Corporate Social Responsibility for Global Business - British Petroleum - Case Study Example

Corporate Social Responsibility for Global Business Name: Course: Institution: Date: Corporate Social Responsibility for Global Business BP History and operations Company structure British Petroleum (BP) is a multinational oil and gas company, which was originally established in 1908 as the Anglo-Persian Oil Company. Its deterioration in 1914 led to the decision by The UK government to invest and become a major shareholder in the company (BP 2010, p. 3). A board and executive team heads the company, which is responsible for the provision of direction and oversight of the company on behalf of its shareholders. Geographic operations The company operates in six continents and sells its services and products in more than 100 countries. The company has employed about 90,000 employees on the global platform and it has more than 1 million shareholders. In terms of production of oil, the company has a refinery capacity of 2.6 million barrels per day in all its 17 refineries across the world (BP 2010, p. 3). BP value chain Figure 1.0 BP value chain In an attempt to create value, the company is responsible for the supply of energy, which is an essential ingredient in improving the lives of millions across the world and supporting economic development. The activities of the company also help in creating employment opportunities, development of infrastructure, investments and the provision of revenues to governments (BP 2011, p. 3). When understood in relation to the value chain of the company, it is possible to argue that at every stage in the value chain, the company identifies opportunities of creating value through successful execution of its responsibilities as mandated by the industry. Through proper management of its infrastructure, the company ensures that protection of the people at the drilling, production and consumption point is guaranteed through the institutionalization of adequate safety and security measures (Tuner 2014, p. 57). Profitability and prospects of BP Profitability and prospect analysis of BP encompasses an assessment of a class of financial metrics, which is used in the determination of the company’s ability to generate sustainable profits from sales of the available resources. Classically, greater ratio numbers result in higher investment value for the company. Figure 2.0 BP return on sales The profit margin of the company is calculated by a multiplication of the operating dividends by the net sales. The company has had a relatively lower operating profit margin that the prevailing average in eth industry since 2011. This is following the Deepwater oil spill in the Gulf of Mexico since 2010 (Turner 2014, p. 62) Compare and contrast BP and Royal Dutch Shell Since the 2010 Deepwater Horizon accident, BP has initiated and implemented programs aimed at ensuring optimum stakeholder value maximization. This is through different environmental and economic restoration efforts especially in areas along the Gulf coast. The company has committed about $170 million aimed at supporting tourism initiatives in the affected states along the Gulf coast (Turner 2014, p. 58). One way by which the company has ensured that it promotes its intentions to ensure the safety of its stakeholders is through different cleaning practices on the Gulf shoreline. The company is also a major investor in the promotion of tourism initiatives considering that since 2010; it has been dedicated to the restoration of the Gulf seafood and ensuring massive investments in the local communities (Coombs 2010, p. 35). These investments have been through enterprise development and education programs in the communities along the Gulf coast. This is aimed at ensuring that local communities develop a positive perception of BP and its operations in the Gulf of Mexico and in other regions around the world. The company has also fully financed the $20 billion trust that was founded in 2010. This financial resource is to be used in the settlement of claims and the restoration of natural resource damaged during the oil (Turner 2014, p. 61). The oil spill at the Gulf of Mexico resulted in loss of employment opportunities in the tourism and fishing industries due to the closure of federal and state waters and tourist destination sites (Teen 2012, p. 162). The company has been able to respond to this crisis by employing about 2,300 people originating from the Gulf of Mexico to support the livelihood of the local communities. The company also expects to make an annual investment of $4 billion in the oil and gas sector at the Gulf of Mexico for more than a decade (Sumaila 2012, p. 502). The company operates on the understanding that its stakeholders comprise all the organizations and individuals who are affected by the activities of BP in any area of interest whether as a provider of energy resources, an employer, governments or businesses. One way by which the company maximizes stakeholder value to the employees is by engaging them in adequate training initiatives on how to consult different activities when working for the company. In addition, the company keeps its employees informed by opening channels through which the employees can engage in amicable communication