The Fall of British Petroleum’s Ethics

British Petroleum (BP), a global energy group based in London, is no stranger to environmental hazards. Over the last 20 years, dating back from the Exxon Valdez oil spill to the present day Gulf Coast oil spill that followed the explosion of an off-shore drilling site late last month, BP has found themselves in a number of unethical decisions that have caused a drop in their reputation. Companies are formed to turn profits for their stakeholders. However, we must ensure that unethical decisions do not hold back profits by damaging the company’s reputation. I will attempt to explain how unethical decisions can be linked to a company’s reputation and inevitably affect profits.

Down Hill Slide

In 2005, an independent research and rating company named Management & Excellence S.A. (S&E) was founded in Madrid in 2000. S&E released the 2005 results of their ethical study that covered ethics within some of the top oil companies in the world. The S&E ethical study was titled, “Ethics in the Oil Industry 2005” and upon it was BP at number three on the list. The only two oil companies ahead of BP were Royal Dutch Shell at number one and Exxon Mobil at number two. (Manage & Excellence, 2005) BP has displayed that they take ethics very seriously, at least enough to be recognized in the study. This will be our apex to the slippery slope in which the reputations of BP will start its decent.

Also, in 2005, BP faced its worst disaster to date when one of BP’s refineries located in Texas City, Texas, exploded killing 15 people and injuring another 180 individuals and forced thousands of nearby residents to take up shelter within their homes. (Mauer & Tinsley, 2010) An Investigation lead by the U.S. Chemical Safety and Hazard Investigation Board found, “organizational and safety deficiencies at all levels of the BP corporation.” British Petroleum pleaded guilty to felony acts that violated the Clean Air Act and was fined $50 million while only receiving a three year probation sentence. The Occupational Health and Safety Administration (OSHA) issued the largest fine in OSHA history, $87 million, to BP after conducting their investigation. (Mauer & Tinsley, 2010) OSHA discovered over 270 violations that had been previously cited but not fixed and 439 new violations. Ethical problems can be seen with the 270 violations that were ignored and not fixed by BP.

In 2006, BP pleads guilty to a federal misdemeanor that cost BP $20 million in criminal penalties due to an estimated 201,000 gallons of oil that leaked out into the Alaskan Tundra. The Anchorage Daily News stated, “Prosecutors said BP manager failed to heed “many red flags and warning signs” that key pipelines within the nation’s largest oil field were going bad.” (Loy, 2007) BP continues to show ethical problems by ignoring red flags and warning signs that could have stopped the leaks from occurring.

In 2007, BP faced increased problems concerning pollution at a refinery in Whiting, Indiana. British Petroleum uses this refinery to refine heavy crude oil from Canada and is the nation’s fourth largest refinery. (Verschoor, 2007) The refinery is also one of the largest polluters in the Midwest, and now with BP looking to expand the refinery, would release 54% more ammonia and 35% more “sludge” into Lake Michigan. (Verschoor, 2007) Ammonia allows for the growth of algae blooms that can kill fish and trigger beach closings and the sludge contains concentrated heavy metals like lead, nickel, and vanadium. How does BP get away with mixing toxic waste into Lake Michigan when this type of process BP uses is banned in Lake Michigan? Regulators gifted BP with the first ever exemption for the process of mixing waste with clean lake water 200ft offshore Lake Michigan. BP continues to create ethical problems in all forms of environmental issues. How did BP obtain the exemption and why didn’t they respect the laws already in place for the Lake?

After three years of unethical decisions being conducted by BP, we are starting to see a clear ethical drop in BP’s practices. Another report by M&E released in 2007 titled, “World’s Most Sustainable and Ethical Oil Companies 2007,” again positioned the top oil companies in the world from highest to lowest in Ethics using a 120 point evaluation process. (Management & Excellence, 2007) The 2007 report shows that BP has fallen to number four on the list. Shell, Petrobras, and Total hold the top three spots now. These reports coincide with the unethical behavior being conducted by BP. Furthermore, in 2008, BP had no major unethical environmental outbursts and the M&E report for 2008 placed BP at number three on the list.

Summary

With the recent Gulf Coast oil spill, BP’s ethical dilemmas are continuing to grow. As authorities try to uncover why the explosion happened and the events that lead up to it, I would bet that a whole new crop of unethical decisions made by BP will be seen. Some of the unethical issues to arise already are BP’s failure to admit that an accidental surface or subsurface oil spill would occur from the well in a report to the federal Minerals Management Service and BP never addressed how to address a spill at 5,000 feet or below. (CBS/AP, 2010) Common sense would tell you that you should address at a minimum how to stop an oil spill at new depths before drilling. Only time will tell what next years M&E ethical report will grade BP, but if I had to guess, I would say it’s going down a few spots.

References

CBS/AP. (2010, April 30). BP Didn't Plan for Major Oil spill. Retrieved May 10, 2010, from CBSNews.com: http://www.cbsnews.com/stories/2010/04/30/national/main6449241.shtml

Loy, W. (2007, October 26). BP Fined $20 million for pipeline corrosion. Retrieved May 10, 2010, from VicVickers.com: http://www.vicvickers.com/files/ADN-20071026-BP-Fine.pdf

Manage & Excellence. (2005, February 24). Studies and Rankings. Retrieved May 10, 2010, from Manage & Excellence: http://www.management-rating.com/index.php?lng=en&cmd=210

Management & Excellence. (2007, February 21). World's Most Sustainable and Ethical Oil Companies 2007. Retrieved May 10, 2010, from Management & Excellence: http://www.management-rating.com/archivo/Brochure%20Oil%20Study%202007l.pdf

Mauer, R., & Tinsley, A. M. (2010, May 10). BP has long history of legal, ethical violations. Retrieved May 10, 2010, from STLToday.com: http://www.stltoday.com/stltoday/news/stories.nsf/nation/story/8B253843F6E57DD58625771E00821C1C?OpenDocument

Verschoor, C. C. (2007, September). Is BP an Acronym for "Big Polluter"? Retrieved May 10, 2010, from imanet.org: http://www.imanet.org/pdf/09_07_ethics.pdf

By: Joseph Dustin