Current Business Themes - Dissertation Example

Executive Summary The present dissertation deals with the concept of sustainability and sustainable development in the corporate world. The topic of our discussion is mainly related to the oil exploration and production industry. Over the last two decades, public alertness and anxiety about oil spills has been high. Prospective arrangements for opening offshore and Arctic regions for oil explorations have once more caused great alarm. This dissertation is concerned with the management of oil spills and oil spillage risk in oil exploration programs. The happening of oil spills is basically a matter of probability. A probabilistic incident like oil spill event or oil spill contact to an environmentally responsive area cannot be forecasted; only an approximation of its likelihood can be quantified. Basically two eminent companies have been selected for the purpose of information gathering. Interview has been conducted with the senior managers of BP and Shell. The two major natural disasters caused by these firms have been discussed here. Also the report states the corrective measures undertaken by these firms. It can be concluded from the study that the occurrence of oil spillage is fundamentally a subject highly dependent on probability. A probabilistic occurrence like oil spill incident or oil spill spreading and affecting the marine ecology as well as the human lives is a matter that can’t be anticipated; only an estimation of its possibility can be made. When an organization takes steps for sustainability practices, it becomes essential for it to know the probable causes of risk. Thus considering the environment prior to the business objectives should be the main aim of every firm related to this industry. Contents Introduction 3 Literature Review 4 Research methodology 9 Findings and Analysis 10 Interview with the Shell team 13 Conclusion and Recommendations 17 Reference 19 Introduction In the present corporate era, all the firms strive to gain the trust of its stakeholders so that a long term business relationship can grow between them. A long term relationship in business depends on product quality, customer service, and good reputation. Reputation is the concept that many successful firms fail to achieve. Business reputation is considered as an asset that is intangible which distinguishes a company from other firms and draws consumers to make them buy things again and again from the same company and at the same at time the consumers readily pay a top price for the goods and services. However, in spite of the discerning involvement between financial performance and reputation, pragmatic studies account for questionable findings. Reputation is an exclusive element of a business that can be achieved by it through its good work and goodwill (Lee & Roh, 2012). One of the greatest sources of reputation is the sustainability framework practiced by the firm. Sustainability can be attained by the means of numerous activities that comprises of the reputation of the management. These activities comprises of the formation of the environment-friendly goods, motivating and retaining employees, saving energy etc. which aids the business to preserve value via return and growth on capital. The aim of the present study is to focus on the various facets of the oil exploration and production industry and the corporate social responsibility practice followed by the firms of this sector to maintain sustainability. The two main firms that will be covered in our study are BP and Shell. It will be a comparative analysis between the environmental policies of both the firms that will further discuss about the various measures taken by these firms to repair the damages. For the present study the research question happens to be, how do the oil exploration and production plants deal with the issues of environmental pollution and what are their approach to a sustainable environment? The topic in hand will be studied by the conduction of both primary and secondary research. The primary research will be done by the means of interview where qualitative survey will be conducted. We will mail a questionnaire to the concerned persons of BP and Shell and will ask them to send us the answers for each question. Based on the feedback received from the concerned people we will present the findings and those findings will be supported by the secondary research collected from the internet sources. Literature Review The World Commission on Environment and Development Report published during 1987 that is also referred to as the Brundtland Report, explains the concept of sustainable development as the kind of growth that “meets the needs of the present generation without compromising the ability of future generations to meet their own needs.” Savitz and Weber recently suggested that trade concerns and the interests of the ecology and the community system interconnects the operations of every firm. They express the overlap connecting business objectives of growing market profits and share and the ecological aims of taking into account the climatic transformation and the public wellbeing as the “sustainability sweet spot.” (Sharma and et. Al, 2010). The initial point for ecological sustainability is astonishingly easy: if everybody identifies that natural resources and ecosystems are restricted, financial choices can be oriented in such a manner that the final products of fiscal activities are ecologically sustainable as well (Sharma and et. Al, 2010). The Global