Perhaps the most ironical statement in the contemporary world is to hear a company that extracts non-renewable resources describing itself as a green company. While the word Green is more than a buzzword in contemporary business circles, people fail to understand how organizations in the global oil business embrace the concept of greenness. Still, greenness is the essence of sustainability – a primary concept in modern business practices. Sustainability has been described variously as the ability to meet the needs of the current times without adversely affecting the capacity of the future generations to meet their needs (Epstein, 2008). According to Andreas (2011) there are some words and phrases that have for a long time been considered to be synonymous with sustainability. Among such words are such terms as: greenness, sustainable development, environmental friendliness, renewable resources and environmental concern. The oil and gas industry remains the most controversial industry as far as sustainability is concerned. This report endeavors to discuss elaborate strategies that Lukoil Company would use to adapt to the environmental limitations and socio-political issues in the future – the year 2053.
An Overview of the Company
Founded in the year 1991, Lukoil is no doubt the second largest oil company in Russia, after ExxonMobil. The organization is headquartered in Moscow, Russia, but has operations in 40 countries around the world. With 150000 employees, Lukoil is considered a major player, not only in the Russian economy, but also in the global economy (Grace, 2005). In the year 2009, Lukoil produced well over 97600 tons of oil. The company, which was founded by Vagit Alekperov is in the oil and gas industry and has petroleum, natural gas and petrochemicals as the main products. Lukoil Company, which recorded revenue of 139.2 billion USD in FY 2012, has been one of the case studies of many researches in the topic of sustainability. The organization is considered of the most reputable as far as corporate social responsibility is concerned (Podobnik, 2005).
Much like all other organizations in the oil and gas industry, Lukoil has been under attack from various socio-political groups and environmental activists over matters relating to the deprivation and pollution of the environment (Grace, 2005). In response, the organization has continuously south to employ environmental impact assessment on the new and potential fields with the primary aim of reducing the impact of the mining activities on the flora and fauna, especially the fish stock and the plants associated with aquatic life. Since the organizations employed the efforts of prioritizing the biodiversity, there has been a drop of approximately 7.8% in the total volume of pollutant and environmentally adverse effects (Tate et al, 2013). Similarly, in the year 2007 there has been a 3.8% in the total area polluted land as compared to the previous year.
Strategies for Sustainability
It passes for a fact that sustainability is equal to success in the 21st century. Therefore, it is a concept that must be given ample prominence because it stands at the center of success (Pascal & Elkind, 2010). While this is the case, the strategy to be employed must be in such a manner that it embraces all the three sections of the oil and gas industry – the upstream, the midstream and the downstream. It goes without saying that for Lukoil to survive in the extreme conditions of 2053 where resources will be extremely strained, it will have to embrace the views and priorities of all its stakeholders. This means that the organization, in a bid to remain sustainable, resilient and competitive, it will have to hold continuous and robust dialogues with the most important stakeholders (Bachman, 2009). The stakeholders that should be given prominence are the shareholders, the customers, the government, the employees, the non-governmental organizations and the community at large. Through such dialogues, the organization will no doubt access views that will be useful in designing a route into the future.
Secondly, the organization, Lukoil will inevitably have to incorporate sustainability into its corporate governance plan. This will be done with the sole aim of making corporate social responsibility a primary effort in the business. It is important to mention that sustainability and corporate social responsibility are inseparable concepts (Luo, 2011). According to Johansson et al (2012) incorporating sustainability into the corporate governance goals will ensure that an organization prioritizes accountability and direct oversight on the activities of the organization. Perhaps the most important thing about accountability is that Lukoil will respect the environment and hold it in high regard into the future. Corporate governance will enable the organization to make it an essential part of training. Through incorporating sustainability into the training program, Lukoil will efficiently do away with the traditional view that sustainability is a thing of the management, and bring it to the employees (Seidel et al, 2013). Speaking of employees, workforce diversity will play an essential role as it will enable the organization to gather varied views, especially if employee inclusion will be made a central factor in decision making.
