Ethical Report of British Petroleum Plc (BP)

Table of Content

One of the world’s worldwide largest and well-known oil companies is British Petroleum Plc (BP). BP grants its customers with alternative energies such as fuel, gas, petrochemical products for everyday stuffs. Even though, the company wishes to act upon on corporate social responsibility, for instance reducing its carbon dioxide (CO2) emissions they still succumb due to some internal corruptions. In such cases they were intended to develop an alternative sources of energy such solar power (Waren, S2012). Conversely, BPs environmental image has been spoiled these recent years. But it is vague that is BP acted so.

In fact, defining ethics itself is complicated. Therefore, in different hypothetical perspective it allows juxtaposing arguments over the standards of BP practices. Consequently, Utilitarianism theory from the normative ethical theories, are ideal theories to determine the contrasting feature of business ethics and to recognize that BP acts as an ethical multinational company or feign as an ethical company. 1. 0 Identification of ethical dilemmas of BP using environmental scanning 2. 1 Extreme ethical cases of Oil Spill and explosion BP has been growing over the years without any problems.

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It has been endeavor to be in the position of eco-friendly brand, but the recent incidents has created dilemma on consumers regarding the brand standing, down to recent spills in Alaska (2006) and gulf of Mexico (2010)(Deepwater Horizon oil spill –one of largest accidental release of oil in deep sea). Line corrosion inpiping system causing to a pipeline leak and spilled over thousands of gallons of oil in Alaska seabed. However, in the Gulf of Mexico the semi-submersible undercover offshore drilling fig deepwater exploded and hydrocarbon leaked into the gulf before the well was closed.

Meanwhile, BP also caught up in 2005 Texas City Refinery explosions in March 2005. This largest refinery accident causes 180 workers injured and thousands of nearby residents to keep stay in their house. Environmental analysis is expounded about effects of the problem on certain factors. Based on sociological factor, the effect of oil spill has killed and injured many people especially the labors of BP. This loss of life and loss suffered by the families, friends and co-workers of those who died is deeply regrettable.

In other hand, there are too many dangerous contaminants entering our estuaries, causing harm and poisoning to public whom swims nearby those polluted areas. Although, BP intended to clean-up the seabed they remains silent about the serious health problems upon workers and volunteers who were being employed for those intention since 1989 Exxon Valdez spill in Alaska. The workers werefacing grave health risks such as infected respiratory, liver malfunction, kidney failure, and some blood disorders are posed by highly contamination of chemical substance in deep sea (Betinis. K2012).

Dramatically many people lost their jobs or business turned down including which coastal industries and financial markets which are bought BP shares due to oil spill and explosions. The oil spill also devastated the environmental and wildlife everywhere as it hit and it is questioned how long the consequences will last. The exclusive fact of the Deepwater Horizon spill in gulf is not only how deep it is, but also the huge quantity of chemical dispersants sprayed on the surface of the sea floor (contaminated surface area). According to scientists, deep sea corals appear to have been seriously harmed by the Deepwater Horizon oil spill.

This is because the explosion, in April 2010, poured an estimated 405 million litres of oil into the Gulf, causing major environmental disaster. As per their investigation coral colonies are bleached and loss of tissues that showed the evidence of impact. Worse case in this scenario is low levels of oxygen. Sea creatures like pelicans, sea turtle, fish, dolphins and also microbes that engulf the oil also with levels of oxygen depletion could be fatal to many other creatures in the water to be addressed the environmental factor.

Technologically, BP has not well manage it which is often lead to accident involved loss of hydrostatic control of well. This is followed by failure to control the flow from the well with the blowout preventer equipment. Ultimately, the BP emergency functions unsuccessful to seal the well after the initial explosions. 2. 2 Exploiting employees The Piper Alpha disaster which is occurred in July 1988 led to chain attack on North Sea oil rigs. During the disaster, many workers were injured and died. Thereby, many of them felt unsecure working in plants. By the way, they were gathered and strikes for union recognition and improved safety rights.

However, BP did not agree and started to recruit non-union labour. Later this led to many employees to fall sick, as a result of inhaling dust containing silica at the plants and two explosions in ten days. The company was fined ?750,000 for breaking of the Health and Safety at Work act and lives of three workers. At the same time, it has been discovered that BP using mostly African-America prison laborers to dispose the oil deposits in shore. These laborers are forced to work 12 hours a day in very risky conditions. The reality is that they were being squeezed.

As a result, many of them fallen sick and died too. Exploitation of employees is not new practice for BP; in fact it changes the social trends which will later impact on the demand for product. Unpleasant labouruses or violates a person’s basic rights forms bad reputation on company. Thus, it reduces loyalty of customers and the availability and enthusiasm of individual to work with company. In contrast, exploitation of employees by BP greatly reduces cost of production and obtaining huge profit. Therefore, new technologies help them to modify their model of drilling system into much easier.

