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British Petroleum: Responsible Management Audit Case Study


Executive Summary

BP is one of the leading oil and gas companies in the world. This firm has been operating in a very competitive business environment. Although its operations went smoothly without serious incidents in its earlier times, the firm has been recently accused of serious environmental pollution, especially after the massive oil spillage in 2010. The firm is also facing an allegation of abuse of human rights. According to some recent reports, BP is has contravened some of the labour laws. It has also been accused of a series of corruption cases.

Introduction

British Petroleum is a large British multinational gas and oil company, which has its headquarters in London, England. The company has a heavy presence in the United States, where most of its products are sold. The company also has various processing plants and outlets across Asia, Africa, and South America. According to Abbi and Jain (2006, p. 89), BP is one of the most profitable oil companies in the world. It has been able to embrace emerging technologies in its production strategies, helping it cut its costs of operation. However, the company has performed poorly in terms of human rights protection and environmental conservation. BP has some of the worst records in terms of environmental pollution both at its onshore and offshore plants. The Deepwater Horizon oil spillage remains one of the worst environmental degradation occurrences in the history of this industry. Human rights groups have also accused this firm of its reluctance to protect their employees when they are working at the plants known to be volatile. In this responsible management audit report, the analysis will be focused on how this company has performed in terms of human rights protection, environmental conservation, respect for labour laws, and avoidance of corrupt dealings.

Discussion

According to Frase, English and Poston (2000, p. 46), many large multinational corporations are run with total disregard to human rights and concern for the environment. These two are important aspects of the sustainability of a firm that should be given as much attention as profitability. BP is one of the firms that have performed very poorly in this area. Some of the recent activities of this firm have revealed that the management is less concerned about the need to protect the environment and the society at large. It would be important to analyze specific issues that have been raised about the firm in recent times.

Human Rights

According to Kaptein (1998, p. 80), every business entity has the responsibility to respect and support international human rights. This principle emphasizes the need for individual firms to ensure that their operations are in line with international human rights principles. Corporations have the responsibility of ensuring that they protect the rights of their employees and other members of society. BP has performed poorly in this area, especially over the last twenty years. The Texas City Refinery explosion in March 2005 is one of the incidents that the firm’s lack of concern to its employees (Bulmer-Thomas 2008, p. 45).

A detailed enquiry into the incidents that led to the explosion points out to a deliberate attempt by the management of the firm to maximize its infrastructure at the expense of the rights of the employees. The accident was as a result of the management’s inability to replace the old infrastructure with new, improved ones. Reports from government agencies noted that there was an effort by the management to increase its profitability by maximizing on its use of the existing infrastructure (Taverne, B. (2008, p. 89). For this reason, employees were subjected to the use of infrastructure that exposed them to a lot of risks. The explosion that took place in March could not be avoided because the management ignored some of the safety procedures set in this industry. The result of this was a loss of 15 lives. Over 180 other workers sustained injuries that redefined their lifestyle. There was a general complaint from the employees that the management was not concerned about their well-being.

The second principle of human rights demands that firms should not be complicit in human rights abuses (American Institute of Chemical Engineers 2011, p. 16). This principle requires individual firms not to engage in acts that may contravene the human rights of its employees and members of the society. The working environment of the employees of this firm, especially those at offshore plants, has been put to question. The recent reports show that some of these employees are forced to work for over 14 hours in a day (Black 2011, p. 68).

The management has developed a work plan for these employees that makes overtime unavoidable. Although they make the packages for overtime very attractive, the fact that employees do not have the right to choose whether to work for overtime or not appears to be part of forced labour. BP is also known to have entered into strategic partnerships with other corporations and governments that do not respect human rights (Rose 1961, p. 38). Some of the strategic partnerships with various dictatorial governments are Africa, and Asia shows that it supports their human rights abuses. Currently, the firm is working on various plans that would enable it to repair its public image. Some of these plans are meant to the old human right of its employees and other members of society.