with the management (Sumaila 2012, p. 502). The company also ensures value maximization to its shareholders by paying their dividends in a timely manner and organizing meetings through different platforms to provide these individual with information concerning the Deepwater Horizon. The company has also been able to advocate to its shareholders to help in the development of polices and strategies, through the board, that could be used in addressing the Deepwater Horizon accident and initiate safety precautions to minimize the possibility of such an accident in the future (Sumaila 2012, p. 505). Customers are an essential part of the company’s stakeholder population. The company services more than 7 million customers in a day and there is need to ensure that these customers receive quality products and services (BP 2011, p. 8). The company engages customers through different research initiatives to gauge its ability to satisfy the customers in relation to its competitors. In matters of corporate social responsibility, other than engaging in the restoration of the Gulf of Mexico, the company is also an advocate of green energy. This has been demonstrated by the desire by the company since 2010 to promote the use of solar and wind energy (Tuner 2014, p. 62). This the company has ensured through its solar energy program and the establishment of windmills in different areas in the United States and in the UK. Furthermore, the company is also engaged in the production and the consumption of biofuel, which is considered safe to the environment. These are activities aimed at altering the perception of the public towards the company (Tuner 2014, p. 62). Royal Dutch Shell Company just like BP is one of the leading supplies in fossil fuel energy and gas. The company demonstrates it level of stakeholder value maximization by ensuring that employees are provided with safe working environment. In addition, the company also provides its shareholder with timely and relevant information concerning the performance of the company and areas that require additional strategies of the realization of organizational growth (Dragani & Kotenev 2013, p. 9). Other than the provision of affordable and quality resources to the customers, the company is also responsible to the local community. In 2011, Shell was ranked as one the best companies in poverty reduction, maternal and child health activities in Nigeria. The was achieved by the ability of the company to apply the principle of morality in the promotion of sustainable livelihoods in the local communities within Nigeria (Dragani & Kotenev 2013, p. 11). The poverty reduction, maternal and child health programs were founded on the desire to promote the wellbeing of members of the local community. This was realized not only through the provision of employment opportunities but also through the establishment of programs aimed at improving the lives of members of the community who do not directly benefit from the company but are affected by its operations (Dragani & Kotenev 2013, p. 14). An assurance of safety is also another element that Shell has continued to emphasize. This has been realized through the decision by the company to advocate for the production and consumption of renewable energy to reduce the use of fossil fuel, which is harmful to the environment. The company in bid to demonstrate its dedication to environmental conservation, it has been engaged in different activities related to reforestation and the protection of marine life especially in areas of deep sea drilling (Dragani & Kotenev 2013, p. 9). This is considered as an attempt by the company to ensure that its operations are acceptable to members of the local community and to its stakeholders considering its dedication to environmental conservation and the proviso of clean energy for economic development. The Deepwater Horizon accident in the Gulf of Mexico in 2010 led to a spill of about 20 million barrels of oil into the sea. This was considered by BP Company as one of the worst oil disasters in the world. Following the incident the management of BP and Shell asserted the need to conduct investigations to ascertain the real cause of the disaster (Fisher 2014, p. 11746). BP promised to compensate all those affected by the oil spills and to begin a process of restoring the damaged areas to ensure fishing and tourism activities regained normal operations. Furthermore, while following the directive of the US government BP and other oil drilling companies stopped their drilling activities at the Gulf of Mexico top allow BP and its affiliate companies to develop sustainable solutions that could be cleaning the ocean and engaging in restorative measures (Fisher 2014, p. 11748). More than one year after the oil spill at the Gulf of Mexico, the management at BO through its CEO recognizes the extent of the damages arising from the Deepwater Horizon accident in 2010. The company is dedicated towards additional investment initiatives aimed at restoring tourism and fishing grounds for sustainable development in the Gulf coast (BP 2011, p. 6). In addition, the company is in the process of providing additional funds to the trust aimed at settling debts and payment of claims to individuals and different companies that were affected by the oil spill. Through the management, the company has been able to demonstrate its dedication towards community development by introducing educational and empowerment programs in the Gulf coast. In 2011, however the company announced its intentions of developing one of the deepest offshore oil fields at the Gulf of Mexico. This is despite the devastating consequences that were demonstrated during the Deepwater Horizon accident (BP 2011, p. 8). Initially the Royal Dutch Shell Company was among the companies that voiced concern for the need to ensure proper infrastructure prior to Deepwater drilling. This was following the devastating nature of the oil spill in one of BP’s wells in the Gulf of Mexico (Royal Dutch Shell. 