Can Companies in the Oil Industry Achieve a Competitive Advantage Through Making Contributions Towards Climate Change?

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Are the major oil companies putting their best foot forward on global climate change & the environment?

Climate change is a serious global concern of both the public and the governments. With the increase in greenhouse gases (GHGs), mainly carbon dioxide (CO2), and methane in the earth's atmosphere. There is a widespread view that this increase is leading to climate change, with adverse effects on the environment.

According to the IPCC official report website (2007):

“Warming of the climate system was “unequivocal” as is now evident from observations of increases in global average air and ocean temperatures, widespread melting of snow and ice and rising global average sea levels.”

http://ipcc-wg1.ucar.edu/wg1/Report/AR4WG1_Print_SPM.pdf (2007)

Climate change is more serious now more than ever as the past six years has been our warmest years on record. Al Gore’s (2006) documentary ‘‘An Inconvenient Truth,’ concluded that: “Humanity is sitting on a ticking time bomb. If the vast majority of the world's scientists are right, we have just ten years to avert a major catastrophe that could send our entire planet into a tail-spin of epic destruction involving extreme weather, floods, droughts, epidemics and killer heat waves beyond anything we have ever experienced.” http://www.wunderground.com/education/gore.asp

For information on climate change and government responses please refer to appendix 1 for a full introduction from multiple references which was especially prepared for the purpose of this report.

Below is an image that Gray (1993) portrays in his book, as to why business accountants need to invest and address environmental issues. As businesses sole purpose of activity is to survive in their current market, Gray introduces the theory that there is a direct link between being social and business competitive.

Accounting for the Environment-Rob Gray with Jan Bebbington and Diane Walers (1993) pg.5

The image evaluates external factors that can be opportunities or threats to an organisation in order to portray a better public image to increase public relations for a positive brand image. The purpose of this is to be trusted by clients so they are influenced in buying products as not only to benefit themselves but to benefit the environment as well. This can also increase customer loyalty to a brand as well as influencing positive media while raising the awareness of products and the company as a whole.

it is important to analysis these factors to take opportunities and minimise threats to stay above the competition and remain profitable despite cost. Gray emphasise that these factors include; Legislation, Fiscal measures, Corporate Customers, Investors Financial Institutions, Employees Trade Unions, Public Concern, and Environmental Groups. For definitions of these factors please refer to appendix 2.

In relation to Grays (1993) model the oil industries main competitors; BP, Shell, and Chevron all release opening statements indicating as mass contributors of CO2 emissions they share the concern of the governments and public and plan on taking positive action to tackle climate change. Through the mention of improving efficiency through improving operations in the production of fossil fuels, while also investing in new technologies to produce crude oil while minimising CO2 emissions, and to invest in new greener alternatives for energy. To view these statements please refer to appendix 3.

Source : Partners in Change, India
Now the next question that arises is what the need of running business for all the stakeholders instead of shareholders who only invested the money and took the risk of investing? Is it possible to run the business profitably taking along the stakeholders in this globalization era and competitive environment? And how to interrelate business activities with society and community and what.s the ultimate effect on its bottom line adopting CSR issue as a culture in its...
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