Corporate Social Responsibility (CSR) has become one of the most important aspects of a business practice that companies cannot afford to ignore. It needs to be specified that “CSR is concerned with treating the stakeholders of the firm ethically or in a responsible manner” (Hopkins, 2007, p.15). It can be stated that the importance of CSR increases with the size of the company due to the fact that in large companies any CSR related issues will attract wider media coverage and accordingly will have greater implications.
This article analyses one of the most important aspects of CSR, being responsible towards the natural environment of host country in case of BP Plc, a global oil and gas company based in London, UK. The article starts with the outline of the company, followed by the analysis of CSR issues BP is facing in host countries. Also measures required to be undertaken by BP in order to address CSR challenges effectively are described in the paper, as well as the limitations of acknowledged measures are acknowledged.
BP Company Outline
BP is an international oil and gas company that operates in more than 80 countries under two segments: exploration and production, and refining and marketing (Reuters, 2011, online)
The company has more than 79,000 employees globally that are working on 22,100 retail sites, 14 wholly or partly owned refineries and producing 2,426 barrels of oil per day (BP at a Glance, 2011, online).
Steffy (2010) informs about mergers and acquisitions engaged by BP with a range of companies especially highlighting the merger with Amoco in 1998, and the acquisition of Arco in 2000 and states that these events became factors contributing to the current size and state of the company.
BP is engaged in CSR initiatives intensively, promoting the projects related to the renewable sources of energy, investing in projects aimed to tackle climate change issues, and others. But, at the same time BP has caused a range of disasters and was involved in contradictions that are going to be partially covered within this research.
CSR Issues Facing BP
BP is faced with considerable CSR related challenges that if not dealt with timely and effectively threaten to damage the image and long-term growth of the company. Specifically, one of the main challenges the company is facing today relates the negative environmental affect BP is causing in host countries. According to Guardian (2010, online) BP had caused 6% more CO2 emissions, 5% more water usage, 12% increase of waste in host countries the company operated during the year of 2009 alone.
Previously, the practice of not giving due importance to these issues had caused the company in great losses, both, in terms of damage to the company image, as well as financial losses that occurred in forms of compensation payments.
One of the recent incidents of a big scale is Deepwater Horizon Oil Spill that occurred in the Gulf of Mexico in April 2010, lasting for three months and resulted in more than 10,000 local people becoming temporarily unemployed and followed by $20 million compensation package issued by BP according to demands of US president Obama (King, 2010).
Moreover, 2006 Alaskan oil spill can be indicated to as another example, where more than 260,000 gallons of oil were spilled in Prudhoe Bay area and resulted in BP ceasing its operations in that region (O’Rouke, 2007).
Further similar disasters and emergencies include Taxes City chemical leak in 2010, hazardous substance dumping issue 1993-1995 in Alaska and others (Daft and Marcic, 2009).
Measures BP can Implement in Order to Address the Issues
As it has been shown above causing environmental issues in host countries can result in serious consequences for BP at various levels. Therefore, recommendations can be made for BP strategic level management in order to eliminate the possibility such incidents taking place in the first place. Recommendations can be summarised into following four points:
Firstly, BP should adopt a proactive approach in terms of dealing with environmental issues in host countries. It is better to be proactive rather than reactive in terms of dealing with potential emergencies related to environmental issues. Therefore the company should be critically analysing the technical and other aspects of operations frequently and systematically with the view of identifying and eliminating potential issues.
Secondly, BP management should introduce effective environmental health and safety and other standards and enforce its application. The importance of the issue should be communicated to employees at all levels and any disobedience to the standards should be dealt with seriously. Likewise, individual employees, as well as departments that are consistent in applying the environmental health and safety standards should be rewarded accordingly in tangible and intangible manners.
Thirdly, BP should closely cooperate with external stakeholders in terms of eliminating the possibility of environmental disasters. Tom (2008) offers similar recommendation to multinational companies as well and highlights the importance of non-government organisations (NGOs) in terms of identifying areas of potential disaster. BP should also consult local government officials, as one of the most influential external stakeholders and take into account their feedback in terms of eliminating the possibility of environmental disasters.
Fourthly, BP should initiate and sponsor knowledge-sharing programs aimed at eliminating the possibility of environmental disasters caused by activities of the company. Knowledge sharing programs should include the cooperation among major competitors in terms of exploring environmental issues and improving the level of efficiency of various business processes.
Limitations of Measures Suggested
The measures proposed above for BP represent a set of effective means and methods that will enable the company to dramatically improve the level of its environmental records. However, at the same time, these measures are associated with a range of risks and limitations that need to be addressed in order to increase the level of efficiency of proposed measures. The numbering of risks and limitations described below corresponds to the numbering of measures that have been formulated in above in previous section.
Firstly, there are no specific tool and methods available regarding how BP can adopt a proactive approach towards environmental issues in host countries. In other words, despite being an effective recommendation, pro-activeness is a challenging task for BP to implement due to the fact that there are no set criteria against which the company could measure the level of its pro-activeness.
Secondly, effective health and safety standards introduced by the company might be violated by the senior level management. It is the responsibility of senior level management to enforce the compliance to health and safety standards introduced in order to prevent environmental disasters in host countries. However, there is a risk that ‘special orders’ contradicting health and safety standards might come from the very top, and no one can argue with the senior level management and this might compromise the environmental safety within host countries.
Thirdly, cooperation with external stakeholders might not be achieved due to the parties not realising the extent of possible dangers and some stakeholders not being interested on the issue. Discussing about disasters caused by company negligence, Idowu and Louche (2010) state that, before disasters actually take place, the possibility of them happening always seem very low. Therefore, external parties might not be too enthusiastic in terms of cooperating with BP in order to reduce the chances of environmental disasters, considering the threats to be insignificant.
Fourthly, knowledge sharing initiatives proposed by BP aimed at reducing the chances of environmental disasters might not be accepted by competitors due to distrust or other reasons. According to the recommendation if major players in oil and energy industry like BP, Shell and Chevron engage in intensive cooperation in terms of introducing safe practices of oil refining and similar measures all of them will benefit significantly. However, this might not work in practice because of distrust between the competitors and a range of other reasons.
CSR has evolved as a separate business discipline because of increasing amount of attention towards it from media and general public. Business can benefit from CSR by engaging in it actively and thus improving the image of the company, or they can choose to ignore it which can result in negative consequences for the company. CSR has many aspects and environmental issues in a host country caused by the activities of the business are considered to be one of the important aspects of CSR.
The report has formulated a range of measures to be implemented by BP in order to deal with environmental issues in host countries in a more efficient manner. The strategies include adopting a pro-active approach, introducing relevant health and safety standards, close co-operation with stakeholders and initiating knowledge sharing among the major players in industry.
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