In other words, technology can reduce costs, improve quality and lead to innovation. These developments can benefits consumer as well as themselves (Oxford Press, 2012). Regarding legal factors, a firm’s employees’ health and safety is very important. In this scenario BP failed to protect their employees. Hence, employment law is not completely followed by BP. 2. 0 Evaluation of BP’s dilemma using Utilitarianism Theory 3. 3 Dilemma 1 – Extreme ethical cases of Oil Spill and explosion BP the oil company is using advanced technologies to find oil and gas under the earth surface.

When their ultimate drilling methods went wrong, the first of the latest effort to contain the spill, robots cut a leaking pipe. BP then used giant shears manipulated by undersea robots to snip off of the pipe, after a diamond-edge saw failed to do the job (Blogger, 2012). By the way, BP started the “top kill” operations to stop the flow of oil (Bloomberg). The procedure was intended to prevent the flow of oil and gas and to kill the well by injecting heavy drilling fluids through the blow – out preventer on the seabed. Unfortunately, the attempt is declared a failure three days later.

This “top kill” procedure supposed go into drilling mud pumped from surface, and then the oil goes into blowout preventer. If pressure and density sufficient, oil and gas flow stopped. Well then filled with cement. As per Prof Iraj Ershaghi, director of the petroleum engineering programme at the University of Southern California, if there are leaks around the conductor casing, or if the intermediate casing strings are not cemented in place adequately, a burst of a certain portion of the casing could occur and the “top kill” may fail (BBC news, 2010). . 4. 1 Option 1 – Current risky project by BP Cost The weakness of this operation caused largest deepwater oil spill which is a huge threat for the environment. Oil from the Deepwater Horizon disaster causes very specific and potentially lethal defects in marine life such as fish, sea birds, dolphins, and coral reefs including heart problems and loss of facial cartilage. Moreover, during and after the disaster the workers faced as many as hazardous at disposal sites through inhaling radon gas, which can lead to lung cancer (eHow. com, 2012).

Meantime, BP was admitting loss of 11 workers and 17 were injured in the explosion on the deepwater Horizon. An estimated 4. 9 million barrel of oil leaked into the Gulf after the blast (BBC News, 2010). They were also entitled to face loss of future earnings. If BP stay tuned with current drilling system which caused environmental defect, employees’ death, falls of market share are lost customers loyalty whereas the company publicity has been damaged this recent years. Therefore, BP looks to win back customers with double loyalty point’s offer (MarketingWeek).

In future vise, when BP earns more profit they can involve more in corporate social responsibilities. In fact, corporate social responsibilities allowed a company to conduct the business in an ethical way while pursuing long term goals that are good for society, for instance, providing scholarships for high school students, donating welfare or charity, eco-friendly projects and etc. Therefore, company reputation will increase. Benefits On other side, the existing drilling method also benefits the company by diversification of investments.

The diversification concept is actually reduces the risk of an investment portfolio and vice-versa. For example, (Source: Poppelaars. J 2012, “On eggs and Baskets”, Blogspot, viewed on 15 October 2012, <http://john-poppelaars. blogspot. com/2012/03/on-eggs-and-baskets. html>. ) An imagination of two projects, a safe and a risky one, both with independent probabilities of success; each project requires an initial investment of $10 million. If investing solely in the safe project the probability of losing $10 million is higher compared to spilt investment in both safe and risky projects.

Thus, many business executives including BP are following that instinct; thus, they earn more profit than only focusing in safe project. Besides that, the riskier project cost cheaper than safe project. In order to cut cost BP exercise risky projects such as “Top kill”. Thereby, they were ensuring their profit maximization. Potentially, BP’s profit determination might increase the concern on corporate social responsibilities, so as to maximize publicity to win back customer loyalty. By the way, research and development for safer deep water oil drilling perhaps could be made from return on riskier projects. . 1. 2 Option 2 – Alternative safe project In deepwater drilling, controlling pressure in the oil well is crucial, so a new model of simulator is being developed for the purpose of balancing the hydrocarbon pressure in well. The simulator for drilling operations is composed of a set of nonlinear coupled partial differential equations that describe the simultaneous flow of hydrocarbons in a well. This mathematical model represents a ‘virtual laboratory’ where the finer mechanisms related to a number of different physical effects can be studied in detail (Prof.

Evje. -isssource. com). Cost Even though, BP wishes to conduct safety drilling project, some obstacle prevent them from doing so. BP said the Liberty project, which was expected to produce 40,000 barrels a day, would have cost more than $1. 5 billion to drill safety as well cost of the Alaska project (theguardian). In fact, they can save money rather than involving in more costly projects. When expenditure increases profit maximization decrease, thus, other profitable plans relatively down. Development of new technologies will be retarded. Benefits

At the same time, Expensive safe drilling models are isothermal, and relevant physical mechanisms are factored into, such as frictional forces, hydrostatic pressure, force of gravity, and compression and decompression of gas (isssource. com). Such mechanisms are most favourable drilling operations and well control practices in order to minimize the possibility of oil well disasters. Pursuing safe method by oil companies even can partially protecting the environment. BP involvements in ethical drilling project also can enjoy the long term benefits in terms of better reputation of company and customer loyalty.

