The concept of sustainability is a modern trend in the business environment. Both the internal and external environments of modern companies aid in their sustainable management and operation. Sustainable practices in the contemporary business world integrate the concepts of corporate and environmental sustainability and social responsibility. Corporate sustainability enables modern businesses to make profits, while at the same time, conserving the environment through the reduction of pollution and emission of greenhouse gases. They also give back to society through corporate social responsibility programs. Corporate commitment to sustainable practices is driven by various factors, both in the internal and external business environments, such as organizational identity, management policies, and government policies, among others. The concept of corporate sustainability enables businesses to make profits while conserving the environment and providing social benefit to members of society, thus ensuring companies’ long-term viability.
Task 1
Corporate sustainability poses numerous advantages to businesses, the environment, and society. Sustainable management enables businesses to realize immense profits while conserving the environment and engaging in humanitarian activities. Sustainable business management provides a win-win situation for all business stakeholders as companies continue to make profits while preserving the environment. However, the implementation of sustainable corporate practices is expensive and time-consuming. This challenge has resulted in several companies delaying to make and implement sustainable management policies. Numerous key drivers and stakeholders, both within the internal and external business environment, contribute to enhance modern company’s commitment to sustainability. The critical sustainability drivers ensure that organizations make and implement sustainable practices. By making businesses choose between being sustainable or going out of business, sustainability drivers enforce their commitment to sustainability. Sustainability drivers have resulted in numerous contemporary companies adopting and implementing sustainable business management models.
British Petroleum is one of the oldest, largest, and most successful oil companies in the world. British Petroleum (BP) was established in 1908 as the Anglo-Persian oil company, with its headquarters located in London. BP has since expanded its energy operations worldwide as it currently has a presence in eighty countries (BP Sustainability Report, 2019, p.3). Thanks to BP’s worldwide energy operations, the company produces more than 3.5 million barrels of oil a day (BP Sustainability Report, 2019, p.5). BP’s global operations have made it one of the richest companies in the world through market capitalization, with the company being ranked the 6th largest energy company globally (BP Sustainability Report, 2019, p.5). BP also has one of the most comprehensive corporate sustainability models that ensure the sustainability of its function and business operations. Numerous sustainability drivers operate to ensure that the BP Company and its thirty subsidiaries are operated in a manner that conserves the environment and considers the social need of people in all the areas of the organization’s operations.
Business shareholders are at the forefront of driving modern corporates’ commitment to sustainability. BP’s shareholders lead from the front in ensuring that the company operates sustainably, and its activities are guided by sustainable management policy. Over the years, BP shareholders have advocated for better sustainable management models, and this has led to the constant evolution of the company’s operations and practices (BP Sustainability Report, 2019, p.3). By adopting an environmental, social, and governance (ESG) policy, BP shareholders have adopted structures that they use to hold the company’s executives accountable for sustainability issues (Epstein and Buhovac, 2010, p.309). The company’s ESG policy enables BP shareholders to have an intricate comprehension and analysis of the company’s sustainable practices and how they relate to those of rival companies. In the contemporary world of investments, asset owners are increasingly evaluating companies’ ESG policies before investing their money in any business organization (Eccles and Klimenko, 2019, p.109). The increased role of shareholders in advocating for sustainability has made several modern companies change their policy models to attract more investors.
BP investors and shareholders have also expanded the company’s scope of fiduciary duty to include financial returns and sustainability returns. The current expansive fiduciary duty of BP obliges the company to provide its shareholders with sustainability reports that focus on the corporate and environmentally sustainable practices of the organization and its corporate social responsibilities annually (Eccles and Klimenko, 2019, p.110). BP shareholders also drive corporate sustainability by offering incentives to the company’s executives and workforce whenever set sustainable targets are achieved. BP offers 9% of the company’s annual profits to its workforce when set environmental and corporate sustainability targets are achieved (Eccles and Klimenko, 2019, p.112). The rewards enable the company’s workforce and executives to remain committed to implementing corporate sustainability in the company’s operations.
