Ethical and Safety Improvements to Promote Sustainability for BP
Introduction
To maintain its status as a premier oil producing and refining organization, BP must
examine its ethical practices to ensure the safety of its employees, production sites, and
the overall sustainability of the environment in our world. Each year BP has to make up
for losses that are incurred due to the lack of a safe workplace. While the company
promotes safety courses for its employees, BP has repeatedly avoided, ignored, and
denied claims of work place disasters being caused directly from unsafe work
conditions. Accepting the true causes of its organizational disasters will lead to the
expansion of safety measures and environmental sustainability. Alongside accepting
the true causes of these damages, BP must be willing to set aside its primary concern
for profits and insist that cutting costs from safety measures will be stopped.
Purpose and Scope
This report will examine two of BP’s latest disasters, the Texas City fire and the
Deepwater Horizon spill, and provide evidence of how future problems can be avoided
through various strategies and how the organization will be able to remain profitable.
The need for advances in BP’s ethical relations to the environment and safety of its
workers will be expressed through the following topics: (1) The need to maintain upkeep
and replace outdated machinery to create safe working conditions. Following the
malfunctioning of an octane-boosting isomerization (ISOM) unit, which had been
designed in the 1950s, the unit burst into flames and took the lives of fifteen workers1;
(2) BP concludes the cause of the Texas City refinery fire was due to a “series of
failures” by its staff.2 Since the event BP has made reformations to safety practices and
employee safety reports, but it has proven to still be in need of a transformation rather
than reformation; (3) BP, like most organizations, contracts its construction to the lowest
bidder, but in the case of the Deepwater Horizon breach, this practice proved to be
disastrous. This report will establish the needs for an improved ethics system and code
for the organization based on safety and sustainability.
Environmental Disregard and Penalties
BP has a long record of violations against the United States Environmental Protection
Agency extending back to its merger with US-owned Amaco in 1998. For instance, the
following year, BP was fined over $6 million in penalties for dumping hazardous waste
at an oil field. This was just the beginning of BP and its continued disregard for
regulations and policies set by the EPA. A fire at a Texas City, TX, refinery resulted in
the largest fine given by the OHSA for safety violations. The incident cost BP $50.6
million alone.
“The ‘Other Cause’: Unsafe Conditions in the Workplace,” Safety Compliance Letter,
no. 2842, October 2007, p. 1, Business Source Premier, EBSCOhost, accessed on
March 3, 2012.
2 “Following the rules,” The Economist, Vol 13, No. 29, August 15, 2005, p. 1, Business
Source Premier, EBSCOhost, accessed on March 3, 2012.
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Methods
The information presented throughout this report has been collected through
researching academic peer-reviewed journals, newspapers, company reports and
analysis, and online sources.
Criteria
Despite the fines and penalties the EPA and OSHA has placed on BP, further efforts
must be made from within the organization to salvage its future production and
generation of profits. Until these efforts are made BP will continue to put the lives of its
employees, wild life, and our entire planet in danger. These perils can be prevented and
avoided if the Report’s recommendations are considered and implemented in their
entirety.
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The Safety of Oil Extraction and Refinement: A Growing Concern With
A Disastrous Past
Throughout the years safety has been a large concern for those involved with the
extraction and refinement of oil. Since the beginning of the industry there has always
been risk involved with safely transporting crude oil from its current location to
refinement plants around the world. Despite precautions being made and safety being
preached endlessly, disaster continues to plague the industry. While each and every oil
refining organization has suffered one catastrophe or another, BP’s recent history has
made its need for safety reform and ethical advancement very clear to all who bare
witness. Particularly, I would like to isolate my focus on two events which have cost the
organization millions of dollars in the past decade, namely: the Texas City, TX fire; and
the Deepwater Horizon blow-out in the Gulf of Mexico.
