I. Introduction
Headquartered in London, British Petroleum plc is considered as one of the world’s largest energy companies which provide consumers with fuel and energy as well as petrochemical products. Evidently, British Petroleum is one of the six “supermajors” or the International Oil Company (IOC) along with ExxonMobil, Royal Dutch Shell, Chevron Corporation, ConocoPhilips and Total SA. Since operating an oil company is too risky a venture, British Petroleum embarked on a frenetic growth strategy through continued divestiture and merger and acquisition. The year 2000 also marked a major change for British Petroleum into becoming BP plc. This change was intended to help the company from its longstanding identity as on “oil company” and reposition itself as an “energy company” which will operate in oil, natural gas and solar power. Today, there are three core strategies that British Petroleum commits itself such as exploration and production, refining and marketing and alternative energy.
With the changed identity comes various identities that are associated with BP plc and these identities will be explored in this essay using the AC2ID test and REDS2 process.
II. Corporate Identities Using the AC2ID Test
A. Actual Identity
Balmer and Greyser (2006) noted that actual identity is shaped by different elements such as corporate ownership, leadership style, organisational structure, business activities, markets covered, quality of products and services as well as the values held by the management and the employees (Balmer and Greyser, 2006). BP plc therefore transformed from being a local oil company into a global energy group wherein over 80,000 people are employed to main its operation on more than 100 countries worldwide. Currently, there are six brands that make up BP plc namely BP, Castrol, Arco, Aral, am/pm and Wild Bean Café.
BP plc, as an organisation, also claims to be structured for success through the two key business segments which are the exploration and production and refining and marketing and the alternative energy business known as the BP alternative energy. In line with these strategies are different business activities that include finding, extracting and moving oil and gas, making and selling fuels and products, generating low carbon energy and working responsibly. Of all these activities, working responsibly embodies BP plc’s commitment on the betterment of communities where it operates. Roughly, BP plc is operating in Africa, Asia, Australasia, Europe and North and South America.
Further, corporate social responsibility is also extended on its utilisation of technology. BP plc commit to meeting energy demand efficiently, developing more efficient products, investing in low carbon future and supporting research pertaining to development of efficient consumer products. At Bp plc, an energy mix is developed which makes use of different technologies, enabling a safer, more efficient extraction, refinement and distribution of oil. The mantra is: “From energy diversity comes energy security.” The process is considered as building blocks of a more secure, stable and low carbon energy future.
Throughout the operation, nonetheless, the activities employed by the BP plc are consistent with its values, code of conduct and the BP brand. BP brand, for instance, is a global brand that is typified by its logo of a sunburst, reflecting the goals of the organisation. The code of conduct embodies BP plc’s commitment to integrity. The code is about helping the BP people to do the right thing through the five key areas of health, safety, security and the environment; employees; business partners; governments and communities; and company assets and financial integrity. BP plc, moreover, is progressive, responsible, innovative and performance driven.
B. Communicated Identity
Communicated identity encompasses “controlled” corporate communications but can also include the performance effects of products and services as well as of commentaries made about the organisation, as according to Balmer and Greyser (2006). Apparently, BP plc is positioning itself to be a frontrunner in the future pertaining to the need to meet the world’s continued demand for fuel, energy and petrochemicals. BP plc intends to play a central role in creating long-term options for the future in new energy technology and low carbon energy businesses. Likewise, BP plc is enhancing its capabilities in natural gas which is regarded to be a vital source of relatively clean energy. This is more so because the goal is to transition to a lower-carbon economy and beyond.
Having said this, BP plc also approached sustainability through diverse and affordable energy. BP plc responds to energy challenges by addressing climate change. BP plc believes that the government and the industry are both responsible in resolving climate change. As such, the government shall set an appropriate policy framework and the companies shall invest within that framework for the purpose of delivering a sustainable energy mix. BP plc particularly support a price for carbon provided that there will be uncertainties in the continued planning and making investment in low-carbon solutions unless the consumers and producers will recognise a pay a carbon price. In this way, carbon pricing will make energy conservation more attractive and alternative energy more cost competitive.
Oppositely, BP plc was caught and perceived to be involved in “greenwashing” when in July 2006, after the media had discovered a 270,000 crude oil spill in Alaskan tundra, the company admitted that it is facing criminal charges. Relative lack of press coverage regarding the spill is a proof that BP plc had successfully greenwashed the image it is communicating with the public. BP plc was also subjected to criticisms after it was proven that it is involved in environmentally unsound practices. While BP plc is publicly affirming its commitment to investing in alternative energy sources minimally, in reality, majority of its investment is devoted to fossil fuels (Monbiot, 2006).
C. Conceived Identity
As Balmer and Greyser (2006) put it, conceived identity refers to the main perceptual concepts of corporate image and corporate reputation. While criticisms are surmounting following the oil spills in the Gulf of Mexico, BP plc continues to project a revitalised image that takes responsibility of its actions including its mistakes. BP plc is named as the responsible party and government officials have committed to hold BP plc accountable for all cleanup costs and other damages. BP plc stood up to strategically harness all of its resources to combat the oil spill as well as the impacts that it may have. BP plc is spending $7 million daily in attempt to contain the spill. Further, BP plc commits itself to produce a $20 billion oil spill response fund to be administered by Kenneth Feinberg.
While funds are acquired externally, BP plc also mobilised financially in the inside. BP plc decided to cut the capital spending budget, sell $10 billion in assets and drop its dividend. Brenner (2010) reported that the fund will be used for natural resource damages, state and local response costs and individual compensation. BP plc, in addition, will set aside $100 million to pay offshore oil workers who are unemployed due to the six-month moratorium on drilling in the deep-water Gulf of Mexico. Cuts on capital spending will come from upstream projects, and which will continue until next year. The oil spill disaster also prompts the UK supermajor to revisit the contingency plans as its spill liabilities become clearer. Divestment will target noncore upstream assets.