Labour Rights

Closely related to human rights are labour laws that define how firms are supposed to treat their employees. There have been confrontations between firms and employees for various years in various companies across the world. While business units are focused on earning more profits, employees always need a working environment that is friendly and remunerations that match what they do within a given company. The first principle under labour rights holds that employees should have the freedom of association and right to collective bargaining (Kumar & Sharma 2005, p. 37). Although the management of this firm has not been accused of abusing this right direction, there are claims that the management discourages all forms of unionisation of employees. It has developed a performance contract that seeks to treat employees on an individual basis. Each employee in the firm is treated differently on the basis of the benefits it brings to the organization. This makes it difficult for the employees to join unions because of their diversified needs.

The second principle of labour laws demands that an organization should eliminate all forms of compulsory or forced labour (Russell & Regel 2000, p. 121). BP has been accused of its policies that borders forced labour. The firm has policies which encourage employees to take overtimes, especially those who work on offshore plants. Some of the reports on Deepwater Horizon oil spillage associated the accident with employees’ complacency. Some of these employees are forced to work for long hours even when they are physically exhausted. Despite these accusations, it would be fair to mention that the management has developed attractive payment programs that are above the industry average (Gupta 2005, p. 78). This has seen most employees consider the firm as their preferred employer.

The third principle under labour laws involves abolition of all forms of child labour (Pickett 2013, p. 82). BP’s performance on this aspect of labour laws has been brilliant. Although some of the historical records show that the firm employed underage children to work in the plant during its earlier days, the firm has transformed and currently does not employ minors. The firm has strict regulation about the age of prospective employees at the firm.

The last principle involves elimination of any form of discrimination in its employment policies and employee management (Heisig, Mertins & Vorbeck 2003, p. 69). BP has developed revolutionary policies that give equal rights to its employees irrespective of their race, gender, or any other demographical strata. According to Freudenburg and Gramling (2011, p. 57), BP was one of the firms that had been accused of hiring and assigning employees based on their races and gender. During its early days, women could only be hired as secretaries or typist. Blacks were hired to work in the fields on physical assignments. The whites were the engineers and technocrats at the company. However, this has changed as the company struggle to eliminate all forms of discrimination. It is now common to see female or black engineers or top executives in this firm, something that was unimaginable in its early days. The firm is changing for the better, and although it may take some time for it to conform to all the labour laws and regulations, the current efforts indicate that the management is determined to achieve the best out of it.

Environment

The environment is one of the most important pillars of sustainability for any business unit. It supports the other two pillars, and for this reason, it should be treated with concern. The first principle under environmental laws demands that firms should take precautionary approach to challenges in the environment (Bamberg 2000, p. 56). Firms are expected to have strategies that would ensure that their activities do not pose any threat to the environment. BP has performed very poorly in this regard. The Prudhoe Bay five-day oil leakage of the firm’s oil transit pipeline in Alaska on March 2006 was a clear indication that the management had not taken precautionary measures that would eliminate such occurrence or manage its impact. The fact that it took five days to correct this leakage means that the firm did not have plans to address such issues. The Texas City Chemical leak from April 6th to May 16th 2010 only confirms that this firm did not have measures in place to protect the environmental from its dangerous consequences. It took over 40 days for this firm to realize that there was a leakage of a dangerous chemical into the environment.

The second principle under environmental laws demands that firms should undertake initiatives that would promote environmental responsibility (Harvey & Solly 2006, p. 118). BP has been one of the firms in Europe, Africa and the United States that have developed social responsibilities focused on promoting environmental conservation. The firm has developed plans of planting trees in various parts of the world. It has also developed initiatives and strategic partnerships with governments in Africa to help protect water catchment areas from human encroachment (Honnungar 2011, p. 78). This has earned it massive popularity in these regions. The last principle in this section involves development of technologies which are environmentally friendly.

The management of this firm has been part of the initiatives to develop green energy. This shows its commitment towards having a world free from pollution from fossil fuels. Although its activities in this field have not been commercialized, the management has been working on ways of promoting development of alternative sources of energy. In 2009, Tony Hayward announced that under his administration, BP was going to lay massive emphasis on alternative sources of energy. BP made massive investment into solar energy, bio-fuels, and other environmental friendly sources of energy. The management has plans to make the firm one of the leading energy companies in the world that produces green energy.

