Question:
Case study of BHP.
BHP Billiton is an Anglo-Australian multinational company that is involved in mining petroleum and mining. The organization is headquartered in Perth, Australia and is considered Australia’s fourth largest company (Bhpbilliton.com, 2016). BHP faced reduction in oil prices by 40 per cent in the year 2015 (Stevens, 2015). Additionally, copper, thermal, coking coal and iron ore fell by 12%, 8%, 10% and 24% respectively (Stevens, 2015). These figures indicate that the year 2016 will prove the toughest for the organization (Stevens, 2015). There will be a drive to increase productivity and protect profit margins through effective management.
In 2011, BHP caused offshore oil spill at Gulf of Mexico leading to massive environmental damage and causing harm to the marine species directly (Murphy, 2011). There was a disaster in Brazil caused by a deadly mudslide due to failure of a tailings dam at the Samarco iron ore mine (Saunders, Thomson, & Stevens, 2015). The company had not faced such similar event in the last 100 years and the size of disaster was huge (Yeomans, 2016). According to the reports, the disaster caused nine deaths and 19 people were missing and 640 people lost their homes (Saunders, Thomson, & Stevens, 2015). It also led to massive environmental damage and the clean-up and compensation was estimated at $US1 billion (Yeomans, 2016). The company is liable for £30bn compensation over Samarco disaster (Yeomans, 2016). This paper addresses strategic issues, strategy options and best strategy option for BHP Billiton.
The previous assignment conducted internal, value chain, and cultural analysis based on which strategic issues were identified. The strategic issue was related to the environmental concern and the global financial crisis. The environmental issue is selected for this paper as it is a trending issue. In the recent years, BHP Billiton has been criticized of accidents that have severely damaged environment. The business structure of BHP Billiton is related to mining and extraction of metals and petroleum that has social, economic and environmental impacts (Mayes, McDonald, & Pini, 2014).
The business significantly impacts water resources, air quality, wildlife, soil quality, social values and climate change. Environmental impact is a strategic issue as any project undertaken by the company directly impacts the environment. The mining processes cause contamination of soil, loss of biodiversity, erosion, contamination of groundwater through chemicals. Such contamination affects human health and wildlife directly (Floris, Grant, & Cutcher, 2013). There is a need to address these environmental impacts through stringent regulations and strategic options. Metallic ore mining causes acid drainage and contaminant leaching. It has potential to dissolve toxic metals such as lead, mercury, copper and surrounding rock (Northey, Haque, & Mudd, 2013). These metals are long-term contamination for the aquatic creatures in the water bodies. Mining projects also lead to degradation of soil and sediments. The exposed materials can contribute to chemical pollutants causing short-term and long-term impacts (Lodhia & Martin, 2014).
The mining and extracting operations also cause air quality damage by transporting particulate matter through wind. The gas emissions due to explosions and mineral processing also cause serious effects on people’s health as well as the environment (Collins et al., 2013). The excavation operations are a major source of volatile organic compounds and carbon monoxide. Due to the release of pollutants, the fauna is also displaced thereby disturbing wildlife. Due to disappearance of land and water species, the food supply shall be reduced (Sonter, Barrett, & Soares-Filho, 2014). These issues are identified due to the normal business operations.
Additionally, BHP Billiton has been involved in accidents such as bursting of the Fundao tailings dam in November 2015 (Szoke, 2015). There were controversies regarding the disaster as the accident could have been prevented if the company followed more sustainable and responsible practices. The exact cause of the burst dam was now known. However, the state environmental prosecutor declared that it was not an accident (Schoenberger, 2016). The incident was reported as a mistake and negligence in the monitoring. Recommendations were made to renew the license and concerns were highlight about integrity of the tailings dam which was ignored (Szoke, 2015).
The environmental issues not only cause environmental damage but also impacts economic costs and social values damage. The environmental damage increases economic costs as BHP Billiton had to pay compensation and cleaning up costs. Due to the financial crisis, the prices of oil and iron ore is significantly reducing that is making it difficult for BHP to maintain profit margin. Although mining projects can create wealth, but is also causes considerable disruption.
The strategic issue as identified as environmental concerns need to be addressed. Two strategic options are identified for addressing the environmental concerns raised. The strategic options are evaluated using RACES framework- Resource, Acceptable, Coherent, Effective, and Sustainable.
Green Mining or Eco-friendly Mining
The mining areas are being degraded and affecting the lives of people due to air pollution, retreating water table and many more. Green mining or eco-friendly mining could help in acting as a sustainable solution for mining and extracting resources. Responsible mining practices can be employed at every stage of mining (Erkayaoglu, & Demirel, 2016). Mine site rehabilitation can also help in creating a stable landform so that it can be used productively in the future. The environmental impacts must be systematically measured for mitigation and causing less destruction to the environment. The mining industry requires proper research and development for committing with sustainability and making the place greener. Unnecessary waste must be prevented, and reusable materials must be put to sensible use. Effective solution such as proper waste removal, cleaning excess waste, replanting trees and replenishing native soils can help in rejuvenating the ecosystem. These processes can help in reshaping land and remove hazardous materials (Wilson et al., 2013).
