Impact of Ethical Leadership on Risk Management in the Oil and Gas Industry

The assignment content discusses the energy sector, specifically the impact of natural gas on the environment compared to coal. The discovery of shale gas reserves in the US has given a boost to the industry's supply for approximately 100 years. However, risks remain, including methane emissions and seismic shifts. The importance of ethical leadership is also highlighted, as the oil and gas industry is criticized for its environmental impact. The three pillars of sustainability (social, environmental, and economic) must be considered by companies in this industry to ensure responsible practices. Ultimately, the conclusion emphasizes the need for innovation and creativity to balance the welfare of society with environmental responsibility.

Running head: COMPARATIVE BUSINESS ETHICS & SOCIAL RESPONSIBILITY
Comparative Business Ethics and Social Responsibility
Name of the Student
Name of the University
Author’s note

1COMPARATIVE BUSINESS ETHICS & SOCIAL RESPONSIBILITY
Executive Summary
Sustainability is a concept that is being promoted and encouraged by all the industries
including oil and gas leading the list. People, planet and price are the three pillars of the
sustainability model of business organization. In this report there is a detailed discussion about
the identification of the risks and management of the risks that is associated with the industry.
Some of the major incidents in the history of the oil and gas industry have been discussed in
details along with how ethical leadership can affect the business in the long-run. How risks
associated with the production, transportation and storage of the energy are being tackled by the
leading companies of the industry along with the loophole sin the process are also included.

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Contents
Executive Summary.........................................................................................................................1
Introduction......................................................................................................................................3
Concept of triple bottom line.......................................................................................................3
Overview of the Oil and Gas Industry.............................................................................................4
Impact of ethical risk management of oil and gas industry in the reduction of accidents...........5
Risks that BP, Exxon, and the fracking industry continue to face..............................................7
Impact of ethical leadership in risk management........................................................................8
Conclusion.....................................................................................................................................10
Reference List:...............................................................................................................................11

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Introduction
Ethics is regarded as the backbone of any institution weather it is a business or a non-
profit seeking organization. Ethics and values does not merely state what is the right thing to do,
but it also defines, doing things in a conscious, responsible and in a smart manner so that the
company not only garners goodwill among the customers and the internal employees but also
have a good name in the industry which will only turn out to be an asset in the long run of the
operations of the business. Global ethics are universally accepted guidelines and rules of ethics
and morals which should be adopted by the company and the management in the daily running of
the operations. There are various aspects of ethics be it on the customer end or the employee end
or for the society and the environment.
Concept of triple bottom line
Traditional concepts of business module include sales maximization, growth, expansion
and profit as the primary focus of the business. This is the model of business that was followed
by all business organizations as they would focus on increasing the monetary value of the
business and create a global footprint. This theory has been replaced by a contemporary model
and perspective which is known as the concept of triple bottom line. In this concept the business
model deals with a much broader aspect of responsibilities that business entities have in order to
survive in the industry and the market. It includes three Ps: Price, People and Planet. Price would
include all that was in the traditional model of business, i.e. expansion of the business, sales
optimization and profit maximization etc. People, this an addition to the new version of the
sustainability model of business, it includes the people who are associated with the business be it
the interest of the customers or the employees of the company or the society at large. For
example: cross-cultural management concept deals with people descending from diversified
background to work as a team for the betterment of the organization. Lastly, the concept of
Planet as this is one of the most important aspect in the business process that is often neglected
by the organization. An organization like any other individual is entitled towards certain
responsibilities towards the environment and nature as it has received a lot from the natural
resources.