Texas City, Texas Refinery Fire
In March 2005, 15 employees were killed and many others were injured as a result of
an exploding isomerization unit.3 While incidents such as this are known to occur, later
investigations found that there were signs that led to the explosion and several other
safety precautions and general maintenance of the machinery that were a direct cause
of the explosion. BP reported that the explosion was merely “a series of failures” by the
staff.4 This “series of failures” had a reoccurrence just four months later when an
obsolete resid hydroheating unit overheated and burst into flames. The Chemical Safety
and Hazard Investigation Board said that the cause of the fire was improper piping
materials being used.5 Further investigations reported that both of the units, which had
exploded had proven to be obsolete machinery, which was neglected and had not been
properly maintained. In particular the pipe-fittings from the resid hydroheating unit had
not been replaced with the proper fittings suitable for the extreme temperatures that
they would be exposed to. Ultimately, it was only a matter of time until the units would
fail.
As a result of these incidents, BP terminated several employees whom they thought to
be the most responsible, and several plant managers were also relieved of their
positions. Over the next several years, BP was charged with various fines and penalties
including the following:
 2007: US Department of Justice: $50m criminal fine with three years of probation
 2009: Occupational Safety and Health Act (OSHA): $87.4m penalty for violations
o 2010: BP agrees to pay $50.6m but continues to contest the remaining
sum of the penalty
“DATAMONITOR: BP Plc,” BP, PLC SWOT Analysis, April 2011, MarketWatch:
Energy 11, p. 20, Business Source Premier, EBSCOhost, accessed on March 1, 2012.
4 The Economist
5 Kara Sissell, “CSB: Improper Piping Placement Caused BP Texas City Fire,” Chemical
Week, 168, 35, October 25, 2006: 59. Business Source Premier, EBSCOhost, accessed
on March 3, 2012.
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The Deepwater Horizon Explosion
On April 21, 2010, BP’s drilling rig exploded and claimed the lives of 11 people. While
this loss of life is significant, the months following the explosion proved to be even more
critical to the organization and the environment alike. Following the explosion of the
$500 million rig, it consequentially sank and became the cause of the one the worst
environmental disasters in the United States.6 Over the next several months,
approximately 53, 000 barrels of oil leaked into the Gulf of Mexico. The spill was finally
contained but only after nearly 5 million barrels of crude oil had been leaked into the
water. The surging oil leak had quickly progressed onto the shores of nearby states
including Louisiana, Mississippi, and Florida. The several months of failed attempts to
seal the rupture resulted in approximately $2.4 billion in costs primarily for cleanup.
Figure 1: Deepwater Horizon Clean up Costs (May 2010 – June 25, 2010)7
The costs shown above (Figure 1) reflect only the first two months of cleanup costs.
Thus far, a final cost has not yet been established, but for the 2010 fiscal year, BP has
recognized charges totaling $40.9 billion for the Deepwater Horizon incident alone.
Certainly these costs are significant; but even worse, they were avoidable.
In an interview, Loren Steffy, author of “Drowning in Oil: BP and the Reckless Pursuit of
Profit,” suggests that BP has not learned from its previous accidents and is still placing
the organization’s profits before the safety of its workers. He believes that this was a
“DATAMONITOR: BP Plc,” p.20
CBS News, BP Spill Costs Reach $2.35B, Shares Plummet, http://cbsnews.com/2100500395_162-6617282.html, accessed on March 15, 2012.
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primary cause for the Deepwater Horizon disaster. Just as in the Texas City fire, signs
had been ignored or not considered to be significant enough to require an immediate fix.
Although the accident resulted in such a large leak, the rig was over a month behind
schedule and costing BP millions of dollars due to the loss in production. One of the drill
operators stated that there had been a reoccurring loss in drilling mud which the created
a reoccurring loss in productivity. As a result BP cemented the well and continued its
efforts. Halliburton, the organization contracted to cement the well, ignored the concerns
about the general design and planning for the cementing process brought up by one of
their engineers. Ultimately, it was this design flaw that lead to the catastrophe.8
Being aware of the poor design and strategy for cementing the well is clear evidence of
BP’s willingness to put safety behind profits. Investigations following the sinking of the
oil rig have provided evidence that BP and Halliburton as well as other organizations
involved with the well violated regulations and pushed for a timely completion of the
project rather than the safeness of the rig itself.9 For the Deepwater Horizon project,
employees that were subject to performance evaluations provided that a part of their
evaluations was their ability to cut costs and speed up the completion of the well.