The strategy is evaluated using the RACES framework as under:
Resource- BHP Billiton has abundant financial resources for employing latest technologies to implement green mining. The latest technologies can be used for sharply reducing the impact of mining activities. BHP Billiton can employ abundant manpower especially for restoring or rehabilitation of the mining areas (Park et al., 2014).
Acceptable- The mine rehabilitation is acceptable as it would mitigate the environmental effects of mining. Also, rehabilitation does not cost much due to which it is acceptable. The beneficial land-use is pre-determined and acceptable. The method is acceptable as it would prevent water and air-quality depletion (Burton, Zahedi & White, 2012).
Coherent- There is a long way to go for minimizing the problems and impacts of mining. All the practices that lead to green mining or decreasing footprint of hazardous chemicals due to mining shall move in a unified direction (Shen, Ren & Pan, 2013)
Effective- The method shall be effective once the areas affected or processes undergo cost-benefit analysis. The method shall place economic value on environmental sustainability. The air and water-quality can be tested after implementation of the procedure (Kusi-Sarpong et al., 2016)
Sustainable- The objective of green mining is to reduce the footprint caused due to acid leading to water bodies or emission of toxic gases on the atmosphere. The waste materials can re-cover valuable minerals through re-mining (Fergusson, 2014).
Facility Management
Alternatively, BHP Billiton can enhance its facility management. Facilities management can be of significance to the organization as it shall focus on operational as well as strategic activities. Given by the number of accidents causing social, economical and environmental damage, the organization must consider security and maintenance as its primary objective. The facility management must be connected to the strategic plan of the organization. The role of facility manager is to provide the resources and environment in which employees and organizations can be most productive. They must develop a holistic view, and knowledge of how an organization works, and how departments interface and interact (Dixit et al., 2016).
The strategy is evaluated using the RACES framework as under:
Resource- BHP Billiton can employ sufficient manpower and make them facility manager. Intangible assets such as knowledge, reputation and information are abundant in the organization. The financial position of the organization is strong for which it can employ different facility manager and assistants for different mining sites (Pitt et al., 2014).
Acceptable- The strategy of facilities management is acceptable as the shareholders who have lost the faith and trust can regain their confidence. Due to the accidents and negligence by Billiton, the stakeholder reactions was negative and it lost its reputation in the organization. The financial and non-financial outcomes such as probability of consequences and benefit to stakeholders shall help in identifying best scenarios (Götze, Schumann & Müller, 2014).
Coherent- Effective implementation of facilities management shall be coherent or consistent as the facility managers shall regularly check the security standards. The mining sites shall be regularly maintained by the facilities manager that shall make the process consistent (William East, Nisbet & Liebich, 2012).
Effective- The facility management shall deliver responsive and effective services. The strategy shall help in enhancing and demonstrating better value within the organization’s business plan. Effective and manageable processes can be established through services and resources audit (Atkin & Brooks, 2012).
Sustainable- The approach to facilities management is sustainable as facility managers make the best sustainability executives. The facility managers are tasked with high-stakes decision making and they consider all facets of the organization. The facility managers always strive to be improving processes, increasing productivity and saving cost (Wang et al., 2013).
The first strategy of Green Mining shall be rejected and Enhancing Facilities Management shall be accepted. The mining organization has a long way to go before it can be considered even remotely green. Sustainable mining looks good on paper, but in reality it is may not be easy to follow the guidelines. Green Mining strategy is further rejected as the basic nature of the organization is to extract metals and minerals. The green mining approaches shall help in reducing ecological footprint, greenhouse gas emissions, reduce chemical use and improve processes. However, it may not be easy to establish as a short-term strategy. Making significant investment in research, development and technology shall be expensive as well as time-consuming. The benefits shall be attained from the strategy may be cheaper after implementation. The organization can go green for achieving better public relations or because it feels right to protect the environment (Atkin & Brooks, 2012). But it may prove disadvantageous for BHP Billiton. For switching to renewable sources of energy at the mining facilities can be inconvenient and expensive initially. The cost reduction by going green may not always offset the initial cost that will be incurred. There may be lacking support in obtaining Leadership in energy and environmental design as not all the stakeholders would agree for it. Different stakeholders have different expectations from BHP Billiton due to which they may not completely be able to switch to greener practices (Atkin & Brooks, 2012).
The second strategy, coordination with facilities management shall be chosen. Facilities management comprises of managing at two levels: operational and strategic. At the operational level, the facility management department can ensure corporate and cost effective environment (William East, Nisbet & Liebich, 2012). At the strategic level, the facility managers can help understanding the potential impact of the services, operations and business risk. The facility managers shall help in controlling and managing safety related issues. Not only the mining sites must ensure safety for the employees, but also the potential impact on the environment must be looked by the facility manager (Barrett & Baldry, 2013). As seen previously, BHP Billiton has been involved in accidents in negligence such as oil spill at Gulf of Mexico and bursting of dam in Brazil. Both the accidents have been caused in the recent five years that requires strict control (Szoke, 2015). The injuries, loss of lives and other significant damages caused by the organization makes it questionable about the safety and maintenance at the workplace (Barrett & Baldry, 2013).
