Answer 1
It is difficult to imagine any industry with huge demands and complexity than Gas and Oil industry. The industry is going through enormous trouble. There are various trends, which are affecting the industry. The challenges for oil and gas industry come with some opportunities developing for the sector. These challenges impact the sustainability of the organizations in this industry. These challenges may be strategic, financial, operational and compliance challenges. There are some sustainability challenges, which are faced by the organizations in Gas and Oil industry. Sometimes, these companies avoid the safeguarding of employees and local community for saving costs. In order to avoid the risks, they can implement effective and ethical leadership in sustainability and safety.
This discussion answers all the three questions of the case study, named as “Sustainability Challenges in the Gas and Oil Industry”. The case study describes various risks and challenges, which can be faced by the industry. The major issues are risks of leaks, explosions and spills. These issues are common in all the three companies, i.e. Exxon, BP and fracking industry. The businesses have failed in executing the safeguards, which are essential to protect the communities, employees, suppliers etc. This report includes that management of ethical risks can assist in reducing the accidents. Furthermore, it discusses different risks, which are faced by Exxon, BP and fracking industry. The companies can use ethical leadership to deal with these issues. By adopting new leadership practices and styles, the companies can manage the associated risks. The organizations can focus on the safety and environmental concerns. Developing ethical leadership and corporate social responsibility can assist the Gas and Oil companies in reducing the associated risks.
This is true that managing ethical risks in the Gas and Oil industry relates to reducing the accidents. It is so, because implementation of ethical business practices improves the safety conditions and helps the employees. Moreover, it also enhances the environment by reducing the effects and chances of disastrous events. Management of the ethical risks starts with managing the risks related to the stakeholders of company. If the organization safeguards its stakeholders, it means it is protecting itself against the accidents. The accidents can be reduced by providing appropriate incentives to change the safety culture. The company can provide training and certification courses to the employees, so they can learn about the use of resources and equipment at the workplace. In order to reduce these risks, the company can keep the public safety and environment at a high level. It should try to develop a safe environment, which can reduce the chances of oil spills, leaks and explosions (Aliyeva, 2012). By altering the ethical risks, the company can improve the overall quality of work. If the companies want to reduce the chances of oil spills and explosions, then first it should develop ethical practices at workplace. The case study includes some examples of accidents in the Gas and Oil companies.
In the case of Exxon, it could reduce the chances of disaster. There were some unethical practices, which were the causes behind mishaps, like; the tanker ship should not have been handled by the Third Mate, who was not licensed. Another ethical issue was that the Captain Hazelwood was slept after having a large quantity of alcohol, when the accident was occurred. So, the organization should ban the consumption of alcohol in working hours. As there was a significant amount of alcohol in the system of captain, his steering of the ship to open the tanker made the spillage worse (Dutta & Sengupta, 2014). The decisions and actions of captain were not proper. Moreover, there was unreliable communication between Alyeska Pipeline Service Co. (APSC) crew and shore. In this situation, the private boats were ready to help, but APSC could not call them for help. The costs of this disaster was more than $10 billion for this organization and incalculable for the coastal atmosphere. These are some ethical issues, which are the reason behind this accident. This disaster could be avoided if the ethical risks had been handled in an effective manner.
Answer 2
Furthermore, there is an example of accident of Deepwater Horizon Spill. Despite BP stating that it is giving priority to the sustainability and safety, it did not manage the ethical risks properly. This caused an explosion and killed 15 employees. It resulted in leakage of 2.5 million tonnes of oil into Gulf of Mexico for next three months. It was a major damage to natural environment. The things was not managed properly, like; the well design utilized was not more expensive but more risky. The testing of pipes to detect the gas was not done effectively (BBC, 2010). It did not maintain the oil rig properly and the rig has a faulty blowout preventer. This accident has adverse impact on stakeholders of company. If it had been managed the ethical risks properly, then negative impact on stakeholders would not have occurred. S
Thus, both examples in this case show that these are not the accidents, but these are the unethical practices of BP and Exxon. The companies are lacking of ethical practices and code of conduct, so it caused the loss of property and people. It created adverse image of the company among people and its loyal customers (Vitell, 2015). The examples of these companies are evidence of this that managing ethical risks can reduce the chances of accidents in Gas and Oil industry. Thus, the ethical lapses are the major reason behind these environmental mishaps.
