BP Oil Disaster in the Gulf of Mexico - Case Study Example

Running Head: BP OIL DISASTER IN THE GULF OF MEXICO BP Oil Disaster in the Gulf of Mexico Culture and Cuisine Tutor Date BP Oil Disaster in the Gulf of Mexico Introduction BP is one of the biggest oil companies world-wide and was anticipating greater success as well as increased profits until in 2010 when the Gulf of Mexico oil spill took place. This oil spill might be the company’s largest disaster, but obviously it is not the first oil spill. This report brings light on BP’s Oil Disaster in the Gulf of Mexico and what should have been done to avoid such a disaster: this involves observing the business ethics in addition to engaging social responsibility in all its activities. The report also attempts to evaluate why the oil spill took place and the level of damage it caused. Still, it analyses the nature of leadership needed in order to manage such crisis and also discusses if the BP’s oil response was creditable (Mohr, 2010). BP’s Social Responsibility The main aspects of Corporate Social Responsibility in oil companies such as BP Development of a conceptual framework for corporate social responsibility also involves social issues as well as topic areas in which the responsibilities are tied upon. These issues keep on changing and they are diverse in different industries. This is why the social issues approach to assessing business and society relationships has lead into managerial approaches that deal more with development or specification of generalized modes of response to each and every social issue that turn out to be important to an industry (Radu, 2008). The social issues have evolved under the rubric of social responsibility and hence this change should be acknowledged. For instance, product safety, occupational safety and health in addition to business ethics were not that significant. As much, preoccupation with environment, consumerism as well as discrimination during employment was not very intense. The issues and in particular the level of organizational interest in the issues, are always changing. As a result, as time changes, the social issues should also be tackled as per the changes (Subhabrata, 2007). The concerns regarding social issues vary with different types of businesses. For example, environment is not a major social issue to a bank as compared to an oil industry whereby environment is among the key social issues. Similarly, an oil industry is considerably more concerned with the issue of recycling when compared to an insurance company (Radu, 2008). There are various factors that the management should put into consideration when addressing the social issues within a given industry. These factors include; Matching of the social need to corporate need or the capacity to assist. Gravity of social need. Interest of top executives Public relations significance of the social action The pressure from the government Therefore, social issues should be identified as an important element of corporate social performance, even though there is no specificity on the issues that should be addressed. Consequently, each industry should give priority to the issues that affects the organization the most. For instance, an oil industry must address environment as a social issue (Robertson, 2010). This is a social responsibility subject since the risks and the ultimate negative effects from the spillage of BP’s deep water drilling activities affected the society at large. The oil spill led into huge negative externalities. This means the spillage negatively affected people who were not economically involved with the company and who never consented to bear the risk of BP’s activities (Pursell, 2004). Social Responsibility Lies on the Government and BP In ensuring that oil industries such as BP critically upholds social responsibility and observes business ethics, there should be a model that differentiates between processes and consequences of oil disasters like the oil spill. This will help in understanding how business handles ethical dilemmas at the behavioral and discursive levels. Such understanding will be useful to the government which is responsible in policy making as well as the societal actors who are responsible in examining the corporate behavior. Analyzing the consistency between what a company like BP does and says could assist in increasing the effectiveness of the societal framing of business activities and in inciting business actors in behaving more ethically or to develop and enact their corporate social responsibility (Karl, 2005). Characteristically, examining and exposing the business behavior and obligations as well to increase transparency of business actions can generate incentives for actual behaviors to be more consistent with communication strategies, therefore favoring ethical conduct. For example, the government should instill policies that independently audit corporate social reports, such as BP’s in order to enable comparison between discourses and acts. Furthermore, public reporting of the inconsistencies can provide a lever to induce more consistency. Such a move would have allowed earlier discovery of what was going in BP and it could have perhaps prevented the Gulf of Mexico oil spill. Further, corporate social responsibility forces corporations to live up to their promises and reinforces the link between transparency and responsibility. Of different kind, responsibilities concerning document disclosure as well as archiving involves effective means to incite business actors to act in good faith. In regard to BP’s the Gulf of Mexico oil spill, this would have facilitated an open process of the company’s activities as