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Csr in British Petroleum and Exxon Mobil

Essay by   •  January 12, 2011  •  Research Paper  •  9,400 Words (38 Pages)  •  9,586 Views

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1. INTRODUCTION

The energy sector is generally driven by the price of crude oil. Recent trends of reviving global economy, increasing demand for energy, and political turmoil in oil-producing regions, have seen oil prices soar (to more than $55 a barrel in 2004), thus causing industry rebound. Higher prices have reached most of the industry - producers, refiners, pipeline companies, equipment makers, oil field service providers, and gas station operators - which have all enjoyed new profits. Leading the charge are the world's largest integrated oil companies: Exxon Mobil, BP, and Royal Dutch/Shell (Yahoo Finance, Industry Profile).

British Petroleum (BP) is of one of the world's largest energy companies, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemical products for everyday items. Incorporated in 1909 in Great Britain, BP has transformed from a local oil company into a global energy group with four main businesses: Exploration and Production; Gas, Power and Renewable; Refining and Marketing; and Petrochemicals. The Company employing over 100,000 people has established operations in Europe, the United States, Canada, South America, Australasia and parts of Africa.

Exxon Mobil Corporation is engaged in the energy and petrochemical business. Through its divisions and affiliated companies, Exxon Mobil operates or markets products in the United States and approximately 200 other countries and territories. The Company's principal business is energy, involving exploration for, and production of, crude oil and natural gas, manufacture of petroleum products and transportation and sale of crude oil, natural gas and petroleum products. Exxon Mobil is also a manufacturer and marketer of basic petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics and a variety of specialty products. In addition, the Company has interests in electric power generation facilities.

1.1. CSR Challenges to the Sector

The issue of corporate social responsibility (CSR) - broadly defined to include such concepts as sustainability, sustainable development, and sustainable enterprise management - is now challenging the very foundations of the business strategies of the world's leading organisations (World Petroleum Congress). To many organisations, CSR serves as a guiding principle that strengthens corporate vision, strategy and decision-making; while to others, it represents a series of vital issues that must be managed in order for the company to maintain its "license to operate".

According to Swanson, P. (2002), the focus in the oil sector is usually on impacts in the developing countries where oil is being produced. Often operating in less-developed and undemocratic regions, environmentally sensitive areas, and with huge industrial facilities producing toxic by products, the energy industries are high risk with regard to the ethical, social and environmental challenges encompassed by CSR.

The challenges in the global oil and gas business arise mainly from the fact that:

* More than 90 per cent of the world's reserves are located in the developing countries.

* Successful development of the activities of such companies has a substantial economic impact on the host country - potentially a powerful lever for broad social and economic development, an attractive target for corruption, or disruptive social impact.

* There is a significant environmental 'footprint' - which impacts along the entire supply chain - with implications for resource use, fragile eco-systems and biodiversity, air and water quality, as well as waste, its treatment and recovery (World Petroleum Congress).

* Civil society organizations now have the new forms of relatively cheap and effective communications at their disposal (Swanson, P. 2002). What they expose can be disturbing to the public in the home countries of these companies

Companies in the petroleum and gas industry have pioneered corporate social responsibility mainly because many of the core issues at the heart of the CSR debate have been high on their agenda for many years. Many petroleum companies recognise, for example, that their prospects of gaining new licences or access to new commercial opportunities are significantly enhanced by showing that governments, partners, and suppliers want to work with them on non-financial as well as commercial criteria.

With respect to the areas of concern identified above, we can extinguish a number of issues and challenges faced by the companies operating in the energy sector. These issues are of particular importance when considering investing into the oil and gas industry and are likely to be looked at by rational and socially-responsible investors.

While it is quite popular to categorise CSR challenges into long-term and short-term ones, such segregation is of little value when talking about the petroleum and gas sector. Due to the specifics of the sector, most of the projects undertaken by energy companies have considerably long duration and thus are faced by challenges bound to last for a long time. Therefore, it can be concluded that most of the CSR issues in the energy industry (or at least the main ones from the socially- responsible investor's point of view) are long-term, thus the companies must work gradually and consistently in order to try to assure the best practise all along.

The main challenges to the sector are presented below.

1. Petroleum companies are becoming increasingly more concerned with the question as to whether the oil era is ending since significant attempts to create new energy sources have been put in place. The main issue here is how the industry will respond if mass production of new cars based on alternative fuels begins (Thorvik,A.).

2. Companies in the energy sector must make money for its owners, in a legal and ethical way, while providing valued products and services to the public. These products and services must be aimed at making lives better, more comfortable, and more fulfilling (Sprow, F.B., 2002).

3. Operating in the way that complies with all the laws and customs relevant to the business. This is particularly relevant when the company is operating in multiple countries with varying levels of development and different legal base (Sprow, F.B., 2002).

4. Careful environmental operations, attention to safety and health. A company should be seen as making some contribution to the common good while minimizing any negative impact of its activities. (Westgaard, G.)

5. Social and economic development of the host country

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