While the financial damage caused both internally and externally by the Deepwater
Horizon oil rig disaster is phenomenal, the lasting effects of the incident will prove to be
even more catastrophic. Internally the damage has expanded from profits to public
humiliation. Externally, the environmental damage has resulted in a loss of BP’s profits,
as well as the potential permanent damages to the habitats of marine life.
An Overview of Safety Violations
While maintaining a primary focus on the damages and costs of the Deepwater Horizon
and the Texas City disasters, there has been many other incidents which provide further
evidence of the need for BP to further examine its ethical and safety procedures. Some
of these events, such as the Prudhoe Bay oil spill, suggest BP’s poor attempts to
maintain sustainability. Other instances never resulted in such disastrous conditions, but
surely if BP does not plan to transform its organizational outlook on safety and ethics,
any of these cases may be tell-tale signs of future disasters to come.
On the following page I have included a timeline of safety violations that BP has
committed and been penalized by the Organizational Health and Safety Administration
(Figure 2). Details presented within the timeline, provide explicit evidence of the BP’s
failure to maintain safe working environments and displays the organizations overall
negligence for its employees safety and well-being.
“An Interview with Loren Steffy, Conclusion,” Business & The Environment, Vol. 23,
no. 2, February 2012, p. 4, accessed on March 2, 2012.
9 Sandy Smith,”Deepwater Horizon: Production Rewarded, Safety Ignored,” EHS
Today, no. 4, October 2011, p. 66, Business Source Premier, EBSCOhost, accessed on
March 12, 2012.
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Figure 2:
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Beyond the Numbers: The Real Issue Surrounding BP
Containing Public Scrutiny through Safety
While taking such great economical hits as a result of each of its disasters, BP faces
larger issues, which could ultimately lead to greater profits in the future. It is clear to see
that safety has been neglected in search of greater profits, but resulted in astronomical
losses. These losses are not limited to finances, the pubic perspective of BP as a brand
was greatly impacted as well. With its history of creating environmental issues, the
reputation of the company has suffered greatly. It seems that with each violation of
operational safety, BP appears to become a larger target for consumers to create a
negative connotation with, and rightfully so. The recent bashing is nothing new the
brand and I believe the worst is yet to come if BP is unable to adapt a safer way to
operate.
10
Fast Company, Fossil Fuel Industry Hangs BP Out to Dry,
http://fastcompany.com1667839/fossil-fuel-industry-hangs-bp-out-to-dry, accessed on
March 12, 2012.
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Originally being named British Petroleum and using the slogan “Beyond Petroleum”
after its merger with Amaco, “BP” has been considered to stand for several other names
or slogans. The following are some of the more common, or unique translations of the
oil refining company’s name and slogan:
 Best Polluter
 Boycott Petroleum
 Big Problems
While these names are certainly attacks against BP, they also act as a guiding light for
the organization. According to BP’s Code of Conduct, BP is “committed the protection of
the natural environment, to the safety of the communities in which we operate, and to
the health, safety, and security of our people.” The summary of the BP Code of Conduct
notes that the Code is the “cornerstone” of BP’s commitment to integrity and
“summarizes the standards” of how they behave. 11 However, history reveals that while
these facets are present, they are not being properly executed. To have such
aspirations of being a truly sustainable organization is wonderful, but to fail to achieve
this is damaging not only to the environment that BP swears to protect, but also to the
organization as a whole. These failures have cost BP’s brand image to suffer, which in
turn has lead to decreasing revenues and have even spurred consumers to boycott the
company by refusing to purchase gasoline from its distributors. BP not only failed to
achieve the goals laid out by its Code of Conduct, but it also failed any possible
salvation through poor public relations.
