HC2121 Comparative Business Ethics and Social Responsibility

Describe the Sustainability Challenges in the Gas and Oil Industry found in the 11^th edition of the prescribed Business Ethics text book by Ferrell.

There is no denying that the world’s commodities depend on the drilling for oil and gas and its effects on the economic and environmental effects. It has been estimated that during 2017, the world’s claim for the natural gas will reach over 4 trillion cubic meters. Managing the ethical risks in the sustainability challenges in the gas and oil industry, initiates with the management of the risks to the company’s stakeholders (Alothman, 2016). If an activity is to be determined to carry out a high risk of injury to stakeholders, then, it must be redesigned and protects in order to diminish and eradicate the potential risk. Lowering the risks to the stakeholders will also diminish the risks to the happening of the accidents. However, the dependency of the worlds to the oil and gas has noteworthy contests. The demand for the oil reduces the world’s oil stocks at a disturbing arte. Safety is another major concern as major accidents have been caused the oil and gas manufacturing to be highly assessed.      

This essay will present the concern of sustainability challenges in the oil and gas business. It will underline how handling the moral concern in the oil and gas manufacturing could be relates to dipping the accidents. In addition to this, the study will compare the risks that some of the major industries carry on facing in outsourcing a passable supply of the energy. At last, the study will outline how ethical leadership assists the oil and gas commerce to achieve risks.  

How does managing ethical risk in the oil and gas industry relate to reducing accidents?

One of the greatest and major concerns of the oil and gas industry is the risks linked with it. As the request for the oil and gas is at an alarming rate, there now appears a situation where the world’s oil reserves will be completely depleted. Drilling in the oil and gas business contributes in the water pollution and also pollutes the air with the release of harmful gases. These harmful particles then contribute to the warming of the earth’s atmosphere (Bodell, 2014). But what entices the most consideration is when the oil and gas corporations practice any major tragedy or faces any major accidents such as oil spills. As most of the oil reserves are positioned underneath the ocean, businesses have to execute the drilling rigs to excerpt the oil from underneath the ocean floor (Bodell, 2014). These actions have many chances of having accidents like oil spills and oil leaks.

As the operations of drilling oil from beneath the ocean has risks like oil spills, oil and gas business have adopted many protection procedures and processes that are destined to diminish the environmental impression and prevent these tragedies from happening. Ethical issues are part of these businesses that have also led to major ecological accidents (Bryant, 2007). The Exxon-Valdez spill in the United States is not only known for environmental impact but also on the responsibility and accountability of the oil companies for the clean-up and restoration. The Deepwater Horizon oil spill by BP is another oil spill that raised questions on the accountability of the oil and gas companies (Bryant, 2007). Both of these tragedies took place due to the ignorance of the moral danger areas and alternatively this risk directly led to the disasters.

It is mandatory that employers are providing safe and healthy working conditions for all its employees. The health administration of the countries are enforcing act and sorts regular astonishment inspections to safeguard that the trades are uphold safe working atmospheres. Maintaining healthy and safe working conditions is a sure process to reduce the accidents in gas and oil industry (Dias, 2010). Oil and Gas industries needs companies to take greater responsibility for their decisions and to provide leadership which needs to be based on ethical principles. Most of the accidents in the oil and gas companies share shared factors like flaws in the safety ethos of the organisation. Every organisation culture is based on the shared morals and standards upon which decisions regarding the company’s operations are based (Ekhator, 2014). Having a safety philosophy is simply the subsection of the complete organisational culture that portrays the company’s overall attitudes and methods to the safety and risk organization. Other common factors in the accidents of oil and gas industry are the lack of commitment towards the safety by leaders and the non-existent of the change procedures. These factors are the large proportion of major accidents that happens after some changes in the system or changes in the way to which it is being operated (García-Rodríguez et al., 2013). Flawed communication and reporting system is also a major factor in large number of misfortunes, unsafe situations. This can be proved with the statement given in the case scenario, where in the Exxon Valdez ship Captain Hazelwood ignored the Coast Guard warnings that rocking the ship might make the oil spill more worse; and subsequently this ignorance results in killing thousands of sea birds, sea otters, wildlife and finishing the fishing season over the area for numerous years.      

Another common factor is the inadequate learning from the past events and it is due to the fact that most of the prior accidents are not investigated appropriately (Gough, 2011). The indications of the fundamental systematic facts of the accidents are recognized as the reason of the events. Accidents are very multifaceted procedures and needs to be investigated properly so that in future, the past arrears could not be repeated. System safety sets stress on scheming the system that includes the operational mechanisms and engineering to prevent dangerous system fatalities (Higgins, 2010). Confusions among the different difficulties and answers can lead to overemphasis on one type of security (both occupational and personal safety) with thinking that other types of misfortunes can be prohibited. Levenson 2011 believes that procedure accidents are of low possibility. The implications are that accidents with low probability are least associated with low risks and low chances of accidents (Higgins, 2010). As for illustration, the design and operation by Deepwater Horizon did not sufficiently monitors the issue of hydrocarbons from the Macondo well.          