Proper organizational identity is an essential driver of corporate commitment to sustainability. British Petroleum has established a proper organizational identity that emphasizes its commitment to sustainability. Over the years, BP has evolved its organizational identity to ensure that it matches with its aims of venturing into green energy sources, such as solar and wind (BP Sustainability Report, 2019, p.6). BP has invested heavily in sustainability campaigns that aim to link the company’s identity with sustainability and green energy. The company invested millions of dollars in BP’s Go Green campaign and the reimagining energy initiatives that sought to inform the world of its commitments to sustainable energy (BP Sustainability Report, 2019, p.5). BP has since rebranded so that the company can be publicly identified with the Go Green Movement that is central to its activities. BP also changed its organizational structure from the traditional bureaucratic-based system to a simple, decentralized system to complete the company’s switch to sustainability. The company currently utilizes a decentralized organizational structure divided into three groups; business groups, enablers, and integrators (BP Sustainability Report, 2019, p.9). The company’s three groups are interdependent and have the autonomy to function sustainably without interfering with the company’s operations (BP Sustainability Report, 2019, p.5). BP came up with modified values and a code of conduct centered on sustainability and green energy to ensure that its operations match its organizational identity.
Social activism has been and continues to be a key driver of BP’s sustainable management practices. Before adopting sustainability in 2010, after the Deepwater Horizon disaster and oil spill, the company was notorious for its unsustainable practices. Before 2010, BP was built around a business model that focused on making money for its investors at whatever cost, and this resulted in the company’s unsustainable activities causing numerous environmental accidents around the world (Epstein & Buhovac, 2010, p.308). In 1965, BP recorded its first of many environmental disasters when its hastily constructed oil rig collapsed, killing thirteen workers and releasing hydrocarbons to the environment (Epstein & Buhovac, 2010, p.308). The company’s refinery in Texas City was also plagued by several chemical leaks, which resulted in a significant explosion in 2005 after BP failed to take action on the reported leakages (Epstein & Buhovac, 2010, p.308). The explosion killed 15 workers and released millions of volumes of toxic fumes and hydrocarbons to the nearby environment. In both 2006 and 2007, the company’s operations were besieged by gas leaks in both the Prudhoe Bay and the Caspian Sea, respectively (Epstein & Buhovac, 2010, p.309). In 2010, the Deepwater Horizon disaster took place on the Gulf of Mexico, resulting in the death of 11 workers and the spillage of more than 4.5 million barrels of oil (Epstein & Buhovac, 2010, p.310). The spillage was the worst in history and brought unprecedented public relations problems to BP.
Social activists fed up with the company’s irresponsible behavior asked consumers to shun BP’s products. The social activists also started to run anti-BP campaigns that reduced the company’s stock value to an unprecedented low, making the company make huge losses (Epstein & Buhovac, 2010, p.310). The deleterious effects of social activism made the BP board to appoint a fresh executive team tasked with making the company’s operations sustainable. After the 2010 disaster, the company embarked on making a raft of changes to its procedures, models, and policies to ensure that they concurred with BP’s sustainable corporate model. The company embraced the idea of green energy and invested billions of dollars in its implementation to appease the growing anti-BP social movement (Epstein & Buhovac, 2010, p.311). Though the company still deals in oil, it produces renewable energy from its solar and wind energy plants worldwide.
Technological advance is also a key driver of companies’ commitment to sustainability practice. Modern technology has made traditional forms of energy quite expensive and mostly obsolete. More than 55% of the world’s population uses gas and other renewable forms of energy to perform general household activities, such as cooking (BP Sustainability Report, 2019, p.11). Therefore, advances in technology have reduced the reliance on traditional forms of energy, such as paraffin and petrol. Advances in technology played a crucial role in ensuring that BP, under its sustainability model, invested in renewable energy sources. The company invested in renewable energy sources, such as wind and solar, to serve the needs of sustainability-oriented customers who rely on modern sources of energy.
