Critically analyse the firm’s Corporate Social Responsibility ( CSR ) as a strategy in the Oil&gas sector: CASE OF BP Company.
BP earlier known as British Petroleum is a British conglomerate dealing in oil and gas. The company has its headquarters in London, England. The company is among the seven largest oil and gas producers in the world. BP has its area of operation spread over 72 countries around the world. The daily output of the company is 3.6 million barrels. The company was founded in May 1908 with the discovery of oil in Persia. This way the company was established as an Anglo Persian oil company. During the World War I the company was given permission to get full control over the oil field and thereby it became the British Petroleum. Later the company merged with the American Oil Company namely AMOCO.
CSR or Corporate Social Responsibility is actually the self regulation that is applied by the businesses with the purpose to offer responsibility to environment and social well being of the people. The major responsibilities are of legal, ethical, economic and environmental dimensions. CSR therefore applies corporate responsibility by offering customer care, takes care of stakeholder’s interest and showcase interest to business partners through fair, transparent, committed and credible business process. CSR also offers responsibilities towards employees by giving all equal opportunities irrespective of gender, caste, color and creed. In addition the development of work culture is made such that their could be offered fair chances of growth, motivation to the employees and a safe and healthy work environment. The social responsibility is also taken care of by offering community or society with the product and services that produce value for money. Also the environment is given due care of by the reduction in wastage and applying reuse and recycling of waste materials (www.bp.com, 2016).
Analysis of the policies and approaches to CSR by BP:
1. Social investment:
The company has distributed about $11.2 billion as part of employee wage and benefits in year 2016. Also the taxes paid to the government comprising income and production taxes levels up to $2.2 billion. The total dividend distributed to BP shareholders mounted up to $7.5 billion. The company at present operates in different countries. The policy of the company is to offer jobs to the locals of that particular company. For instance in Angola, the company has 86% of the work force of Angolan nationals. The plans are to increase this workforce by 90% till year 2020. Similar is the case with the Papuan workforce which are forms 85% part of the workforce of the company in the country. This way attempts are made to recruit the workforce from the local community or the country where the business is established. Different trainees are given technical skills and support so that they could perform their duties well and that too in a safe working environment.
2. Taking action on climate change:
The company is taking wise action on climate change. The company for a price on carbon and even supported the idea of supply natural gas and managing methane with the purpose to cut down carbon consumption. In addition attempts are made to provide innovation to the customer in the renewable energy. Investment and start ups are made in innovation. This way the company is making all efforts to help the customers reduce carbon emissions. In this regard, the company has completed detailed assessment of its upstream operations to identify primary sources of methane emissions which is a safe gas that can be used for running automobiles. The company has rather become the first supplier of commercial jet biofuel using the existing infrastructure that the company has in Norway’s Oslo airport. In addition, BP has launched PTAir which leaves 30% lesser carbon in the air than other fuels.
3. Focusing on safe operations:
BP has 18,000 retail sites around the globe. The economic value that is generated by the company business is $187.3 billion. More than 6000 marine voyages are completed by BP operated and chartered vessels. This way efforts are made to operate in a safe working environment. Due to these efforts, the company has been successful in producing safely about 3.3 million barrel of oil on daily basis. In addition to that attempts are made to make process safety, contractor safety, personal health and safety and transportation safety. The security and crisis management are also applied to overcome cyber threats and oil spills. Even the foundations for operating responsibly been applied with the governance of sustainability issues and developing three lines of defence.
4. Maximizing value to the society:
The company has distributed employees with wages and salareies of about $11,233 million in one year. the taxes to the government including income tax and production tax is paid about $2,174 million in year 2016. In addition the total dividend distributed to the shareholders of the company is at $7,469 million. In addition to these efforts the contributions are also made to society directly through communities functions and social welfare which amounted up to $61.1 million.
5. Respecting human rights:
BP respects the human rights and therefore allows grouping of employees and selection of their leaders. At present there are 74,500 group of employees in group, out of which 394 are leaders. The women percentage in the group leadership is 22% in year 2016 as against 17% in year 2012. Also the women have been given due place in management which have reached 29% in year 2016 as against 25% in year 2012. The company has also made efforts to support the minorities through group leadership. There are about 7% of the group leaders belonging to the racial minorities. However it has been observed that the employee turnover is at 16 in year 2016 which is higher than 13 in year 2012.
6. Managing local environmental impacts:
Attempts are made by the company to reduce the consumption of fresh water which has declined to 87 million m^3 in year 2016 as compared to 106 million m^3. In addition the air emissions in the form of nitrogen oxide has also declined to 125 thousand tonnes in year 2016 as against 140 thousand tonnes in year 2012. The environment expenditures are also made by the company which have rather declined considerably to just $536 million in year 2016 as against $7,230 million in year 2012.
