british petroleum

CORPORATE SOCIAL RESPONSIBILITY OF BRITISH PETROLEUM 1

CORPORATE SOCIAL RESPONSIBILITY OF BRITISH PETROLEUM

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Table of ContentsAbstract.............................................................3Introduction.........................................................4

Theoretical Approaches...............................................6Edward Freeman’s stakeholder approach...............................6

Milton Friedman’s corporate Social Responsibility theory............9Discussion and conclusion...........................................12

References..........................................................15


Abstract

The main focus in this assignment will be to evaluate

British Petroleum from various perspectives such as business

ethics, corporate social responsibility, and sustainability. Here

the company will be judged accessing its contribution in business

ethics, corporate social responsibility, and sustainability.

British Petroleum’s operation in various regions in the world

will be judged against ethical ground. For giant companies like

British Petroleum corporate responsibilities is a bigger concern.

How responsibly British Petroleum is acting in the territory is

also a key issue to be investigated in this report. Lastly

sustainability in the operational region is also crucial as giant


petroleum companies possess huge power with which they can do big

changes which may have positive or negative effects on the people

of the region. So in this report it will also be a focus to know

how British Petroleum is using its power throughout the world to

ensure sustainability.

Globally some models are developed to evaluate contribution

in business ethics, corporate social responsibility, and

sustainability. Some of them are very famous & are widely used in

business. In this report such models will also be used to

critically evaluate the performance of British Petroleum in the

above mentioned area. A thorough investigation will be made to

judge the performance of British Petroleum in every aspect using

the model.

Introduction


British Petroleum is one of the largest oil and gas companies

around the world. It is a British multinational company which has

headquarters in London. According to market capitalization it is

the sixth-largest energy company in the world. In recent time

British Petroleum has started its business in renewable energy

sector such as biofuels and wind power (British Petroleum, 2014).

Since its inception in 1908 as Anglo-Persian Oil Company the

company has gone through major diversification & lastly took the

shape of British Petroleum plc in 2001.

At present British Petroleum operates in almost 80 countries.

British Petroleum has a production capacity of around 3.2 million

barrels per day & has reserve of 17.9 billion barrels of oil in

its storage. British Petroleum has around 17,800 service stations

across the world (British Petroleum, 2014).

From the very early age British Petroleum has been accused of

being involved in some of the major environmental and safety

incidents. Some of the remarkable incidents of them include


1. Texas City Refinery explosion in 2005 causing death to the 15

workers.

2. The wreck of Torrey Canyon which is the largest oil spill over

accident till these days in Britain.

3. The Prudhoe Bay oil spill accident occurred in 2006 which is

the largest oil spill accident occurred on Alaska's North Slope

resulted in a US$25 million civil penalty.

4. the Deepwater Horizon oil spill out in 2010, the largest

accidental release of oil into marine waters in history, this

incident took proved to be very disastrous to the natural

environment, health and had long lasting economic consequences in

the region. To clean up the oil from the coast One-point-eight

million gallons of Corexit oil dispersant were used at that time

which is the largest application of this type of chemicals in the

history of USA. In the lawsuit British Petroleum agreed to pay

around $4.5 billion in fines and penalties which is also the

largest penalties for any criminal act in US history (British

Petroleum, 2014).


So focusing on the above mentioned incidents & other contribution

to the civil society British Petroleum was chosen for the report.

In this report it will be investigated how British Petroleum is

performing for the selected criteria discussed earlier.

The layout for the assignment will be designed in a way to

give the reader maximum flexibility to concentrate on the topic.

In the very beginning a descriptive analysis will be made about

the British Petroleum company. Its historical events will be a

strong evident regarding how British Petroleum actually acted of

the given aspects that have been set previously. Among other

aspects some basic information will be discussed to give an

overview of British Petroleum. A clear overview of the company

will help one define what British Petroleum actually can do &

what other factors are out of its control. A short overview about

the operation of British Petroleum will be given so that it is

easy to understand the strategy & long term vision of British

Petroleum. All these things will give the reader a clear view of

the organization about to be evaluated.


Theoretical Approaches

Edward Freeman’s stakeholder approach

The Edward Freeman’s stakeholder approach is an

organizational management theory of corporate social

responsibility which addresses morals and ethical issues of the

organization in managing an organization. The stakeholder theory

describes and recommends methods using which management can give

due attention to the interests of those relevant groups. Simply

it attempts to address who or what needs to be counts on an

ethical ground.

