BHP Billiton’s Case study for Corporate Citizenship Essay
BHP Billiton’s Case study for Corporate Citizenship
Corporate citizenship focuses on the kind of responsibility companies apply toward the community they are operating in. The area of focus could be how customers and the community could be impacted by what a given company or corporation is doing. The area of concern could include the communities such companies are operating in, stakeholders that include shareholders, employees, and other businesses such as suppliers that are interacting or working with such entities.
What is involved in corporate citizenship is more than statuary obligation where companies are required to meet certain standards and requirements by law. Corporate citizenship evaluates what business entities with various forms are doing to add to the quality of life of their employees and their dependants, as well as the community they are operating in, including the larger society that their community is part of.
Corporate citizenship, also known as corporate social responsibility (Catalyst Consortium, 2002) has opponents and proponents where the opponents argue that focusing on corporate citizenship will derail businesses from focusing on their main concern, which is the usual role businesses are playing in the community. Others are saying, in reality the whole concept is not more than a window-dressing. There are opponents who insist that focusing on corporate citizenship will enable businesses to divert the attention governmental watchdogs are directing at them.
What the proponents highlight is if corporations and similar businesses are sensitive to social responsibilities, it will directly benefit them by enabling them to avoid focusing on their short-term drive to maximize profit (Fields, 2002). What is involved in all this is the ethics of doing responsible business in communities where these numerous big businesses that could be corporation are involved, whereby being ethical in what they are doing will benefit them more, by enabling them to avoid pitfalls that could come to haunt them.
At the same time, the numerous communities that are accommodating numerous businesses will be free of harm by their wrongdoing. It is difficult to quantify and to come up with some kind measurement technique concerning what should be the standard ethical conformity required from each business entity because of the varied involvement each one of them has in what they are doing (Thillmany, 2007). It is possible to mention Demngs’s Fourteen Points, Balanced Scorecards (Leadership Institute) as an effort to introduce some kind of a standard, although it is difficult to see how successfully it will do the job.
Furthermore, Orilizty, Schmidt, and Rynes (2003) had demonstrated that there is a correlation between social performance that takes into consideration the environment and financial performance. The problem with such outlook had been since businesses are aware of their social responsibility they would avoid focusing on the short-term gain they would garner from their conducting business. Some of the key components of corporate responsibilities might involve charitable activities or volunteering to activities that require the input of bigger entities.
It is also possible divisions such as human resources or public relations could look after corporate responsibility, while using other divisions in an organization if they are suitable cannot rule them out. It is also possible that it could involve the CEOs or the Boards. There are key areas in an organization where corporation responsibility more vivid. One of them is human resources where the kind of hiring and retaining practice that pertaining to a given firm will enable it to attract good employees and having such practice in place would enable to portray a good image in the community it is operating in.
Another area that needs attention is the kind of risk management applied in a given firm, where if anything goes wrong it will be difficult to repair a damaged corporation image. Incidents such as corruption and environmental accidents could exacerbate the erosion of a corporation’s image and requires handling with the utmost care. Overall, the kinds of advantages a corporate that has a good image and is good citizen could reap could a long way and could avail a vast advantage for those that could score high marks.
There is also a case where corporations would like to minimize outside interference directed at them, especially by governmental bodies that could levy heavier taxes or introduce strict regulations. Such measures could impeded the advancement corporations can make and one way to avoid that is to engage in various activities such as a concern for the safety and health of their workers, introducing diversity, making the environment their priority, and getting engaged in the community they are operating using the available various channels.
In all this, it is possible that corporations will find themselves in a dilemma, because their primary goal is to maximize profit for the stakeholders and if they do not fulfill that obligation, they will not generate enough interest to attract investors. There are economists such as Milton Friedman (NYT) who had openly advocated that since the main drive of corporations is to make profit, they do not have to be worried about the society around them. Such strong-held views had been defied simply because if every corporation strives to become a good citizen, whatever it incurs for doing so will be part of doing normal business.
The investors who are members of society will reward those that are good corporate citizens, while they shun away from those that are not, and that obviously affects corporations that fall behind in meeting their good citizenship role. It is also possible that some of the operation of some corporations might have a negative impact on society, on their employees, on the environments and the like, yet they could engage in a public relation campaign to distract critics, observers, or regulators.
A few examples to cite are tobacco or petroleum companies whose operations cause damages and no amount of public relation could hide that. In a situation like this, those who can control such operators such as governments, investors, as well as suppliers could exert pressure on them to meet certain good citizenship requirements. Overall, it is possible for corporations to be good citizens and become effective business operators. At the same time, even if some corporations try to become good citizens, because of what they are involved in, it will take them longer time to meet the requirements.
The outcome validates that if corporations are not responsible and accountable for what they are doing and have more inputs into the communities they are operating, and unless they oversee the welfare of their workers, as well as numerous partners and stakeholders, in today’s market place where information travels fast, it could cost them a lot. The high price to pay could be worse for those that are public companies, simply because they could be deprived valuable resources such as capital, expertise, manpower, and the like to make them conform.
