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For this assessment analysis of the case study relating to business ethics: Sustainable Challenges in the Gas and Oil Industry.

Sustainability Challenges

The oil and gas industry is a crucial industry, without which, the daily lives of the common people is next to impossible. Oil and gas are something which is needed for commuting, for cooking food, for machines, or commercial products like plastics, fertilizers, and is even used in some pharmaceuticals (Tom, 2012). So, nearly each aspect of an individual’s life is touched by some or other form of oil and gas. And this is the major reason why, even though this industry cases a lot of negated impact over the environment, it is still continuing (Scott, 2014).

Due to this reliance over the oil and gas industry, major challenges have been created. The most important one in this regards relates to the alarming rate at which the natural reserves of oil are depleting. If anyone is aiming sustainable development or sustainable future, the same becomes difficult with regards to the controversies which surround the oil and gas industry (Anis, 2015). Sustainability refers to the use of nature resources and the biological system in such a manner, that the future generations can also use them. If the present generation depletes all of the natural resources, the regeneration rate of which is very slow, the future generation would not have a sustainable future; because sustainability is actually the ability of sustaining (Mikkelsen and Langhelle, 2008). The commercial exploitation and the blatant misuse of the resources for earning profits and putting the environment and the notion of sustainability at risk, has surrounded the oil and gas industry for a long time (Weiss, 2008).

In the following parts, a discussion has been carried over the sustainability challenges which are being presently faced by the oil and gas industry.

In the oil and gas industry, managing of ethical risks becomes crucial, so that the safe and healthy working conditions can be provided to the workers. There is a need to adopt such ethical procedures which are based on the responsibilities, core values of respect, exemplary behavior and has to cover a range of central areas (Garbie, 2016). So, not only the environment has to be taken care of, there is also a need to adopt such practices which help the workers in getting a safe environment, which is free from catastrophes or disasters. The companies like Exxon and BP, along with the fracking industry have faced a lot of risks in the recent time which relate to the spillage, explosions and even contamination of the environment. And each of these aspects has a grave possibility of putting the environment at harm, along with the stakeholders. It is stated that an effective leadership, which is coupled with ethical decision making and promotion plus upholding of stakeholders can help in dealing with these issues (Ferrell, Fraedrich and Ferrell, 2016).

Managing Ethical Risk in the Oil and Gas Industry

Ethical risks are such possible risks, which although can be legal, but do break the base of being ethical or upholding the values (Nelson, 2016). Risk management relates to the dealing of risk before they take place, by effectively forecasting the same and undertaking such procedures which minimize or avoid the impact of such risks (Pritchard, 2014). In the oil and gas industry, a number of ethical risks are faced on the basis of the controversies that surround it and the accidents which are caused on frequent basis (Jennings, 2008).

It is known facts that due to the oil and gas industry activities like drilling operations, the air contaminants are released in the air and the same also contributes to the water pollution. Another aspect of such risks relate to the greenhouse gases which are the biggest cause of the global warming being presently faced and which is evidenced from the changing environment of the Earth (Casper, 2010). Often, the oil and gas industry have to go drill beneath the ocean floor surface, in order to get the oil resources, and in case a leak is caused during such drilling activities, it has serious repercussions over the entire ocean body, and its associated stakeholders (Faure, 2016).

Such risks make it crucial for the oil and gas industry to adopt such processes and procedures which make the entire process safe so that the negated impact over the environment could be reduced and the disasters could be averted (Revie, 2015). Though, due to the ethical lapses which the companies undertake, a number of environmental disasters take place. The famous examples of these are the ones undertaken by BP, Exxon and for which the fracking industry is presently being cursed (Ferrell, Fraedrich and Ferrell, 2016). Though, they would be discussed a little later.

A question which arises due to these issues is whether the ethical risks in the oil and gas industry can be effectively managed or not. The answer to this is not clear. This is because the world is running towards a commercial objective, where earning profits is the supreme goal. This does not mean that everyone has forgotten about the basic ethics and the value of life. Those who value life have emphasized over the effective management of such ethical risks, which can be clearly identified on the basis of past incidents (Noland and Anderson, 2015). The incidents like BP and Exxon have shown that the negligence of the industry can result in a grave harm to not only the environment, in terms of the life forms which live under the sea, but the same also affects the human beings who are dependent upon such life forms. If these risks are identified in timely manner, and steps are taken to steer clear of them, in case they actually take form, the environment can be safeguarded to a great extent (ERM, 2014).