Traditionally in the shareholder view of a company only the

owners or shareholders that is the stockholders of the company is

important, and the company has a mutual interest to deal with

their needs first, to increase value for them. Unlike the

shareholder theory Stakeholder theory states that there are other


parties involved with the company including employees,

financiers, customers, suppliers, political groups, communities,

trade unions, governmental bodies and trade associations

(strategy & society, 2014).

The theory has mutually supportive multiple distinct aspects

which are: descriptive, instrumental, and normative in nature.

The descriptive approach is mainly in use to describe and explain

the characteristics and behaviors of the company, including how

companies are actually managed, how the board of directors

considers corporate constituencies, the way managers think of the

company, and the nature of the company itself (Fisher and Lovell,

2003).

The normative approach is the core of the Stakeholder theory

by which evaluates the function of the corporation and judges

them on the "moral or ethical ground maintaining the guidelines

for the operation and management of the company. For this

Stakeholder theory has three basic questions to consider which

are given below.


1. What responsibilities or duties an organization needs to

perform to its stakeholders?

Not in all the cases the organization owes anything to any group

even if the group may have a legitimate interest on the

organization (Fisher and Lovell, 2003). In case of the group

being a society at large & expresses its demand through

legislation, then the organization is obliged to pay attention to

it. In a lower level of obligation the right for a stakeholder

group’s can be consulted before major decisions are made

(strategy & society, 2014). In the least position the

organization at least let the group why they did they took such a

decision.

2. How an organization would decide between the two or more

incompatible demand from the Stakeholders of an organization?

It is a critical issue what criteria should the organization use

& how to develop such a logical criteria when deciding which

stakeholder group should be giving prioritize services?


3. What legitimate interests a group of people needs to have to

be justifiable as a stakeholder in an organization?

In this question company will decide whom the company will

consider as a stakeholder. A large number of people can be

influenced by the operation of British Petroleum but will British

Petroleum consider all of them as the stakeholder? Focusing on

the vision, aim, operation & most importantly the impact over the

region British Petroleum will decide whether British Petroleum

will consider a particular group as a stakeholder (Fisher and

Lovell, 2003).

The oil industry is criticized by different group for

different reasons including the use of political lobbying,

factors related to environmental, excessive executive pay scale

and lack of safety and health related issues for the workers

(Stern, 2007). British Petroleum has been chosen as the

organization to be analyzed for the report since it is a unique &

one of the most powerful companies in the industry for various

reasons (strategy & society, 2014). Firstly the nature of the

British Petroleum & the industry in which it operates is a highly


regulated market. Secondly, very high level of profits in oil

industry and extreme concentration of power British Petroleum are

the other mentionable reasons why British Petroleum has been

chosen for the report (Stern, 2007).

One of The major issues for British Petroleum which has been

marked by various stakeholders is the environmental issues linked

to its oil reserves. Most of the Oil companies, particularly the

British Petroleum has a long struggling issues coming out against

them related to environmental issues (strategy & society, 2014).

Some of the environmental organizations and some other

stakeholders have expressed concern over the indiscriminate

company performance of British Petroleum that resulted in serious

negative consequences to the environment. 'In August 1991, based

on an Environmental Protection Agency (EPA), a Washington, D.C.-

based public interest group Citizen Action analysis of toxic

release inventory data for 1990 remarked British Petroleum

among the top 10 polluters in the United States (strategy &

society, 2014). This finding brought out by environmental

agencies and other concerned environmentalist groups was a major


shock to the British Petroleum. In response British Petroleum was

forced to take measures regarding the issue related to the

environment (M. JONES, FELPS and A. BIGLEY, 2007).

At times when Lord John Browne took over the British

Petroleum administration, British Petroleum redefined its

marketing strategy putting higher emphasis on environmental

issues. In 1997, the British Petroleum approbates the Kyoto

Protocol, a worldwide agreement with the aim of preventing global

warming by reducing greenhouse emissions. Since then British

Petroleum has been able to implement subsequent efforts with the

aim of minimizing their business' impact over the natural

environment (Martin and Mertens, 2013). These initiatives include

the provision for cleaner burning fuels, elimination of bribery,

the reduction of emissions or facilitation payments as well as

political. Decision has been made to publicize all activities of

the company to make the society aware of business operations of

British Petroleum. All these are done only to maintain trust

among the stakeholders (Stern, 2007).