The facility manager must ensure that the mining site is operating efficiently by conducting tests and inspection thereby maximizing efficiency of processes and reducing risk of failures. The manpower must be trained in a manner that the responsibilities are run efficiently day-to-day. The sites must be shut down if it is risky in nature. Closure of sites shall help in preventing accidents. The facility manager shall also have a continuity plan in the event of major failure and quick recovery. The facilities management department would be one of the key players should it be necessary to move the business to a recovery site. When it comes to integrating a sustainability program throughout an organization, an executive with only experience in finance or human resources may not be the best choice to take on the role of the Chief Sustainability Officer (CSO). Instead, the best fit may be an executive with broader experience in all facets of the organization, who has successfully built bridges to work with other departments, and who may have a bit of engineering or technical expertise as well. Facility managers often have the unique skill sets to fit that bill, and more and more frequently are being promoted into a high-level sustainability position (Barrett & Baldry, 2013).
The profession of facility management has grown and matured over the years. A facility manager is a well-rounded and fully educated practitioner in the holistic management of the built environment. No longer has a department-by-department initiative, sustainability required a systems approach to managing a business. Facility management is a system that supports all other systems. The optimal impacts of sustainability are long term and belong in a strategic plan, and the best facility managers are already linking facility management strategy and sustainability tenets to those of the overall entity (Barrett & Baldry, 2013).
Conclusion
Conclusively, the strategic issue was related to the environmental concerns. The business significantly impacts water resources, air quality, wildlife, soil quality, social values and climate change. The environmental issue is selected for this paper as it is a trending issue. The business structure of BHP Billiton is related to mining and extraction of metals and petroleum that has social, economic and environmental impacts. There were controversies regarding the disaster as the accident could have been prevented if the company followed more sustainable and responsible practices. The environmental issues not only cause environmental damage but also impacts economic costs and social values damage.
There is a long way to go for minimizing the problems and impacts of mining. The objective of green mining is to reduce the footprint caused due to acid leading to water bodies or emission of toxic gases on the atmosphere. The role of facility manager is to provide the resources and environment in which employees and organizations can be most productive. Due to the accidents and negligence by Billiton, the stakeholder reactions was negative and it lost its reputation in the organization. The facility managers are tasked with high-stakes decision making and they consider all facets of the organization. Sustainable mining looks good on paper, but in reality it is may not be easy to follow the guidelines.
References
Atkin, B. & Brooks, A. (2012). Total facilities management. Chichester, U.K.: Wiley-Blackwell.
Barrett, P. & Baldry, D. (2013). Facilities management. Osney Mead, Oxford, OX: Blackwell Science.
Bhpbilliton.com,. (2016). BHP Billiton | A leading global resources company.
Burton, M., Zahedi, S. J., & White, B. (2012). Public preferences for timeliness and quality of mine site rehabilitation. The case of bauxite mining in Western Australia. Resources Policy, 37(1), 1-9.
Collins, P. C., Croot, P., Carlsson, J., Colaço, A., Grehan, A., Hyeong, K., … & Rowden, A. (2013). A primer for the Environmental Impact Assessment of mining at seafloor massive sulfide deposits. Marine Policy, 42, 198-209.
Dixit, M. K., Dixit, M. K., Culp, C. H., Culp, C. H., Fernandez-Solis, J. L., Fernandez-Solis, J. L., … & Lavy, S. (2016). Reducing carbon footprint of facilities using a facility management approach. Facilities, 34(3/4), 247-259.
Erkayaoglu, M., & Demirel, N. (2016). A comparative life cycle assessment of material handling systems for sustainable mining. Journal of environmental management, 174, 1-6.
Fergusson, L. (2014). A Long-Term Study of Mine Site Rehabilitation in Australia. Asian Journal of Water, Environment and Pollution, 11(4), 1-17.
Floris, M., Grant, D., & Cutcher, L. (2013). Mining the Discourse: Strategizing During BHP Billiton’s Attempted Acquisition of Rio Tinto. Journal of Management Studies, 50(7), 1185-1215.
Götze, J., Schumann, C. A., & Müller, E. (2014, June). Context awareness and augmented reality in facility management. In Engineering, Technology and Innovation (ICE), 2014 International ICE Conference on (pp. 1-5). IEEE.
Kusi-Sarpong, S., Sarkis, J., & Wang, X. (2016). Assessing green supply chain practices in the Ghanaian mining industry: A framework and evaluation. International Journal of Production Economics.
Lodhia, S., & Martin, N. (2014). Corporate sustainability indicators: an Australian mining case study. Journal of Cleaner Production, 84, 107-115.
Mayes, R., McDonald, P., & Pini, B. (2014). ‘Our’community: corporate social responsibility, neoliberalisation, and mining industry community engagement in rural Australia. Environment and Planning A, 46(2), 398-413.
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