Sample Case Study on BHP And Ok Tedi

BHP And Ok Tedi Case Study

Ethical Issue

Globalization trend tends to spread the scope of environmental damage through transnational business operations (Kline 207). Ethical analysis regarding ecological economics centers on a span of environmental issues. In the Ok Tedi case study, the ethical issue recurring from time to time is the question of environmental despoliation. The BHP in conjunction with the Papua New Guinea (PNG) government overlooked the general procedure of obtaining an informed consent from Ok Tedi locals. As part of the community’s natural resource, the government was (ethically) mandated to protect and involve locals prior to establishment of the BHP Company.

From an ethical standpoint, complaints on environmental damage from locals formed the basis of litigation against PNG government and BHP. Local land owners viewed BHP and PNG government decisions as ‘a disaster’. That is, land owners perceived the extent of environmental damage as ‘a disaster’. Subsequent launch of complaints against the two stakeholders (PNG government and BHP Company) placed this ethical issue on a more expanse trans-regional scale. At a local level, the presence of a foreign company extracting resources and eventually degrading their home areas also formed an area of concern. To them, the litigation grounds against BHP and PNG assumed a more socio economic nature than it was environment. However, the major ethical issue centered on damage caused by mining on the Ok Tedi ecosystems and its reluctance to mitigate such damage around the area.

Economic Versus Environmental Protection

As a rule of the thumb, environmental protection standards dictate that ecological integrity and health should always be given top priority. In the Ok Tedi case, no ethical grounds permit socio economic benefits (accrued) to eclipse environmental concerns. According to Ostasiewski (1), businesses that attempt to get involved in international trade encounter a number of ethical challenges. While the Australian government was issuing injunctions on BHP operations in Papua, certain considerations were not integrated in the ruling. For instance, it would have been important for the court to note that the company was not familiar with homeland values, culture and different levels of economic development. On the other hand, there is no limit or extent to which human benefits can be measured to or compared with environmental protection without crossing the ethical boundary. In BHP’s case, their corporate social responsibility (CSR) ‘ratings’ were good enough to enable them establish a long lasting relationship with the host government. However, its CSR went beyond the ecologically and ethically permitted boundary. As evident in the case, BHP had contributed to significant socio economic growth of the locals and the nation on a larger scale. The value of Ok Tedi ecosystems is way above that of putting up infrastructure, social amenities and creating employment for the locals. This case leans towards environmental virtue ethics vis a vis the ethical dimensions of sustainability.

The ethics of rights, welfare and justice are largely integrated in two distinct theories: ethics of duty (deontology) and the ethics of ends (utilitarianism). For the most part, environmental protection standards lean towards deontology. Deontological ethics tend to center focus on human rights and their autonomy (International Atomic Energy Agency 5). According the IAEA article (5), deontological ethics protects human rights and considers them a moral obligation even if greater happiness is realized if these rights are neglected. In the BHP case, achieving ecological integrity equals (above anything else) human rights of the locals at Ok Tedi. This is regardless of the infrastructure, amenities or job platforms created to meet human demands.

Tailings in the Fly River and Recommendation

As far as the complaints go, tailings at Ok Tedi are the major issues raised by few locals living along the river. They are the main ethical obstacle between PNG-BHP Company and a few of the local residents affected by mining. Perhaps a more effective approach to understanding this issue is through deontological versus utilitarian theories. As mentioned before, the former advocates for human rights and human autonomy even if both have to be neglected to achieve the greater happiness−in this case happiness being environmental protection. Contrary to deontological, Mill’s utilitarian theory focuses on maximizing production of happiness and welfare and on ends despite the means used to attain it (IAEA 6). In a more befitting context, presence of tailings and failure of BHP to rectify or opt for other alternatives takes the form of an ecocentric-based theory. This type of environmental ethics theory dismisses the assumption that morally-acceptable values can be derived from ecosystems regardless of their relation to humans (IAEA 6).

From a biocentric perspective, the issue arises because the key stakeholders (locals) feel their lifestyles have been changed significantly and no sufficient compensation is given by the BHP at community level. Such obstacles can only be overcome if the host government in partnership with foreign governments formulates a global ethical framework in light of transnational business investments. In addition, host governments (in this case PNG) should integrate a top-down bottom-up approach that emphasizes community participation and decision makings regarding such projects.