In light of that, this paper will analyze how BHP Billiton, an Australian based resource company is meeting its requirements of a good corporate citizenship. BHP Billiton The company claims that it is distinguished from the other resource companies because it has quality assets, a lineup of projects that the other companies do not have, it is claiming to be customer focused in its marketing effort, it is diversified across many countries, the commodities it deals with are also diversified and that includes the markets it is operating in.
One final exception the company has is it is into petroleum business too. With its 39,000 worldwide workers, it is industry leader or near industry leader in commodity business, such as aluminum, energy, mostly coal petroleum and natural gas, copper, manganese, iron, uranium, nickel, silver, and titanium minerals. All this information and more, such as the $15. 6 billion net profit it made for the year 2007 is on the company’s website. It market capitalization from the same source is $140. 5 billion for August of 2007.
The company came into existence when two dual listed companies, BHP limited and Billiton Plc merged in 2001. One other important information is the two merged companies continue to exists as separate entities, but they operate as a combined company under one board of directors (BHP Billiton, About Us). Stakeholders BHP Billiton clearly identifies its stakeholders and they start from its employees and contractors, the communities around them that use the products the company is coming up with.
There are also those it claims to have influence on what it is doing and that group starts from the investment community as a whole, not only its shareholders, its business partners, organizations in the communities it is located in, unions, non-government organizations, suppliers, various governmental bodies, media, and industry associations. The company believes according to its own statement that accountability and transparency go together.
Because of that, it claims that the company’s charter, its sustainable development policy, HSEC management standards, and the guide to proper business conduct is honest and done with integrity and fairness. The company claims that it is an avid believer in dialogue with its stakeholders, as it had witnessed the feedback it gets from them had enabled the management to refine their decision making accordingly, where all prevalent relation information is shared among staff that had resulted in strengthening the relationship with stakeholders.
Furthermore, there had been a mechanism to address any grievance that originates from stakeholders. Company Approach to Sustainability The company claims that its sustainable development focuses on how its contributions will have a lasting effect on social, environmental, ethical and economic aspects of the company, as well of the communities it is operating in. Because of that, the company’s priority is to get it right the first time and claims that it has a holistic approach to what it is doing.
One of its priorities, which is zero-harm is a requirement to all those involved in the company and they are accountable for their actions. The zero-harm drive focuses in creating a harm free work environment, as well considering the impact what it is doing would have on the environment. The reward it is seeking for accomplishing that is it wants to attract investors, by demonstrating their investment will not only be valued, but it will be made in a company that meets all its social obligations that goes beyond the mandated ones.
The same applies to employees that it wants them to be attracted to it because of what it offers and because of the stand it had taken in the community. There is also getting preference from communities and stakeholders for being adherent to what the good corporate citizenship consensus requires. As far as the companies strategies are concerned, it take into account that it is a diversified company that will have to look after its cash flows, where some kind of stability is required in order to be in a position to meet financial, social, and environmental needs, while at the same time it delivers value to its stakeholders.
The company admits that it also had a business dimension that it has to take into consideration because, without doing that it will find it difficult to meet its sustainability goal. However, it is with dedication to achieve that goal by making its priority the zero-harm policy that focuses on the well being of workers, communities, and the environment. Furthermore, it makes its priority an effective governance and risk management that will be part of how it operates, so that any wrongdoing will not backfire and affect its progress (BHP Billiton).
Sustainability Reporting The company has a policy where it has to review its performance regularly and make its findings public. It believes that doing that will enable it to demonstrate that it is accountable and transparent. It further believes that doing so is an effective stakeholder engagement and the reporting process would become a management tool to measure performance, key company issues, and related management concerns and approaches. It claims that it uses two forms of reporting one online reporting and the other in print.
To demonstrate there is a convergence between the company’s risk management and sustainability programs, the sustainability summary report is included as a chapter in the annual reports of the company. Because of the size of the company and what it is involved in, it will result in making the size of the stakeholders large, necessitating that each operation produces its own sustainability report in the locale and region that it operates (BHP Billiton, Our Business). There is a sustainability committee of the Board whose job is to oversee health, safety, environment, and community (HSEC).
There are also line managers who are responsible to oversee HSEC performance. This function called HSEC function has the responsibility of providing guidance directly or through networks. It is also open for outside inputs that could originate form experts and it is possible to channel them through a forum on Corporate Responsibility. The diagram illustrates the prevalent structure for sustainable development. Accordingly, the structure demonstrates that it is possible to direct feedbacks to the highest governance body at the company.
At the top of the structure there is BHP Billiton Board appointed by the shareholders to look after their interest. Then there is a subcommittee called Sustainability Committee and it main job focuses on HSEC risks, compliance with legal and regulatory requirements concerning HSEC, performance concerning HSEC matters. It is also responsible for preparing annual sustainability summary report. The members have the academic qualification that is pertinent to HSEC so that they can carry out their duty effectively.
