Sustainability and corporate responsibilities have become the most important factors to consider in the modern business environment. In fact, with customers become sensitive to the quality of the products offered in the market, the businesses must review their corporate social responsibilities. Regarding the case study, the disasters have stricken the oil and gas industry in the recent time (Cleveland 2011). For instance, the BP, Exxon-Valdez, and the fracking industry have put the gas and oil industry into disrepute. These companies have reported dangerous spills, leaks, and explosions that affect the environment and the society. Despite the governments adopting stringent environmental laws and regulations, these giant players have failed to comply. The low uptake of the regulations has thus led to numerous preventable disasters that have harmed the biosphere. The problem, therefore, lies with the disaster and risk management strategies (Ferrell, Fraedrich, and Ferrell 2011). There is a need for the companies to adopt contingency plans that will save the society from preventable disasters during oil drillings (Schneider, Ghettas, Merdaci, Brown, and Martyniuk 2013). Based on the significance of the oil and gas industry, this article provides an analysis of the situation regarding sustainability and moral practices. It involves answering relevant questions relating to risk management and comparing the risks that Exxon, BP, and the fracking industry experience (Ball 2011).
The oil and gas industry have to address the risks and uncertainty befalling the companies. It is important that the companies consider addressing the issues that have affected the environment or harmed the society. Leak, explosions, and oil spills are endangering biosphere (API n.d). The highlighted risks in the case study require proper management. Without a doubt, the safety of the environment is good for everyone and every life. Although it has proved difficult to avoid risks, the management can prevent those (Ferrell et al. 2011). The most important steps should involve the management of stakeholders and organizational images. It is thus critical for the management to handle the issues by complying with the regulations in place. As such, it will be possible for the companies to restore the public confidence and trust upon managing risks.
The major oil and gas companies including BP and Exxon have taken swift measures to correct the situation (Ball 2011). The most important step would involve implementing operating management system. This system should form the basis of an organization’s EHS terms, contractor management, operational reliability, social responsibility, and related issues. Due to the deep-water horizon disaster, the company conducted internal investigation. To this effect, the investigators provided various recommendations to enhance operational safety and reduce risks during the drilling operations. Exxon also responded to the disaster by investing in occupational training and health. It had to establish a new committee to help the employees so that any infectious disease would be controlled (ExxonMobil 2012).
Anis and Siddiqui (2015) maintained that organizational culture and values are essential in determining the conduct and behaviours of its employees. Through safety culture, the stakeholders will find it possible to identify issues of concern and offer relevant mitigations as a safety measure to the situation. The custodians of the safety culture are the leaders and managers of the company. This is because; they engage in strategic decision-making processes that determine the future of an organization (Dutta and Sengupta 2014). The management must have taken wrong decisions and assumed the problems facing their companies (Environment Agency 2013).
Managers and leaders would remain on the spotlight for failing to adopt the environmental regulations and standards. In the case study, the affected companies were victims of poor leadership who only focused on their personal interests instead of the welfare of the society. For example, the managers avoided the implementing disclosures systems and maintained the fracking methods instead of adopting the new fracking system in drilling because not everyone in the industry is implementing the technique (API n.d). However, the ethical leaders would be responsive by balancing the needs of stakeholders and environment (Dekker 2006).
The environmental reporting is an important factor that the companies can use to avoid disasters. The reporting and disclosures should be conducted consistently, transparently, and accurately to avoid creating confusion. According to Ferrell, Fraedrich, and Ferrell (2016), the report should reflect the sustainability challenges the organization is facing in addressing the expectations and needs of its stakeholders. To this effect, both external and internal stakeholders can easily get to know the issues affecting the organization. Besides, the reported information must be factual, understandable, clear, and coherent thus allowing for an independent review. Indisputably, a transparent company would engage in disclosure processes, assumptions, procedures, and limitations that are interfering with the organizational processes. The disclosed reports should be properly applied and credible based on the information collected and consistency to allow for meaningful reviews (McCarron 2017).
The use of cloud should form the basis of organizations in defining their risk management efforts. Although this method has faced criticism and opposition, it provides the best platform where the companies can store the sensitive data related to the off-site. Meehan (2016) maintains that the security issues raised about the cloud may not stand because of solutions associated with the top-of-the-line EERP. The organization needs to focus on protecting the customer’s data through the adoption of an encrypted communications system, building a virus scanner, use the comprehensive disaster recovery program, and use stringent physical access models. With proper internet connectivity, the organization can optimize the available network (Dutta and Sengupta 2014).