2011, p. 14). The company was among the oil production and processing companies that advocated for the need to seek lasting solutions to the problems related to Deepwater drilling. The company has demonstrated its concern for environmental protection even a year after the disaster. The company through the management has however argued that the security and safety precautions have been considered despite the prevailing evidence that offshore drilling entails complexities since it is prone to technological failures that are relatively unpredictable in real time. Shell has been accused of being insensitive to security and environmental concerns by engaging in offshore drilling in the Gulf of Mexico. Stakeholder analysis Market stakeholders for BP included consumers of oils and gas products from the company within the Gulf of Mexico and in other areas around the world. This is because the consumers that comprise of individuals, companies, and governments often require these products to engage in sustainable developmental initiatives (BP 2011, p. 11). Non-market stakeholders for the company after the oil spill were the local communities in the Gulf coast, affected governments, companies, and individuals in the tourism and fishing sectors. The local communities were important non-market stakeholders due to their perception about the company and its effects on the environment. Organizations in charge of the environment and governments were important in responding and developing amicable environmental procedures. Organizations and individuals in the tourism and fishing industries were affected since the oil spill damaged tourist attraction sites and fishing grounds (Tuner 2014, p. 66) The local communities in the Gulf coast were concerned with the need to acquire sustainable employment opportunities and ensure that the operation of the company did not have any negative effect on their environment. The employees of the company were dedicated towards working in an environment in which their safety and overall wellbeing was guaranteed (Fisher 2014, p. 11747). The government was to ensure that other than the revenues collected from the activities of BP at the Gulf of Mexico, proper management was guaranteed according to the existing laws. The environmental, tourism and fishing organization and individuals were concerned with the threat that any disaster would cause to their areas of work (Fisher 2014, p. 11747). Stakeholder expectations were in agreement with those of the company considering that part of the corporate social responsibility of the company was to ensure the provision of quality gods and services while ensuring the development of the local communities through employment, educational and empowerment programs. While providing revenues to the US the company was to act in accordance to the laws governing offshore drilling. These laws were to not only ensure environmental sustainability but also conserve fishing and tourist grounds, which were essential for the economic development of states along the Gulf coast (Tuner 2014, p. 61). Figure 3.0 BP stakeholder map Pressure groups, community voices, ocean conservancy groups and the US government were some of the stakeholders who were advisedly affected by the Deepwater Horizon accident. Their call for the company to take responsibility following the accident played a major role in the outcome of legal cases against BP in the United States (Boufadel 2014, p. 9500). In addition, it was through demonstrations by the affected parties that the company was able to develop a $20 billion trust fund aimed at compensating those affected by the disaster. Stakeholder coalition was also effective since it made it possible for the government to allow BP to hire thousands of employees to begin a process of cleaning the sea of the oil. Stakeholder coalition was also demonstrated in the reduction in the number of customers willing to purchase BP products until it was ready to demonstrate it desiccation towards fining lasting solutions to the Deepwater Horizon disaster (Boufadel 2014, pp. 9501-8502). Issues management and recommendation Customer environment provides BP with a platform of understanding the characteristics of its complex customers who include groups of people, the government, and organizations. Change in perspective of the customers following the drill should help BP in developing a customer-focused strategy to ensure relevance in the highly competitive oil and gas market (Boufadel 2014, p. 9495). Economic environment entail the dynamics of the market the