Ethical Dilemmas of BP - Essay Example

?Instructions: BP (British Petroleum) had made significant efforts to re-brand and re-develop its business model to support Green energy resource andalternative energy before the accident that occurred in the Gulf of Mexico tarnished its image and led to it to be fined a huge amount for the clean-up and damages. Before the Gulf disaster, BP implemented a major change in its corporate structure to focus on capital investment in developing wind, solar, biofuel energy sources, and carbon sequestration storage technologies in order to position itself for inevitable changes in society related to its own major products, oil and gas. BP used its own business analysis about the production resources of its reserves worldwide and their depletion through “peak oil” theories, and determined that it would be innovative in investing current budgetary surplus and profits into future sectors and alternative energy. This can be seen as evidence of a 20 to 30 year future plan for the company aligned with socially progressive “Green” ideologies, yet rooted in the profit of the status quo and oil-dominated economies globally. Thus, the Green initiative of BP can be critically questioned as to its veracity of motive or construction as a marketing tool and brand, but few other companies globally have invested so much capital in Green technologies and clean, alternative energy sources. Evidence suggests that this is derived from the influence of socially progressive forces inside the publicly traded company as employees and management as the primary cause for the change in business model, though it is based also in a stark view of the changes required in Western societies economically over the next twenty years. This can be seen in a lecture given by Dominic Emery of BP in London in March of 2011, where he shows how BP’s policy on renewable energy was developed out of its own research into global economic trends: “Renewables, including biofuels, are projected to account for 18% of the growth in energy to 2030 – compared to 5% of the growth since 1990 - and the rate at which renewables penetrate the global energy market is similar to the emergence of nuclear power in the 1970s and 1980s. The projected shift from higher to lower carbon energy is driven in large part by the anticipated trend of increasing policy support. So even in our base case – what we see as the most likely outcome - we see a change in the fuel mix that projects a strong future for renewables, gas and nuclear. Wind, solar, biofuels and other renewables all look set to grow their share in primary energy, from less than 2% now to over 6% by 2030. The same is true of nuclear and hydropower.The use of renewable energy will grow strongly – we believe at around 8.2% per year to 2030 which is almost four times the 2010 level by 2030.” (Emery, 2011) Focusing on cleantech and renewable energy is not simply a marketing ploy or lip-service for BP to mask its environmental destruction in oil drilling or the inordinate profits, salaries, and benefits of its executives & owners. Rather, BP has actually some of the most highly respected market analysts in the oil and gas industry looking at internal production numbers related to peak oil, and sees the development of cleantech in a society as proceeding at an accelerated rate over the next twenty years. In this business analysis, BP management decided to form a venture capital affiliate (AE Ventures) to invest profits from current operations in future business opportunities in cleantech. “AE Ventures is the strategic corporate venture capital arm of BP Alternative Energy. The team is focusing on three investment activities: investing in highly innovative cleantech companies and funds; investing in next generation carbon offsets; incubating proprietary cleantech R&D. The team was set-up in 2006 and has since invested around $100m in 20 different cleantech and carbon ventures and funds. The aim is to invest a total of $150-200m by 2013.” (BP, 2011) An excellent example of this is the company’s investment in Verenium, an American-based company that is conducting advanced research into the production of biofuels from organic matter from enzyme cultures. This company has collected enzyme, bacteria, and other biological organisms such as algae from extreme environments around the world in order to search for and develop species that can be used to produce ethanol from organic matter. This ethanol or through other processes methanol, and biogases like methane from other composting techniques, can all be used as natural, renewable sources for biofuel production, implementing fuel sources that do not impact current food markets. The relationship of biofuel demand to global fuel supply is very important, as price rises in corn and other raw materials can impact the global poor adversely who rely on it for subsistence diets. While BP’s policy cannot eradicate these types of social injustices on its own accord is a given, yet the company’s efforts in developing biofuels and other cleantech and renewable sources of energy is socially progressive. Nevertheless, some suggest that former CEO Toney Heyward actually opposed the Green aspects the company was developing on this foundation. As Terrence Murray wrote in “BP’s Cleantech On Thin Ice?” (2010): “BP had been moving away from its ‘Beyond Petroleum’ model of a pan-energy company for some time before the spill. Since he took the company’s reins in 2007, Tony Hayward has shifted its focus to the core oil and gas business,to the detriment of its cleantech unit. A few weeks before the oil spill Hayward announced the shutdown of its sole U.S. photovoltaic solar plant and the relocation of production to China and India. BP has also closed plants in Europe and Australia and the company’s dedicated cleantech headquarters in London. Cleantech, particularly the R&D intensive kind that oil companies like to invest in, may be a luxury the company feels it can’t afford when it’s facing a multibillion cleanup tab.” (Murray, 2010) The advantage of this for BP’s brand was lost when the company suffered a drilling accident in the Gulf of Mexico, leading to a polluting stream of oil being released for months and causing the intervention of the Federal and State governments in the U.S.. This event was a proverbial “worst case scenario” for BP, especially in relation to the genuine efforts the company had been making to transition to Green energy internally. However, Green energy and cleantech still represent only a small fraction of BP’s overall business activities, and the drilling in the Gulf is indicative of the risk to the environment that is ongoing in the exploitation of natural resources historically. BP was forced by the U.S. Congress to create a $20 billion USD fund for the Gulf spill clean-up and for victims to be compensated for damages. Thus far, approximately $3.6 billion USD has been paid to claimants, according to the Telegraph. (Sherwell, 2011) The question of many is which behavior represents the real BP, that of the spill and the response of former CEO Tony Heyward, the continual fines the company received for other environmental and safety issues, or the Green, progressive forces within the company itself that seek to take it “Beyond Petroleum”? The effect of the Gulf spill and the social tarnishing of the BP brand may favor the Green faction in the company to institute further reforms and changes to the business model to favor cleantech and renewable energy, but until society transforms fundamentally to these sources of energy as a basis of the economy, the company will continue to be transferring profits from oil and drilling to the future Green energy research. Sources Cited: BP (2011). AE Ventures. Web. BP, 2011. Retrieved from http://www.bp.com/productlanding.do?categoryId=9025020&contentId=7065292 BP (2011). Alternative Energy. Web. BP, 2011. Retrieved from http://www.bp.com/modularhome.do?categoryId=7040&contentId=7051376 Emery, Dominic (2011). The Outlook for Renewables and BP Alternative Energy. Web. BP, 11 March 2011. Retrieved from http://www.bp.com/genericarticle.do?categoryId=9025016&contentId=7067916 Sherwell, Philip (2010). BP oil spill: Dramatic recovery of Gulf of Mexico one year on. Web. Telegraph, 10 Apr 2011. Retrieved from http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/8423173/BP-oil-spill-Dramatic-recovery-of-Gulf-of-Mexico-one-year-on.html Webb, Tim and Pilkington, Ed (2010). Gulf oil spill: BP faces $34bn in fines as Senate smashes estimates. Web. Guardian.co.uk, 14 June 2010. Retrieved from http://www.guardian.co.uk/environment/2010/jun/14/gulf-oil-spill-34bn-fines Read More