Task 2
Proper implementation of sustainable business management practices allows companies to remain profitable and in business over long periods. The secret of businesses, such as BP that have existed for more than 100 years, can be traced to their sustainable management of the relationships that exist between the various stakeholders and the companies (Epstein & Buhovac, 2010, p.307). Business stakeholders support the existence and profitability of businesses as they provide the environment for business operations. A proper relationship between the businesses and their stakeholders is essential in ensuring that companies remain viable long after its establishment. Corporate sustainability involves numerous concepts and features aimed at protracting the lifetime or existence of a business organization. Concepts, such as sustainable value creation processes, sustainability reporting systems, and long-term management are features of corporate sustainability that enable businesses to operate over a long period.
Sustainable value creation focuses on prolonging business profitability and viability. The concept of sustainable value creation is the economical use of a company’s capital in the creation of value and profit in the short-term while guaranteeing the sustainability of its capital and value creation capacity in the future (Evans, Fernando, & Yang, 2017, p.204). Sustainable value creation ensures that business operations are handled in a manner that ensures both short and long-term success. Systemic thinking is essential in achieving sustainable value creation as it integrates all crucial operations of a company to assess its long-term viability. Systemic or systems thinking is an inclusive investigative approach that seeks to understand the relationships, interactions, and boundaries that exist within a unitary organization (Evans et al., 2017, p.208). Through systematic thinking and management, an organization can analyze the whole set of factors that comprise its internal and external environment. Systems thinking is essential in creating a sustainable and vibrant relationship between a business and its stakeholders. The stakeholders of businesses enable the smooth flow of business operations and guarantee profitability (Evans et al., 2017, p.204). Thus, a company cannot exist long in its operations without an efficient working relationship with its shareholders.
British Petroleum has remained in operation since its establishment in 1908 due to its astute corporate management practices. BP has a comprehensive value creation process that ensures that all its activities and operations are in line with its stakeholders’ demands. The BP business model and policy is built on the company’s strong relationship with its stakeholders, both in the internal and external business environment (BP Sustainability Report, 2019, p.21). The BP Company has one of the best internal environments globally, with its workers being among the well paid in the world (BP Sustainability Report, 2019, p.23). Moreover, the working condition at BP is a top concern and priority of the company to ensure that workers are comfortable and productive. BP maintains a healthy relationship with its external environment by considering the needs of its customers and people living around the company’s plants situated worldwide (BP Sustainability Report, 2019, p.25). The company also maintains good relations with the various governments under whose territories it has invested and the different international bodies that regulate the field of energy production. This healthy and wholesome relationship between BP and its stakeholders has enabled the company to exist in business for decades.
The whole system design of a business organization is essential for the implementation of sustainable value creation. The whole system design is sustainable and ensures that the impact of each aspect of business operations are efficient and in line with the company’s sustainability practices (Evans et al., 2017, p.214). Large businesses have several operations that range from production or manufacturing of products to sales and marketing. The whole system design of business organizations enables companies to implement wholesome, sustainable practices in all domains of their operations (Evans et al., 2017, p.214). Whole systems optimize not just single parts but also the entire system of a business enterprise and thus reveal mutual synergies that are sustainable and interactions that are unsustainable and discarded (Evans et al., 2017, p.216). Therefore, companies that implement the whole system design can track, measure, and evaluate the sustainability progress of their business operations.
BP utilizes a whole system design that ensures all company activities are in line with its sustainability practices. The whole system design implemented by BP enables it to analyze and report the sustainability of the production, marketing, sales, and management activities (BP Sustainability Report, 2019, p.55). BP has more than six different brands under its umbrella, and these brands’ divergent nature makes it difficult to track each brand (BP Sustainability Report, 2019, p.58). However, the whole system design utilized by BP does not only enable the company to track the sustainability of each brand but also allows for the measurement and reporting of the brands’ sustainable practices.