Comparison of Risks faced by BP, Exxon and Fracking Industry

The ethical issues in the oil and gas industry relate to the keeping the commercial interests supreme in comparison to safeguarding the environment. Hence, it is an obligation of the oil and gas industry that when they undertake such activities, they ensure that the adequate and appropriate measures are adopted so that the environment and the possible stakeholders, which can be easily identified, are protected (Leveson, 2011). For instance, when the oil is drilled from the ocean shores, care needs to be taken that the oil is not spilled or leaked. And preparations should be made to contain the leakage, in case the same takes place. Another example of managing the ethical risks relates to avoiding the accidents which can be caused over the surface of the ocean. For instance, in the matter of Exxon spillage, the ethical risk could have been managed by the captain of the ship, by firstly not sleeping on the job, and even if he was, he should have appointed a reasonable person, who could have dealt with the situation at hand (Baram, 2011).

Another requirement on the part of the oil and gas industry is to ensure that the interests of the stakeholders are kept supreme. In case that is not possible, they should be kept at par with the commercial motives, so that each of these can be given equal weight age. When the decisions are taken on the basis of ethical values, the “life” would gain automatic supremacy over commercialization and the ethical values would help in reducing the number of accidents which are presently faced by the oil and gas industry. Hence, it is quite clear that by managing the ethical risks in the oil and gas industry, the possible accidents can be avoided. And even if they are not completely avoided, the individuals could be prepared to manage the magnitude of the disaster (RPS Energy, 2010).

The Exxon incident was such where the captain of the ship slept below the deck. And while the ship was under the command of Cousins, who was unlicensed for the role of piloting the vessel, the accident took place. Even though he had made attempts to stop the ship from being wrecked and hitting the reef, it eventually did. As a result of which, the oil was spilled over the sea which was one of the worse disasters of that time. And due to this disaster, a number of sea birds and other wildlife were killed. This also affected the people who were dependent over the sea wildlife, as the fishing season was closed. It was revealed later on that the captain was drunk. So, even when he had made attempts after the incident took place to get the ship free, he was unsuccessful. As a result of this aftermath, Exxon had to spend millions of dollars in compensation and also in the cleanup efforts, along with reimbursing the local, federal and state governments (Ferrell, Fraedrich and Ferrell, 2016).

The case of BP was also related to oil spill. This case also relates to the past incidents where the refinery explosion resulted in the death of 15 employees of the company. The company even changed its name and rebranded its image but the controversies were never left behind. In 2010, 11 employees were killed due to the explosion that was caused. There was also a leaking of thousands of gallons of crude oil from the damaged oil well which was an environment calamity. BP made attempts to relieve the pressure from the damaged well; though, these failed. Eventually, the oil washed up different coasts and even wreaked havoc over the fishermen’s livelihood. Several other individual whose income was dependent upon the Gulf were also affected. BP had a contingency plan which later on was revealed to be extremely inaccurate as it showed that the company was not prepared for the incidents like the Deepwater Horizon spill (Ferrell, Fraedrich and Ferrell, 2016).

The fracking industry has also faced a number of controversies, where its proponents state that it is beneficial for the environment and the opponents highlight the harmful effects of the environment. Even though fracking has been around for more than sixty years, the same has attracted a wide-scale media attention. Through this technique the gas can be drilled with more efficiency and the results can be improved by 45% for a single year. Though, this technique has major risks. It releases chemicals, as well as, methane into the water which is present near the drilling site. Now, it is known fact methane is one of the major contributors to the greenhouse gases and can easily shift forms. Even though the lifetime of methane I the environment of earth is less than the carbon emissions, the affects of it are twenty times higher. So, this technique ultimately degrades the environment. Fracking also necessitates a large amount of water, which later on gets mixed with chemicals like hydrochloric acid, benzene and diesel and attains carcinogenic properties (Ferrell, Fraedrich and Ferrell, 2016).

When the risks faced by BP, Exxon and the fracking industry are compared, it clearly reveals that these three greatly negate the environment. After the incidents which took place in the matter of BP and Exxon, care should have been taken that the incidents are not repeated. Even when BP has had a range of such incidents in the past, where the oil and gas activities undertaken by it have resulted in a grave harm, not only to the environment, but which has proved fatal for its employees, it was obligated to ensure that instead of merely changing its outer look, it concentrated over ensuring that the incidents were not repeated. And yet it failed in this regard (Ferrell, Fraedrich and Ferrell, 2016).