well as its oil drilling operations (Radu, 2008). The government can also make use of product liability in ensuring that such companies are fully accountable for such disasters. Regulations that place a burden of proof on business and not authorities can also assist. Such regulations force business actors such as BP Company to endorse their full responsibility and to display their good faith from the beginning, as opposed to situations where business in only required to react to accusations of misbehavior blow out by societal actors, whereby case denial stances are simpler to organize and sustain. In regard to the oil spill, this would prevent BP from only reacting to incidents just because they raised public concern (Subhabrata, 2007). Apart from direct framing of business activities in BP Company in order to encourage more ethical action, the oil spill dilemma can also be reframed. This can be driven by actions that are exogenous to the business. Public actions can be implemented to increase the BP’s business costs allied to the undesired societal consequences such as the risks the oil spill caused. For example, internalization of environmental or social costs in BP Company as well as reduction of the business costs associated with implementing processes that are less damaging to the society should be mandated (Skodvin, 2003). CRS a lip service Most organizations pay slip service corporate social responsibility but very few companies in the long run deliver their promises. In the case of BP, it has a corporate social responsibility system yet it was never effectively utilized. If BP had used the system effectively, this disaster could not have taken place (Subhabrata, 2007). BP Oil Disaster in the Gulf of Mexico is apparently a business case for social responsibility. If the management within BP had established a strong ethic foundation of authentic CR within the oil industry, this disaster could have been prevented through the workers who would have done the correct thing and would have blown the whistle regarding what was happening when everyone was not. On the contrary, this never occurred and this has led into the company’s market valuation dropping sharply and hence losing a lot of revenue in this (Mohr, 2010). According to various studies on Gulf of Mexico oil spill, it was revealed that the oil spill could have been allied to cementing which is the procedure of case installation in order to secure the oil well’s wall. A federal study discovered that problems resulting from cementing were linked to nearly half of the thirty nine offshore blowouts since 1992 to 2006. Nearly all were in the Gulf of Mexico. If BP critically observed the business ethics and effectively upheld social responsibility, the company was supposed to address the problems from the time they began and this would have probably prevented such a disaster. Halliburton, which had conducted several functions on the rig even cementing, confirmed that it had concluded the casing around twenty hours before the incident took place. It declared that it had carried out tests illustrating the integrity of the casing. But BP Gulf of Mexico oil spill brings out genuine CRS questions; it is the question of corporate, social responsibility in addition to business ethics (Radu, 2008). BP’s business involves finding of the oil, refining the oil and selling of the gas and such business operations. During its business activities, BP Company interacts with large number of people and organizations as well, and the interactions gives the company ethical responsibilities. The basic ethical responsibilities of BP Company would include: Offering clients with the product they expect Having honest deals with the suppliers Making sure that there is considerable levels of place of work health and safety Putting honest efforts in building long-term share value Conforming to environmental regulations as well as complying with industry best practices and such. BP case illustrates that most of the organizations employ CRS as a lip service and therefore the organizations should implement valid CRS programs and ensure that these programs utilized effectively. BP did not make use of its CRS program effectively and this is what resulted into an enormous disaster taking place (Skodvin, 2003). Who is Responsible? The government is responsible for the disaster too since it approved the actual exploration of the oil in the region. Within few days after the approval of the exploration, Interior Secretary Ken Salazar filed an exceptional motion with the court to let off permitted oil drilling in the Gulf of Mexico. He in particular acknowledged BP’s operation as one that was supposed to be released from the vacature and this was warranted (Mohr, 2010). Bp is also responsible for the oil spill disaster. This is because as a company it is responsible and accountable for all its activities and the consequences there after. Furthermore, BP has a bad environmental and safety record. Still after the 2005 Texas City Refinery blast whereby 25 people died, BP has been constantly racking up safety contraventions. In spite of the nature of each and every offshore oil drilling as well as the safety record of BP being egregious, the BP’s exploration plan ignored the likelihood of a spill constantly, insisting that spill was not likely to take place or practically impossible. Surprisingly, BP’s plan was accepted without considering the environmental costs of an oil spill. It is not possible to guarantee that enormous oil rapture cannot take place and it occurs, it is not possible to contain it fast and fully enough to avoid undesirable environmental damage. The state should ensure that BP compensates