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Overview of the Oil and Gas Industry
Oil and gas industry has been the pioneer of industrialization since the industrial
revolution. The products and services are provided by this industry and significant and have
special importance in running any other business around the world. Light, heat and mobility are
just some of the aid that everyone enjoys form the produce of this industry. Though no one can
deny the importance and the utility of the oil and gas industry, no one can also deny the fact that
due to oil and gas drilling there is a lot of environmental depletion. Over the years there has also
been a lot of disagreement around the economic and environmental issues surrounding this
company. According to Ferrell and Fraedrich (1991), by 2017 the demand for oil and gas will
reach up to 4 trillion cubic meters. To combat this great demand of oil and gas natural resource
large reserves’ are being drilled and the industry has also faced a lot of controversies regarding
the safety of the workers and the health hazards that are associated with working in the reservoirs
and the site of the oil platforms.
As referred before sustainability is always has been an issue with this industry the drilling
of the oil and gas causes serious water pollution from the remains of the drilling and also the
procedure causes a large amount of air pollution. Apart from that the land is being drilled and
depletion of natural resources is another factor of the industry that causes environmental threat.
Oil spills are another problem in the world that are causing serious water pollution and are
developing major concerns in the world. Most petroleum reserves are found beneath the ocean
floor and drilling rigs are utilised to extract the materials any leak or any issue with the rigs have
the potential to cause major environmental damages. Leaving behind the traditional concepts of
profit maximization business organisations are taking over the mantel of sustainability and
welfare. Hence, the oil and gas industry companies have slowly invested and opted for
sustainable, improved so that it can decrease the environmental impact as well as avoid the
potential of any kind of disasters. Not only oil and gas companies but corporate all around the
world have recognised the importance of environmental sustainability and have adopted it as a
part of the business model.

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Impact of ethical risk management of oil and gas industry in the reduction of accidents
Understanding and analysing the risk associated with several stakeholders is the first step
towards developing an ethical culture within the organisation. Working in an ethical environment
may cause a lot of changes in the policies and the decision making procedure of the company
and it may take a little getting used to the new affairs of the operation by the employees and the
stakeholders. Risk management and reduction of accidents are a part of cause and effect concept.
If companies take an account of the risks that they pose to the environment or ethically and work
towards reduction of those risks and crisis situations simultaneously the accidents associated
with the risks also reduces. Two of major oil spills that united States have ever experienced to
date is the Exxon Valdez spill and the deepwater horizon oil spill. There are several reasons for
oil sills it can be man-made or natural. Experts estimate that 30-50 percent of oil spills are caused
by human error directly or indirectly. Moreover 20-40 percent times it is caused due to the
failure of mechanism or equipment malfunction. If the management assess this problem and take
precautions and employee skilled professionals to handle equipments, check and recheck the
accounts and the records so that there is no place for human error then the plausible conditions
for oil spills can be reduced and managed by the oil and gas industry (Michel and Fingas 2016).
There are several mode of transportation involved in the transfer of petroleum from the oil, form
the field to the server. Starting from tankers, pipelines, railcars, and tank trucks etc are few of the
examples of the mode of transportation used. Hence there are high risks associated with the
transportation of the products. Not only oil and gas industries governments also all the world has
taken strict will measure and code of guideline sthat help reduce the risks of oil spills.
Training the worker to develop skills, advanced use of technology to build equipments
and modern ways to tackle the procedures of drilling, extraction and transportation process are
some of the ways that can reduce the impact and the oil spills incidents. Recognizing and
identifying danger and strategizing plans associated with risk analysis of the septic operation and
practicing risk-mitigating actions are the most evident prevention tactics of prevention of oil
spills. Research and development should be encouraged in the companies and innovations in the
technologies should be implemented to understand the risk and manage them accordingly.
Understanding the reasons and the cause of oil spills in the past provide an insight of what went

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wrong and how could it be prevented is one of the ways in which companies can reduce the risk
of oil spills (Yusuf et al. 2014). The technologies before implementation or installation should go
through thorough checks and quality procedures to endure temperature and climatic changes so
that it does not behave in different ways in different conditions. The technologies should be
certified by the authorities and should in corporate leak detection and in-line monitoring
procedures for pipelines (Ventikos and Sotiropoulos 2014).
Apart from oil spills there are also accidents with the employees who are working in the
reserves and the platforms as well. The lives of the employees of any organization are one of the
most important aspects that companies should take care of. Health issues from inhaling toxins
exposed from drilling process, oil and gas and petroleum are all inflammable substances and
hence there is a lot of risk associated with fire and explosions for the workers who are working in
these reserves. Over the years of facing criticisms and controversies related to the occupational
hazards that are associated with the oil and gas industry the wellbeing of the workers and safety
precautions has been prioritized by my companies. Yet, there are several industrial hygiene
concerns that are often ignored as they are not that prominent but cause a lot of impact. In order
to determine the real risk to workers companies have to understand and analyze the risk in proper
way and management has to take policies and decisions accordingly for the betterment and
improvement of the working conditions of the workers. Accidents like falls and explosions and
fires are some of the casualties that can be prevented with extra careful practices and proper risk
management policies of the company (Ventikos and Sotiropoulos 2014). Apart from this, the
workers are mostly exposed to hazaderous chemicals like drilling fluids, hydrogen sulfide, silica,
diesel exhaust and mercury. A proper exposure control plan or EPA must be implemented by the
company in order to reduce the risk that people are in due to chemicals that they are surrounded
in the process. The plan should highlight and provide guidelines to protect the health and
wellbeing of the workers against chemical exposures, it should also give out information and
data relating to health hazards, equipment controls, safety procedures during the working hours,
skill development and training to the workers and maintaining a check or record of the incidents
and its cause and impact so that in the future such accidents may not occur.
Ethical risk management will reduce any accidents in the future and companies have
encouraged the usage of sustainable technologies and ethical guidelines to ensure the reduction