How BHP is Handling the Crisis

The OK Tedi disaster case compelled a global responsibility to support the leadership of Papua New Guinea in order to ensure that BHP took full responsibility of the mess it caused to the people of PNG. The extent of destruction and havoc caused by OTML had been underestimated in the first reports that were made when the disaster became a global concern (Kennedy 1). The company was obligated to build reliable tailings retention system, dredge the river and definitely compensate the communities that were affected by the disaster. This obligations demanded appropriate leadership to manage the organisation and at the same time ensure that the organisation adhered to Corporate Social Responsibility (CSR) and enforce critical measures to solve the crisis.

Despite many environmental issues that come up as a result of great pollution caused by OTML, the company had denied the intensity with which the case was portrayed to the public domain. However, after several researches and scientific experiments had been conducted along the river channel and the nearby communities, it was found that there were underestimations on the effect of pollution caused by the company. There the company’s leadership was faced with great challenge of protecting the company from possible losses.

BHP expressed regret over its involvement in the mining process claiming that its venture in PNG has failed to yield good returns on its investment. These aspects compelled a quick response by the firm considering the option of earlier closure. BHP-Billiton had intensions of closing down its processes in PNG but it was greatly opposed by the government and other minority partners who had great shares in the company.

However, the aspect early closure sparked fear in the government of PNG compelling its officials to involve the World Bank in order to weigh out the best options. Actually, 10% of the PNG government income and 20% of the country’s export came from the mine and endorsing the closure of the firm would mean that the government lost a great deal (Kennedy 1). Due to high pressure from global environmental bodies and the government of PNG, BHP acknowledged its responsibility on the mess and weighed out some options in order to handle the crisis.

Leadership Style and Leadership Tools

The leadership of BHP considered an option of using their own consultants to help in resolving the crisis raised global concern. The magnitude of the disaster demanded involvement of several parties to be able to come up with the best way out. This included involving the government of PNG and the World Bank to weigh out the most appropriate step for the company to take (Kepore and Benedict 223). One of the tools that have been used by the firm to overcome the crisis is negotiations with key stakeholders like government and the communities involved in order to reach some compromise of the matter. However advice from other international bodies on the communities affected and the government have affected the entire negotiation process.

The legitimate action taken against the company might jeopardize the operation of the firm which has global reputation in the mining industry. Therefore, the leadership of this company devised best strategies that could protect its reputation and ensure its survival. There were several attempts by the firm to neutralize the publicity of the disaster in order to protect itself from possible losses as a result of public disapproval. However, the attempts did not bear much since the firm was subject to legitimate action from the communities affected by pollution.

Leadership and Power

There were different allegations of the company making use of its powerful position to influence the opposition using questionable means. These were some of the effort used by the company to clear its name and avoid possible losses that might come along once the case gains global concern.

Severally, BHP has colluded with PNG government to suppress compensation claims and cover up the environmental damage it had caused for two decades (Kepore and Benedict 223). For an international corporation with global influence, such tactics can only amount to further disaster that might jeopardize its success in future. In 1996, there were attempts by the BHP to settle the crisis by offering the landowners $110 million in order to withdraw the case, however, it was not successful and the firm was compelled to part with $150 million on out-of-court settlement. In spite of the settlement, the company continued polluting the rivers with tailings.

It is quite evident that there is great harm and damage caused by the firm’s ignorance in addressing its Corporate Social Responsibility. The firm should bear the responsibility of its ignorance and ensure that within a specified period of time it makes the necessary adjustments and correct its mistakes. It is a great cost to incur but it is the only way that can ensure its public trust is not eroded (Hackman 414). By collaborating with government of PNG, it can be possible for the firm to implement good approach that can settle the crisis. One of the biggest mistakes that the company makes is escaping its responsibility and letting the local communities suffer the effects of its ignorance.

Works Cited

Hackman, Michael Z., and Craig E. Johnson. Leadership: A communication perspective. Waveland Press, 2013.

International Atomic Energy Agency. Ethical considerations in protecting the environment from the effects of ionizing radiation. Austria. 2002. Print.

Kennedy, Danny. “BHP’s Big Mining Mess.” Multinational Monitor 21.4 (2000): 7. Business Source Complete. Web. 24 Nov. 2014.

Kepore, Kevin P., and Benedict Y. Imbun. “Mining And Stakeholder Engagement Discourse In A Papua New Guinea Mine.” Corporate Social Responsibility & Environmental Management 18.4 (2011): 220-233. Business Source Complete. Web. 24 Nov. 2014.

Kline, John. Ethics for international business: Decision-making in a global political economy. London: Routledge. 2010. Print.

Ostasiewski, Paul. Considerations for a global business ethics framework. Wheeling, West Virginia: Wheeling Jesuit University. n.d. Print.