Corporate Sustainability Report 2013 presents that corporate houses throughout the globe are starting to consider sustainability more gravely. A glance at the measures taken by almost 8,000 firms from 140 nations taking part in the United Nations Global Compact frames an impressive story. Firms ranging from the leading to the smallest in terms of size, from the most expanded to the least grown nations are determined to establish widespread sustainability values on labour, human rights, anti- corruption and environment into their operations and management (United Nations Global Compact, 2013). The six major trends of the corporate sustainability concept are- The “tone from the top” is the answer to finely tuned preparedness and awareness for risks in sustainability. Multilateral and Government organizations aren’t playing a significant role in the business sustainability programme. Sustainability issues today consist of augmented proximity and risk of natural reserve scarcity. Business danger response is not paired well to the degree of changes taking place due to sustainability disputes. Amalgamated reporting is unhurried to take control of. Investigation from shareholders and investors are showing rising trends (Ernst & Young, 2013). Corporate social responsibility is another form of corporate sustainability. CSR has been referred to as corporate commitment in publicly accountable behaviors in answer to three factors: the desires and actions of influential stakeholders, the capacity of such activities to boost stock performance and competitiveness and societal demands. Intrinsic to the argument about CSR are aspects of legitimacy. Broadly measured, legitimacy implies to socially established behaviors and values. As an element, legitimacy is conferred upon corporations by their stakeholders. Suchman defines “legitimacy is a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions” (Nunnenkamp, 2012 ) . NGOs and business organizations, as part of the budding corporate social responsibility (CSR) movement, are creating tactical coalition at an unparalleled point. The alliances have effected in public union of values and brands in an effort to achieve social, economic, political and cultural advantages. For instance, American Express lately commenced its Red Card. The top credit card players donate 1% of patron’s total expenditure to the Global Fund to help prevent AIDS in Africa. The union attracts communally aware customers to employ American Express Red in place of another credit card and gathers fund for the Global Fund. The concern of the present dissertation is the oil exploration and production industry and its sustainability practices. The oil industry is concerned with a long history of spills on the North Slope and the probability of future spills is high. Indeed, there has been an oil spillage once a day, on average, from the time when gas and oil development began on the North Slope. In order to make the subject worse, ocean currents move the chemicals and oil hundreds of miles. Further, in the Arctic Ocean, cleaning up oil spills would lead to enormous challenges. Suppression and recovery at sea hardly ever leads to the removal of more than a comparatively small fraction of a large oil spill, i.e. only 10-15% and often significantly less. Till date, no technology subsists in order to clean up oil in the sea ice circumstances and late-season spills would stay behind until the following year. Furthermore, cold water splits down oil much more slowly than the warm water. Climate change has considerably weakened the basis on which Arctic ecosystems function. Species mainly at risk include polar bear, walruses, ringed seals, beluga and bowhead whales and coastal birds. So, it is found that the environmental risk is associated with the oil exploration programs (Goodyear and Beach, 2012, p.1). Oil spillage refers to an unintentional release of oil in a water body due to human activity and is regarded as form of pollution. Oil spillage occurs due to release of crude oil from underwater wells and pipeline, or offshore drilling rig, or a tanker, frequently presenting a danger to marine life and environment. Oil spillage became a main environmental problem mainly because of the use of super tankers competent of transporting more than 500,000 tons of oil. On ocean surface, oil is dangerous to several forms of aquatic life because it averts adequate amounts of sunlight from penetrating and also decreases the dissolved oxygen levels. Crude oil makes gills and feathers ineffective, and because of this reason fish and birds die from direct contact with the oil itself. The overall environmental problem is caused by negligent or unintentional release of used gasoline solvents and crankcase oils and the natural seepage from the ocean floor greatly heighten the overall environmental problems. The major risk related with oil spillage is the environmental risk. This is said because the overall environmental problem is caused by negligent or unintentional release of used gasoline solvents and crankcase oils by individuals and industries and the natural seepage from the ocean floor greatly heighten the overall environmental problems. On ocean surface, oil is dangerous to several forms of aquatic life because it averts adequate amounts of sunlight from penetrating and also decreases the dissolved oxygen levels. Crude oil makes gills and feathers ineffective, and because of this reason fish and birds die from direct contact with the oil itself. So, the main risk associated with oil spillage