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in the incidents in the past decade. Consistently increasing awareness and advancement of
technologies by the oil and gas companies have decreased the possibilities of accidents it should
be kept in mind that these guidelines are strictly followed. There are also several authorities and
institutions that look after the companies in this matter as well.
Risks that BP, Exxon, and the fracking industry continue to face
The oil and gas industry is full of risks and hazards. Oil spills and accidents are bound to
happen as it deals with inflammable substances, hence in order to avoid the accidents the
companies should take mitigation measures and risk management policies. During the Exxon oil
spill which occurred during 1989 the company recognized its mistake and had taken full
responsibility in restoring the shores and the wildlife that was fiercely affected by the oil spill in
the sound region (Whiffen 2013). The company has to pay millions of dollars in as fine and
restoration process went on for more than a decade. But experts believe that there has been a
permanent effect on the environment and the water life of that area and it cannot be restored back
to normal any time soon. The significant damage that the spill has caused to the fishery and the
water life in that area is of great extent (Berkowitz et al. 2017). The beaches in that area are also
examined as toxic and are filled with oil remaining. The shoreline is still contaminated and there
rare several pits of oil still found in that region. The oil and gas industry has leant a lot form this
iconic infamous incident and has adopted a lot to ensure that such incidents do not take place in
the future (Papavinasam 2013).
The explosion in the deep water horizon in the Gulf of Mexico highlights the fact that the
oil and gas companies are yet to be fully responsible in recognizing the threat that they pose to
the environment and the society. Companies are yet to understand the gravity of the risk that the
operations possess. Beyond petroleum was already under the radar of criticism for the careless
policies and decisions that the company showed towards handling safety and precaution of the
works along with the sustainability of the operations (Ferrell and Fraedrich 1991). That the
company had to rebrand itself, it adopted some extensive and some important measures in the
daily operations of the business, code of conduct in the reservoirs and drilling areas as well as
using alternative energy sources. As the company tried to reposition itself as sustainable and
responsible it had drawn upon some obligations towards the society and environment
(Lamendella et al. 2014). The explosion of the oil rig in the Gulf of Mexico made it evident, how

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obligated they were in their actions. The explosion did not only affect the environment by
spilling gallons of crude oil into the water but also took the lives of 11 workers who were in the
rig. All the efforts of the company to stop the oil from spilling failed and around 2.5million
gallons of oil was pouring out of the rig on a daily basis. The costs of Louisiana, Texas, Florida,
Mississippi and Alabama were washed with oil affecting the daily livelihood of thousand of
fishermen and killing several aquatic animals. The explosion proved that the contingency plans
of the company to control any disaster were inadequate and not full proof. There was no option
of system shut down which could have been used as a last resort in any crisis situation. The after
effect of this spill will be felt by both the company and the country for years as the government
had ordered to shut down 33 rigs in that area which supplied around one-third of the supply in
America (Acosta-González et al. 2015).
Hydraulic fracturing also known as fracking is a process of extracting natural gas by
pumping water, sand and chemicals into shale rock to force out the gas. Fracking has been view
by many as the revolutionary opportunity in the energy sector. Natural gas is comparatively
cleaner than coal as it emits considerably less amount of sulfur dioxide, nitrogen oxide and
mercury which is the known to be the harmful components in the burning coal. Furthermore the
process requires only 0.5% of drilling liquid which is also hazardous. The recent discovery of the
shale gas reserve in the United sates have given this process a boost and also a promotion to the
energy supply for approximately 100 years as anticipated by experts (de Melo-Martín et al.
2014). Nevertheless, the risks yet remain it is comparatively lesser than others but it is still a
inflammable substance and that itself has a lot of risk associated with it. It is being said that
methane is being emitted by the process of fracking and also that it cases the seismic shift of the
tectonic place in the area of drilling. There are other chemicals that are used by the process
which are carcinogenic in nature like benzene, hydrochloric acid and diesel (Kelland 2014).
Impact of ethical leadership in risk management
For an industry as old and as criticized like the oil and gas industry, it is very important to
be ethical in nature, the three pillars of sustainability model must be considered by the oil and
gas industry than any other as the risks associated with the industry is also significantly higher
than any other industry. As stated by Ferrell and Fraedrich (1991), there are risk associated the
production to the transportation to the storage of the product that the industry offers. In such