Risk management is very important for gas and oil industry, as it may face various risks in supplying the energy. This industry carries many risks and challenges along with the opportunities. The companies, which are here in the case study, are the major players of oil and gas industry. Still, they faced some risks and failed to avoid the accidents and disasters. The risks, which are faced by Exxon, BP and fracking industry in providing an adequate supply of energy, are such as; Leaks, oil spills, explosions and environmental pollution (Yusuf, Gunasekaran, Musa, Dauda, El-Berishy & Cang, 2014). These risks are same for all three groups, because their business operations are conducted in same industry. Each of them has damaged their stakeholders and environment. Exxon and BP have faced decrease in the supply of resources. They may be more appropriate to take major risks for fulfilling the demand of customers. Frecking industry faced the customer insecurity as no one was positive with the safety of its activities. Apart from these risks, these companies have to deal with the reputation among customers and people, who purchase oil from them. For example, a loyal customer of BP learned about oil spill damaging the ocean. Now, that customer will possibly switch to any other oil company, i.e. Shell oil, because their oil and gas are not having adverse impact on environment. So, each must try to gain and retain the trust of customers (Kiany, Rahimi & Jokar, 2015). These risks and accidents affected the performance and position of companies in Gas and Oil industry.
They also dealt with political risks. Activist and political groups will pressurize them, for instance, National Resource Defense Council. Apart from this, the politics can impact the oil industry in regulatory and compliance sense. The companies are covered by various regulations, which limit where, when and how the wastage will be extracted (Shaw, 2016). Like; Fracking industry has been alleged of releasing the methane and other chemicals in the water near it drilling plants. The company also discharged harmful gases like; methane into the environment. In Fracking industry, the major concern is environmental risks. The companies can focus on reducing the quantity of water, which is utilized by recycling the water. These risks are major concerns and affect the environment adversely. There are some cities like; Colorado, France, Germany etc., which have banned the fracking activities due to environmental damage.
Also, they deal with financial risks, as they have to spend money on repairing and cleaning of oil spills. Lacking of ethical leadership is also an important risk, which BP faced at the time of accident. The example in case study demonstrated that Brown lacked of ethical leadership by decision making and it caused the loss of property and indicated the negative image of company. As each and every company has its own core values, one of the core values of BP is safety. This defines that the company is committed to the development and safety of public, societies, communities and its stakeholders (Leveson, 2011). With various disasters, BP finally failed to sustain its core ethical value, i.e. safety. By this, it lost the trust and reputation among its customers and stakeholders.
All of three companies are facing the operations risks. These are the risks, which are resulted from the failed systems and processes due to any external and natural event. Apart from this, the operations and products of company pose risks on environment and people. These risks shift the customer’s loyalty and trust to other companies and brands. The companies should try to identify and manage these risks for sustain their business operations (Crane & Matten, 2016). The case study shows that all the companies in working in same industry, so they are facing almost similar risks and challenges. The environmental and climate changes are impacting operations of all the companies. So, the organization should have a contingency plan, which can be used in emergency situation. After meeting these accidents, the companies become more attentive towards operations and health and safety concerns (Yukl, 2010).
Ethical leadership can play an important role in the oil and gas industry for managing the risks. Ethical leadership can be defined as the type of leadership, which is emphasized on leading the people and organization in a way that regards the dignity, rights, individualism and other’s opinions. In this, the leaders does not force the viewpoints on the followers and subordinates, instead they understand and considers their opinions (Ferrell & Fraedrich, 2015). Ethical leader shows the suitable behavior, which is conducted to interpersonal and personal connection in two-way communication. It can benefit both organization and followers as well. Ethical leadership can help in managing the risks by elimination of environmental risks. As discussed in above answers, managing the ethical risks and practices can help in reducing the associated risks. Leadership plays a vital role in setting the organizational culture (Back, 2006). If the leaders in organization make ethical decisions and they are committed to safeguarding its stakeholders, then other people in organization will follow. If there will be effective leadership, then all the policies and safety measures will be followed carefully. If any operation is considered too risky, it will be reformed or eliminated before the occurrence of accident.
The organizations in Gas and Oil industry may have the benefits from the leadership practices, which are focused on safeguarding the environment and stakeholders, not only on their performance. With this, the ethical leadership can develop an organizational culture of transparency and responsibility. The organization can gain the trust of public by standing up and speaking up for their problems (Weiss, 2014). By developing ethical leadership, they can accept their own faults and convince the people that it will not happen again. They will protect the stakeholders and environment.
