British Petroleum Company - Case Study Example

British Petroleum Company It is quite often now that we hear of Corporate Social Responsibility. Equally often, perhaps in the next sentence, we hearof an organization getting lambasted for being lacking on the Corporate Social Responsibility or CSR front. This point is not a recent discovery but has been under scrutiny for decades now. It has emerged with time as people have realized the cost of doing business to themselves, their environment and the simple lifestyles around them. Therefore, when companies take resource from a place to create something new and to sell it, CSR makes it the obligation of that company to repay the environment, the land and people of that area. The obligation of the company to its shareholders is a profit at the end of the year and dividends in return. Contrarily, it is the obligation of the stakeholders to demand some form of repayment for the use of resources, land and talent for that very profit. Purpose This paper will examine the Corporate Social Responsibility practices of British Petroleum Company to see how socially responsible and upright this company has been over the years and in which areas it is lagging behind. British Petroleum has been the recipient of mixed reviews from recognized institutions for a very long time. With some calling it among the most socially responsible companies to those that call it one of the worst companies of the year, BP has seen it all. Whether it has emerged the winner or not, after this grueling scrutiny, will be covered in the following pages. Scope This report is meant to be a critical analysis of the practices adopted by BP as far as CSR is concerned. It is based on the information provided in the secondary sources used in the preparation. About the Company BP is known to be an organization that has one of the highest CSR profiles among all big players in the oil industry (Banerjee, 2007). British Petroleum is among the largest oil and gas exploration companies in the world. Its operations include (M2PressWIRE, 2002): the exploration and production of natural gas and crude oil; refining of crude oil; manufacture of petroleum products; marketing of refined products; construction and mining; and transportation of crude oil; marketing and trading of gas and power, of liquefied natural gas (LNG), natural gas liquids (NGLs), biofuels and low-carbon power generation. The headquarters of BP are situated in London, UK (bp.com, 2009). What is Corporate Social Responsibility? Many people have come to associate corporate social responsibility to be the responsibility of an organization to spend some money on projects that affect the community or perhaps advertise some environmentally friendly practices they have adopted. This application of the concept limits the responsibility of the organization in its own favor, rather than being mutually beneficial to the company and stakeholders. Snider et al (2003, p176) provide a definition of Corporate Social Responsibility as ‘the obligation of the firm to use its resources in ways to benefit society, through committed participation as a member of society, taking into account the society at large and improving welfare of society at large independent of direct gains of the company.’ There are four key aspects of Corporate Social Responsibility as identified by Carroll (2004). These are ‘expectations’ that the society places on the organization operating around it at any time and are: economic, legal, ethical and philanthropic. This means that the communities that companies operate in, have the right over that company in the economic, legal, ethical and philanthropic sense. With economic, the meaning is that the company will not make the people bereft of their right to decent employment, in fact the company would encourage it more. Also the income of the households must not be worse off than before. The legal aspect is that the company is not breaking any law and is allowing the people as well to practice it freely and without fault. The ethical right over that company is that the company will not break any rules of ethics, will be equitable and true in its practices. The philanthropic aspect is that the company will extend a hand of support and help, without demanding any price in return, when the people are in need. CSR was previously known to mean that it is the company responsibility of ‘seriously considering the impact of the company’s actions on society’ (Caroll & Buchholtz 2008, p35) This definition does not address the idea that a company must remedy any negative effects it is having on the society nor does it say that the company must make effort to increase or create better actions. It does not even provide a definition of what is meant by ‘seriously’ considering company actions. Motivation for CSR One might ask that the right of the community to have a hand over and above the company is not exactly fair. So why should the combine abide by the rules of socially responsible behavior rather than just working towards a prift. The answer is a multitude of reasons. Frynas (2005, p.583) describes the key motivations of a profit seeking enterprise to spend money on CSR. These are as follows: To gain competitive advantage; To maintain a stable work environment; To effectively manage external perceptions; To keep employees