is the environmental risk. Prior to describing the risk assessment process, identification of the variety of terms is essential which is used in describing the oil spillage risk assessment process: Source: The operations or facilities such as pipeline, oil tanker, storage tank, offshore installation and non-tank vessel; from which an unintentional release of oil takes place (Imo, 2010, p.3). Hazard: A potential danger such as uncharted rocks, maintained equipment and congested waters; which causes the release of the oil, often leads to oil spillage risk (Imo, 2010, p.3). Event: Event is mainly referred to the accidental release of oil such as a hazard interaction with a resource in order to create an event (Imo, 2010, p.3). Frequency: The statistical number of times an incident will take place within a definite sample size over a definite period (Imo, 2010, p.4). Probability: Probability is referred to a particular incident and is conveyed as a number between zero and one; which means between zero chance and certain (Imo, 2010, p.4). Likelihood: It is a general term which covers either probability or frequency, depending on the analyses used (Imo, 2010, p.4). Consequence: The consequence may be environmental or socio-economic costs or damage which may take place from an incident (Imo, 2010, p.4). When a ship descends, it carries oil along with it into the abyss. Corrosion, storms and other events can lead to the leakage of that oil and pollute the sea, which kills the marine life, birds, and also poses a health risk to people. Out of 20,000 shipwrecks in United State waters, the NOAA i.e. the National Oceanic and Atmospheric Administration, in recent times recognized 6 drawn vessels that most terrorize to pour out their oily innards. NOAA proposed further consideration and oil clean up of 17 of those shipwrecks. In the further sections we will conduct interview sessions with the senior managers of two reputed firms of the oil and petroleum sector, namely BP and Shell from whom we will gather further information about the hazards commonly occurring in this sector and the measures taken by these firms to prevent such occurrences. Research methodology The interview process will be conducted through an online conversation mechanism like chat or email. Primarily, the people from both BP and Shell were asked to provide their preferable timing when they will be able to spare some time towards the interview session as the questionnaire contained 5 qualitative questions and therefore the interview is supposed to be a time consuming session. On getting the preferred time slots the concerned person will be contacted. Findings and Analysis The senior managers of both the companies were approached through the interview session and two questionnaires were sent to each manager and they reverted back with their answers which have been analyzed in the next section. Interview with the BP team 1. What is the age of the respondent? - 41 to 46 years 2. What is the designation of the respondent? Senior Management . 3. What are the various kinds of enterprise risks that might emerge as a result of excessive and improper measures and processes in oil exploration exercises? Potential environmental impacts from our activities fall mainly in the following areas: Waste generation, management and disposal: hazardous and non-hazardous wastes are produced from operations at the Greater Plutonio FPSO, rigs and logistics sites. Operational discharges: these include drill cuttings generated when we drill into the seabed to construct a well. Mud or drilling fluids may adhere to the cuttings and when disposed at sea may settle down and deposit on the seabed. The main process discharge from the FPSO is warm seawater with traces of biocide from the seawater cooling system. From time to time, produced water may also be discharged, depending on the volumes produced and the status of the facilities. Air emissions: these are generated mainly from the combustion of fuels in power generation for drilling, marine vessels and the FPSO, well clean-up and testing operations and flaring. Accidental spills: If an incident occurs and oil or chemicals are released to the environment, those substances have the potential to pollute the waters and land, affecting flora and fauna as well as other users who depend on these resources. Underwater noise generated by our activities results from vertical seismic profiling carried out during drilling operations and regional seismic surveys. The noise induced in the water column can affect marine fauna. Potential effects on marine mammals and turtles are of particular concern. To manage these impacts, BP Worldwide operates an environmental management system (EMS) which meets the requirements of the international standard ISO 14001:2004. It provides a systematic approach to managing environmental impacts and seeks to ensure that every practical step is taken to minimize those impacts. The system is externally certified and covers the Greater Plutonio production operations, all seismic, drilling and supply base activities in BP Worldwide, and onshore office facilities. Work will be done in 2011 to identify how the EMS will be incorporated within OMS. Risk reduction and continuous improvement are key elements of both systems. BP has been developing a more integrated approach to managing HSE compliance, using a systematic approach to identify legislation, assess its applicability, examine controls and assign actions. 