The oil and gas industry has a crucial contributin in the global economy. The participating companies have to explore enormously as they invest a great sum of money in new reserves, complex plots and innovative equipments. Among all the available issues, workplace safety and health issues have always been the key ones to manage. Also, with the changing environmental scenarios, the climate change, energy policy and ecosystem protection have become the current issues and challenges to be addressed. The stakeholders associated with this industry, in general, have consolidated their concerns under a topic of “sustainability” and demands that the active participants of this industry address these issues as soon as possible (Macmillan, 2000).
The oil and gas industry operates in a number of challenging places across the world and at the same time faces a number of human-rights related issues. The ethical issues prevailing in this industry are considered as a prime cause for the accidents that have been discussed in the given case study. The following report has been precisely written to answer the prime questions that have been asked in the case study. The first section of the report talks about how the companies participating in the gas and oil industry could reform their ethical policies so as to minimize the accidents related to oil spills and freckling industry. The next section compares the risks faced by the BP, Exxon and the freckling industry in providing a good supply of energy to the customers and meet their precise requirements. This section is followed by a discussion of the role of ethical leadership in the evaluation and management of these risks. This section talks about the prominent role played by the leaders and their ethical practice in combating the risks associated with this industry (Barclays Bank, 2015). The report is concluded by highlighting the sustainability challenges that were held responsible for all the three cases that have been discussed in the case study and along with this the importance of addressing the ethical issues in order to minimize the accidents and inevitable risks in the gas and oil industry across the world.
The management of the risks associated with the ethics in this particular industry is quite important. This approach is crucial for the economy and even the businesses whose prime aim is to ensure healthy working conditions for the employees. When the companies fail to ethically uphold the rights of the human resources it is managing and even fails to maintain a close compliance with the competition laws of the country, then the reputation of the firms are highly damaged and even the investors are not attracted towards the firms.
The ethical risks could be managed in the Gas and Oil Industry by paying attention to the safety of the local communities and environment. The safe environment minimizes the risks of oil spilling, leaks and explosions. If the companies improve their ethical policies then it will not only affect the public and the communities, but at the same time improves the firm’s reputation in the market by relieving the public pressure and criticism the company has to deal with in case of any accidents (Leveson, 2011).
Ethically, a company working in this industry is required to use the basic and appropriate safety engineering technologies and practices. The System Safety Engineering has been existing as a System Engineering Discipline in most of the companies participating in the Oil and Gas Industry since five decades. A number of researches have been made in this direction and the engineers have been effectively operating safer systems and manage safety risks. The recent and earlier accidents related to oil and gas spill and leakage suggest that there is a certain number of loopholes in this system that are not being managed and mitigated at a proper rate. So, it is quite sure that the firms that have a sound system of evaluating the safety issues could easily minimize the accidents in the coming future and even the impacts of the ones that have already occurred (Conner, 2015).
Hopkins coined a word “Culture of Denial” for those industries where the risk assessment is vague and most of the times, the credible warnings are simply dismissed without any appropriate actions. In such a case, the accidents are rapid and could not be avoided as the mitigation plans are not sound enough to tackle their outcomes. Moreover, a second type of unethical culture is seen in these companies known as “Paperwork Culture” in which most of the talented employees just spend their precious time in writing elaborate arguments about system safety an a very little is done in action.
Other notable ethical risks in this industry arise when the safety leaders are not committed to the safety policies and issues. This is the prime factor that could be effectively used to differentiate the organizations with high and low rate of accidents. When the leaders fail to implement their time and talent in analyzing the loopholes in the safety system and they often neglect the safety issues that are constantly being raised by the subordinates then there are sure chances that the company also fails in employing the appropriate resources required to avoid an accident in a given span of time (Reinhard, 2011).
As the Gas and Oil Industry is day by day becoming more demanding, hence the managers and executives have to incorporate and implement a number of change processes in their working culture or in the entire system. The companies have mentioned the tactics to manage change processes in their reports and book of rules and regulations, but they are not being followed effectively. This is unethical as the management fails to communicate the basic idea about the ongoing changes in the company and hence fails to gather support of the subordinates in the implementation of the change process in every crucial business and operating units of the firm (Hatler, 2011).
