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Xcellon Institute_School of Business

Case study analysis of BP (Beyond Petroleum) Focuses on Sustainability

PGP-GBM (2011-13)

Corporate Governance and Business Ethics

Submitted By: Manish Kumar Lodha M00103


Submitted To: Prof. Vivek Raina

ACKNOWLEDGEMENT ________________________________________________________
No task can be achieved alone. It took many special people to facilitate and support it. Hence, I would like to acknowledge all for their valuable support and convey my humble gratitude. I would like to offer my special thanks to Mr. Vivek Raina Prof. Corporate Governance and Business Ethics, Xcellon Institute School of Business, who were the source of inspiration to provide the guidance.

Manish Kumar Lodha



Case summary..


Question & Answer.. 5-7


Case Summary
BP (Beyond Petroleum) was founded over a hundred years ago by William DArcy. DArcy was a wealthy British man who invested all his savings into the search for oil in the Middle East. It took more than six years and DArcy nearly losing all his money before he struck it big. In 1908, in what is today known as Iran, the Anglo-Persian Oil Company was founded. The companies head manager George Reynolds helped established a pipeline through the area to help transport the crude oil out. It took several years and a tremendous amount of work to establish one of the largest refineries in the world. Over the years BP has grown into one of the worlds largest energy companies. They have faced numerous ethical, environmental and moral issues that they have tried to rectify to improve their image but not always successfully. Throughout the years since BP was founded by Mr. DArcy the company has had to find ways to sell their oil to the consumer and ways to obtain oil which meant finding new places to dig and ways to not go bankrupt. In the early 1900s under Winston Churchill, the British Navy became shareholders in BP. This began the long debate of oil companies being involved in Politics. The twentieth century brought huge change, growth and a shift in power in the oil industry in the Middle East. This had a major effect on BP causing them go from 140 million barrels of oil produced to 500,000 barrels. BP was forced to look for other places to dig for oil if they were to survive. This began the Forties Field off the coast of Scotland and Prudhoe Bay in Alaska. These remote and oil rich areas presented logistical challenges for BP. They were faced with showing their stakeholders that they were committed to protecting the environment while trying to build the largest deepwater pipeline and a 746 mile pipeline through the Alaskan wilderness. Over the years BP has not always been able to keep its commitment to the environment and its stakeholders.


Question & Answer

Based on the history of the company, why did BP get involved in so much questionable conduct? I feel that BP has been involved in questionable conduct for a few reasons. Failure to rectify safety issues, misconduct and negligent behavior is a recurring theme that has occurred over the century BP has been in business. It seems to me that BP continually fails to take care of major issues that if fixed they could have prevented major disasters from occurring. It is almost like BP is constantly trying to hide something in the hope that they will make more money and further their business. BP was charged with violating the Clean Water Act when the pipeline in Alaska leaked crude oil. BP had failed to respond to several major red flags. The pipeline had been corroding and went unchecked for over a decade and eventually led to two different leaks occurring that contaminated the pristine landscape of the Alaskan tundra. It seems to me that BP gets into trouble because it historically came close to going bankrupt numerous times and they would do anything to prevent that from occurring again. It is more about the bottom line than following the ethical guidelines they set for themselves.

Analyze BPs efforts to improve sustainability. Do you think they are sufficient or do you think they need to do more? BP has done its fair share of implementing sustainability initiatives to adapt to the changing world. In 2005 BP started its Alternative Energy business. They invested $1.4 billion in the attempt at going green. BP is using wind, solar, biofuels, carbon sequestration and storage, better planning and implementation as ways to become more sustainable. BP had installed enough wind turbines to supply power to 6 million homes. BP has also signed agreements with several producers of solar panels in Asia. They also do 70 percent of their solar business in Europe due to a higher demand there. In Spain, BP has developed two of the largest solar power plants in the world. This project will supply energy to up to a million homes. BP has also introduced a solar-driven pump system in Wyoming in the attempt to help reduce greenhouse gas

emissions. BP has become the largest foreign stockholder in a bioethanol company. BP views biofuels as necessary to bridge the gap between oil and the time when better alternative energy sources are available. Another way BP has been involved in the future of alternative energy is they have been researching the use of carbon sequestration. This is the capture of greenhouse gas emissions from smokestacks and other pollution sources and pumping them underground to empty oil or gas fields. BP has established an environmental awareness program in Britain. This program aims at helping stakeholder understand the impact of global warming, the importance of sustainability and the effect of their carbon footprint. I think that the sustainability programs that BP has implemented are decent. I think that if BP continues to pursue sustainability programs and phases out their reliance on oil they will be better. BP needs to continue to do much more in this area even if they continue with the programs they have already implemented. They have made so many mistakes and made numerous violations that it is the least they could do to rectify their errors in some way.

Do you believe the BP code of conduct and ethics initiatives will prevent future misconduct? The BP code of conduct and ethics is a beautifully written ideal for how a company should operate. I however do not believe that it is logical or possible for BP or any company to adhere to such a code of conduct. If I just examine the basics of human behavior and look at the code and exclude the business side, I do not see how one code can apply to the varied group of people who are employed at BP. Once you begin to cross cultures, languages and customs, the definition of ethics and conduct is varied. I understand that BP went to great lengths to study customs of various cultures and took in to consideration the language differences. I also do not think that a code of conduct is effective in preventing people from wrongdoing. People will do crazy things and I do not see how a written document can control the behavior of someone who wants to be deceptive. Even though this case study was written before the huge Gulf Coast Oil spill, it is obvious that BP did not properly adhere to a proper code of conduct and ethics. And as the clean up goes on in the Gulf Coast it is interesting to watch how ethical BP is going to be. I am once again dumfounded by the lack of ethics and morals that a company can have. BP is just another example of a company that has its prioritize backwards. Money first, people and the

environment last. It seems to me that they will do anything to hid and cover up and errors or mistakes. Yes, they are implementing some major sustainability programs and as long as they are actually used to their fullest capacity they will be beneficial. I suppose that I am biased and that I do not like the ideals that big companies have. Why cant we use more solar and wind power? Why do we have such a dependence on oil? If we were able to decrease our oil consumption then a company like BP would eventually lose the grip it has all of us. I think that we have been engrained to believe that the behavior and ethics of companies like BP are just the way its done. I really believe that there is another way to do things and that once we quit looking for another way to make a million dollars and focus on people and the environment we live in, we all will be surprised at how things come back around to you.