Anti-corruption

In defining this principle, Sullivan (2011, p. 78) says, “Businesses should work against corruption in all its forms, including extortion and bribery.” Corruption has been one of the reasons why some members of the society suffer. It denies people and other business units their rights as it seeks self-satisfaction through greedy and dubious means. BP was once one of the firms that loathed corrupt dealings, especially after the Second World War (Ulivia 2006, p. 57). It built its image as a principled firm that does not bend laws for self-benefits, based on laws that favoured it during these early times. However, this changed as the laws became strict and the market became very competitive. The management realized that it was operating in an environment that had so many challenges. For some time now, this firm has been associated with a number of corruption cases both at its local plants and other facilities overseas. Ferrier (2009, p. 48) says, “The Project on Government Oversight lists BP as number one on their listing of the 100 worst corporations based on instances of misconduct.”

This is an independent not-for profit organization that conducts investigation on the behaviour of individual firms within the United States. To be ranked first in the list of this reputable organization is a shame to such a large firm as BP. It clearly indicates that this firm has been openly engaging in corrupt activities within this country (Tusiani 1996, p. 32). This may explain the Texas Refinery plant was operating with infrastructure that were of poor standards and the concerned authorities at the federal and state level never took action till the accident occurred. Despite the strict rules and inspections that these government institutions have towards firms in this industry, they never bothered about the structures at BP. This could be taken to mean that the concerned government officials were given bribes to make them ignore the violation of the set standards.

List of Reference

Abbi, Y & Jain, S 2006, Handbook on energy audit and environment management, TERI Press, New Delhi.

American Institute of Chemical Engineers, 2011, Guidelines for auditing process safety management systems, Wiley, Hoboken.

Bamberg, J 2000, British Petroleum and global oil: 1950-1975: the challenge of nationalism, Cambridge Univ. Press, Cambridge.

Black, E 2011, British petroleum and the redline agreement, Dialog Press, Washington.

Bulmer-Thomas, V 2008, Britain and Latin America: A changing relationship, Cambridge University Press, Cambridge.

Ferrier, R 2009, The history of the British Petroleum Company, Cambridge University Press, Cambridge.

Frase, L, English, F & Poston, W 2000, The curriculum management audit: Improving school quality, Rowman & Littlefield Education, Lanham.

Freudenburg, W & Gramling, R 2011, Blowout in the Gulf: The BP oil spill disaster and the future of energy in America, MIT Press, Cambridge.

Gupta, K 2005, Contemporary auditing, Tata McGraw-Hill, New Delhi.

Harvey, W & Solly, R 2006, BP tankers: A group fleet history, Chatham, London.

Heisig, P, Mertins, K & Vorbeck, J 2003, Knowledge management: Concepts and best practices, Springer, Berlin.

Honnungar, V 2011, British Petroleum Oil Spill Crisis and Aftermath: Corporate Governance and Communication at BP during the disaster, GRIN Verlag GmbH, Munich.

Kaptein, M 1998, Ethics management: Auditing and developing the ethical content of organizations, Kluwer, Dordrecht.

Kumar, R & Sharma, V 2005, Auditing: Principles and practice, Prentice-Hall of India, New Delhi.

Pickett, K 2013, The internal auditing handbook, Wiley, Hoboken.

Rose, T 1961, The management audit, Gee, London.

Russell, J & Regel, T 2000, After the quality audit: Closing the loop on the audit process, ASQ Quality Press, Milwaukee.

Sullivan, H 2011, Death threats from British Petroleum & Life beyond the grave: Inspired by the career of Gillian Christabel Richardson (1939-2009) & in memoriam: tireless Chatelaine of the natural world, Author-House, Bloomington.

Taverne, B 2008, Petroleum, industry and governments, Kluwer Law International, New Delhi.

Tusiani, M 1996, The petroleum shipping industry: A nontechnical overview, PennWell Publishing, Tulsa.

Ulivia, B 2006, British petroleum trade in 1925, G.P.O, Washington.

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