The oil and gas industry are compelled to use the best control systems and structures to manage risks. Importantly, the new safety policies as adopted by the Presidential Commission have provided the guidelines relevant for managing risks. Exxon, for instance, should use a systematic process to manage and assess the risks regarding its operations (McCarron 2017). The process requires for the re-assessment of the project thus determine the environmental conditions and operations (McCarron 2017). In fact, it would be prudent for the companies to resort to alternative water sources and maximize the opportunities associated with recycle, reuse, and reduce water wastage. Exxon should further consider various factors to determine the best approach for every process and site (Kaplan and Mikes 2012). The factors it needs to consider should include operational efficiencies, costs, and energy use. Therefore, site-specific approach would be sustainable are attract the support of stakeholders, especially the community as explained by Konar and Cohen (2001).
The Exxon Valdez wreck and BP’s deep-water spill exposed the poor leadership issues affecting the companies. As explained by Leveson (2011), most of the employees have irrelevant skills to handle the situation. In fact, the companies prefer underqualified personnel who are exploited for the interests of the organization. This is because; experts can prevent most of the disasters if they are hired to work in these oil-drilling sites. The most qualified individuals working in these sites have little certification. The oil and gas companies have to be true to their goals and vision of hiring qualified employees (Ball 2010). They need to train them so that they receive proper certification to work in the drills. Indisputably, certified employees understands the EHS policy and can interpret the mission of the organization thus promote accountability (Schneider et al. 2013).
The industry requires the best hazard analysis approach. McCarthy (2013) has noted that the U.S Department of Energy has put this resource management under the safety regulations. The federal government has introduced the Process Safety Management laws to manage such highly hazardous chemicals (Ferrell et al. 2011). This law ensures the oil and gas companies use an effective and consistent approach to maintain the integrity of the industry. The issue with this regulation is that it can never be applicable to the servicing operations and gas or oil well drilling. Because of this shortcoming, the Process Hazard Analysis was adopted that remains a systematic approach to help the stakeholders identify, evaluate, and control the hazards regarding the hazardous chemicals (McCarthy 2013). The OSHA has identified different methods to undertake the process hazard analysis including Fault Tree Analysis, Checklist, Failure Modes and Effects Analysis, Checklist/What-if, Hazard and Operability Study. OSHA has highlighted the significance of implementing these methods through knowledgeable teams (McCarthy 2013).
The hydraulic fracturing operations as used by the oil and gas industry have been put under scrutiny. The intense analysis of the operation has exposed potential harms to the environment and neighbouring communities. The potential harm or risks include water and air pollution. The company must also be vulnerable to increased traffic, noise, and crime. These are part of the risks Exxon, the BP, and the fracking industry. Without a doubt, when the companies fail to monitor and track the potential problems, it would be impossible for the regulators, investors, and the public to understand the issues. Therefore, demonstration of the problems can enhance the resolution to the issues affecting the firms. Since the companies have failed to report to the investors the situation, it would be impossible for the investors and creditors to understand the steps the companies are taking to resolve the problem or mitigate them (Sylves and Comfort 2012).
The aspects of uncertainty among the customers are an issue that have affected the organizations in equal measures. This problem has struck the fracking industry more than Exxon and the BP companies. The fracking industry has to analyse the situation and resolve the risks. The safety of their exploration remains under scrutiny regarding the safety operations structure (Manna, Marco, Letterman, and Mullen 2014). The public confidence and mutual trust is important. The three companies have engaged in the unethical practices by failing to provide evidence or reporting appropriately to the stakeholders. This confirms the companies never prioritized the corporate responsibility factors. The hydraulic fracturing system is untrusted and requires review. Therefore, the main risks that these companies have experienced include explosions, spills, and leak.
The business world survives on reputation, in that the companies which fail to meet the ethical standards. Importantly, these organizations have to value the interests and anticipated perception of their targeted clients (Ferrell et al. 2011). They believe that any action affecting their customers would put their brands in disrepute. Following the explosions, spills, and leaks into the environment, these oil companies must be ready to deal with the way likely approach of the consumers and other stakeholders would take regarding their oils. The customers can opt to avoid buying their oil and gas. For example, the BP consumer who is deemed loyal can change his mind about the firm following the oil spill that completely harmed the ocean. In response, the consumer would opt for the substitute products that are produced by responsive companies. In fact, the consumer can would switch to the gas from Shell Oil instead of the BP’s product.
Fracking is a unique process that ensures the natural gas is forced out of shale rock. This dangerous process has proved destructive to the community and the environment. Since this technique has remained alive for over six decades, its efficiency has declined with the emerging issues. Recently, the US discovered large reserves of shale gas that could last for over 100 years (Ferrell et al. 2011). With the new hydraulic fracturing process, drilling of the resources out of the reserves has proved possible. Although the fracking process presence significance opportunities to the companies, it carries risks. This process produces dangerous chemicals like methane that is emitted in the waters (Ferrell et al. 2016). Apart from releasing the chemicals at the drilling point into water, it also releases methane gas into the atmosphere. As a result, the system leads to small seismic shifts. The fracking process requires a lot of water that runs into million gallons for every week.