The flawed communication and reporting systems are yet another reason for the occurrence of accidents. Most of the employees are well aware of the system malfunctions and unsafe conditions prior to the actual loss, but they try to curb the precursor incidents in order to avoid defaming of the firm in the current and potential markets. This is ethically not accepted and if the executives instead report such issues to the higher authorities in time, then there are sure chances of avoiding such accidents beforehand only. The precursor events are to be adequately investigated and reported so as to gather all the possible resources that would be required at the time of actual loss events.
The ethical grounds of these companies are also questioned when they fail to adequately learn from the prior incidents. The oil spill incident of the Exxon Valdez could have been used as a great learning instrument, but the Deep Water Horizon incident at BP proves that the companies participating in this industry hardly learn from the bad experiences of one another. In unethical systems, the prior accidents are only superficially investigated. The changes are made frequently in order to control the after situations of the accidents, but the executives fail to identify the prime underlying causes and hence the accidents continue to occur. In unethical safety culture, the accident investigations usually focus only on operator errors or the technical failures. The accidents could be minimized if the firms could start learning from the previous incidents of their own company or of the other similar competitors in the industry (McCarron, 2017).
All the three mentioned companies have to meet the changing demands of the customers and at the e same time have to adopt the standards set by the environment agencies of the company so as to minimize the impacts of the accidents on the environment and the surrounding local communities. It is sure that all three of them will continuously face the risks of leaks, spills and explosions because such accidents are inevitable, even if the company has the best of the equipments and working strategies. To adequately supply the energy to the clients and customers the companies will have to design such strategies that could help the firm in evaluating the exact source of the accidents and then keep it prepared with the best mitigation plans in order to minimize the after effects of the accidents (Hove, et al., 2002).
While supplying the adequate energy, the companies could also face a number of risks in maintaining a good brand image and reputation of the company despite the past and ongoing accidents and hazardous incidents (Sherwood, 2013). These accidents have numerous trust related issues associated with them. The harmful impacts of oil spills on the ocean have forced a number of loyal customers of Exxon and BP to switch over other potential suppliers of energy in the markets. Moreover, there is also a risk of selecting the proper target markets for the company as the firm has to select such customers that could be retained for a longer duration even in times of economic turmoil and hazardous accidents (Wipro, 2013).
There are also political and financial risks associated with such industries. After the oil spills and gas leaks the government becomes more aware and concerned and usually thinks twice before allotting a major venture to the company (International, 2014). In order to progress and work smoothly the company has to firstly deal with the ongoing legal issues associated with its previous accidents and incidents. Moreover, the accidents pose a great political pressure to such companies as now they have to be more sustainable in their practices as they are easier targets for any wrong doing. The investors also feel reluctant in investing a huge amount in such companies that have faced serious accidents in the past as they are already suffering a huge economic loss while compensating the victims and paying huge fines to the government and environmental bodies (Nielsen, 2007).
Ethics is all about morality which depicts that any action or morality is right or wrong. Ethical leadership is therefore quite crucial in order to improve the organization’s performance. The ethical leadership could be defined as an appropriate behavior that is conducted in personal and interpersonal relationships so as to establish a two-way communication among all the involved stakeholders and even in the decision making process. An organization cannot be considered as ethical if the leaders fail to recognize the ethical culture in the company. Due to this reason, most of the companies in the Oil and Gas Industry have set ethics as the topmost priority of the company and even have incorporated business ethics as a crucial element in the core working strategies of the firm (Kolaczkowski & Weller, 2016).
Looking over the mentioned cases in the Oil and Gas Industry, the participants failed to put in the safeguards crucial for the protection of the employees, local communities and even the suppliers. It could be said that the scenario might have been entirely different it these firms has effective ethical leaders who not only work for the betterment of the company but even for the entire industry (Najat, 2016).