Managing the risks related to the oil and gas commerce is to be done by keeping the environment and public at a high and safe level (Lertzman, Garcia and Vredenburg, 2013). There are chances of reducing the occasions of oil spills, leaks and also explosions by keeping a safe and healthy environment at the industry. Maintaining a safe environment not only effect the public and the society but also effects the position of the stakeholders and public pressure. It also assists in managing the criticism that the companies have to further deal with.

Compare the risks that BP, Exxon, and the fracking industry continue to face in providing an adequate supply of energy?

The most controversial aspects of hydraulic fracturing revolve around the issue of water. Huge quantities of water are needed for the fracking job that increases the regional water stress and develops or creates challenges with the management of post fracking water waste. The major risks that each of the enterprise face are the leaks, spills, and explosions happening. Other than these stated terms, these corporations also have to deal with the reputation of the consumers and buyers who buys the oil (Mimbi and Lutz, 2014). As for illustration, if a customer of BP found out that the company’s oil spill is harming the ocean and the environment, he or she will certainly switch to any other corporation oil as their gas and oil are not harming the ocean and the environment. Oil Companies also have the common risks regarding the political and financial risks. Strong community opposition is being promoted due to the high risks related to the water contamination and regional water stress which happens during the fracking and production.

Fracking happens when the water, sand or chemicals are driven into the shale rock in order to power the natural gas to increase to the surface. Fracking has been now for more than 60 years and has economic benefits (Mimbi and Lutz, 2014). In addition to the economic benefit, it has also be claimed that fracking also results in grater sustainability than other traditionally energy sources. But, fracking also carries some significant risks as well (Smorodova and Segreeva, 2017). The process has been accused of releasing chemicals and methane into the air and there have been also allegations that fracking causes small seismic moves in the sea.   

The oil and gas business’s hydraulic fracturing processes are under powerful inspection for possible damage to the neighbouring societies and the environment. It is from air and water contamination to augmented traffic and crime (Smorodova and Segreeva, 2017). It is important track down these potential risks and if corporations are not chasing these risks, then it will be problematic to validate to investors, governors, controllers or the public that the difficulties are eradicated. It is important for the companies to adopt the best performs and to alleviate their impressions on societies and the ecology.    

Methane which makes up to 70-90 % of the natural gas could get leaked during the drilling and could contaminate the drinking water supplies. There are also climate change implications due to the release of natural gas in the atmosphere. It happens as methane is highly potent greenhouse gas. Major oil and gas companies like Exxon and BP, have a huge history of conspiracy and poor performance, which includes the contamination of sensitive environments and oil spills, while having a comprehensive environmental and biodiversity management structures in the company (Thompson, 2013). Companies which have poor track record for monitoring and governing the environmental impact such as water use, spills, waste, safety and operational integrity or with the poor practices of community engagement, are very much less prepared to meet more stringent regulations around the gas drilling.  

How can ethical leadership help the oil and gas industry to manage risk?

By exercising the voluntary practices, moral leadership could aid the oil and gas manufacturing to cope the risks integrated within the context of the operations of the oil and gas commerce. Voluntary practices of the oil and gas businesses include the values, beliefs and the voluntary contractual obligations of the business. Safety culture of the company must be set up by the frontrunners of the oil companies as they prepare the rudimentary values upon which the verdicts will be based (Olivier, 2012).  Management commitment regarding the safety has been initiated to be the most substantial factors in differentiating among the organisations with high and low misfortune rates. In the current business context, most of the corporations have administration of change procedures on the books but the procedures of this management are not completely followed up by the company’s operators (Thompson, 2013). From the adequate learning gathered from the past events, the investigation of the management accident usually emphases on operator error, or on technical let-downs, and disregards the systematic factors, and the management (Ramos and Veiga, 2011). Human error is the other indication of safety problems and these errors are not cause of the accidents. In order to reduce the human operator error requires looking at such things as the design of the equipment, the helpfulness of the operating measures provided and the presence of the goals conflicts and manufacture pressures.    

Supervisors can utilise the information from the past incidents to remember the potentials risks and to execute the safeguards to protect the local societies, employees, dealers and the violability of many industries. The oil and gas landscape has driven the entire oil refining industry to revaluate its operations (Smorodova and Segreeva, 2017). Sustainability has been achieved by executing the long-term strategies to manage the costs while being in noteworthy situation and appropriate time frame. There are several critical factors that are composed in the oil and gas operational excellence that needs and must be managed in an integrated way to sustain the high level of operating performance (Smorodova and Segreeva, 2017).

The main factors are safety that must be managed in an integrated way to sustain the high-level f operating performance. Some of the main factors are the safety, reliability, operational efficiency and cost optimisation. In addition to this, supervisors must also include the some exercise on the stated factors in order to maintain high levels of operating performance in the workplace. Oil and gas corporations also faces some ecological risks, health and safety risks, accountability risks and also the reputational risks, the administration on which is vital of the corporations on long-term success (Sullivan, 2005). The corporate social responsibilities that refer to the kinds of things those companies conduct in their operations to navigate these swirling currents of changing prospects.       