In the aftermath of the Deepwater Horizon oil rig explosion and spill, the public
intensified its scrutiny of BP for its environmental and safety negligence. To make
matters worse, Tony Hayward, BP’s CEO at the time of the incident, made public
statements saying how they “will make it right” before the well was sealed.12 This
statement, and other similar statements made at the time, revealed BP’s main concern
to be its own image and reputation rather than the containment of the spill and the
effects it would have on the surrounding area. These promises and statements followed
by failed actions created a great amount of damage to BP’s reputation and made
shareholder’s consider the capability of Hayward to further lead the organization.
In October of 2010, Tony Hayward stepped down from his position and was replaced by
Bob Dudley. However, this has not created much more than ripples in the organizational
pool. While a new head was clearly needed after the public relation fiascos made by
Hayward, it does not mean a new establishment of safety in the workplace. In an
interview, Loren Steffy states:
Curtis Verschoor, “BP Still Hasn’t Learned Ethical Lessons,” Strategic Finance 92,
no.2, August 2010, p. 1, Business Source Premier, EBSCOhost, accessed on March 2,
2012
12 John Balmer and others, “Explicating Ethical Corporate Marketing. Insight from the
BP Deepwater Horizon Catastrophe: The Ethical Brand that Exploded and then
Imploded,” Journal of Business Ethics 102, no. 1, p. 11, Business Source Premier,
EBSCOhost, accessed on March 1, 2012.
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Dudley will try to once again change BP’s culture without changing the people,
much as Hayward tried and failed to do…. Dudley must recognize the deep and
dangerous problems that plague BP [that pose] a threat to both worker safety
and the environment…. [New safety initiatives] and [the] executive reshuffle
must, at least, be and admission of the company’s past mistakes….I’m very
concerned that the lessons aren’t resonating with BP. Their response has been
very similar to their response to Texas City. I don’t believe they have addressed
the fundamental cultural issues that are at the root of all their operating
problems.13
Steffy brings to light that safety for both worker and the environment are key to BP
successfully reestablish itself in the eyes of the community. These values provide much
more than a marketing ploy. By increasing the safety of the working conditions, BP will
also eliminate the losses incurred from such disasters. Developing safer working
conditions will surely create immediate costs, but surely there initial expenses will be
much less than the expenses created by disasters that would have been preventable
had BP developed safer conditions.
Ethical Understanding
While BP has developed a great understanding of how the industry operates, there is
sufficient evidence to suggest that the organization’s understanding of ethics is less
than to be desired. As expressed by Ron Crossland of Human Resource Planning,
“Without ethical leadership, growth is at best a ruse and at worst an economic calamity.
Any growth strategy that does not include the satisfactory growth of leadership talent
will eventually wander into sticky thickets.”14 As presented earlier, Loren Steffy sees
little hope for BP to change it’s ways, but notes that there is certainly room for the
organization to improve Its ethical understanding across the board.
BP’s Code of Conduct clearly expresses its aspirations to promote a safe environment
for its workers and the surrounding areas alike. However, this code is simply written on
paper and expressed through speeches. In attempts to truly live up to these aspirations,
BP must first recognize what corporate social responsibility (CSR) is. CSR can be
defined as the management of stakeholder concern for responsible and irresponsible
acts related to the environmental, ethical, and social phenomena in a way that create
corporate benefit.15 By fully understanding this concept and applying it to its facilities
rather than just stating it as a part of its code, BP will create a safer environment,
promote a better brand image, and possibly eliminate future disasters and losses. The
potential elimination of disaster, and financial losses, as well as reducing possible fees,
“An Interview with Loren Steffy,” Business & The Environment, p. 4
Crossland, Ron, “Growing Leaders to Grow Your Business,” Human Resource
Planning 30, no. 4, October 2007, p. 14, Business Source Premier, EBSCOhost,
accessed on March 2, 2012.