Milton Friedman’s corporate Social Responsibility theory

The stockholder theory by Milton Friedman is a normative

business ethics theory related to the corporate social

responsibility of a company. It is a theory about the corporation

and its moral purpose and responsibilities of the company (Martin

and Mertens, 2013). The theory describes businesses as a mere

arrangements by which a group of people mainly the stockholders,

offer capital to another group, the managers which the managers

use to achieve specified aims set by the stockholders in response

stockholders receive an ownership interest for bearing the

associated risks.” It is just a contractual agreement in which

both the parties the stockholders & the managers have entered

voluntarily. The agreement describes the responsibilities and

obligations to the both contractual partners. Executives requires

to acts as agents in part of the stockholders. They have been

empowered to manage the money advanced by the stockholders. Not

in all cases the purpose of the business necessarily needs to

earn profit for the stockholders, other goals are also common,


but the main concern of the stockholder theory of Milton Friedman

is profit-maximization (Martin and Mertens, 2013).

In his stockholder theory Milton Friedman allowed Executives

to spend their personal funds anyway they see worthy of for any

charitable funds or project that they think will socially

beneficial. Friedman appreciated them as a private citizen, but

when functioning as an executive for corporations they are acting

as an agent of the stockholders and are bound not to use business

resources except for the purposes they are authorized for by the

stockholders (Martin and Mertens, 2013).

Milton Friedman took the shareholder approach to the social

responsibility. In This approach Milton Friedman tried to show

the shareholders as the economic engine of the company and the

only group to which the company must be socially responsible. As

discussed earlier, the goal of the firm according to Milton

Friedman’s’ stockholders theory is to maximize profits and return

a portion of those profits to shareholders as a reward for the

risk they took by investing in the firm (Senge, 2008).


Milton Friedman in his theory of stockholder advocates that

the shareholders should be given the authority to decide what

social initiatives they need to take part rather than making the

decision by their appointed executive, who they are appointed for

business purpose.

Friedman also urged that a company should not have any

"social responsibility" to the public or society because the only

concern for the management is to increase profits for itself and

for its shareholders and that the shareholders will be in full

authority to make decision regarding social responsibility

(Stern, 2007).

In this theory Milton Friedman states that companies concern

for the community rather than for profits, would leads them to

totalitarianism.

In his book, Friedman wrote "There is one and only one

social responsibility of business to use its resources and engage

in activities designed to increase its profits so long as it

stays within the rules of the game, which is to say, engages in

open and free competition without deception or fraud."


Many argued with the stockholder theory offered by Milton

Friedman saying it inconsistent with the concept of corporate

social responsibility which they said comes at the cost of the

stakeholder. Following example can be considered as a logical

point by the opponent of the Milton Friedman stockholder theory

(Senge, 2008). If a company donating to help victim got hurt in a

natural disaster like cyclone, in any way which is may not be

considered as an action in the best interest of the shareholder.

Not considering the scenario Friedman would suggest that

shareholders themselves be given the authority to decide how much

and to whom they want to donate. Some other argue that goods &

services provided to the society at any crisis moment build

further allegiance between customer & the corporation and meet

the stockholder theory's requirement through a different

mechanism (Senge, 2008).

So far The Friedman doctrine deemed to be controversial. In

her book Naomi Klein's a left-wing social activist book she

criticizes the theory, saying that most of citizens become


sufferer with huge wealth in the hand of corporate elites (Senge,

2008).

Discussion and conclusion

It is notable discovery that people mostly stakeholders

expect firms to help society solve its problems besides firms

traditional function of providing goods and services to the

citizens. As these activities are generally seen as desirable so

when the firm does all these activities, then it is called

socially responsible. In case of firms negligence to these

activity those same people may feel British Petroleum to be

irresponsible.

