British Petroleum Company: Organization’ Social Performance

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Topic: Business & Economics
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Introduction

British Petroleum (BP) is a multinational company that deals with gas, crude oil, and petroleum products (Frerrier, 2010). Its headquarters are in London. According to statistics, BP is among the largest energy companies based on market capitalization. Based on annual income, it was named the fifth-largest company in the world in 2012. In the energy industry, it is classified among the largest energy companies based on production. Through vertical integration, BP operates in all areas of the energy industry. It engages in the exploration, production, distribution, refining, and marketing of oil and petroleum products (Frerrier, 2010).

In addition, it deals with power generation and petrochemicals. It is present in roughly 80 countries throughout the world. The largest division of BP is located in the United States. BP is the second-largest oil and gas producer in the U.S. based on market capitalization and production capacity. BP is present in several African and Asian countries. Through its shareholders, the company has improved its management and leadership teams over the years. Good leadership has been the key to the company’s success (Falola & Genova, 2005).

Products

Oil and natural gas are the company’s main business segments. Upstream activities comprise exploration to find new oil and gas reserves, implementing strategies to facilitate access to new resources, and production, refining, storage, and transportation of different products (Frerrier, 2010). The upstream section of the company involves the management of pipelines, natural gas and oil reserves, processing facilities, and international exploration and production operations. Upstream operations take place in 30 countries around the world. On the other hand, the main downstream operations of the company include oil refining and marketing.

Other downstream activities include refining, manufacturing, transportation, trading, and sale of oil and other by-products (Frerrier, 2010). BP’s main products include oil, natural gas, petrochemicals, lubricants, petroleum products. Two external factors that can affect the success of BP include stiff competition and government policies. There is stiff competition in the energy sector due to the development and exploration of alternative sources of energy. The emergence of companies that focus on the production of green energy is a threat to the success of BP (Falola & Genova, 2005). On the other hand, government policies can affect the company’s success. The energy industry is one of the sources of gases and industrial wastes that pollute the environment. Strict environmental conservation policies and legislation can affect the success of BP by limiting access to opportunities.

Salient stakeholders key roles and responsibilities

BP has several stakeholders that play different roles to ensure the smooth running of the company. Three salient stakeholders include contractors and partners, governments, and non-governmental organizations (Vassilou, 2009). The role of contractors and partners is to ensure that the exploration, production, and processing operations of the company are safe and responsible. They also facilitate and take part in the development of high standards for the company’s operations and processes. To improve their performance and effectiveness, BP conducts training for all contractors and suppliers. Governments act as the company’s consultants with regard to regulation and adherence to legal statutes in order to ensure that the company is transparent in its financial operations and other ventures (Vassilou, 2009).

Finally, non-governmental organizations act as consultants for new projects and ventures. They provide specialized expertise and knowledge on various organizational aspects, such as leadership and management (Falola & Genova, 2005). It is imperative for companies to collaborate with non-governmental organizations in areas that include climate change, energy policies, biodiversity, environmental conservation, and observance of human rights (Lawrence & Weber, 2014).

Stakeholders influence on financial performance

Stakeholders play important roles in influencing the financial performance of companies (Lawrence & Weber, 2014). The aforementioned BP stakeholders play important roles with regard to influencing the company’s financial performance. First, governments affect the financial performance of BP through the enactment of legislation that reduces the number of opportunities available to the company. After the 2010 oil spill in the Gulf of Mexico, many governments reviewed their legislation and policies with regard to environmental conservation. In addition, many governments commenced the process of thorough scrutiny of environmental laws to prevent such accidents.

State intervention in such matters reduces the opportunities that the company has. BP paid heavy fines that affected its financial performance. Second, initiatives by non-governmental organizations regarding environmental conservation could have negative influences on the financial performance of the company (Falola & Genova, 2005). In recent times, issues that are core in the activities of NGOs that fight for environmental conservation include global climate change, reduction of greenhouse emissions, and reduction of global warming. The cost of implementing strategies and using technologies that conserve the environment influence the financial well being of BP. Third, governments are concerned with transparency in the company’s accounting processes and adherence to industry-specific laws. Failure of conventional accounting systems and fatal accidents such as oil spills and accidents cost the company a lot of money. For instance, after the Gulf of Mexico oil spill, BP paid a tax charge of $40.9 billion in damages.

The charge included contingent liabilities for future costs that might arise because of the effects of the spill on people and the environment. Fourth, the preservation of human rights and safety is also a costly undertaking. Failure to implement safety measures leading to the occurrence of fatal accidents can cost the company a lot. The company has been sued several times for failure to improve employee safety and work standards. In order to improve its reputation, BP contracts NGO’s and environmental groups whose responsibility is to oversee the implementation of safety standards and adherence to human rights guidelines in all its operations. Contracting these organizations affects the financial performance of the company through consultation charges. Fifth, contactors have a direct influence on the financial performance of companies because of project completion charges (Falola & Genova, 2005). BP pays contractors for every project they undertake. Effective negotiations and outsourcing can prevent cost inflation.

Controversial corporate social responsibility concern

A controversy regarding BP’s corporate social responsibility in violation of environmental conservation laws and policies (Vassilou, 2009). One of the most important factors to consider when operating in the oil and gas industry is the effect of a company’s activities on the environment. In past years, BP has engaged in various activities that have had adverse effects on the environment. For instance, the 2010 oil spill in the Gulf of Mexico had adverse effects on natural ecosystems. Some of the company’s operations, such as oil drilling, exploration, manufacturing, and transportation, pollute the environment if executed without caution. For instance, in 1999, one of the company’s operations in the U.S. was accused of illegally dumping hazardous materials that caused severe environmental degradation.