There is also a forum focusing on corporate responsibility that brings various stakeholders together to discuss and debate on social and environmental issues that are relevant to the company. The audit committee of the board has a job to make sure the financial reporting, internal control structure, risk management, and all required audit functions are in sound condition. The sustainability committee of the board and the audit committee work together, so that the overall overseeing of what takes place in the company meets the requirements.
There is also a global ethics panel whose main job is to assist the CEO and to enable him meet the governance document requirement, whereby honesty, integrity, forwarding respect and dignity to others would be part of the CEO’s job. In addition, it deals with employees facing ethical issues, it reviews business conduct issues that came into existence, and it assesses new policy issues and recommendations. Healthy People The company claims that the well being of people is key to the success of what it does.
Because of that, its zero harm policy is very important for the company. Safe Workplace The company here also claims the safety of those who work for the company, the contractors of various stripes, and the communities the company divisions are located in are all important for attaining its goal as a good corporate citizen. There are a host of measures that the company is introducing on an ongoing basis to safeguard the health of its employees and the communities that are hosting it wherever it operates.
Environmental Commitment The company states that it operates in numerous countries operating a wide variety of business in locations that have different ecosystems. It recognizes that the businesses it is in could affect the environments. Key areas it is focusing on are emissions of gases and particulates, impact of what the company is doing on water quality, land disturbance, land-use change and habitat removal and the like that require more attention be paid on how some of the works are carried out.
To deal with such problems the company has a charter that states that the company has an overriding priority to health, safety, environmental responsibility, and sustainable development. Some of the methods it is applying to attain this goal is to strive to be the leader in introducing sound industry practices, to set goals to achieve targets, and enhancing biodiversity protection by taking into consideration ecological values and the use of land. Social Responsibility The company recognizes that what it owns and what it does in various communities could affect cultures and living conditions.
It strives to avoid negative social impacts as much as possible, and strives to maximize the benefits and opportunities the involved communities would get from what it is doing. Some measures it is taking to oversee the social responsibility issues are building trust and dialogue with those it believes will be affected by what it is doing, promoting human rights among its stakeholders where it would incorporate in what it does issues such as freedom of association, exclusion of child labor, prohibition of forced labor, proper and ethical use of security personnel.
Building social and human capital by introducing community development, it proposes to recognize and respect indigenous people culture, belief, and traditional rights, and come up with facilities that will contribute enhancing and reserving of indigenous cultures. It also proposes to control all economic impacts it will create on others by creating economic opportunities such as employment, education in a form of training, and what it calls business spin-off, and all other impacts such as displacements, impacts on food and water supplies (CSR Network).
Strength and Weakness The company strength starts from its size and its diversified asset base. As it had been the case if it plans to take advantage acquisition, it has what it takes to allure stakeholders of the targeted companies that had been true when it tried to acquire Rio Tinto for 75 billion pounds (Guardian CO. UK). As well as it could withstand market ups and downs since all its assets could not be subject to price change at the same time.
It weakness stems from country risk where it has to go to many localities in order to procure what it wants and that will include undeveloped regions where the requirements could be much higher. As well as the risk of losing its investments without compensation is always because of political instability. The other areas is some of its products that it relies such as uranium and oil are hazardous for the environment and it does what it does amid pressure and opposition resulting making extracting and bringing those commodities expensive.
Especially the company is under pressure to bring to a halt all its activities concerning mining uranium and there is a movement going some of it originating from some of its stakeholders who are asking to stop everything it has to do with uranium (Guardian Co. UK). External Corporate Citizenship Rating Sources When it comes to rating companies most of them had given it a very high mark. Among others, Ethics World had highlighted what BHP Billiton is doing as far as sustainability is concerned and accordingly this particular agency had approved the fact that it had a good stand in that area.
(Ethics World). Another source SMH Australia had stated that according to Australia’s Responsibilities index had put Westpack a bank in Australia at the top of the index with a score for corporate responsibility of 99. 53, while BHP had come second with 93. 21 and the company it tried to acquire Rio Tinto came third at 91. 54 percent (Sydney Morning Herald). In accountability rating conducted in South Africa where BHP Billiton has interest and operation it had scored first according to Mineweb publication.
It was UNISA Center for Corporate Citizenship that conducted the research, the sponsors being Barloworld and the Unisa College of Economic and Management Sciences according to the publication (Mineweb). REFERENCE BHP Billiton, “About Us”, www. bhpbillition. com-bbccontentrepositary/docs/aboutus/BGF. pdf BHP Billiton, “Our Business”, www. bhpbillition. com-bbccontentrepositary/docs/ourbusiness/metallurgicalcoal/Illawarracoal/publications/ICsustainReport. pdf