Thirdly, the strategy to be embraced by Lukoil should prioritize open reporting. Such reporting will enhance accountability to all stakeholders. The reporting should address six aspects, which will make it possible for the organization to cover all the three parts of the industry without much hassle (Great Britain and Great Britain, 2004). Foremost, the organization should employ an articulate vision and strategy. The strategy should provide the corporate managers with the ability to come up with the most innovative ways of making the organization survive in what can be considered a resource-strained environment. Considering the rate at which the natural resources are depleted without replenishment, it is a matter of common knowledge that the year 2053 will be a time when the oil reserves will have shrunken significantly. With the oil reserves shrinking, the organization will have to come up with other strategies to give the organization a competitive advantage and create value for the organization. Analogically put, the organizations in the oil industry will be like organizations newly joining an industry because the business platform will have totally changed (Krosinsky et al, 2011).
The second and the third aspects of the reporting structure with regard to sustainability should entail the comprehensive modification of the management systems (Cadman and Hume, 2012). Bureaucratic management structures will not effectively serve an organization in an environment where the resources are substantially strained. This is because bureaucracy does not give room for innovation – a critically needed element in coming up with options that will enhance efficiency and effectiveness. The reporting structure will require an inclusive management system so that the Lukoil employees can be in a position to give important views with regard to renewable options. The fourth aspect of the sustainability reporting structure will require the management to determine the material issues for reporting (Podomnik, 2005). The fifth and sixth aspects will largely be concerned with selecting indicators, collecting data and the ultimate analysis and assessment of the information.
As part of the strategy, the organization will come up with certain sustainability indicators. Among the most potent indicators will be the environmental indicators. These include: Green House Gas (GHG) emissions, alternative energy sources and so on. The environmental audit will focus on the extent to which such indicators will have been recorded. Other indicators can be taken from the ecosystem, and this essentially means that the organization can use such features as fresh water and biodiversity as indicators (Dixon, 2008). Other indicators include air emissions and spills to the environment. In the year 2007, Lukoil used these indicators as a way of evaluating sustainability. These can continually be used because; as much as the industrial conditions may change within the industry of oil and natural gas, rarely will these indicators change (Great Britain and Great Britain, 2004). With regard to these indicators, there is a lot that Lukoil can do to gain competitive advantage in the year 2053. Notably, the organization can employ novel technology is reducing such negative indicators as green house gases.
Secondly, Lukoil Company will have to carry out a thorough environmental scan before embarking on its operations. These will call for use of novel technology in estimating the extent to which the operations may interfere with the flora and fauna of the prospective site (Eweje and Perry, 2011). In the year 2007, Lukoil used the infrared satellite image of the prospective drilling site in the north eastern part of the Caspian Sea. In point of fact, this is one among the most potent way of employing technology to uphold sustainability. It is a matter of common knowledge that technology is not static. In the year 2053, the technological platform of the world will have changed significantly. Through adequately employing technology, the organization will no doubt gain a competitive advantage over such competitors as shell and ExxonMobil. Through robust corporate social responsibility pan, Lukoil will gain the competitive advantage associated with the general public, the consumers – both local and international – as well as the government.
In addition to dealing with the environmental concerns, Lukoil will have to address various challenges posed by the socio-political arena (Johansson, 2011). In point of fact, the government has a significant role to play as far setting business strategies and goals is concerned. Considering that Lukoil Company is in the industry of oil and natural gas, it goes without saying that the government restrictions impact greatly on its decisions. Much like any environmentally aware government (and all governments are) the Russian government is a champion of sustainability. It is in the forefront of fighting climate change. As such, the Russian government has imposed strict regulations with regard to disposal of waste and emission of the greenhouse effect gases (Grace, 2005). In this respect, the ministry in charge of defense and natural resources management has asked the Lukoil Company to be a part of the government sponsored efforts of fighting against the depletion of the environment.
In conclusion, it is clear from the foregoing that the primary challenges that are likely to affect Lukoil Company in the year 2053 revolve around the fact that the resources it deals in are non-renewable, and that the government is continuously changing the business environment. The government will make the business platform a little rough trough encouraging competition. Clearly the primary strategy for gaining resiliency and staying competitive in the future includes such practices as investing in renewable sources of energy, employing sustainability reporting, encouraging innovation within the organization, and employing reliable compliance audits, collaborating with the key stakeholders as well as addressing all sections of the industry. This way, the organization will be the most resilient as it will have competitive advantage and higher value as well as acceptability among the campaigners for green business.
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