For Exxon, it was crucial that care was taken that the people responsible for running the ship were not working in an unethical manner. So, when it appointed people who were to lead the ship, it had to ensure that they had the proper license. Though, the risk of Exxon was lower in comparison to BP. This is evident from the fact that the captain of the ship consumed alcohol, which could not have been predicted by the company and hence, this particular risk could not have been avoided. Furthermore, it had no history of such incidents, and even though oil spillage incidents have taken place for others, the same did not take place in circumstances which were similar to that faced by Exxon (Ferrell, Fraedrich and Ferrell, 2016).

For the fracking industry, the risks are known, and hence, there is a need to take steps on their part to avoid any such incidents. So, when the risk faced by fracking industry is compared to those faced by BP and Exxon, it is the lowest. Though, this does not mean that this technique is safe or free from flaws. It has already been highlighted that oil and gas industry is crucial for the daily livelihood of the general public, and for providing the adequate supply of energy, the activities have to be undertaken by all three. Though, it is crucial that while undertaking their work, care is taken that the incidents of past are not repeated. And this is most important for BP as it is cursed with calamities. It is also crucial for Exxon due to the magnitude of loss to the environment and the amounts which it had to discharge as reimbursements. And just because an incident has not taken place in the fracking industry of such magnitude, it does not safeguard them from the possible future environmental calamities (Ferrell, Fraedrich and Ferrell, 2016).

Leadership is a position which enables the leader to get the people to adhere to them and to guide them the proper manner of undertaking the things. A leader leads by examples and motivates the others to follow the practices which the leader portrays to be ethical and acceptable (Disparte, 2016). The best way of managing the risks in any sphere of life is through ethical leadership. This is because it is such leadership which is particularly directed towards respect of the ethical values and beliefs, which is meant for the rights and the dignity of others. An ethical leadership is marked by concepts of fairness, trust, charisma, honesty and consideration (Butts, 2017).

When a mix of ethical leadership is attained with risk management, the environmental risks which are faced by the companies or the industry as a whole can be mitigated, if not eradicated. An ethical leader would keep the interest of the stakeholders before the interests of the organization and would make such decisions which do not have a negated impact over the environment (Svedin, 2015). For instance, in the case of Exxon, had the captain being an ethical leader, he would not have left the shift under the command of an individual who did not have the requisite qualification, experience or the license to manage the ship. More importantly, he would not have consumed alcohol when he knew he was on duty. Other than this, the lack of ethical leadership on part of Exxon is also highlighted here. Exxon should not have appointed an individual at place, when they knew he did not have the requisite pilot license. Due to these ethical breaches, the incident of oil spillage took place, which could not be controlled, even when attempts were made to do so (Ferrell, Fraedrich and Ferrell, 2016).

Had Exxon, or for that matter, the other organizations who have breached the ethical considerations, which have resulted in calamites, been ethical, they would have been considered as trustworthy organizations who could stand up or speak up for someone about their problems. If ethical leadership is taken on the positions of both higher and lower level management, the issues with regards to the possible risks could have easily been managed. Ethics is a rule of conduct which focuses over the actions of a person or a group and where the actions are undertaken on basis of common good instead of personal goods. It deals with morality and right conduct. So, ethical leadership focuses on the rights, dignity, opinion and the individualism of other people (ECI, 2017).

Hence, an ethical leader would ensure that the steps are taken by their organization which manages the identified risks in a proper and timely manner (Gould, 2013). Through ethical leadership, the companies themselves can set examples for the other companies in the oil and gas industry to follow such practices which are considered as ethical, instead of indulging in such activities where only their interests are kept supreme. This is with a special reference to the fracking industry, which even though has not faced a major issue, but on the basis of possible risks it faces, highlighted by its opponents trough strong criticism, it needs to undertake ethical practices and emerge as an ethical leader for the other industries. In short, through the ethical leadership, where ethical practices are followed and leading is done by examples, the risks being faced by the oil and gas industry can be managed whereby they can be minimized (Fernando, 2015).

Conclusion 

In the discussion carried in the previous parts, the ethical issues which have been faced by the oil and gas industry, with a particular regard to sustainability, had been highlighted. This discussion revealed how the companies like BP keep their personal interest supreme and harm the various stakeholders over and over again, just for gaining personal benefits, even when they personally have to bear costs due to such incidents. The previous parts emphasized over the fact that in order to manage the ethical risks which are being faced in the oil and the gas industry, there is a need to adopt the ethical practices and keep sustainability in the mind.

The case of fracking industry, along with that of BP and Exxon shows that the companies ignore the ethical consideration in a number of times, due to which, the environment has to be bear the losses. The companies come, create a havoc, pay fines and leave, but the environment has to bear the repercussions for a long time. Through the adoption of ethical leadership and following ethical practices, such risks can be mitigated.