4. Is your organization aware about the various harmful risks and potential hazards that might develop in the environment regards to complication in the oil exploration programs? The BP organization more than most is well aware of the risks and hazards associated with drilling complications. On the 20th April 2010 an explosion on board the Deep Water Horizon semi-submersible Mobile Drilling Rig killed 11 workers and injured 16 others. The rig burned continuously until it eventually sank resulting in a massive oil spill in the Gulf of Mexico considered to be the largest accidental marine oil spill in the world, and the largest environmental disaster in U.S. history. After this incident BP has made some changes in the organization around risk management whilst drilling. BP has stringent internal requirements regarding the design of wells, operations of drilling activities, and the capability to manage loss of well control situations, as well as regarding preparation for oil spill and crisis management events. These requirements will be addressed prior to the commencement of drilling operations to help reduce the risk of an oil spill incident, and to better assess whether appropriate equipment, procedures and personnel are available to respond should an emergency event arise. The installation of a BOP and other well controls, which are part of standard offshore drilling, means that the chance of a loss of well control event occurring is extremely remote. 5. Does your organization have a framework and operating procedure when it comes to dealing with risks related to oil spillage? What is your knowledge in these regards? Yes BP now has a “Containment Response Plan” in place not only in Worldwide but globally. BP seeks to deliver safe and compliant offshore drilling activities as a key strategic activity to mitigate Group level risks, and to differentiate BP by having the ability to demonstrate to governments, regulators and other stakeholders how we will operate in offshore regions in preventing oil related incidents such as oil spillages. The following five capabilities will be required prior to the commencement of any drilling activity and for the full duration of operations on each BP operated offshore well (from design to abandonment): Prevention; Relief Wells; Containment; Spill Response; and, Crisis Management. (BP, 2012) Interview with the Shell team 1. What is the age of the respondent? 47 to 52 yrs 2. What is the designation of the respondent? Senior Manager. 3. What are the various kinds of enterprise risks that might emerge as a result of excessive and improper measures and processes in oil exploration exercises? Oil exploration activities involve high risk operations and related to our business, normally we call for high focus on; High pressure Lifting operations Work at heights Hot work Energy isolation Confined space activities Operating motor vehicles Environmental conservation 4. Is your organization aware about the various harmful risks and potential hazards that might develop in the environment regards to complication in the oil exploration programs? Yes. In all areas of operations, the impact of the environment should be considered before beginning any activity: • Waste coolant, oil, chemicals, etc. are properly collected and disposed of and not discharged into open drains, waterways or land. • Metal scrap, wood waste, plastics, etc. are segregated and properly disposed of or recycled. • All hazardous or harmful emissions into the atmosphere are contained, controlled and monitored. • The use of energy is controlled, reduced and monitored. In the Netherlands a case was initiated during 2008, where the global headquarters of Shell is located. The case was looking for compensations for lost earnings from the polluted waterways and land in the Niger Delta area. It was the 1st instance when a Dutch listed firm has been prosecuted under the domestic law for offences supposedly conducted by an overseas ancillary division. The entire case was related to oil-spills in 4 regions of the Niger Delta namely Ogoniland, Goi, Ikot Ada Udo, Akwa Ibom area and Oruma in Bayelsa area. The cultivators had claimed that oil leak had polluted their farmland and fish ponds with the faulty pipelines. However the court identified that the spillage were not the consequence of a deficit of safety or maintenance but it was caused due to disruption. Judge Henk Wien stated that, “dismissed all claims against the parent companies... since pursuant to Nigerian law a parent company in principle is not obliged to prevent its subsidiaries from harming third parties abroad” (BBC News Africa, 2013). Another judgment is due yet in a London court, in a situation where 1000s of citizen from a highly contaminated zone of the Niger Delta region expect to compel Shell to disburse compensation. However the firm has already accepted liability for that oil spillage. 