Political forces seem to drive this industry because the cartels fund the political activities of aspirants. The companies believe that by supporting the political elites, they can have an opportunity to protect their interests and avoid victimization from the law enforcement agencies. The executives of these companies use the politicians to formulate policies that protect their businesses and protect them against litigations and public pressures. The political risk would emerge in a regime change, where new government is coming into force.
The industry is also vulnerable to financial risks and the oil and gas companies must address this problem to avoid problems. Studies have identified the industry to be operating opaquely as they compromise transparency (Dutta and Sengupta 2014). This has made the market value to be uncertain. The industry suffered a blow following the economic crisis that has pushed customers to seek environmental friendly fuel. Indeed, the customers are opting for renewal energy sources. The oil and gas companies have thus reported low earnings. Exxon, the BP, and the fracking industry reported huge losses that threaten their existence (Ferrell et al. 2011). The affected companies must invest their resources in the best approaches to avoid the risk. Apart from investing in the current products, the firms can diversify to mitigate the situations.
Since time immemorial, leadership has played a crucial role in defining the success and goals of an organization. With the organizational leader, it becomes possible for an organization to set goals, define its vision, and create an acceptable culture. Ethical leadership are always concerned about the welfare of the stakeholders. These leaders would make decisions in the best interest of these stakeholders, such as consumers, community, government, employees, investors, and owners among other stakeholders. These leaders have earned respect among the followers because they act to protect the environment. Transparent and responsible leadership guarantees an organization an efficient management of risks as explained by Ferrell et al. (2016). Regarding the companies in the case study, the ethical leadership seemed to have been lacking. Nobody knew what was going on in these firms as the managers conducted their activities opaquely. For instance, in the deep-water drill, the involved companies never taken the recommendations of experts serious as advised leading to accidents and oil spill.
Transparency is an important factor in the management of businesses. Company executives and management have the responsibility to keep everything open for scrutiny. This implies that the disclosure system must be up to standard and founded on benchmarks. As part of the ethical leadership principles, it is possible for the businesses to consider using proper guidelines that are beneficial to the organization (Patton 2001). The accounting practices and code of conducts have emphasized on a free-corruption business environment, where managers share crucial information with relevant departments. The disclosure and whistleblowing culture should be pegged on the firm’s culture. The disasters these companies have caused have seen them be fined millions of dollars. For example, BP had to be compelled to pay over $4.5 billion and faced 14 criminal counts and felony charges because of the leak.
The sustainability factor focuses on the environment risks. The management of the organizations must address the issues regarding the environmental degradation. The managers must act within their powers in serving the needs and expectations of stakeholders. This must be in line with the ethical practices relevant to the targeted audience. Therefore, the ethical leaders must act responsibly to protect their stakeholders (Dutta and Sengupta 2014). This gives credence to the democratic leaders to takeover companies. The companies, especially the oil and gas organizations have to utilize the hazard analysis system and fracking to manage the environment. The leaders must embrace the environmental standards to guide their activities and operations without compromising the core values of the organization.
The ethical leaders have the responsibility to establish safety control structures to prevent any future spills. The deep-water horizon accident was a mistake from the management who failed to use safety control structure. It has proved to be critical for the managers to strengthen the safety control structures in the offshore oil and gas industry. According to the case study, the Presidential Oil Spill Commission identified the best strategies to prevent such oil spills (Ferrell et al. 2011). The future prevention would depend on information sharing and effective decision-making because the government regulators can rarely help. The workers in the oilrigs should be involved in making-decision regarding the oil and gas industry. Therefore, the ethical leaders must recognize the strategic position of everyone thus maximize their productivity (Konar & Cohen, 2001).
Conclusion
The exploration of oil and gas is a tedious and dangerous work that companies involved must be careful. This is because; these products are inflammable. Apart from this challenge, the companies have to confront the political and social challenges thus making the exploitation and management technically complex. Based on the case study, the oil and gas companies have opted to be considerate of the community. These businesses have intensified their investments socially responsible activities. This is part of the paying back to the community and gain citizenship. For these companies to achieve these obligations, they have to comply with the environmental protection regulations and laws as adopted in different countries.
Recently, the oil and gas companies have engaged in the sustainable activities. They have been compelled to be socially responsible and sustainable. The managers of these companies have no option but to value the good governance practices as captured in the case study. Since the modern world depends on oil and gas, the involved companies must address the issues putting the company into disrepute. Recently, the crude oil and petroleum reserves appear to be depleted at an alarming rate. Unfortunately, the demand for this natural resource is surpassing the supply. Besides, the industry is vulnerable to various risks and safety concerns. This follows the recent accidents that have befallen the industry. This has made many people to criticize the industry for failing to act responsible. The industry can restore its image by adopting a more responsive corporate culture instead of the risk-taking culture. The oil and gas companies like Exxon and BP have to emphasize on the ethical leadership that ensures the firms’ practices meets the ethical standards required during drilling.
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