References 

Anis, M.D. (2015) Issues Impacting Sustainability in the Oil and Gas Industry. Journal of Management and Sustainability, 5(4).

Baram, M. (2011) Preventing Accidents in Offshore Oil and Gas Operations: the US Approach and Some Contrasting Features of the Norwegian Approach. [Online] Center for Catastrophic Risk Management. Available from: https://ccrm.berkeley.edu/pdfs_papers/DHSGWorkingPapersFeb16-2011/PreventingAccidents-in-OffshoreOil-and-GasOperations-MB_DHSG-Jan2011.pdf [Accessed on: 01/06/17]

Butts, J.B. (2017) Ethics in Organizations and Leadership. [Online] Jones and Bartlett Learning. Available from: https://www.jblearning.com/samples/0763749761/EthicalLeaderhip.pdf [Accessed on: 01/06/17]

Casper, J.K. (2010) Greenhouse Gases: Worldwide Impacts. New York: Facts on File Inc.

Disparte, D. (2016) Simple Ethics Rules for Better Risk Management. [Online] Harvard Business Review. Available from: https://hbr.org/2016/11/simple-ethics-rules-for-better-risk-management [Accessed on: 01/06/17]

ECI. (2017) Five Keys to Reducing Ethics and Compliance Risk. [Online] ECI. Available from: https://www.ethics.org/resources/free-toolkit/reducing-risk [Accessed on: 01/06/17]

ERM. (2014) Sustainable Solutions for the Oil and Gas Industry. [Online] ERM. Available from: https://www.erm.com/globalassets/documents/presentations/2014/sustainable-solutions-for-the-oil-and-gas-industry.pdf [Accessed on: 01/06/17]

Faure, M. (2016) Civil Liability and Financial Security for Offshore Oil and Gas Activities. Cambridge: Cambridge University Press.

Fernando, M. (2015) Leading Responsibly in the Asian Century. New York: Springer.

Ferrell, O.C., Fraedrich, J., and Ferrell, L. (2016) Business Ethics: Ethical Decision Making & Cases. 11th ed. Boston, MA: Cengage Learning.

Garbie, I. (2016) Sustainability in Manufacturing Enterprises: Concepts, Analyses and Assessments for Industry 4.0. New York: Springer.

Gould, S. (2013) Ethical Leadership and Developing a Code of Conduct for Organizations. [Online] International Federation of Accountants. Available from: https://www.ifac.org/global-knowledge-gateway/ethics/discussion/ethical-leadership-and-developing-code-conduct [Accessed on: 01/06/17]

Jennings, M. (2008) Business Ethics: Case Studies and Selected Readings. 6th ed. Mason, OH: Cengage Learning.

Leveson, N. (2011) Risk Management in the Oil and Gas Industry. [Online] MIT. Available from: https://energy.mit.edu/news/risk-management-in-the-oil-and-gas-industry/ [Accessed on: 01/06/17]

Mikkelsen, A., and Langhelle, O. (2008) Arctic Oil and Gas: Sustainability at Risk?. Oxon: Routledge.

Nelson, B.L. (2016) Law and Ethics in Global Business: How to Integrate Law and Ethics Into Corporate Governance Around the World. Oxon: Routledge.

Noland, D.P., and Anderson, E.T. (2015) Applied Operational Excellence for the Oil, Gas, and Process Industries. Oxford: Elsevier.

Pritchard, P. (2014) Environmental Risk Management. London: Earthscan.

Revie, R.W. (2015) Oil and Gas Pipelines: Integrity and Safety Handbook. Hoboken: John Wiley & Sons.

RPS Energy. (2010) Preventing Major Accidents in the Oil and Gas Industry. [Online] RPS Energy. Available from: https://www.rpsgroup.com/Energy/Services/Advisory/Downstream/pdf/RPS-Final-Hazard-White-Paper_Nov2010_combined.aspx [Accessed on: 01/06/17]

Scott, M. (2014) Challenges for oil & gas. [Online] Raconteur. Available from: https://www.raconteur.net/sustainability/challenges-for-oil-gas [Accessed on: 01/06/17]

Svedin, L. (2015) Ethics and Risk Management. Charlotte, North Carolina: Information Age Publishing.

Tom, R. (2012) Integrated Operations in the Oil and Gas Industry: Sustainability and Capability Development: Sustainability and Capability Development. Hershey, PA: Business Science Reference.

Weiss, J. (2008) Business Ethics: A Stakeholder and Issues Management Approach. 5th ed. Mason, OH: Cengage Learning.

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