5. Does your organization have a framework and operating procedure when it comes to dealing with risks related to oil spillage? What is your knowledge in these regards? The energy supplied by us provides support to the financial growth and expansion to the major corporate sectors. Our operations aim at addressing social issues and put effort to provide advantage to the neighboring dwellers, safe-guarding our repute along with the conduction of successful business. We dedicatedly work towards sustainable development by our endeavors that aim at meeting the globe’s rising energy requirements in environmentally, socially and economically accountable means. Our assurance and policy reveals the incorporated way we implement across the divisions of Shell within the domains of “health, security, safety, the environment (HSSE) and social performance (SP)”. Every subsidiary of Shell, the joint ventures and contractors under our functional power must administer HSSE and SP in accordance with the assurance and policy. Commitments- In Shell all are dedicated towards: • Pursuing the objective of “no harm to people”; • Protecting the surroundings; • Using material and power professionally to create our goods and services; • Respecting our stakeholder’s interest and supply to the communities within which we work; • Developing power reserves, goods and services constant with these objectives; • Openly providing statement on our activities; • Playing a key role in sponsoring best approaches within our markets; • Managing HSSE & SP concerns as any other grave business operation; and • Promoting a background within which all the employees of Shell contribute to this dedication. Policy- Every Shell corporation: • Has a methodical move toward HSSE & SP framework that has been created to make sure the acquiescence with the legal regulation and to attain constant performance progress; • Fixes targets for development and determines, evaluates and creates reports for the firm’s performance; • Requires joint ventures and contractors to administer HSSE & SP in accordance with the guiding principle; • Engages efficiently with the affected groups; and • Involves HSSE & SP presentation in the assessment of employees and offers prizes accordingly. By the means of these commitment principles and policy framework we aspire to have an HSSE & SP activity which will make us proud. It will help us to gain the loyalty of consumers, society and shareholders, which will further help us to be a responsible corporate group and to dedicate ourselves towards the activity of sustainable development (Shell Global, n.d.). Conclusion and Recommendations Thus it can be concluded that the oil exploration industry offers both profit and risk and both are related to huge transactions. Therefore making profit and mitigating the risk factor is totally based on the company’s experience, forecasting techniques and the motive for running the business. Sustainability is a critical aspect of this business and it is highly recommendable for the firms to carry on their business as per the ethical standards, which might cause their operations to incur loss in some cases but still this the proper framework to stay within the market because at the end of the day the existence of a business becomes meaningless if it loses the public support. The concept of risk management and the implementation of business intelligence tools are highly recommended for the firms operating the oil exploration and production sector. The theory of traditional risk management has evolved during the years and it is necessary for every academician and professional to be acquainted with the current changes that are applicable. It is recommended for every organization related to the oil exploration projects and related to other industries to study the trend of these risks and take preventive measures in advance. Moreover there is variety of Business Intelligence tools used in today’s business organizations. Business intelligence is the process of gathering large quantity of data, assessing the data and offering a high end report set that compress the fundamental nature of the data into the foundation of the business activities, making the management able to make basic decisions related to the business. Last but not the least, giving priority to the surrounding and the society is highly recommended for firms related to oil exploration and production industry. Reference 1. BBC News Africa, 2013. Shell Nigeria case: Court acquits firm on most charges Available at http://www.bbc.co.uk/news/world-africa-21258653 2. BP, 2012. Annual Report and Form 20-F 2012. Available at www.bp.com 3. Ernst & Young, 2013. 2013 six growing trends in corporate sustainability. GreenBiz Group Available at http://www.ey.com/Publication/vwLUAssets/Six_growing_trends_in_corporate_sustainability_2013/$FILE/Six_growing_trends_in_corporate_sustainability_2013.pdf 4. Goodyear, J. and Beach, B., 2012. Environmental Risks with Proposed Offshore Oil and Gas Development off Alaska’s North Slope. New York: Natural Resources Defense Council. 5. Imo., 2010. Manual on Oil Spill Risk Evaluation and Assessment of Response Preparedness 2010. United Kingdom: IMO Publishing. 6. Lee, J. and Roh, J.J. 2012 Revisiting corporate reputation and firm performance link, Benchmarking: An International Journal, Vol. 19 Iss: 4/5, pp.649 – 664. Available at http://www.emeraldinsight.com/journals.htm?articleid=17051004 7. Nunnenkamp, P, & Öhler, H 2012, 'Funding, Competition and the Efficiency of NGOs: An Empirical Analysis of Non-charitable Expenditure of US NGOs Engaged in Foreign Aid', Kyklos, 65, 1, pp. 81-110, Business Source Premier, EBSCO host. 8. Sharma, A. and et.al, 2010. Sustainability and business-to-business marketing: A framework and implications. USA: Elsevier. 9. Shell Global, n.d. HSSE and social performance - commitment and policy. Available at http://www.shell.com/global/environment-society/s-development/our-commitments-and-standards/hse-com-policy.html. 10. United Nations Global Compact, 2013. Global Corporate Sustainability Report. The Wharton school of the university of Pennsylvania Available at http://www.unglobalcompact.org/docs/about_the_gc/Global_Corporate_Sustainability_Report2013.pdf Read More