resource, cost of products and services and the economy of the country in context. The economic environment of BP in the Gulf of Mexico was affected by the disaster sine it lost most of its customers in the tourism, fishing and government agencies that were affected by the oil spill (Tuner 2014, p. 59). Technological environment require the company to assess the available technology and how it can be used in curbing the current and future possibilities and effect of the Deepwater Horizon disaster, technological applications in cleaning the sea and restoring marine life and the environment at the Gulf of Mexico can be an essential tool (Lewis 2010, p. 59). Social environment encompasses traditional belief systems in a community that define human behaviour. BP can use the social environment to advocate for ownership of the problem among citizens in the US to ensure that they develop collective and collaborative solutions with regard to the values that define nationalism (Tuner 2014, p. 62) The political environment encompasses all the power groups that can affect business operations in the country. In the US, political debates between republican and democratic parties were contributors to the fines and compensation fee the company paid. However, BP can advocate for political responsibility in the development of solutions towards the effects of the oil spill (Maresh & Williams 2010, p. 287). The legal environment presents threats to the company considering that the oil spill despite its accidental nature was in violation of the laws concerning offshore drilling. This explains why the company lost most of the lawsuits demanding compensation. The company can however use legal procedures in the form of restraining orders against malicious players in the market (Maresh & Williams 2010, p. 288) The geophysical environment was adversely affected by the oil spill. This is especially marine life, coral reefs, fishing destinations and air pollution. BP can liaise with other organizations in the tourism, environment, and fishing sectors to ensure the development of sustainable solutions for environmental restoration (Harris Interactive 2011, p. 3). Competitor environment entails the weaknesses, strengths, and opportunities that competitors companies such as Shell and Amoco realized following the disaster. Inasmuch as BP was restoring its capacity as a reputable company through environmental restoration initiatives, it was facing challenges from competitors regarding negligence accusations that led to the dictator at Deepwater Horizon (Maresh & Williams 2010, p. 290). Customer environment was is the most significant radar screen that BP must manage directly following the oil spill at the Gulf of Mexico. When this problem is understood in relation to Issues management process, the first step would be to raise the issue by identification by any stakeholder in BP especially the employees due to constant interactions with customers. The management must be informed of the issue (Fisher 2014, p. 11744). Evaluation and documentation of the issue would be the second step. This is a brainstorming initiative by management, local community and the employees to determine the validity of the issue. Customers form an important part of BP it is important for the company to demonstrate dedication by providing quality products and services in a safe environment (De Wolf & Mejri 2013, p. 50). This is part of the solution to the problem. It is the responsibility of BP to inform its customers of the initiatives it has taken since the oil spill and the sustainability of the strategies in relation to providing sustainable solutions. This will help in resolving the issue since customers will also be able to comment on the strategies hence providing amore collaborative solution (Boufadel 2014, p. 9497). Conclusion The Deepwater Horizon disaster in 2010 was one of the most devastating oil spills in the history of the United States. BP, the company that was in charge of the well assumed responsibility of the accident and was involved in settlement of claims and paying of fines to different individuals, governments, organizations and groups of people. Despite the compensations, the effects of the oil spill are still evident in the fishing, tourism and the activities of the local communities along the Gulf coast. The realization that customers form an essential part of the company necessitates the need to focus on the development of sustainable and integrative solutions aimed at restoring the environment and compensating the most affected areas and individuals. Involving customers in such activities improves their perception about the role of BP in developing the community and providing quality products. References Boufadel, M.C. 2014. “Simulation of the Landfall of the Deepwater Horizon Oil on the Shorelines of the Gulf of Mexico,” Environmental Science & Technology, Vol. 48(16), pp.9496–9505. BP 2010. BP Sustainability Review 2010. [Online] Available: http://www.bp.com/assets/bp_internet/globalbp/STAGING/global_assets/e_s_assets/e_s_assets_2010/downloads_pdfs/bp_sustainability_review_2010.pdf. BP 2011. BP Establishes $20 Billion Claims Fund for Deepwater Horizon Spill and Outlines Dividend Decisions. 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