In the year 2000, the company was again sued for violating air pollution laws. BP engages in the irresponsible release of toxic gases into the environment. The company ignores the adverse effects of toxic gases on the environment. For instance, in 2013, residents of Galveston County sued the company for releasing toxic gases that caused health problems. The company executives had provided misleading information regarding the toxicity of the gases. In Canada, BP has been criticized for its involvement in the extraction of oil sands because the project has adverse effects on the environment. According to experts, the project is carbon-intensive and, therefore, a major cause of environmental pollution and degradation.

Stakeholder coalition plan to target controversial issue

Forming a stakeholder coalition to address the aforementioned controversial issue would involve several steps. After identification of a controversial issue that needs to be addressed by the organization, the process of forming a stakeholder coalition would commence. The first step would be to determine the resources, skills, and influence necessary for the attainment of the coalition’s goals. The process of identifying potential partners would involve the selection of partners with skills, experience, influence, networks, and resources needed for the achievement of common goals (Freeman, 2010). For instance, partners who have networks with government officials and non-governmental organizations would be recruited. In addition, individuals working in organizations that advocate for environmental conservation would also be recruited.

Other members would include government representatives and representatives of BP’s contractors and suppliers. Government representatives would ensure that the company complies with government legislation on environmental conservation. Representatives of the company’s contractors and suppliers would ensure that the management of BP implements measures to enhance environmental conservation before the commencement of all projects. Partners from non-governmental organizations would be involved in advocating for better methods of oil exploration and waste disposal (Freeman, 2010). They would also conduct studies in order to evaluate the impact of the company’s operations on the environment. Collaboration among various target groups would be fostered by establishing principles, guidelines, and practices of cooperation that would favor all groups (Freeman, 2010).

In addition, mechanisms would be developed to harmonize the activities of individual groups. Harmonization would involve a thorough explication of the roles of each group and its contribution to the goals of the coalition. A budget plan would be developed in order to facilitate the smooth running of the coalition. Finally, regular meetings would be arranged to discuss the progress made by each group in their area of interest (Freeman, 2010). Information sharing is an important aspect of enhancing the effectiveness and efficiency of a stakeholder coalition. Information sharing would be facilitated by developing a website and using social networks to disseminate information to coalition members. In order to avoid disagreements and collisions among partners, the coalition’s ideals would be determined through a consensus (Freeman, 2010). In addition, effective methods of solving problems and overcoming challenges would also be developed. These methods would involve the participation of all members.

Stakeholder formation challenges

The process of encouraging stakeholders to form a coalition would involve several challenges. Examples of such challenges include failure to agree on certain issues, differences in personal values and goals, and difficulty in explaining the benefits of joining a stakeholder coalition (Freeman, 2010). One of the challenges would be the development of a strategy to solve challenges and problems that are agreeable to all members. Stakeholders possess different views and approaches to solving problems and overcoming challenges.

It would be difficult to reach a consensus with regard to the best strategy to use in solving problems. Another challenge would involve the creation of common goals and values for the coalition. Reconciling the values and goals of individual stakeholders to those of the coalition would be difficult because some people could be unwilling to change their values and objectives. It would be difficult to fulfill the needs of every individual stakeholder. Finally, it would be difficult to convince the stakeholders about the benefits of participating in the activities of the coalition (Freeman, 2010).

These challenges would be overcome by developing the coalition’s goals based on the values and goals of individual stakeholders. The process would include open discussions and training programs for all stakeholders. In addition, the challenges would be overcome by developing a leadership team to lead the group with integrity and trust. One of the challenges that face coalitions is a lack of consensus regarding certain matters. Finding consensus would involve choosing options that are agreeable to all stakeholders and avoiding making decisions without extensive consultations with stakeholders.

Conclusion

British Petroleum is an international company that offers services and products in the oil and gas industry. It is present in more than 80 countries around the world. The company’s array of products includes natural gas, crude oil, petrochemicals, lubricants, and petroleum products. BP is also involved in the exploration, refining, trading, storage, and transportation of oil and natural gas. In past years, the company has been involved in several controversies that had serious financial ramifications. BP has been sued several times for violating environmental conservation laws and failing to improve safety standards in its factories.

It would be necessary to form a coalition of stakeholders in order to persuade the company to adhere to environmental conservation laws. The formation of a stakeholder coalition would involve several challenges, such as lack of consensus in the development of common goals and values and a lack of consensus on certain issues. It would also be difficult to convince stakeholders of the benefits of forming a coalition. These challenges would be overcome by explaining the benefits of forming a coalition with regard to personal and professional gains, utilization of effective communication methods, and the development of a strong and effective leadership team.

References

Falola, T., & Genova, A. (2005). The Politics of the Global Oil Industry: An Introduction. New York: Greenwood Publishing Group. Web.

Freeman, R.E. (2010). Strategic Management: A stakeholder Approach. London: Cambridge University Press. Web.

Frerrier, R. (2010). The History of the British Petroleum Company. London: Cambridge University Press. Web.

Lawrence, A. T., & Weber, J. (2014). Business & society: Stakeholders, ethics, public policy (14th ed.). New York, NY: McGraw-Hill Irwin. Web.

Vassilou, M. (2009). The A to Z of the Petroleum Industry. New York: Scarecrow Press. Web.