7. Foundations for operating responsibly:
BP has been working hard to cutdown its GHG or Greenhouse Gas emissions. Due to this reason the company has initiated the process of accepting carbon pricing. Under this method, BP has to pay for GHGs emissions so as to seek solution to reduce its emission. To cut down emission of GHG the company has become the top 10 supplier of natural gas in the U.S. In addition to that various new big gas proejcts are initiated in Oman, Egypt, Trinidad and Caspian sea so that the substitute of safe gas could be made available.
Advantages & disadvantages of CSR of the BP Company:
The advantages of CSR of BP can be stated below.
1. Meeting public expectations:
BP has been meeting up to the public expectations in controlling the carbon emissions. The use of wind power and non-conventional sources of energy are used to power the business process in the company. In addition donations and participation in the programs for social promotions are made from time to time (Azadi & Rahimzadeh, 2012).
2. Creating favorable environment for business:
BP has applied all the legal pre-requisites in its business establishment. The arrangements of lights, space, healthy and safe working environment are the key features of the establishments of the company. This way favorable environment is made for the business where employees could safely engage in daily business activities (Bitner, 1992).
3. Building a favorable public image:
Through participation in various local events and social promotional activities the company has become successful in building a favorable public image. This is the reason why working with BP Company is considered as the top priority by the locals in the region where the company has its establishments (Caniels & Gelderman, 2007).
4. Achieving minimization of government controls:
Through application of various government norms and conditions the company has become successful in minimization of government controls. This has helped the company to develop in a hassle free environment where all the norms and regulations are followed and employee safety is given due importance (Corta, 1993).
5. Achieving better use of surplus resources:
With the minimum interference by the government agencies due to full compliance with legal laws and regulations the company has attained better use of its surplus resources. That is the maximum utilization of available resources has helped the company to attain better profit earings and thereby achieve surplus outcome (Goldstein, 2007).
6. Resolving complexities of social problem:
The active participation of the company in various social activities and event to support local society has helped in resolving various complexities of social problem. That is the problem of unemployment has been removed through the deployment of locals in the company establishments (Jayachandran, 2004).
7. Benefits to the company in the long run:
Through investment in developing non-conventional energy source will not only help the company to overcome problem of carbon emission but also the cost of operation will decline considerably. This way the investment made in non conventional sources will benefit the company in the long run by producing non pollutant energy that will costs considerably lesser in the long run (Kaden, 2006).
8. Increase in employee loyalty and retention:
Through application of the employment laws in the establishment there would be an increase in employee loyalty and retention. The recognition and fair payment to the employees will ensure that they will consider their presence in the company for long time period. Also they will consider that efforts are recognized and paid back fairly (Kotler & Gary, 2006).
9. Improved quality of service and products offered:
The deployment of the various quality related laws and regulations, the company will be in a position to offer improved quality of service and products to the customers. That is the product quality will not get compromised owing to the regular quality checks and there will the desired level of output for the customers that would lead up to their expectations (Kotler, 1973).
10. Customer loyalty is achieved:
By offering customers with high quality products at considerably lower or competitive prices will certainly add to the customer loyalty. This way customer loyalty attained will help in maintaining long term sustenance and growth of the business in the long run (Lotayif, 2016).
The disadvantages of CSR of BP can be stated below.
1. Compromising shareholder’s interest:
By making investment in the development non-conventional sources and active participation in the social welfare projects the profits earned will get compromised. That is the shareholder’s interest in earning more profits in terms of dividend will get affected by making investment in other non-profit businesses (Sharma, 2013).
2. Corporate reputation affected:
The corporate reputation may also get affected with the investment made in non-conventional sources. The investors may get skeptic about the strategy and future policy of the company due to this reason. This is because the investment in non-conventional sources is huge and takes a lot of time in getting the repay. Therefore the investors may not show their acceptance in continuing further with such projects (Samli, 1995).
3. Competitive disadvantages:
The expenditures made in various social welfare and non-conventional projects could lead to competitive disadvantages. That is the earnings may get affected and the pricing policy may be disturbed due to such investments. Therefore an overall competitive advantage may be lost due to investment in various non-profit projects (Rao & Klein, 2004).
Recommendations as to how the firm could improve its CSR in that particular location:
The following are the recommendations as to how the firm could improve its CSR in that particular location.
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Samli, C.A., 1995. International consumer behavior: its impact on marketing strategy development. Quorum Books.
Sharma, N., 2013. Marketing Strategy on Different Stages PLC and its Marketing Implications on FMCG Products. International Journal of Marketing, Financial Services & Management Research., 2(3), pp.121-36.
https://www.bp.com/, 2016. Sustainability report.
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