satisfied. There is increasing evidence that companies that are proven or even known to be socially responsible have an upper edge over their competition. This is because a socially responsible company is more aware of its surroundings, of its stakeholders and its impact on them. With its operations, the company is affecting these stakeholders and then gets feedback from them accordingly. If there is a waste or spillage problem that the company should be aware of, the social environment would let such a thing be known to the company before it can cause any catastrophic results. As quoted in the Times (n.a., 2004) For firms genuinely wishing to show true corporate responsibility, a key component is accountability to all stakeholders. If firms have systems in place not only to garner constructive criticism but also to feed this back into a decision making process, they have understood the concept of how they maintain their "licence to operate". British Petroleum and Corporate Social Responsibility The oil industry in general is quite hazardous to the environment, requiring objectionable stuff at each stage of processing starting from exploration to production to transportation, refinery (Frynas, p594) and final delivery of finished (processed) product. Despite this environmental impact, oil is the most essential and valuable commodity in the world today and does not have a readily available or acceptable substitute. These factors make the practice of socially responsible behavior extremely important for all oil companies. Initiatives (economic, legal, ethical and philanthropic) Firms can have a joint impact on the society and environment with the aid of well-thought and well planned initiatives. These serve the economic, legal, ethical and philanthropic expectations that communities and the people have from them. Following is the critical analysis of some initiatives that British Petroleum has undertaken over the years. By the closing of the 20th century, British Petroleum was on the crossroads. It was pondering over its social responsibility and then took the proactive decision to decrease emissions and be more socially and environmentally responsible in the coming years. The company also set timelines for itself. It was in line with this policy shift that the company rebranded itself, effectively positioning the company as one that is more than just a petroleum company i.e. Beyond Petroleum. The logo of the company also changed and started including the Helios, with a new motto of ‘Beyond Petroleum.’ (Esposito, p214) This was driven by the CSR-motivated initiative by the company in 2000, which aimed at making the enterprise the most sustainable energy company (mallenbaker.net, 2009) in the oil industry. In Australia, the company, in conjunction with Primary Energy and CSR, has agreed to double the supply of biofuels to over 400 million liters per day (Macdonald-Smith, 2006). The purpose of this initiative is to help in the decreasing of air pollution and of course, to provide a cleaner alternative to oil. Ethanol, which is a product of agricultural sugar crop, is a very clean petrol substitute. Primary Energy has plants in Kwiana, Western Australia and a few more planned in New South Wales. CSR is Australia’s biggest sugar refiner. BP is taking a leadership role in this illustrious project and aids in increasing the jobs available in Australia. This strategy is meant to promote the image of the company away from oil to more sustainable energy sources. BP is moving into alternative fuel types as well. In Angola, Africa, BP apparently distributed condoms in an anti-aids initiative (Frynas, p.587). The condoms were not suitable for the Africans and the campaign had to be deemed a failure. It is surprising to note that such a well-established company would launch such a poorly researched campaign. This could mean a lot of things as far as CSR is concerned: either the company was unwilling – for any reason – to spend the effort to research the minute but cumbersome details for the project or perhaps the company was non-serious and made a half-hearted attempt at this philanthropic gesture. Or it could be a genuine, if well-intentioned, mistake. This raises multiple concerns about the motivations of the company but BP has many other projects that make the dismissal of such a claim almost necessary. As it turned out, it was actually an ill advised plan: the company spent money to train its staff at a prestigious business school about environmental concerns such as global warming and climate change but did not think of hiring a simple development expert to give a more relevant and practical insight such as checking the eventual user first before supplying a product (Frynas). Then there is another instance of philanthropy by British Petroleum in Zambia where BP provided solar-powered refrigerators for storing anti-malaria vaccines. BP is continuing to work on the economic front, looking for investment opportunities. As is known, BP is one of the major oil producers in Alaska, which is considered under threat as a result of ‘intensive production’ (Walker, 2002). Also, BP had plans to start the construction of an off shore oil project in the Arctic, and worked towards opening the Arctic National Wildlife Refuge to drilling. (Walker, 2002) Although this is an ambitious project, the ramifications