Business Ethics and Corporate Social Responsibility in Petroleum Development Oman - Case Study Example

Contemporary Management Issues Petroleum Development Oman Llc Introduction a. Comprehensive introduction of business ethics and CSR b. Background of the organization c. Objective of the assignment Business Ethics a. Theories of business ethics b. Evaluation of business ethics to stakeholders c. Development and sustainability of business ethics Corporate Social Responsibility a. Tthe different elements of CSR b. Critical evaluation of the rewards of CSR to the organization Conclusion and findings References Introduction Business ethics and Corporate Social Responsibility are the two issues in modern business environment that gain more interest within managerial world (Delmas et al, 2013). However, CSR has the attention of not only management, but also of all stakeholders, including investors, business media, customers, partners, etc. d. Background of the organization Petroleum Development Oman (PDO) is an Oman-based company operating in the oil industry, and engaged in both exploration and production of natural gas and oil (MarketLine, 2014). PDO is owned by four major players, the Government of Oman, Royal Dutch Shell, Total, and Partex with a 60%, 34%, 4%, and 2%, respectively (Petroleum Development Oman, 2014). The company’ s business is a large-scale business accounting almost all of the country’s natural gas supply and for more than 70% of its crude oil productions (Petroleum Development Oman, 2014). In order to perform its operational activity at more than 5,000 producing wells the company employs about 6 000 people and works with more than 35, 000 contractors (Petroleum Development Oman, 2014). Taking into consideration this type of business and the number of people involved, the company has extremely huge social and environmental responsibility for its activity. e. Objective of the assignment There are two key objectives of the assignment. The first one is to provide an overview of the theories of business ethics to stakeholders and critical analysis of how Petroleum Development Oman Llc develops and sustains business ethics and how the company conducts business ethics to its stakeholders (including shareholders, employees, customers, suppliers, and government). The second objective is to review different elements of corporate social responsibility (CSR) and to provide critical evaluation of the rewards/benefits of CSR obtains the Petroleum Development Oman Llc while implementing CSR. Business Ethics d. Theories of business ethics There are many various definitions and interpretations of the term “business ethics”. One of the most common interpretations is that business ethics or values set the definitions of good and bad, right or wrong in business environment (Payne, & Landry 2006). Further, these definitions become generally accepted standards in the business context (Gavai 2010). Thomas Garrett explains that business ethics is “concerned primarily with the relationship of business goals and techniques to specific human needs” (cited by Gavai 2010, 4). There are recognized two traditional theories of business ethics: Raiborn and Payne principles and the Kantian analysis (Payne, & Landry 2006). The idea of the Kantian approach to business ethics theory implies that “one should do to others as others do unto one” (Payne, & Landry 2006 82). Raiborn and Payne have offered the concept of “business ethics” as guidance to decision making process and suggested the development of certain “Golden Rules” that identify ethical values that are important to the stakeholders and society (Payne, & Landry 2006). Business ethics is covering the interest of all stakeholders, including: shareholders, employees, government, suppliers, local public, customers, creditors, dealers, etc. (Gavai 2010). Customers, being a crucial integral chain in any business have consumers’ rights that should be protected by the ethical codes or rules. The most important rights include: right of information, right of choice, right of safety, and right to be heard. With society becoming more and more environmentally and socially aware, many businesses have developed ethical perspectives and practices covering such social issues as: consumerism, social protection, people-oriented management, energy conservation, etc. (Gavai 2010). Petroleum Development Oman also has made a significant focus of its business ethics on CSR. More detailed analysis is presented in the following sections. e. Evaluation of business ethics to stakeholders Employees PDO has officially declared its position towards ensuring safety in the exploration, development, storage, production and transportation of its products in Oman (Petroleum Development Oman, 2014). Therefore, PDO ensures safe and healthy working conditions to its employees and contractors combined with the sophisticated practice of recruitment, development and training. The company’s management highlights the importance of respecting the employees’ rights in accordance with the Omani Labour Law (Petroleum Development Oman, 2014). Moreover, the PDO has developed Health Safety and Environment (HSE) Management System’s requirements and is promoting a culture in which everybody shares these HSE principles (Restucci 2011). In addition to the HSE there are 12 Life saving rules that were developed for all employees and contractors of the company. Customers, Suppliers and other stakeholders The Oman-based oil company states that all relevant stakeholders including