all the victims and contains the whole situation entirely including the environmental damage that took place. BP in turn should ensure that all those affected by the disaster are compensated and the damages that took place as a result of the disaster have taken care of (Mohr, 2010). Corporate social responsibility and business ethics are there since a company is supposed to behave in a socially responsible way. For example, BP should have a corporate social responsibility plan while planning their future socially responsible business operations. If BP had considered this, probably it would have ensured that it’s the oil exploration at Gulf of Mexico would be faultless and did pose any risk to the environment, habitants of the regions or any one else who got affected by the spill. This is where corporate social responsibility and business ethics come into play. Furthermore, BP should be responsible for the consequences of the oil spill and hence should fully compensate all the victims as well as rehabilitate the damaged environment and clear the mess that resulted from the oil spill (Mohr, 2010). How BP has been held accountable The tax code has been utilized as the tool to offer relief to all the victims who were affected by the disaster. As a result, the tax code can be used to a mode of providing further relief to the victims. There are several policy alternatives which could be explored and they include; casualty loss deductions, employment incentives, improved access to retirement savings as well as incentives for charitable relief. The government has also held BP responsible for the oil spill and has authorized compensation to the victims (Michael, 2010). Legislation has been introduced by the government which will avail tax relief to the Gulf oil spill victims. Bp would be required by the Oil Spill Tax Relief Act of 2010 to compensate the victims as legalized disaster payment, and thus exempted from gross income for tax uses. Moreover, Gulf Access to Savings Act of 2010 should be introduced which would allow BP to provide improved access to retirement savings. BP has been forced to pay in order to have costal wetlands restored and in making sure that wildlife that survived the disaster is recovered (Michael, 2010). BP’s Response Lacked the Value of Responsible Business BP’s acceptance of responsibility for the oil spill and accepting to compensate the victims shows the values of responsible business in business practice. BP promised to take full responsibility for the spill and promised to clean the oil spill. This shows that BP accepts its social responsibility in handling the outcomes of its activities. The company launched a large response effort in halting the leak as well as in minimizing the effects of the oil spill. About 2,000 employees struggled in containing the spills by using chemical dispersants and floating booms (Michael, 2010). However, the oil spill in the Gulf of Mexico was a big thereat to marshes, wildlife as well as commercial fishing activities. The company’s administration assured that it would stop the recently planned oil drilling along the country’s coast until research on what caused the incident is completed. After the oil-covered waters were toured, it was discovered that the company lacked enough resources to meet the challenges and mitigating the threats posed by the oil spoil. This included rapid clean up of the region as well as stanching of the gushing oil from a seeping out well around 50 miles southeast of Venice, La. Even though the rough sea conditions thwarted efforts of collecting the oil floating on water’s surface, the company did not work as fast and hard as required to get the job done. It took a long time for the engineers to seal the leaks which were revealed after sinking of BP-leased Deepwater Horizon rig. Both the government and BP officials established that about 5,000 barrels of oil were every day leaking into the Gulf. The unrestrained leak threatened in becoming the country’s worst environmental disaster, finally surpassing the spills from 1989 Exxon Valdez tanker disaster as well as 1969 nosh-up off the coast of Santa Barbara. The oil spill endangered the fishing industry within Louisiana, delicate coastal ecosystems and habitants all over the region (Robertson, 2010). BP lacked strong ethical control in handling the after effects of the disaster. Instead of taking responsibility of the entire disaster, BP’s management resulted in arguing the subject of liability within the court of public opinion. The company’s CEO Tony Hayward, claimed that that was not their accident and blamed both Transocean and Halliburton. Even if BP was evading legal responsibility, it appears BP’s public relations and legal positions were resulting into finger pointing in evading the social responsibility as a company (Robertson, 2010). Business ethics and corporate social responsibility involve considering the interests of the stake holders. In this case, stakeholders are the people and the parties that get affected by the actions of the company. In the development of a public response to the gulf oil spill, BP Company did not appropriately place its stakeholders at the heart of their strategy while handling the disaster (Pursell, 2004). Instead of the company concentrating on evading the legal responsibility which mainly affects internal stakeholders, BP was supposed to have identified with external stakeholders who suffered as a result of the oil spill. The external stakeholders consist of Gulf Coast fishers, close by habitants who economically depended on tourism, those involved with harm to wildlife in addition to those who just take pleasure in the physical loveliness of