Taking responsibility towards both lower and high level employees will also assist in managing the risks. The organizations can develop ethical leadership and conduct effective ethics and compliance programs, which reach all the employees. Ethical leaders can educate the employees that they are responsible for avoiding the misconduct, which can create accidents. They can improve the safety measures and motivate the employees to follow all the measures (DesJardins & McCall, 2014). They can set up the workplace environment with the safety and quality management. There should be a code of conduct, which may include all the rules and policies of workplace. It should also include the penalties for breaching the rules. For example, it should mention that employees cannot consume alcoholic products in working hours. They cannot make any decision without the approval of their senior authority. In all the examples in case study, the leaders do not play an effective role. The decision made by them proven wrong for the company. Thus, the leaders should keep transparency in the decisions and take the opinions of other people in organization.
Furthermore, it can be seen that CEO of many organizations are setting ethics at the top priority of the company and its strategies (Anis & Siddiqui, 2015). These strategies can assist the companies to become different from its competitors. So, the leaders in gas and oil companies can promote ethics to regain the trust of public. Corporate social responsibility (CSR) can be used as an important strategy to promote the business ethics of organization (Abdulrahman, Huisingh & Hafkamp, 2015). It can focus on the responsibility towards society and other social factors, because it is the major contributor to organization’s profitability. By developing CSR, the leaders can create better relations with the stakeholders and focus on the safety and health concerns. Other aspects include, such as; employee rights, human rights, environmental protection, stakeholder rights, community and society relations and corruption issues (Mullins, 2013). CSR needs the gas and oil companies to get success in each aspect in order to gain a reputation as a trusted organization. Oil and Gas industry is an example of the industry, which extracts lots of pollutants to the environment. So, Corporate Social Responsibility is supporting tool to create good reputation among the people of society.
For example, BP, an international oil company and it is one of the strongest leaders in the gas and oil industry (Cemeron, 2013). After the accident, the company started to spend money to promote CSR on TV to enhance its brand image in environmental and social responsibility. However many times, absence of ethics harmed the pictures by failure of business operations, for example, Alaska oil spills and Texas refinery explosion. Thus, ethical responsibility and ethical leadership at all the levels of management are required to manage the risks of oil and gas industry.
Conclusion
Thus, the above discussion shows that the operations of gas and oil organizations are as politically and socially complex as it is technically difficult. It represents a short part of this industry. However, this provides the overview of the risks in this industry. Last two decades have experienced some of the gas and oil industries creating great progresses towards operating the business in sustainable and social accountable manner. The industry is facing different challenges and risks, which are affecting the sustainability of Oil Company’s business. The organizations in this industry have different risks related to leakage, spills and explosions. The report shows that despite of growth in gas and oil industry, there are some sustainability risks, like; safety risks, environmental risks, changes in climate, society disagreements etc. It is hereby concluded that there is a need of strong improvement in the organizations in this industry. The social and sustainability programs are not enough to win the trust of public. The report described the risks and accidents, which are faced by BP, Exxon and Fracking industry. It is analyzed that these accidents could be avoided by the organization, if it would have managed the ethical risks properly. Finally, the above discussion found that managing the ethical risks and developing ethical leadership can reduce the chances of accidents in the respective industry.
Ethical leadership affects both organization and individual as well. So, leaders and managers should manage the operations under a code of conduct. As per the example of Gulf of Mexico incident, first, the leaders require to establish ethical leadership at the top priority of the organization. Then, they should run the company and make all the decisions very carefully using that code of ethics. In addition, the organizations in this industry should establish the core values on the basis of these accidents and disasters, so they can be avoided in future. They should create the code of conduct to fulfill the needs and expectations of stakeholders and customers. Along with this, the managers should enhance the ethics of organization by corporate social responsibility. Finally, the ethical leaders should conduct the ethical training programs at the workplace to ensure that superiors and subordinates will behave ethically in the future.
References
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Abdulrahman, A.O., Huisingh, D. and Hafkamp, W., 2015. Sustainability improvements in Egypt’s oil & gas industry by implementation of flare gas recovery. Journal of Cleaner Production, 98, pp.116-122.
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BBC, 2010, what do we Know about the Deepwater Horizon Disaster? Retrieved from <https://www.bbc.co.uk/news/10370479>.
Back, P.E, 2006, Taking a Proactive Approach to Ethics’, Professional Manager, vol.15, no.3, pp. 37.
Cemeron, K, 2013, BP: Innovation, Incentives, Metrics, Ethics, Leadership, Retrieved from <https://www.examiner.com/article/bp-innovation-incentives-metrics-ethics-leadership>
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DesJardins, J.R. and McCall, J.J., 2014. Contemporary issues in business ethics. Cengage Learning.
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Yusuf, Y.Y., Gunasekaran, A., Musa, A., Dauda, M., El-Berishy, N.M. and Cang, S., 2014. A relational study of supply chain agility, competitiveness and business performance in the oil and gas industry. International Journal of Production Economics, 147, pp.531-543.
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