An Evaluation: The Role of Corporate Social Responsibility Efforts of British Petroleum (BP) towards their Global Business Operations
Chapter 1 Introduction
The first chapter focuses mainly on the issue that the study explored which is the role of Corporate Social Responsibility in the operation of British Petroleum. Main areas are covered herein including background, the problem, aims and objectives and importance of the conducted study. In this chapter, the researcher established the dimensions related to corporate social responsibility.
Background of the Study
As contemporary organisations move into a more ethical global business environment, trickling down of corporate social values and mission to the greater public is now deemed a requirement. Regardless of corporate beliefs and culture, the economic or productive value of modern organisations is nonetheless derivative from its worth and its extension of organisation’s profundity for wealth-profit index by which serves as the competitive measure to sustain its very existence (Henriques, 2003). In simpler terms, corporations are now perceived in the forefront to promote sustainable social development by sharing its resources for the projects, programmes and initiatives which have a social cause. Dubbed as corporate social responsibility or CSR, companies at present are obliged to act responsibly and expected to be sensitive about ethical issues (Carroll, 1979, p. 500).
Businesses around the globe are continuously developing to respond to the needs of their customers. It is very vital for them to develop creative ways that will maintain their competitiveness. The corporate world is characterised by paramount restrains, high demands and expectations on productivity, and excessive competition where management members necessitate the familiarity and importance of business ethics and social responsibility. Considering the trends in the corporate world, many employees are pressured to cut corners, break standards and rules, and engage in other forms of questionable practices so as to do away with a number of inconveniences and achieve outcomes the fastest way possible while neglecting the provision of appropriateness and fairness. With respect to this, this paper will evaluate and discuss the concept and role of business ethics and social responsibility in application to the business practices of British Petroleum or simply BP.
Brief Background of British Petroleum
Headquartered in London, BP Plc is considered as one of the world’s largest energy companies which provide consumers with fuel and energy as well as petrochemical products. Evidently, British Petroleum is one of the six “supermajors” or the International Oil Company (IOC) along with ExxonMobil, Royal Dutch Shell, Chevron Corporation, ConocoPhilips and Total SA. Since operating an oil company is too risky a venture, British Petroleum embarked on a frenetic growth strategy through continued divestiture and merger and acquisition. BP plc therefore transformed from being a local oil company into a global energy group wherein over 80,000 people are employed to main its operation on more than 100 countries worldwide. Today, there are three core strategies that British Petroleum commits itself such as exploration and production, refining and marketing and alternative energy.
Currently, there are six brands that make up BP plc namely BP, Castrol, Arco, Aral, am/pm and Wild Bean Café (BP online, 2010). BP plc, as an organisation, also claims to be structured for success through the two key business segments which are the exploration and production and refining and marketing and the alternative energy business known as the BP alternative energy. In line with these strategies are different business activities that include finding, extracting and moving oil and gas, making and selling fuels and products, generating low carbon energy and working responsibly. Of all these activities, working responsibly embodies BP plc’s commitment on the betterment of communities where it operates. Roughly, BP plc is operating in Africa, Asia, Australasia, Europe and North and South America (BP online, 2010).
BP plc is positioning itself to be a frontrunner in the future pertaining to the need to meet the world’s continued demand for fuel, energy and petrochemicals. BP plc intends to play a central role in creating long-term options for the future in new energy technology and low carbon energy businesses. Likewise, BP plc is enhancing its capabilities in natural gas which is regarded to be a vital source of relatively clean energy. This is more so because the goal is to transition to a lower-carbon economy and beyond. Desirably, BP plc wants to be recognised as a “green” company which consciously puts initiatives to eradicate climate change at the centre. In essence, BP plc is currently operating through environment-friendly technologies.
Statement of the Problem
Organisational characteristics unique to BP plc is opposing, however, wherein on one hand BP plc is recognised to be a key figure in addressing climate change and on the other hand BP plc is also accused of greenwashing because of its less environment-friendly operations. What is clear though is that BP plc is responsible and accountable for serious oil scandals in the history with the Gulf of Mexico oil spill as the most recent despite the ongoing initiatives to achieve sustainability. With the oil scandals that are glooming the confidence of the consuming public as well as the investors, BP plc can only rebuild its image while focusing towards becoming a green oil company. The last may seemed to be impossible for an oil company to green its entire operation. This may be also the reason why BP plc is likely to greenwash the media and the general public.
In retrospect, BP plc was caught and perceived to be involved in “greenwashing” when in July 2006, after the media had discovered a 270,000 crude oil spill in Alaskan tundra, the company admitted that it is facing criminal charges. Relative lack of press coverage regarding the spill is a proof that BP plc had successfully greenwashed the image it is communicating with the public. BP plc was also subjected to criticisms after it was proven that it is involved in environmentally unsound practices. While BP plc is publicly affirming its commitment to investing in alternative energy sources minimally, in reality, majority of its investment is devoted to fossil fuels (Monbiot, 2006; Frey, 2007; Milmo, 2007; Green, 2007).