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cases ethics become the backbone of the company and just developing sustainable and health
welfare products does not end the process for the industry. The policies and the decisions as well
as the technologies that are innovated have to go through strict and stringent rules and
regulations. The companies are in great need for leaders who are ethically driven and give more
and more importance to the societal and the environmental welfare because those two factors
form the majority of backup and support for the company (Varfolomeev et al. 2014).

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Conclusion
The impact the oil and gas industry have on the economies, environment and society is
unlike any other industry. The importance of energy is not unknown to any but the pressing issue
at the current situation is the significant depletion of the environment and the effect it has on
society. Oil and gas companies should understand the responsibility they have towards the
welfare of the society along with the environmental responsibility they have. The aim should not
be to prevent any accidents that are a prerequisite that comes with the business, the aim should
be towards innovations and creativity so that the company can ensure the betterment of the
environment and the improvement of the work life of the people associated with the industry.

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Reference List:
Acosta-González, A., Martirani-von Abercron, S.M., Rosselló-Móra, R., Wittich, R.M. and
Marqués, S., 2015. The effect of oil spills on the bacterial diversity and catabolic function in
coastal sediments: a case study on the Prestige oil spill. Environmental Science and Pollution
Research, 22(20), pp.15200-15214.
Berkowitz, H., Bucheli, M. and Dumez, H., 2017. Collectively designing CSR through meta-
organizations: A case study of the oil and gas industry. Journal of Business Ethics, 143(4),
pp.753-769.
de Melo-Martín, I., Hays, J. and Finkel, M.L., 2014. The role of ethics in shale gas
policies. Science of the total environment, 470, pp.1114-1119.
Ferrell, O.C. and Fraedrich, J., 1991. Business ethics: Ethical decision making and cases.
Houghton Mifflin College Division.
Kelland, M.A., 2014. Production chemicals for the oil and gas industry. CRC press.
Lamendella, R., Strutt, S., Borglin, S., Chakraborty, R., Tas, N., Mason, O.U., Hultman, J.,
Prestat, E., Hazen, T.C. and Jansson, J.K., 2014. Assessment of the Deepwater Horizon oil spill
impact on Gulf coast microbial communities. Frontiers in microbiology, 5.
Michel, J. and Fingas, M., 2016. Oil Spills: Causes, Consequences, Prevention, and
Countermeasures. Fossil Fuels: Current Status and Future Directions, 1, p.159.
Papavinasam, S., 2013. Corrosion control in the oil and gas industry. Elsevier.
Varfolomeev, E., Marin, O., Bykov, D., Karasev, O., Velikanova, N., Vetchinkina, E., Edelkina,
A. and Thurner, T., 2014. Connecting strategy, environmental and social indicators: a study of
oil and gas producers.
Ventikos, N.P. and Sotiropoulos, F.S., 2014. Disutility analysis of oil spills: graphs and
trends. Marine pollution bulletin, 81(1), pp.116-123.
Whiffen, J., 2013. Exxon Valdez Oil Spill. Proto-Type, 1.

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Yusuf, Y.Y., Gunasekaran, A., Musa, A., Dauda, M., El-Berishy, N.M. and Cang, S., 2014. A
relational study of supply chain agility, competitiveness and business performance in the oil and
gas industry. International Journal of Production Economics, 147, pp.531-543.