can be profound and extent of environmental effect is to be accounted for. CSR in Business Interest The CEO of BP is a world renowned protagonist of CSR. Quoted by Banerjee (2006), as cited by Bakan (2004), the CEO summarizes the BP CSR philosophy as: BP’s social responsibility is good business driven b practical commercial reality and hardheaded business logic. The company’s good deeds are in our direct business interest, not as acts of charity but of what could be called enlightened self-interest. The fundamental test for a company is performance. Since 1997, the company has been involved in efforts to portray its image as an environmentally friendly and socially responsible company. Whether that be issues of sustainability, emissions reduction, investment in alternative fuel, public speaking on CSR, ad campaigns or over policy change, BP has undergone a massive ‘green’ makeover. Now the company is not trying to find a mass target market that is more environment-prone but is actually seeking to soften its public image and reputation (Maak & Pless, 2006). Holistic Approach As discussed previously, CSR must not be limited in scope and particular to actions and activities. In fact it should cover all levels of the organization and all involved processes, making it holistic in application. Davies (2006) quotes Stewart Lewis as having believed that CSR is only ‘effective’ when it is applied throughout the company. He says: “CSR requires integrity to be sustainable so that the image projected must be consistent at all levels”. All the companies that have managed to adapt CSR into their Business-as-usual (BAU) have been able to launch successful and reliable Corporate Social Responsibility campaigns. This is true for BP: Davies (2006) recounts a story that a journalist once disbelieved the campaign by British Petroleum and decided to test it. When he got in touch with a junior technician, the latter informed him that CSR was indeed “the way we all work”, he understood that BP has a policy to be proactive in behavior that is socially responsible and that is being implemented in the company. BP must focus new initiatives on the human rights aspect, advertising and promoting where there is need as human rights is one of the key aspects of CSR (n.a., 2004). Conclusion CSR has emerged to become a business philosophy and a requirement. There is not a single organization in the world that would be successful without being big on the CSR front. This is a reality that most organizations are embracing and quickly adapting to. BP is one such organization that has taken CSR to be an important asset, strengthening its brand image and reputation. BP has taken some missteps along the way but overall, it has leveraged CSR to the fullest. What more it can do is that it must seek more partnerships with non-profit organizations and do more work in the less fortunate countries of the world. Then establishing a presence there will allow deeper penetration for the company. Furthermore, investment in alternative fuels should continue as they are going to be fueling the world in the years to come. Summing up, CSR and business go together, and BP is one quick company to realize that. References “About BP” (2009). BP Plc. Retrieved 28 Nov 2009 from http://www.bp.com/marketingsection.do?categoryId=2&contentId=7013628. Banerjee, Subhabrata Bobby (2007). Corporate social responsibility: the good, the bad and the ugly. UK: Edward Elgar Publishing “BP” (2009). Corporate Social Responsibility - Companies in the News. Retrieved 28 Nov 2009 from http://www.mallenbaker.net/csr/CSRfiles/bp.html. “British Petroleum Plc - An In-Depth Business, Strategic and Financial Analysis of British Petroleum Plc” (2009). M2PressWIRE. Retrieved from Newspaper Source database. Carroll, Archie B. & Buchholtz, Ann K. () Business and Society: Ethics and Stakeholder Management. OH: South Western CENGAGE Learning “CSR a heavy responsibility” (2004). The (United Kingdom) Times. Retrieved from Newspaper Source database. Davies, Adrian (2006). Best practice in corporate governance: building reputation and sustainable success. England: Gower Publishing, Ltd. Esposito, Mark (2009). Put Your Corporate Social Responsibility Act Together! Oklahoma: Tate Publishing Frynas, Jedrzej George (2005). The false developmental promise of Corporate Social Responsibility: evidence from multinational oil companies. International Affairs, 81, 581-598 Hess, David, Rogovsky, Nikolai & Dunfee, Thomas W. (2002). The Next Wave of Corporate Community Involvement. California Management Review, 44(2), 110-125. Maak, Thomas & Pless, Nicolas (2006). Responsible Leadership. NY: Routledge Macdonald-Smith, Angela (2006). Primary, CSR strike deal with BP for doubling annual supply of biofuels. The (Brisbane) Courier Mail, 1, 079, Snider, Jamie, Paul, Ronald & Martin, Diane (2003). Corporate Social Responsibility in the 21st Century: A View from the World’s Most Successful Firms [Electronic Version]. Journal of Business Ethics, 48, 175–187. Walker, Cam (2002). Greening corporations or scoring greenbacks? Does corporate engagement represent an opportunity for green groups to increase commercial environmental responsibility, or is their faith in self-regulation misguided and inviting abuse? (Features). Arena Magazine, p.44(3). Retrieved from Expanded Academic ASAP. Read More