If the ethical leadership elements were present at every stage of development in the Oil and Gas Industry, then just after the Exxon Valdez Disaster, the companies would have become more aware of such accidents and even make it mandatory to implement every possible safeguard that is considered necessary for the protection of the environment. Yet, BP assumed that such an incident could never happen to them. The presence of ethical leaders change such a mindset of the managers and employees and compel them to design and implement the best safeguard strategies even if the previous ones are intact and capable enough to combat serious incidents. In the absence of such leaders, BP did not succeed in implementing such strategies that could avoid the possible future accidents (Phaks, 2014).
Under the ethical leadership, the companies in the Oil and Gas Industry could regain the trust of the stakeholders that have been lost due to the previous accidents and hazardous incidents. It’s been more than five years since the incident of Deepwater Horizon Spill and still the losses and adverse effects of the incident are quite fresh among the stakeholders. This has created a number of trust issues among the people associated with the industries, whether they are the employees, customers or the investors or local communities. The industry has set expectations that it could work without any negative influence, but it has failed to do so. Hence, here the ethical leadership could be used to re-establish the trust that has been lost (Spence, 2010). The ethical leaders could help the companies in building standards for the environmental performance and incorporating a number of strategies in the core working practices of the firm that could help the firms in attaining these standards. These leaders also have a capability to set up such systems that could mutualise the prevailing risks. For such an approach, these leaders usually work upon the such systems that have already been successfully established in the other sectors such as healthcare and food industry (PWC, 2017).
It is an undeniable fact that the public could not easily forget about the image of millions of gallons of oil washing up on the American beaches, but the approaches adopted the ethical leaders could help the companies to build confidence in the working strategies of the oil and gas industry. The leaders could suggest a number of mitigation plans that could simply help the industry to operate high standards while readily accepting the responsibility of the inevitable accidents that damage the environment in some way or the other. Acceptance is also crucial as because after this stage only a company could design and implement the strategies that are effective in minimizing the after effects of the accidents that have occurred and even prevent the upcoming accidents (Toennesen, 2015).
The ethical leaders also have a tendency to stamp out corruption in such industries and increase transparency among the involved stakeholders. When an industry is corrupted then the implications goes beyond the trust issues and the problems are considered as quite costly that simply creates operational and supply chain inefficiencies. This further leads to huge fines against the company and heavy compliance costs in the aftermath of the scandal which ultimately cripples the companies financially. The leaders play a pivotal role in such cases by establishing a great communication among all the crucial participants of the industries and informing them about all the decisions that are being made in the company. This will allow them to suggest changes and provide valuable feedbacks and eventually remain connected to the company for a longer duration.
Conclusion
The past accidents in the Oil and Gas Industry critically questioned the operational and safety strategies of the companies working under this industry. The companies have failed to learn from the experiences of one another and most of time has failed to acknowledge the importance of ethical practices at the workplace. The prime reasons of rapid occurrence of such accidents could be the loopholes in the operational departments of the companies where the employees are aware of the flawed systems but are unable to report them to higher authorities. Moreover, in both the cases of Exxon and BP, the employees are still struggling in re-establishing the trust of the stakeholders and the same working conditions for the employees.
The aftermath of the both the cases has shown that the local communities are still struggling with the ill effects of the oil spills. This simply raises a prime question that whether these companies are contributing towards the environment and the economy in a sustainable manner, whether they are simply making money while neglecting the accidents and their impacts on the environment. The answer to this is that these companies have although implemented a number of mitigation plans to deal with the accidental risks, yet there are certain areas where they have to consistently work in order to minimize the rate of such accidents. The best approach that could be adopted in this case is the establishment of the ethical practices under the guidance of ethical leaders who not only work for improving the services of such companies, but also to minimize the adverse impacts of the accidents and mishaps on the environment, society and economy of a country.
References
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Conner, H., 2015. Managing Environmental Risk in the Oil and Gas Industry, Available at: https://scholarship.claremont.edu/cgi/viewcontent.cgi?article=2206&context=cmc_theses
Hatler, D., 2011. Accepting the Challenge of Sustainability in the Oil & Gas Industry, AVailable at: https://www.oilgasmonitor.com/accepting-challenge-sustainability-oil-gas-industry/
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McCarron, S., 2017. Key sustainability issues and challenges, Available at: https://corporate.exxonmobil.com/en/community/corporate-citizenship-report/about-this-report/key-sustainability-issues-and-challenges
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