employees, suppliers, contractors and sub-contractors should have access to HSE and follow its rules and policies. PDO views transparency and honesty principles as the major ethical principles in work with both suppliers and contractors (Petroleum Development Oman 2014, n.p.). The principles and rules of PDO (more details in the next issue) should be applied to everybody. Taking into consideration that government represents a majority shareholder in the organization, the same principles should be applicable. f. Development and sustainability of business ethics While there is no specific business code of ethics on the company’s corporate website, the PDO has developed some business ethics principles and rules based on the company’s core values of honesty, respect and integrity and integrated it into Code of Practice (HSE). PDO’s vision “to be renowned and respected for the excellence of our people and the value the company creates for Oman and all its stakeholders” also has influenced of the company’s positioning today and its business ethics culture (Petroleum Development Oman, 2014). The company has three corporate Golden Rules: Comply, Intervene, and Respect. These rules served as a foundation of the HSE policy (Pdo.co.om, 2014). As it has been already mentioned, PDO has developed its own HSE Management System which complies with the PDO internal standards, the Laws of the Sultanate of Oman, best practices and other international standards (Restucci 2011). HSE Management System has been integrated into the PDO’s Code of Practice which includes the PDO Code of Conduct and PDO’s Statement of General Business Principles (PDO HSE Management System Manual 2011). The company’s statement cited below provides a clear insight of the development of its strategy and business operations. “The Company will endeavor to conduct its business in such a way as to protect the health and safety of its employees, its contractor employees, and other persons affected by its activities, as well as to protect the environment, minimize pollution, and seek improvement in the efficient use of natural resources” (PDO HSE Management System Manual 2011, 4). Due to this PDO’s document which undergoes continuous improvements through revision the company is creating and sustaining business ethics practice in the organization and outside it. PDO’s Statement of General Business Principles is supported at both corporate and asset levels and is implemented through the whole organization (PDO HSE Management System Manual 2011). Corporate Social Responsibility c. Discuss on the different elements of CSR Corporate Social Responsibility, like ethics, does not have a universal definition (Erbschloe 2009, 69). The definition of CSR has undergone excessive transformations of interpretation. According to the International Standards Organization, CSR is “The values and standards by which business operates” (cited by Erbschloe 2009, 69). Initially, CSR was encompassing several major elements: economic, legal, ethical and philanthropic (Sun et al, 2010). However, based on the business ethics model, legal and economic aspects are much less important that the ethical and philanthropic (Sun et al, 2010). Nowadays, CSR is often sound with the environmental issues and environmental element plays here an important role. Another important element is the company’s contribution to the local communities or even global community. More and more companies adjust their strategies to environmentally-friendly business approach and focus more on community development initiative, afterwards heavily advertising its CSR achievements among various stakeholders and thus adding value to the company (Paetzold 2010). d. Critical evaluation of the rewards of CSR to the organization The official statement of the PDO in relation to the company’s activity is the following: “At all times, PDO endeavors to be a good corporate citizen, operating in an environmentally responsible and sustainable fashion, dealing transparently and honestly on the basis of open and competitive bidding with contractors and suppliers and supporting and investing in social and community projects” (Petroleum Development Oman 2014, n.p.). By this statement the company states about its active involvement and business focus on the Corporate Social Responsibility. This statement is supported with several sustainable initiatives that the company has undertaken and continues to undertake till today. The company has a set of sustainable programs comprised of such initiatives: Corporate Occupational Health Department The program is aimed at achieving and maintenance of the optimum health and productivity of employees (Petroleum Development Oman 2014, n.p.). Safety The main focus is on ensuring the process and personal safety of employees and contractors Corporate Environmental Affairs The main focus is made on the environmental issues, whereas the company is undertaking many relevant initiatives. One of such initiatives is named NIMR Water Treatment Project focused on sustainable water consumption. By implementing this project, PDO achieves the following benefits: oil recovery, biomass production, greening the desert, salt production, reduction of CO2 emissions, and employment opportunities (Water Threat into Opportunities, 2014). The other environmental initiatives include protection of marine natural resources (coral reefs) (Coral Reef Assess ment & Survey Project, Al Fahal Island, 2014), and various initiatives aimed at greenhouse gas emissions reduction through the more efficient use of the