In lieu with this, this research answers the following queries:
- What advantages are there for a company to be ethical?
- How important is it for British Petroleum to consider corporate social responsibility and be ethical?
- How can unethical actions be prevented through the introduction of the necessities of corporate social responsibility efforts in British Petroleum?
- How can BP implement corporate social responsibility in its strategy?
Aims and Objectives
The study evaluates the corporate social responsibility efforts of British Petroleum (BP) towards their global business operation. Generally, the complexity of today’s global market is different from the past years but still, BP’s business efforts still shows positive impact to their consumers. To determine the various challenges that the company managed to solve is however, might contribute in the company’s action in their formulation of strategies. Through learning the strategies being implemented within the organisation, there is a positive approach on what are the factors that might contribute to the long-term success of the company. With this, the following are the objectives of the study.
- Examine the corporate social responsibility efforts associated with the growth of British Petroleum (BP).
- Understand how BP has developed and grown into very success business despite of the issues relating to business ethics.
- Determine how BP achieved growth and development through the process of efficient corporate social responsibility.
Organisation of the Thesis
This research study will be divided into five chapters in order to provide ease and consistency on the discussion of the topic. The first part will be discussing the problem uncovered by the researcher and provide sample background on the topic. The chapter will constitute an introduction to the whole research study, the statement of the problem in order to present the basis of the study, a discussion on the scope of its study, as well as its effects to individuals and its significance to the society as a whole. The second chapter will be discussing the relevance of the research study in the existing literature. It shall provide studies on the background of the company, corporate social responsibility efforts, and environmental issues. After the presentation of the existing related literature, the researcher shall provide a synthesis of the whole chapter in relation to the study.
The third part of the research study shall be discussing the methods and procedures used in the study. The fourth chapter will be an analysis of the collected information from the secondary sources. Secondary Information assessment will be made in order to uncover BP’s corporate social responsibility stance and to address the statement of the problem noted in the first chapter. The last chapter shall comprise of three sections, namely, the summary of the findings, the conclusion of the study, and the recommendations. With these three portions, this chapter will be able to highlight the implication of the findings in relation to the data obtained.
Chapter 2 Literature Review
According to Robbins & Judge (2007), many employees are confronted with instances where they need to define and decide right and wrong conduct. The characteristics of good ethical behaviours have never been clearly projected in the recent management literatures where the line that differentiates right against wrong conduct has become even more blurry. Managers and leaders respond to ethical behaviour issues (De Mesa Graziano, 2002).
It is provided that when analysing the role and meaning of ethics and social responsibility from the internal and external perspective of a company, Kline, (2006) states that,
“There is a potential problem ...with attaching the duty of managers to the specific desires of shareholders. If anything, moral constrains are meant to constrain desires. Desires are fickle and not always moral”.
Kline’s statement holds veracity and openness provided that business ethics and social responsibility is concerned. In a globalised economy, in both local and international setting where tough competitions occur among businesses, companies are exploiting the benefits of social responsibility and business ethics. These social activities: include charitable contributions, discounts to senior citizens, expenditures on employee alcoholism and substance abuse treatment, responses to customer complaints, product warranties, processes for exchanging purchases, community service in volunteer or governance capacities, employee education, child care or flexible hours for employees with children, advertising or promoting community events, sponsoring sports teams, recycling, special services to the handicapped, and so forth (Suderman, 1999).
Global corporations in which BP belongs view social responsibility as a corporate investment that will result in a long-run corporate profit and not a corporate expense. According to Cotton (1998) businesses supporting social responsibility activities claim that it is in the best long-run interest of the business to become intimately involved in and to promote and improve the communities in which it does its business. Moreover, McCarty & Bagby, (1990) also argued that it can and should improve the corporate and local image of the company, and it is in the stockholders best interest. Further, companies believe that by making communities a better place to live in, it can entice superior and happier workers to the company who in turn will put out better products and increase profits (Michalos, 1995). However, it is important to point out that the primary reason why businesses turn into socially responsible activities is to maximize their profits; public interest comes in second.
The question now is why CSR is relevant today for companies. The answer lies in the four identifiable trends of CSR, which seem likely to continue and grow in importance: increasing affluence, changing societal expectations, globalisation and free flow of information and ecological sustainability. As customers are increasingly endowed with the access to various products and services, responding to affluence is now a strategic objective hence putting a premium to a trusted brand was realised. These customers expect more from the companies where they would afford products and services, implicating public trust and public confidence in the ability of companies to restrict and control own corporate excess. Media, further, are empowered in bringing the public the information of the lapses in CSR. Such situation also empowers activist groups and like-minded people in spreading messages and providing the means to coordinate collective action. Evidenced proved that earth has ecological limits with impacts on the environmental responsibilities that are likely to be criticised and penalised when not performed thoroughly (Werther and Chandler, 2006, pp. 19-20; McComb, 2002, p. 5).