the area. Appropriate social responsibility was supposed to involve BP, Transocean and Halliburton working jointly in order to come up with a relief package to tackle the economic and environmental aspects, irrespective of who was in due course responsible for the oil spill. BP concentrated on its corporate liability and hence hurt all of its stakeholders (Michael, 2010). What role should the US state and BP play? BP as the responsible party should cap the leaking oil well and pay for the response as well as recovery. BP Company should also contain the spill on the surface of the ocean as well as control the negative effects of the oil on the coastal line and also on the valuable wetlands and fisheries within the area. Still, BP is responsible for making sure that spreading of the oil is stopped and the environmental impacts of the oil spill are mitigated. Furthermore, BP has a role in ensuring that the affected states are accorded the necessary assistance and this includes people, businesses in addition to communities. The role of the state is to make sure that BP stops the leakage of the oil, cleans up the oil and each and every affected persons along the Gulf of Mexico are entirely compensated. Through the Oil Pollution Act, the sate should ensure that BP does not cause such a disaster and expect the taxpayers to take care of their disarray. The state should also coordinate the response on the forefront, watch over BP’s efforts and direct further actions where need be. The sate should offer its engineer and scientists to work jointly with BP in order to make sure that the best technology is utilized in ensuring that the oil flow is stopped as fast as possible. The state should ensure that every plan on the table is reviewed and validate the plans that are moving forward and offer additional expertise and input on the new approaches into containing the situation. On the other hand, the other role of the state is to ensure that all companies implement efficient and effective corporate social responsibility program. The state has the role of conducting an investigation on the cause of the oil spill as well as the impacts of the oil spill. It is also the responsibility of the state to investigate the corporate social responsibility of BP and making sure that audit of the company is conducted. Finally, the state has a role of making sure that BP implements a working and effective corporate social responsibility system. Unattainable compensation for this level of disaster It is not possible to compensate for such level of disaster. Even if BP compensates all the victims affected by the oil spill, the damage caused will never be compensated. For example, there is no limit to the damage that affected wildlife as well as the damage done to the coastal societies. Moreover, there is no limit on the jobs lost in fishing as well as in tourism. More than 19,000 compensation claims were made but the utmost oil companies such as BP can pay for such claims is $75 million. BP also has the responsibility of paying all cleaning up expenses associated with the spill which was estimated to be as high as $20 billion. This only reduces the likelihood of BP compensating all the claims adequately. Surface oil slicks that occurred as a result of BP spill have affected a very big region with the oil and tar getting to the shores of Louisiana, Mississippi, Alabama and Florida. Chemicals used in controlling the surface slick were established to be toxic to marine life. Therefore, it is not possible for a company to compensate such level of disaster since the amount the company is required to pay cannot cater for all this and also the damages done are immeasurable and irreversible (Radu, 2008). Conclusion The BP Company should focus on alternative and less socially detrimental processes and this will initiate a dynamic learning process for the business actors. This will lead to the enlargement of the scope and the time horizon of business activities, and therefore the company will depart from the consequential assessment and enable the company to emphasize new positive consequences. Such learning and differential positioning process can induce BP to take into consideration business ethics as potential driver of competitive advantage. This way, proactive business strategies can trigger a positive feedback loop that can eventually lead to innovate, competitive as well as more socially responsible business practices and this would significant reduce the occurrence of incidences such as the Gulf of Mexico oil spill (Radu, 2008). . References Karl, T.l. (2005). The paradox of plenty: Oil Booms and petrol states. , Berkeley, CA: University of California. Michael, W. (2010). Two Workers Dead in BP Oil Disaster Recovery Effort < http://workinprogress.firedoglake.com/2010/06/23/two-workers-dead-in-bp-oil-disaster- recovery-effort/>. Retrieved 2010-11-07. Mohr, H. (2010). "Expert: bp-gulf-oil-spill-68000-square-miles-of.html". Sky Truth. Associated Press. Retrieved 2010-11-07.. Robertson, C. (2010). "Agency Orders Use of a Less Toxic Chemical in Gulf". The New York Times. . Retrieved 2010-11-07. Subhabrata, B. (2007). Corporate social responsibility: the good, the bad and the ugly. , New York: Elgar Publishing. Radu, M. (2008). The dynamics of corporate social responsibilities. Martinus: Nijhoff Publishers. Skodvin, T. (2003). Climate change and the oil industry: common problem, varying strategies. , Manchester: Manchester University Press. Pursell, G. (2004). Oil industries. Almaty: Petroleum publishing house. Patrick, M. (2010). British Petroleum Oil Disaster in Gulf of Mexico: Obama mortgages the Gulf of Mexico to BP. Retrieved on 2010/11/17. Read More