natural resources and reduces operations (PDO Greenhouse Emissions Strategy, 2014). In addition to the above listed sustainable programs, PDO is positioning itself as a business supporting the community, emphasizing its goal to be “a good corporate citizen” (Petroleum Development Oman, 2014). Jointly with the government support, PDO implements a social investment initiatives varying from backing voluntary groups and community-base initiatives to local charities. One of such initiatives is Local Community Contractors – initiative aimed at creating of jobs (contracting positions) and supporting the local Omani businesses, owned by the tribal citizens living in PDO’s concession area. According to the PDO’s data, the company has created more than 1000 jobs for local citizens (Petroleum Development Oman, 2014). In addition to LLC there are other socially responsible projects: health clinics, interactive classrooms and educational materials for people with visual problems, providing support and assistance to youth in relation to securing better job opportunities, training for employment and career development with focus on people living in small villages and towns, Grants and donations for various educational, health, or sporting events, etc. (Petroleum Development Oman, 2014). Moreover, the Oman-based company made a significant contribution to the Omani’s nation by establishing public buildings such as: the Planetarium, the Public Knowledge library, the EcOman Centre, the Oil & Gas Exhibition Centre, and the Traffic Safety Institute (Petroleum Development Oman, 2014). It is possible to suggest the Petroleum Development Oman Llc. is a company taking extremely active CSR position on the market. Many companies tend to do this in order to increase their environmental performance ratings and thus be in trend of increasing socially responsible investing (Delmas et al, 2013). While PDO is not publicly traded organization it still is getting some obvious rewards by implementing CSR strategy. Thus, for example, by ensuring safety and good working conditions for employees as well as integrating tribal citizens and youth to the PDO’s projects the company increase loyalty among community and thus increases the potential of labor force and increases loyalty of current workforce (Paetzold 2010). The overall PDO’s CSR activity helps the company to create better image and increase loyalty to the government (as the majority package of shares is owned by the government). Also, CSR results in improved company’s reputation in the consumer market and thus positively influences on the buying decisions of consumers (Paetzold 2010, 8). References Coral Reef Assess ment & Survey Project, Al Fahal Island. (2014). 1st ed. PDO, p.1. Available at: http://www.pdo.co.om/hseforcontractors/Environment/Documents/coral.pdf Delmas, M, Etzion, D, & Nairn-Birch, N 2013, Triangulating Environmental Performance: What do corporate social responsibility ratings really capture? , Academy Of Management Perspectives, 27, 3, pp. 255-267, Business Source Elite, EBSCOhost, viewed 7 June 2014. Erbschloe, M 2009, Corporate Social Responsibility, Research Starters Business (Online Edition), Research Starters, EBSCOhost, viewed 7 June 2014. Gavai, AK 2010, Business Ethics [Electronic Resource] / A.K. Gavi, n.p.: Mumbai [India] : Himalaya Pub. House, 2010., Ashford University Library Ebook Collection, EBSCOhost, viewed 7 June 2014. Manzandarani, A., Mahlia, T. and Chong, W. (2011). Renewable and Sustainable Energy Reviews. Renewable and Sustainable Energy Reviews, 15(3), pp.1575--1592. MarketLine, (2014). COMPANY PROFILE Petroleum Development Oman LLC. p.4. Paetzold, K 2010, Corporate Social Responsibility (CSR) [Electronic Resource] : An International Marketing Approach / Kolja Paetzold, n.p.: Hamburg : Diplomica Verlag, 2010., Ashford University Library Ebook Collection, EBSCOhost, viewed 7 June 2014. Payne, D, & Landry, B 2006, A UNIFORM CODE OF ETHICS: BUSINESS AND IT PROFESSIONAL ETHICS, Communications Of The ACM, 49, 11, pp. 81-84, Business Source Elite, EBSCOhost, viewed 7 June 2014. PDO Greenhouse Emissions Strategy. (2014). 1st ed. [ebook] PDO, p.1. Available at: http://www.pdo.co.om/hseforcontractors/Environment/Documents/4-Box%20Poster%20final22.pdf [Accessed 7 Jun. 2014]. Pdo.co.om, (2014). GoldenRules. [online] Available at: http://www.pdo.co.om/hseforcontractors/SiteAssets/GoldenRules.aspx [Accessed 7 Jun. 2014]. PDO HSE Management System Manual (2011). Health, Safety, and Environment Code of Practice. CP-122. Available at: Petroleum Development Oman, (2014). Pages - About Us. [online] Pdo.co.om. Available at: http://www.pdo.co.om/Pages/AboutUs.aspx [Accessed 7 Jun. 2014]. Petroleum Development Oman, (2014). Pages - Community. [online] Pdo.co.om. Available at: http://www.pdo.co.om/Pages/Community.aspx [Accessed 7 Jun. 2014]. Restucci R. (2011). Health, Safety & Environment Policy, 1st ed. [pdf] Petroleum Development Oman, p.1. Available at: http://www.pdo.co.om/hseforcontractors/Documents/HSE_Policy.pdf [Accessed 7 Jun. 2014]. Sun, W, Pollard, D, & Stewart, J 2010, Reframing Corporate Social Responsibility [Electronic Resource] / William Sun, Jim Stewart And David Pollard, n.p.: Bingley : Emerald, 2010., Ashford University Library Ebook Collection, EBSCOhost, viewed 7 June 2014. Water Threat into Opportunities. (2014). 1st ed. [ebook] Petroleum Development Oman, p.1. Available at: http://www.pdo.co.om/hseforcontractors/Environment/Documents/6990_Nimr%20Reed%20Bed%20Project%20Poster-01.jpg [Accessed 7 Jun. 2014]. Read More