oil companies, particularly the British Petroleum have battled issues coming out against them in relation to environmental issues. In fact, some environmental organisations and other stakeholders have expressed dismay over the indiscriminate company performance of BP that resulted to harm in the environment. ‘In August 1991, based on its analysis of Environmental Protection Agency (EPA) toxic release inventory data for 1990 (the most recent available), the Washington, D.C.- based public interest group Citizen Action named BP among the top 10 polluters in the United States’ (‘BP: A Legacy of Apartheid, Pollution and Exploitation’ 2006). The findings brought out by environmental agencies and concerned environmentalist groups have caused the firm to take measures regarding the issue.
Two years after Lord John Browne took over the BP administration, the firm rolled out a new marketing strategy that involved emphasis on environmental responsibility. In 1997, the British Petroleum supported the Kyoto Protocol, a worldwide agreement that seeks to prevent global warming by reducing greenhouse emissions. The company has been able to conduct subsequent efforts in order to minimise their business’ impact to the natural environment. These include the provision of cleaner burning fuels, the reduction of emissions, eliminating bribery or facilitation payments as well as political. All activities of the company has been publicised to make the society aware of their business operations. This is done to maintain trust among stakeholders. These moves in the part of the British Petroleum, however were still questioned for their real intention, specifically the question will it make the world in a sustainable energy revolution, through the beyond petroleum movement, or will it be content to gain more profit because of the exploitation of an increasingly taxed planet (Assadourian, 2004).
British Petroleum is one of the biggest companies in the field of oil and allied products whose market value is in hundred’s of billion. But financial crises and unpredictable nature of business are the unavoidable aspects which are also among the highlights of the criticisms of the stakeholders. Business is the other names of ‘risk’ and so the study of the petroleum giant reveals that it was also in the same yard of maintaining stability in its early period of its youth and in early 1990s. The initial, primary and dependable source of finance and funding for a company is the investment market. A company is a separate legal entity having a distinct legal personality, thus having the same needs and requirements of finance (liquidity) and capital like normal businessman or an entrepreneur.
The companies authorised ordinary share capital remains at 36 billion shares of 25cents each, amounting to $9billion. In addition the company has authorised preference share capital of 12,750,000 shares of £1 each ($ 21 million) (Annual Reports and Accounts, 2003. Today the BP group has more than 103000 people working over 100 countries within four main business segments. Having been able to realize their corporate social responsibilities by analysing the views of their stakeholders, the British petroleum has been able to solve the issue and attempt to have an enormous reinvention in 2000. The main goal of this reinvention is to alter the perception the people regarding BP in terms of its business operation and its role in the society. This reinvention is also a part of the adherence of the company to their social responsibilities and which costs $200 million. British petroleum was the first oil industry which started to address the issue of global climate change. It can be said that the corporate social responsibility challenge for the British petroleum has been threefold. The first one is to the challenge of translating the social responsibility commitment into an efficient and consistent approach in the global market. The next is to be able to meld the BP its subsidiaries like Arco and Amoco to social investments and the last is to satisfy and meet the external expectations from the society. These CSR commitment has been strengthened through the changes or reinvention mentioned above which include their advertisement of the “Beyond Petroleum”.
In doing and meeting their organisational goal of being committed to social responsibilities, the company had been able to conduct rigorous planning with more than 130 fully functions Business Units. In this regard, each of the each of the Business Units has largely autonomous business operations with its own identity, history, imperatives and relationships; Through the use of stakeholder models, it can be said that British petroleum’s corporate social responsibility are trying to meet the needs of their stakeholders. In doing so, it can be said that the management of British Petroleum must be able to adhere to the following Stakeholders Dialogue model for CSR.
Comparison CSR in BP and CO-OP
This part of the paper will compare the corporate social responsibility approach of British petroleum and the CO-OP. It can be said that both British petroleum and the CO-OP has been able to adhere to corporate social responsibility in different manners. It can be said that the British petroleum uses social or stakeholder and economic model for its corporate social responsibility.
The Corporate social responsibility strategy of BP has also been able to give importance to three performance measures which include the social, environmental and financial which are known as the triple bottom line. The commitment of the BP with their social responsibility ensures that wherever they operation, their activities should be able to establish economic benefits and opportunities by enhancing the quality of life of individually, specifically those who are directly influenced by the company (See Figure 2).
CSR Report: British Petroleum
Source: British Petroleum Annual review (2007). Viewed May 2, 2008 < http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/set_branch/STAGING/common_assets/downloads/pdf/ara_2007_annual_review.pdf>
The CSR commitment of the British Petroleum focuses on five aspects which include the employee relationships, ethical conducts, health safety and environmental performance, financial aspect and control (British Petroleum, 2008). In order to ensure that they are able to get affiliated with different international and global organisations for Human rights such as the United Nations, US-UK Voluntary Principles and others, for the labour relationships they follow the standards of the ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy and for environmental accountabilities they are linked with the GHG emissions reduction, ISO14000 and Clean Fuels Programs.