15 Balmer, Explicating Ethical Corporate Marketing, p. 7.
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ought to be enough to persuade BP to at least consider updating is current safety
operations.
Through the development of an organization-wide understanding of CSR, BP will be
able to promote such sustainability in all aspects of the organization. This understanding
will also increase worker awareness, which as a result lead to safer operations and
eventually the resurrection of the organization’s public image.
BP: Beyond Profits
An Ethical Approach
While BP has recovered from the initial loss suffered from the Deepwater Horizon
incident, shareholders ought to be concerned with the future of the organization. Clearly
the safety teams in affect right now are irrelevant since they have done nothing to stop
such accidents from occurring. If shareholders wish to remain profitable off BP they
must see that change is needed across the board.
As stated previously, the accidents that occurred at both the Texas City Refinery and
the Deepwater Horizon rig were both avoidable. By increasing the frequency and
intensity of inspections paired with the replacement of obsolete technology and
machinery, BP will be able to cut the costs that future accidents may have incurred.
Certainly, the upkeep of machinery will add to the initial expenses paid but in the long
run establishing a safer work environment will produce greater profits.
The creation of safety boards for each facility and rig with an up-stream operation will
promote more workers to express their concerns in a way that will develop a safer
environment to work in. Ultimately, this strategy relies on upper management’s
willingness to set aside immediate profits in order to maintain safe work conditions for
all who are involved.
While investigations reported that the primary cause for the Texas City accident was
improper materials being used, by installing a more intense training program for
employees, BP would raise the awareness of every employee to certain safety factors.
Increasing the awareness of its employees will allow each employee to be to spot
problems throughout the facility.
While continuing to follow its current Code of Conduct, BP ought to promote this code
not by what it is able to write on paper but rather by moving safety up on its priorities
through actions. These actions will eliminate costs, and promote the organization in a
beneficial way that may ultimately lead to greater gains and larger profits. These actions
will also result in a better reputation with the public and may lead to new levels of
consumer involvement based on purely on its consideration for its workers.
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Conclusion
BP has been faced with many hardships as the result of disasters. These hardships
expand from the loss of profits to the loss of life. If BP wishes to eliminate some of these
hardships it must actively pursue to make the working environments safer for all people.
By doing so it will not only eliminate loss, but resurrect its public image through the
promotion of the environmental sustainability. The creation of a new active campaign to
protect the environment and workers alike is something that all stakeholders can agree
on as being an important issue. The destruction of the environment will ultimately lead
to the destruction of BP’s source of revenue. If BP wishes to continue to be a prominent
force in the competitive market, it will have to consider these changes in its operations.
During the second quarter of 2010 BP reported a $17.1 billion loss, but the company
has recovered from this loss in the fourth quarter of 2011.16 During this period, BP
earned approximately $7.7 billion in profits.17 While these numbers suggest that BP has
made a comeback from its most recent accident, following the reported
recommendations will increase the probability of avoiding such astronomical losses like
the one suffered in the second quarter of 2010. By avoiding these losses, profits will
continue to rise, which will not only be better for the organization itself, but also for those
who own shares in it.
As the need for oil continues to grow, so does the need to make operations safer. With
the increase in production, there is also an increase in the possible risks. By showing a
greater concern and a larger commitment to operational safety, BP can continue to
grow and expand throughout its global market.
16
BP, Second quarter 2010 results,
http://bp.com/extendedgenericarticle.do?categoryld=2012968&contentld=7063863,
accessed on April 17, 2012.
17 Clifford Krauss, Julia Werdigier, “Two Years After Spill, BP Profits and Plans,” New
York Times, http://www.nytimes.com/2012/02/08/business/global/bp-reports-strongerq4-earnings-in-2011.html?pagewanted=all, accessed on April 17, 2012.
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