Sustainability reporting systems are an essential element of corporate sustainability. Sustainability reporting enables companies to measure, analyze, and report the sustainability of their business operations. Sustainability reporting is necessary as it provides data that is relied on by both the business and its stakeholders for decision-making purposes. There are several contemporary sustainability reporting systems in the current corporate world, ranging from those focusing on environmental social and governance (ESG) issues to those that focus solely on greenhouse gas emissions and environmental safety (Yang, Vladimirova, & Evans, 2017, p.32). The most relevant sustainability reporting systems cover environmental, social, corporate, and governance issues as they cover the complete spectrum of sustainability (Eccles & Klimenko, 2019, p.114). The ESG reports affect the companies that produce and impact societies as they cover social and governance issues (Eccles & Klimenko, 2019, p.114). Corporate sustainability reporting systems should be based on the Sustainable Development Goals established by the United Nations as they are universal and inclusive of all aspects of sustainability.
With the proliferation of the concept of sustainability in the corporate world, most companies implement sustainability reporting. A 2016 PWC study of sustainable reporting by more than 400 companies in 17 countries revealed that only 28% of companies provide quantitative targets linked to societal impact (Yang et al., 2017, p.33). Sustainability reports that ignore social issues defeat the purpose of corporate sustainability, which aims to create a sustainable business, environment, and society.
Sustainability reports facilitate the long-term existence of businesses in several ways. Through credible sustainability reports, businesses can predict the future using their current business models to determine if they will be viable and in business (Yang et al., 2017, p.37). Corporate sustainability reports look at the resources existent within a company and the state of its relationship with essential stakeholders. A company with abundant resources and a harmonious relationship with its internal and external stakeholders is expected to continue being profitable in the future (Eccles & Klimenko, 2019, p.116). Credible sustainability reports also ensure that shareholders remain committed to the success of business organizations, especially when its operations are in line with its set sustainable practices. Investors who are satisfied with a company’s sustainable record may invest additional resources into the organization to ensure that its operations and profitability are protracted. The government also uses sustainable reports to provide subsidies to organizations that promote and implement sustainability. Top-level employees are attracted to work for companies that have proper sustainable practices that are measured and reported, ensuring efficiency and long-term success.
British Petroleum has been able to stay in business for extended periods through a comprehensive approach to sustainability reporting. BP provides annual sustainable reports of its operations that cover environmental, social, and governance issues. The environmental aspect of BP’s sustainability reports looks at the carbon emission of its production activities and how much the company has invested in reducing greenhouse gas emissions (BP Sustainability Report, 2019, p.29). The reports also look at how BP contributes to the beautification of the environment through the preservation of endangered tree species and the conservation of forests. Regarding the social aspects of sustainability, the company’s reports focus on BP’s corporate social responsibilities and impact. Concerning governance, the company reports the result of its international lobbying activities and how they impacted BP’s performance. The annual sustainability report by BP also forecasts on the ability of the company to remain viable in the foreseeable future by doing a thorough analysis of the company’s resources.
Corporate sustainability is the only practical model of relating business performance to environmental conservation and humanitarian issues. Sustainable management enables businesses to achieve long-term profitability and protracted viability. This is achieved at no negative cost to society or the environment and is in line with the Sustainable Development Goals of the United Nations. By implementing sustainable value creation systems, which are measured by sustainability reports, businesses sustainably achieve profitability and long-term success. Within the internal and external environment, several elements contribute to enforcing business commitment to sustainability to ensure that businesses continue to practice sustainable practices.
Reference List
BP Sustainability Report 2019, Sustainability. Available from: <https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/sustainability/group-reports/bp-sustainability-report-2019.pdf >. [Retrieved May 20, 2020].
Eccles, R.G. and Klimenko, S., 2019. The investor revolution. Harvard Business Review, 97(3), pp.106-116.
Epstein, M.J. and Buhovac, A.R., 2010. Solving the sustainability implementation challenge. Organizational dynamics, 39(4), p.306.
Evans, S., Fernando, L. and Yang, M., 2017. Sustainable value creation—from concept towards implementation. In Sustainable Manufacturing (pp. 203-220). Springer, Cham.
Yang, M., Vladimirova, D. and Evans, S., 2017. Creating and Capturing Value through Sustainability: The Sustainable Value Analysis Tool A new tool helps companies discover opportunities to create and capture value through sustainability. Research-Technology Management, 60(3), pp.30-39.