According to Epstein (1987, pp. 99-102), corporate social responsiveness focuses on the individual and organizational processes for determining, implementing, and evaluating the firm’s capacity to anticipate, respond to, and manage the issues and problems arising from the diverse claims and expectations of these stakeholders. The moral argument for CSRstates that CSR ‘broadly represents the relationship between a company and the principles expected by the wider society within which it operates’ (Werther and Chandler, 2006, p. 16; Lea, 2002, p. 10).
Word Business Council for Sustainable Development defines social responsibility as the continuing commitment to behave ethically and contribute to economic development while also improving the quality of life of its workforce, their families, and the local community and the society at large. Corporate Responsibility Index claims that social responsibility is achieved when a company has effectively and sustainably built a lasting, meaningful relationship within its sector where it belonged and its immediate community (Scott, 2007). In other words, social responsibility concerns the social environment and the ever-changing social contract. Importantly, the underpinning is that a company should consider the societal impacts of its decisions and actions. Sims (2003, p. 43) argued that companies must act to protect and improve the welfare of the general public. The businesses must aim not only on organizational effectiveness but on existence to address the needs of society.
As social responsibility is intertwined with the issue of accountability, it can be considered as both critical and controversial. Critical because a for-profit company could be the largest and most innovative part of any free society’s economy as it can drive social progress and affluence. However, it is also controversial because the question – what is the purpose of business within a society? – remains to be unanswered (Werther and Chandler, 2006, p. 8). Having thought deeply of such a question, striking a balance between corporate and social responsibilities should be a strategic focus. To become accountable, a company has economic, legal and ethical responsibilities wherein not only the company has to make profit in order to survive, but the company is also obliged to its stakeholders to maximise earnings and operate efficiently, complying the best of the standards. The underpinning is that a company should provide a quality, sustainable living to both internal and external stakeholders.
Speaking of social contract, social responsibility transcends beyond mere obligation between a company and its workforce. Instead, the social responsibility of a company also extends to individuals, groups and other organisations, government and the society as a whole, comprising the stakeholders of a company. Sharplin (1985) states that social responsibility refers to the set of written and unwritten rules and assumptions in a corporate manner and these rules are applied to its immediate community including the people within that community. Gossy (2008, p. 6) also identifies primary and secondary stakeholders and active and passive stakeholders. Primary stakeholders have a vital in the company while those secondary stakeholders may not actively participate but the company could still exist. People who seek to participate in the activities of the company are considered active stakeholders such as managers and employees. Most shareholders, the government and the local communities are, in contrast, considered as passive stakeholders.
Proaction is considered as the highest level of responsiveness to social issues where companies actively seek to improve and contribute to society. Companies with proactive philosophy will try to carry out discretionary responsibilities (as cited in Harila and Petrini, 2003, p. 32). Proaction is an approach to corporate social responsibility that includes behaviours that improve society. Organizations that assume a proaction strategy subscribe to the notion of social responsiveness. Proaction according to Carroll (1979, p. 501); Joyner and Payne (2002, p. 298) involves actively addressing specific concerns of stakeholders and anticipating social problems before they arise or are officially recognized, and developing strategies to deal with these issues.
Lane, Mendenhall and McNett (2004) state that organisational values are found on vision and mission statements which drive strategy. Strategy and ethics are linked through the idea of purpose. Managers understand purpose in quite personal ways as a guide for their personal action. For the mutual benefit of the organisation, managers’ actions are activated by agreement with others especially that correlates with the organisation. It would be necessary to note that managers are put in their position to diffuse responsibility. Managers do understand the purpose of their organisational activities in terms of their own personal engagement with and responsibility for them. Likewise, managers also understand purpose as it applies to their connection to others, in and beyond the organisation, people who agree to responsibilities related to their shared goals. The purpose of an organisation is ethical in nature and is influenced by culture. When such assumption is left in tacit, misunderstandings could arise (Sharma and Bhal, 2004). To be effective then, values should reside at the operational levels in the thoughts and actions of those who implement the strategy whom are the managers. It is important then for managers to understand others and own implicit culturally influenced ethical assumption.
Organisations are often structured as a collection of functions and roles that have decentralised operational responsibility. Holian (2002) relates that managers are then responsible on performance of subordinates’ performance. The diversity in functions and roles could have challenging ethical issue. Once the demarcation among these functions and roles became an issue, managers could miss the opportunity to make ethical decisions. Managers are in a response mentality as moral action may be a part of the problem’s solution of a different order than ethical decision-making. Because organisations are made integrated, managers are confronted with the challenge of the tendency to be problem-oriented which may confound ethical problems in the organisational level (Carroll, 1990).
According to Casali (2007), organisations may encourage managers to be unethical in forceful and implicit ways via disincentives. The reward of quantity over quality is an example of this as well as the bottomline pressure for profits at any cost, open door policies but closed door practices, punishment for reporting policy violations, promotion of managers known to be less ethical and patterns of deception throughout management. As such, the way performance maybe measured may put pressure on managers to act for the short term rather than to choose what might be the right approach for the organisation in the long run. Hence, the lesson for managers is to set and manage reasonable performance expectations (Vardi and Weitz, 2004).
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