Just like British Petroleum, other organisations are also able to adhere to the concept of being socially responsible and THE CO-OP is never an exemption. It can be said that among all other corporate social responsibility model, the CO-OP has been able to adhere to the social or stakeholder CSR model. The corporate social responsibility of this company works in various stakeholders such as individual members, employees, customers, corporate members, suppliers, the wider community, and the cooperative members. In doing so, the company has provide community investment of £7.3m, which is equal to 3.2% pre-tax profit, up from 2.5% in year 2003. Aside from community investment, the Co-operative Group has also been able to give importance to education which they have been able to issued 200 Cash for Schools cards raising with a total of £10,940 for 54 schools all over United Kingdom. The also commit them solves to be part of the society by having a successful partnerships with various community organisations as well as charities which supports disadvantaged communities and they also promote social inclusion which give equal chances and priorities to each individual (CO-OP, 2008).
CSR Report: THE CO-OP 2004
Although each company has different approach in showing their commitment with regards to corporate social responsibility, both companies has been able to adapt some ethical stance which pertains to the to the preservation of the environment not only for the benefit of those who are living but also to those who will live in the future. The company’s ethical stance of the British petroleum and the CO-OP have installed protective devices to protect the health of the community and the employees and participated in community programs.
One of the social goals that CO-OP has been given attention is about the climate change which is a popular choice among other companies. As part of the latest driver of the CO-OP, the industry has been able to install solar panels at the top if its headquarters to be able to meet the energy needs of their building and the industry has also plan to install panels in 100 schools in UK, It shows that the CO-OP has been able to adhere to its social commitment and continuously doing what they have started from the last 15 years.
In this comparison, it can be said that although both companies have their own corporate social responsibility commitment attached with their CSR model, there are still some aspects which these companies are lacking. For instance, it can still be said that the responsibilities that British petroleum did not gave greater emphasis is with regards to environmental issues. This is because of the line of work or business operation of the British Petroleum which is in oil and this hinders the company to provide greater emphasis on protecting the environment. In the case of the CO-OP, it is still
Ethical Theories relevant to BP CSR
Due to the environment and social concerns that have been distinguished by this corporate social responsibility commitment of British Petroleum, management of the company has decided to create a plan in relation to identifying what should be done to be successful with their commitment. Basically, the company wanted to remove the old mindset in regards to ‘petroleum’ that is the idea in which oil companies are treated as dirty, secretive and supercilious.
With this, it can be said that among the ethical theories of corporate social responsibility, the British Petroleum has been able to adhere to the context of virtue theory. Virtue theory is centred on ones ethical condition and the type of individual .the person himself and the type of person he intends to be. Thus, the virtue theory states that becoming a virtuous person is dependent on individual choice. In this theory, the characteristics of a virtuous person are taken into account. More specifically, if a person prefers to become virtuous, he will then live a good, happy and flourishing life. Basically, this theory explains that if a person chooses to be virtuous, he will also become happy for the rest of his life. As an ethical person, one will derive his happiness out of doing good deeds to other people.
In the part of the British petroleum, the virtue theory serves as a significant motivator for their strong commitment of social responsibility. As noted in the discussion above, the employees and staffs of the British petroleum are encouraged to operate by means of helping or benefiting other people due to the belief that doing so will led to them to having a more competitive advantage through enhance social relations. The company has been able to adhere to the context of virtual theory as they are able to shape their business activities and operations towards goodwill, fair management and community benefit. This theory allows the company to give priorities from personal gain or profit to overall benefit. It can be said that this theory is the most applicable theory for British petroleum for their commitment focus non on individual gain but for the benefit of all.
It can be noted that people or stakeholders expect firms not only to perform the traditional function of providing goods and services to all citizens who are willing to pay for them, but also to help society solve its problems. If these things are generally seen as desirable, and the firm does them, then it is socially responsible. If the firm does not, then some people may feel it is irresponsible. In this respect, it is illustrated that businesses like British Petroleum has been able to adhere to the needs of being socially responsible industry.
Moreover, analysis shows that British Petroleum has been able to incorporate and promote increased public participation in dealing with plans and projects toward progress and development illustrates an efficient and effective measure to achieve more possible success of economic and social growth. Since the public is the foremost concern of British petroleum, it is very logical that industries like British Petroleum will be highly incorporated as inputs to come up with sound policies that will reflect the preferences and general welfare of the society. In addition, it can be said that the findings of the study indicated that along with the corporate social responsibility commitment of the company is their environmental protection strategies, human resource management strategies, employee relationship management and their approach for ensuring that they follow ethical standards.
Even though the issue is tackled in its complexity, it is no doubt that social responsibility has to play a great role in today’s business world. It may either contribute to efficiency, effectiveness, success or failure. What is important is that we are becoming more aware each day. No doubt that in this era, social responsibility should become every business’ obligation. Hence, addressing real environmental issues is not yet late through the use of the new technological innovations that serve the interest of sustainable development as companies at present are continuously equipped with ways to adhere to corporate, social and environmental responsibilities.
In this regard, it can be said that even though British Petroleum has been able to adhere to the promotion and commitment of being socially responsible the company still needs to prove that their intentions are clear and that their commitment will be consistent since most of their critics would always view their company as industry which have a negative impact to the environment. This is the issue that should be battled by the company with their corporate social responsibility.
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