Judgement Even though, both options have same number of benefits and cost, option 2 is chosen due to environmental protection. Environmental issue is a serious problem which not only affects present time but effects above it last longer. 2. 2 Dilemma 2 – Exploiting employees People are clever will find something to get up in the life. Similar goes to an organization; they tend to do unethical behaviour in order to achieve company goal and maximize the shareholders wealth. But is unethical behaviour simply a matter to employees whom being a part of the company?

Some says yes, this is because the company itself ignoring its workers’ rights and benefits. 2. 2. 1 Option 1 – Employee exploitation by BP Cost In BP’s case it was caught in Employment Act and Human Rights Regulations, for an explosion at a BP refinery that killed one worker and injured six in January 1991, by the Washington state Department of Labour and fined of $135,000. ( …) In so doing, as mentioned above many labour felt unsecured in plant were fall sick, even died in explosions. This induces to negative impact on publicity of company impression among stakeholders and share market.

This also accedes to, reduce in sales, profit, as well as brand image for long-term. Once brand image spoiled then the existing customer will go for substitute products which produce by competitors. Even so legal problems will appear regarding the company is operating ethically or not, as difficulties in getting approval for projects. Benefits Disgraceful of labour by BP favorably benefits them to achieve high productivity at shorter period during their peak. Shorter productivity time allows them to keep their oil for market on high demand period.

By way of exploiting the employees without concerning safety and appropriate clothing with safety equipments, BP greatly reduces their cost of production. Thereby, the margin of profit increases as cost of production reduces. As per corporations profit maximization is the main goal because they intend the growth of company to raise corporate social responsibility projects. Indirectly, public relations and media hype go up too. Hence, company can involve in advanced level of research and development such eco- friendly drilling technology.

Safety regulations and technology will impressed more people to work with the firm. 2. 2. 2 Option 2 – Pleasant utilization of employees Pleasant utilization of employees might help BP to get rid from legal problems. All need to do by BP is to provide safety conditions and union recognition. Cost Those pleasant conditions are basically increase the operating cost for BP, including labour cost, utility expanses for worker’s safety measurement (I. e. goggles, gloves, safety shoes). Thereby, operating cost for company increases the selling price of oil and other petrochemicals increases too.

Nonetheless, profit that earned will rotate in the firm in form of operating cost. Whereby, lower profit can’t effort to cover research and development as well as social projects. Benefits Pleasant workplace with sufficient and appropriate safety measurement increase employment rate and passion of the workers’ on completing the task efficiently. Consequently, productivity of BP rises consistently. In future, BP will free from any legal risks. Judgement Option 1 is chosen, due to more present and future benefits compared to the other alternative. 3. 0 Corporate social responsibility of BP . 1 Leader in alternative energy sources Renewable energy is gaining popularity as people more concerned about climate change and energy security. In this circumstance, BP doing its part of eco-friendly projects by providing renewable energies such as wind power, solar energy, and biofuels. According to BP, if wind provided around a tenth of the world’s power, it could eliminate the production of around one billion tonnes of carbon dioxide a year. BP recently launched ‘Sherbino 2’ wind farm in Texas – each wind turbine can produce enough electricity for 45,000 average households annually.

According to principles of rights and duties, it is rights for consumers in getting safer energy for their daily household needs. Meanwhile, it was BP’s duty to provide safer products to customers. 4. 2 BP contributions to community Beyond the direct economic impact, BP presence in a country also brings indirect economic benefits, which help to develop the local economy, For example, Iraq – economy of the country has suffered from result of sanctions and war, BP was worked to increase production from the Rumaila oilfield from one to three million barrels each day.

Not only this had the potential benefits on companies involved but also has potential to create significant new wealth for the people of Iraq, providing jobs and building the capability of the Iraqi workforce (www. bp. com). Referring to respect under Kantian Rights, people should treating others as an end and not as mean – this is what BP applies in this case, where it is trying to improve the Iraq economy and people rather than enjoying the benefits of resources.


Betinis. K 2012, “the social and economic impact of the gulf oil spill”, World Socialist Web Site, viewed on 4 October 2012, <> Blogger 2012, Timeline of Events in BP Oil Spill, Viewed on 15 October 2012, <>. BP Socio-economic contribution, viewed on 19 October 2012, <> Fernandez, J 2010, MarketingWeek, viewed on 18 October 2012, <> Guardian News 2012, viewed on 19 October 2012, <>

Oxford Press, 2012 viewed on 7 October 2012, <> Poppelaars. J 2012, “On eggs and Baskets”, Blogspot, viewed on 15 October 2012, <>. Rohrer, F 2010, “What is a top kill?”, BBC News, viewed on 15 October 2012, <> Ullmann, M 2012, “The environmental impact of Oil drilling”, Demand Media, Inc. viewed on 16 October 2012, <> Waren. S 2012, “Is BP an ethical company?”, Business Development Strategies, viewed on 3 October 2012, <>

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