Efficient firms not only provides benefits to the shareholders by providing return on the investment but also to the workers by providing wages, suppliers by providing revenue, customers by providing better products at lower prices and also provides benefits to the local communities by providing job opportunities, infrastructure growth and tax revenues, all of which increases the stakeholders utility (Sullivan, 2005). The word responsibility here implies a duty to someone or something on which the companies own duties to society at large. Many theories on the stakeholder claim that supervisors owe stakeholders a variety of lawful and moral duties (Thompson, 2013). The operations of the companies affect the employees, customers, suppliers, neighbours and governments. Managers and employees of the companies are the people who give the business life and make the decisions that society’s quality to the business.  

 Conclusions 

Managing the ethical risks initiates with the management of the risk’s to the company stakeholders. Of a company protects its stakeholders then it is safeguarding itself from the accidents and risks. If an activity of the company is determined to carry a high risk of injury or harm to the stakeholders, then the process of the company must be redesigned and must be safeguarded to eliminate or diminish the recognized risks. Lowering the risks associated to the company’s operations reduces the chances of accidents in oil and Gas Company. The study identified that as the operations of drilling oil from beneath the ocean has risks like oil spills, oil and gas industry have adopted many safety measures and processes that are meant to diminish the environmental impact and prevent these disasters from happening. Ethical issues are part of these companies that have also led to major ecological mishaps. The Exxon-Valdez spill in the United States is not only known for environmental impact but also on the responsibility and accountability of the oil companies for the clean-up and refurbishment.

The essay also identified that BP, Exxon and the fracking industry face many common risks, such as spills, explosions and contamination to the environment. BP and Exxon face decreasing supply of the resources and that increases the chances of the companies to take more risks in order to meet the demand of the customers. The fracking industry also faces the consumer’s uncertainty. It has been identified in the study that companies which have poor track record for monitoring and governing the environmental impact such as water use, spills, waste, safety and operational integrity or with the poor practices of community engagement, are very much less prepared to meet more stringent regulations around the gas drilling.

In addition to that, the study also identified that leadership sets the tone for the company’s culture. If the leadership makes the ethical decisions and is committed in protecting the stakeholders, then the rest of the companies will also follow the same. Policy and safety precautions need to appropriately follow throughout the company’s operations, if the leadership models and executes it. It is important to redesign or abort a procedure if the chances of risks or accidents are high in the applied procedure.  

References

Alothman, A. (2016). A Detailed View of High Reliability Organization Models in the Oil Industry. Oil & Gas Research, 02(03).

Bodell, T. (2014). Natural Gas & Electricity Pricing: Understanding the Recent Volley in Natural Gas Prices. Natural Gas & Electricity, 30(9), pp.25-28.

Bryant, S. (2007). Geologic CO2 Storage — Can the Oil and Gas Industry Help Save the Planet?. Journal of Petroleum Technology, 59(9).

Dias, A. (2010). Beyond Corporate Social Responsibility: Oil Multinationals and Social Change. The Journal of World Energy Law & Business, 3(1), pp.116-120.

Ekhator, E. (2014). Corporate Social Responsibility and Chinese Oil Multinationals in the Oil and Gas Industry of Nigeria: An appraisal. Cadernos de Estudos Africanos, (28), pp.119-140.

García-Rodríguez, F., García-Rodríguez, J., Castilla-Gutiérrez, C. and Major, S. (2013). Corporate Social Responsibility of Oil Companies in Developing Countries: From Altruism to Business Strategy. Corporate Social Responsibility and Environmental Management, 20(6), pp.371-384.

Gough, N. (2011). Ensuring Adequate Energy Supply. Science Signaling, 4(193), pp.ec273-ec273.

Higgins, C. (2010). Beyond corporate social responsibility: Oil multinationals and social challenges. Asian Business & Management, 9(1), pp.173-175.

Lertzman, D., Garcia, P. and Vredenburg, H. (2013). Corporate social responsibility in Latin America's petroleum industry: a national oil company's strategy for sustainable development. International Journal of Business Innovation and Research, 7(2), p.185.

Mimbi, P. and Lutz, D. (2014). Shareholder value and the common good. 1st ed. [Place of publication not identified]: [Publisher not identified].

Olivier, A. (2012). How ethical is leadership?. Leadership, 8(1), pp.67-84.

Ramos, S. and Veiga, H. (2011). Risk factors in oil and gas industry returns: International evidence. Energy Economics, 33(3), pp.525-542.

Smorodova, O. and Segreeva, K. (2017). THE WORKING ENVIRONMENT FACTORS OF OIL AND GAS INDUSTRY. Oil and Gas Business, (2), pp.130-143.

Sullivan, R. (2005). Corporate Social Responsibility Failures in the Oil Industry20051Edited by Charles Woolfson and Matthias Beck. Corporate Social Responsibility Failures in the Oil Industry. New York, NY: Baywood Publishing 2005. , ISBN: 0?89503?293?7. Corporate Governance: The international journal of business in society, 5(5), pp.99-101.

Thompson, T. (2013). Fracking. 1st ed. Detroit [u.a.]: Gale, Cengage Learning, Greenhaven Press.