Environmentalism and Shareholders

Environmentalism is gaining so much attention these days. Specifically after the recent oil spill disasters which have added so much to the problems like; global warming and unbalancing of ecosystem. Companies have been facing claims for site clean-up costs and such other situations for a long time. Such costs affect the profitability and goodwill of a company which eventually leads to declined rate of annual dividend and poor financial performance. If such problem shapes up as an ecological disaster, it can be an initial step towards continuous downturn of a company’s reputation.In case of BP, oil spill at the Gulf of Mexico is the biggest disaster for both, the nature and the company. This oil spill has blackened the Gulf of Mexico, adding to environmental pollution and a huge loss of aquatic life. This disaster has adversely affected the goodwill of the company. The long term effects of the oil spill are far ranging and would be greater than anything experienced in the history of United States (Szabo, 2010). This fact is clear from the statistical comparisons.Value of company’s shares has declined to less than half and the dividend of the company has also been suspended this year. An amount of $20 billion has been set aside to cover the cost of the spill. Apart from that BP has been held liable to compensate everyone who has suffered loss because of oil spill. According to Paola Totaro (2010), the higher end of the compensatory damages is in the range of $30 to $35 billion. And this estimate excludes the loss to the fisheries business, compensation lost of the rig workers, and cost of tourism lost to the locals.In such situation, the biggest challenge for the company is to regain the value for its shares along with complying with ethical requirements. These two factors are difficult to be carried on the same time; therefore it has become a dilemma for the company. If site clean-up costs are given priority, company’s capital keeps declining due to the liabilities it undertakes. And if the company gives priority to its operations and its financial performance, its goodwill will be adversely affected which is fatal for a company’s long-term existence in the market.A few years before the oil spill, CEO of BP Tony Hayward had commented, “We [BP] had too many people working to save the world, we’d lost track that our primary purpose is to create value to our shareholder. ” This comment reflected the confidence of the CEO in the operations of the company and their firm resistance towards any unforeseen event. But a few years later, the oil spill at Gulf of Mexico proved his comment wrong. BP’s strategies for balancing the requirements of shareholders and ethical marketing need to be developed quite sensitively.BP needs to carry out its operations in other energy sectors along with its environmental responsibilities. It should look to recover and salvage as much as possible from this disaster. There is wide ranging impact on the environment, thus the company needs to plan meticulously in identifying risks, mitigating them and having remedial backup plans. BP should design strategies for its microenvironment and macro-environment. Microenvironment must consider the internal functions of the company, such as; alternative energy sectors, alternate business opportunities, innovative energy alternatives.These strategies will help the company improve its financial performance and thus add value to its shares. BP can regain its position in the market if it applies such policies consistently and makes sure that these policies are implemented upon as well. Company should also consider taking up new undertakings. For its macro-environment, BP should evaluate market’s conditions. It should analyze any opportunities or any threats from the competitors of the company.It should utilize its cultural, economic, technical and political forces, if necessary. Another strategy to regain value is to prioritize a significant component which is least affected by the recent natural disaster. In this way, the isolated undertaking would be used to generate profits autonomously, free from any influence from the strategic core of holding company. And the rest of the resources should be used for cleaning the environment. This strategy can cover both the aspects of the dilemma.“Corporate Social Responsibility is defined as commitment to behave ethically and contribute to economic development while improving the quality of life for members of the workforce and their families, as well as the local community at large” (Howard, 2010). Now where does BP fall on this category? In order to comply with its corporate social responsibility, BP must initiate an effective procedure for cleaning the damaged coast. For future undertakings, BP must make sure that environment is not being damaged.It should also construct a policy or regular checks which should evaluate any possibility for such catastrophe and if there is any need to take pro-active actions. After recent oil spill, BP has lost all its glory and to regain its shareholder’s trust and to comply with environmental responsibilities, it must undertake the above-mentioned strategies and procedures. Along with its financial performance, it must consider its impact on the overall environment and it should fulfil its corporate social responsibility as well. LIST OF REFERENCESHoward, David. (2010) BP – From Social Responsibility to Environmental Catastrophe. [Eco Institution] Available from <http://www. ecoinstitution. com/green-news/bp-from-social-responsibility-to-environmental-catastrophe> [Accessed on August 24, 2010] Szabo, Patrick. (2010) BP Gulf Oil Spill – Impact on America’s Environment and Economy. [Suite101] Available from < http://news. suite101. com/article. cfm/bp-gulf-oil-spill–impact-on-americas-environment-and-economy> [Accessed on August 24, 2010] Totaro, P (2010) Lost at Sea SMH