D. Ideal Identity
Ideal identity, as said by Balmer and Greyser (2006) is purely a conceptual construct about the optimum positioning of the organisation in comparison with the general business environment. According to International Energy Agency (IEA) projections, the world could potentially consume around 40% more energy in 2030 than we consume today – requiring investment of at least $1 trillion every year in energy infrastructure. In meeting this demand sustainably, there will need to be changes in the energy mix. We will need more low-carbon energy and we need to use all forms of energy more efficiently. The share of energy derived from renewable sources will certainly increase in the future, and carbon capture technology could be deployed at scale. However, the IEA anticipates fossil fuels still being the dominant source of energy in 2030, even in a scenario in which major carbon emissions are tightly constrained over the next two decades. In other words, the energy companies of the future will need to supply a diverse energy mix. The mix will be more than oil and gas – but hydrocarbons will still be a major part of it.
E. Desired Identity
While ideal identity is based on current knowledge about the organisation’s prospects, desired identity lives in the minds of the corporate leaders ((Balmer and Greyser, 2006). Put simply, the desired identity is the vision of the leaders for the organisation. At BP, we define sustainability as the capacity to endure as a group: by renewing assets; creating and delivering better products and services that meet the evolving needs of society; attracting successive generations of employees; contributing to a sustainable environment; and retaining the trust and support of our customers, shareholders and the communities in which we operate.
Reliable and affordable supplies of hydrocarbon energy were taken for granted through much of the 20th century as they laid the foundation for the world’s economic progress. They will be just as fundamental in the future, particularly to meet rising demand in emerging economies such as China and India. What’s different today is that energy has become a complex challenge, with strategic, economic and environmental dimensions.
Energy security, climate change and the energy needed to support economic development and jobs will keep energy high on the public and political agenda for some considerable time. I believe the main ways to meet the world’s future energy challenges are through diversity, by accessing the widest range of energy sources; competition, by bringing out the best ways of finding, producing and distributing energy; and efficiency, by making the most of each unit of energy.
III. Misalignment Assessment Using the REDS2 Process
Balmer and Greyser (2006) also identified a process to analyse the AC2ID test which is the REDS2. This is crucial for the purpose of revealing the five identities, examining the ten identity interfaces, diagnosing the situation in comparison with the organisation’s identity and then selecting a suitable strategy. For BP, supporting the transition to a low-carbon economy has several dimensions. We are improving energy efficiency in BP’s own operations through close performance monitoring as well as developing more efficient fuels and lubricants. We are promoting natural gas as a key part of the energy future – gas is easily the cleanest burning fossil fuel, as well as being efficient, versatile and abundantly available. We are also including a cost of carbon in investment appraisals for all new major projects to allow informed investment in fossil fuels and encourage development of the technology needed to reduce their carbon footprint. And finally, we are investing in our low-carbon businesses. Since 2005 we have invested around $4 billion in Alternative Energy, with our activity focused on advanced biofuels, our wind business in the US, solar power, and carbon capture and storage.
IV. Strategic Recommendations for British Petroleum
There are three distinct challenges arising from the world’s growing demand for energy. First, how to provide energy reliably in a world where there is a mismatch between where energy is produced and where it is consumed. Second, how to meet this demand in a way that is environmentally sustainable, and avoids damaging climate change. Third, how to meet this demand in a way that is affordable and enables economic development. So, the three challenges are security, sustainability and affordability.
BP’s analysis indicates that plentiful energy resources exist to meet growing global demand. Proved reserves offer enough oil to last for around 40 years and enough gas for around 60 years at today’s consumption rates, in addition to abundant coal and substantial renewable resources such as sunlight, wind and biomass. Proved reserves of fossil fuels have risen in the past 20 years as a result of new discoveries and new technologies that unlock previously inaccessible oil and gas. In its World Energy Outlook 2009, the IEA anticipates fossil fuels still being dominant in 2030, even in a scenario that envisages major carbon emissions constraints over the next two decadesa. However policy unfolds, substantial investment will be required to provide the energy of the future. The IEA estimates the total investment needed to meet energy demand will be at least $1 trillion per year on average over two decades.
In balancing supply and demand, energy providers and policy-makers need to ensure that countries can count on dependable supplies. Energy security is a major strategic challenge as most oil and gas resources are located in a small number of countries, with 10 countries controlling 80% of global oil reserves and three possessing over half the world’s natural gas.
Policy-makers and energy providers also need to manage the environmental impacts of energy production and consumption. Fossil fuel emissions have contributed to a large increase in the levels of greenhouse gases in the atmosphere from pre-industrial times. Prompted by the risk of climate change and rising temperatures, governments are introducing measures to limit emissions. Other environmental considerations include air quality, physical and ecological impacts and demands on water and other resources. The future energy mix will need to be provided within these constraints, as directed by governments or companies acting voluntarily.
Economic development and an improved quality of life rely on energy that is accessible and affordable to those who need it. The scale of the expected demand for fuel, power and heat worldwide, particularly in large industrializing economies such as China, India, Brazil and Russia, makes this a significant challenge.
References
Balmer J. M. T. & Greyser, S. A. (2006) Corporate Marketing: Integrating Corporate Identity, Corporate Branding, Corporate Communications, Corporate Image and Corporate Reputation, European Journal of Marketing, 40(7, 8):730-741.
Brenner, N. (2010). Hayward says spill ‘never should have happened. Upstream Online NHST Media Group.
Monbiot, G. (2006). Behind the spin, the oil giants are more dangerous than ever. The Guardian, London.
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