In this part the focus will be given to the CSR activity of

British Petroleum. In the first place the focus will go to the

home country Britain. How socially responsible British Petroleum

is in its home country Britain? Today in Britain British

Petroleum is serving over 62 million people with its energy


supply & not only in recent time British Petroleum has been

serving the nation for over 100 year since its inception in 1908

(British Petroleum, 2012). Safety reliability & responsibility is

at the very core to the British Petroleum. In UK British

Petroleum has managed job for 15000 employees & still is taking

250 graduates each year from UK universities. Now a day British

Petroleum is also contributing to service & pension fund of

government offering better opportunities for UK citizens. British

Petroleum has a reserve of 3 billion barrels equivalent oil only

for the UK enough to meet the energy demand of UK for 25 year

(British Petroleum, 2012). Keeping the environmental impact of

oil in mind British Petroleum has started producing bioethanol &

is the largest producer of bioethanol in Britain leading to a

greenhouse gas saving of equivalent of 10000 cars. British

Petroleum has its independent safety organization to ensure the

most in case of safety issue. British Petroleum spends $10

billion in sponsorship in UK companies each year & another $140

million has been invested for research & investigation for

innovation in other institutes each year. British Petroleum is

also supporting the art & culture of UK for over 30 year. British


Petroleum has also supportive program for schools in UK which

promotes science, math, innovation, technology & engineering. And

last but not the least British Petroleum was the proud partner of

London 2012 Olympic games (British Petroleum, 2012).

In the other part of the world like in countries like USA

British Petroleum has the largest investment compared to any

other energy company. In USA British Petroleum accounts for more

than a quarter of million jobs with almost 20000 employees around

the 50 states. Every earned dollar in USA is reinvested in USA by

British Petroleum. In general British Petroleum makes a donation

of $30 million in nonprofit organization in USA. And again

British Petroleum produces enough energy to light up the whole

country (British Petroleum, 2012).

From the above discussion, it is clear that British

Petroleum success in adhering to the needs of being a socially

responsible company. Moreover, analysis has shows that British

Petroleum has incorporated itself and promotes increased public

participation while dealing with progress and development related

plans and projects. the public being the most important concern


of British petroleum, it is very logical that British Petroleum

will be highly incorporated as inputs will be coming up with

sound policies ensured which will reflect the preferences and

general welfare issues of the society.

Additionally, the outcome of the study indicates that along

with the corporate social responsibility commitment of the

company other issues like environmental protection, human

resource management strategies, employee relationship management

seems to be a big concern for British Petroleum.

Addressing environmental issues is never late as the use of

the new technological innovations can easily serve the interest

of sustainable development as companies at present are equipped

with lots of ways to concentrate on corporate, social and

environmental responsibilities.

Even though British Petroleum has been able to adhere to the

promotion and commitment of being socially responsible the

company still needs to prove that their intentions are clear and

that their commitment will be consistent since most of their

critics would always view British Petroleum as a company which


has a negative impact on the environment. This is the issue that

needs to be paid a bit attention to strengthen British Petroleum

position relative to corporate social responsibility.

References

1. Fisher, C. and Lovell, A. (2003). Business ethics and values.

Harlow, England: FT Prentice Hall.

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THEORY AND STAKEHOLDERRELATED DECISIONS: THE ROLE OF STAKEHOLDER

CULTURE.

3. Martin, K. and Mertens, E. (2013). Milton Friedman and Social

Responsibility An Ethical Defense of the Stockholder Theory. Oslo.

4. Senge, P. (2008). The necessary revolution. New York: Doubleday.

5. Stern, N. (2007). The economics of climate change. Cambridge, UK:

Cambridge University Press.

6. strategy & society. (2014). pp.20-27.

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responsibility-british-petroleum-management-essay.php

[Accessed 3 May 2015].

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http://research-methodology.net/british-petroleum-bp-and-

csr/ [Accessed 3 May 2015].

9. Cragg, W. (2001). Business Ethics and Stakeholder Theory. Toronto,

Canada.

10. British Petroleum, (2012). BP in UK. [video] Available

at: https://www.youtube.com/watch?v=1vrj9GyRtPM [Accessed 1

May 2015].

11. British Petroleum, (2014). https://www.youtube.com/watch?

v=TL_51WOv3g0. [video].

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Available at: https://www.youtube.com/watch?v=zb_UaCE21zU



13. bp.com, (2015). Corporate Social Responsibility. [online]

Available at: http://www.bp.com/en_ru/russia/csr.html


14. bp.com, (2015). CSR in Education. [online] Available at:

http://www.bp.com/en_ru/russia/csr/education.html [Accessed

3 May 2015].

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