Case 8: Environmental Disasters and Ethics of International Corporations Bianca Lofton, Will Phillips, Yasin Polat, Justin Jung,

Dario Banda, and Jerry George November 20, 2013 Professor Woldu IMS 3310-002

Introduction The Bhopal Disaster was an accident on the night of December 3rd, 1984 at a chemical manufacturer, Union Carbide Corporation. This accident was started by the leak of 42 tons of a poisonous gas MIC that is used for raw material for pesticide and 80,000 pounds of poisonous gas was leaked from a storage tank for two hours after the accident (Rosenberg). Thousands of people were killed and more were severely harmed and unable to return to work (Broughton). On February 1989, UCC reached a settlement of $470 million (Corporate). Dow, since its merger with Union Carbide, refuses to assume these liabilities in India or clean up the toxic poisons. On April 20th 2010, BPs Deepwater Horizon, oil-drilling rig, exploded in the Gulf of Mexico spilling 200 million gallons of crude oil over months till it was capped on July 15th (Gulf). Methane gas inside the well erupted and exploded while spurting. The rig sunk and large amount of oil was spilled out from the drilling riser. This was the worst case in history compared to the Exxon Valdez oil spill (250k barrels) and 2007 South Korea oil spill (80k barrels) (Gulf). In March 24th 1989, Exxon Valdez spilled about 11 million gallons of crude oil at Prince William Sound in Alaska (Exxon). The cause is Exxon Mobils oil tanker ran aground and, based on the yield of crude oil, this is one of the worst oil spill accidents. Exxon entered into broad scale purifying job. They hired people and paid them $16.96 per hour. On June 25th 2008, the total damage of the Alaskan oil spill was $500 million and the US Supreme Court sentenced Exxon Valdez to $2.5 billion dollars for exemplary damages (Exxon). Problems These disasters serve as an eye opener in regards to safety, the environment, and human rights. With lax regulations and less government involvement companies are more likely to cut corners and make the cheapest decisions in order to maximize profits. These disasters create

many problems such as damage to land, water, animals, people, not to mention the cost of clean up, medical bills, as well as the likely lawsuit from the affected. It is essential for a companys management to take responsibility and bear the consequences of such a tragic event. UCC tried to place all of the blame for the event solely on the shoulders of the companys Indian subsidiary. They even concocted stories that Sikh extremists groups had sabotaged the company and this had led to the catastrophe (Broughton). This was completely unethical and irresponsible. When management finally did own up and accept responsibility for what had occurred, the Indian Supreme Court mediated a settlement that had UCC pay $470 million to the Indian government which amounted to about $500 per victim, which is not nearly enough to cover the necessary medical bills (Corporate). Contributing factors of the gas leak included the storing of MIC in large tanks that were overfilled (no regulations in practice), faulty protective equipment partly due to poor maintenance (outdated technology and no regulations), and unskilled employees (no proper training) (Broughton). Negligence was another contributor to the Bhopal disaster (Sutcliffe). Solutions First and foremost, UCC should never have located the chemical plant in an urban area within close proximity to such a large population of people. It is reported that nearly 120,000 people lived in the area near the plant and yet the toxic chemical plant was still built (Dutta). Second, UCC could have averted the disaster by providing adequate training to the unskilled employees of the companys Indian subsidiary. They should have taken an active role in employee training, safety protocols, and providing clear guidelines and objectives on proper use and maintenance of equipment to safeguard the occurrence of catastrophes. They could have motivated employees and their Indian subsidiary by providing funds for safety training rewards

as incentives to abide by safety regulations. They had a responsibility to ensure that their Indian subsidiary adhered to the highest standards, and they did not uphold that. UCC should have done surprise inspections to make sure their Indian subsidiary and employees were following safety regulations and that all equipment was running, in good working order, and used properly. UCC should have had catastrophe plans in effect and employees should have been trained what to do just in case. These emergency plans should have included hospitals and medical staff with proper training in the event of a chemical disaster. There werent enough doctors and medical staff, and the few that were there didnt have the expertise or knowledge of the chemical MIC and how to treat patients (Dutta). UCC was not protecting human rights. Their bottom line should not interfere with human life in regards to having a safe environment for the employees and Bhopal residents (Corporate Crimes). UCC was very greedy and profit driven with no regard to safety because they cut the factory work force down by half. They also eliminated the maintenance supervisor position and cut safety training at the plant from a six-month time period down to half a month, clearly negligence on their part (Dutta). After the Bhopal tragedy in 1984 the chemicals industry implemented the Responsible Care program by providing awareness through educating the community, and providing emergency and safety standards. Responsible Care is now practiced by 57 national corporations in 65 countries worldwide. Responsible Care companies have reduced process safety incidents by 58% over the past 18 years. From 1988 to 2011, Responsible Care companies have reduced hazardous releases into the air, land and water by more than 76% (Responsible Care). There are social responsibility programs in place that companies can abide by but the important thing that corporations need to keep in mind is collaborating with the government and

communities in the host country to improve the environment and uphold the highest standards and expectations in regards to safety, environment, and human rights. Corporations should uphold the same standards that would be required in the developed nation in the host country even if that nation were a third world nation. Everyone should have the same equal human rights. Lessons Learned The lesson to be learned from this is that companies and countries should regulate social responsibility, implement safety regulations, and most importantly stay engaged during and after the disasters. When companies come in and create subsidiaries, they should comply with laws and regulations that pave the way for social responsibility. UCC consistently attempted to manipulate, complicate, and withhold scientific data that had to do with the toxic spill. By doing this they failed to practice social responsibility. Furthermore, UCC discontinued operation at its Bhopal plant without cleaning up all of the waste that it left behind (Broughton). The plant continues to leak several toxic chemicals and heavy metals that have found their way into local aquifers (Chander). Companies need to stay engaged during and after any disaster, especially cleaning up the effected area (oil or poisonous chemicals) to not cause further damage or harm, and making sure they provide the necessary means for the people to seek the proper treatment. Other small-scale industries have been able to dump toxic wastes as they see fit because regulations have become less stringent. The water that locals drink is becoming poisonous due to the negligence of industrial companies. The Anglo-Dutch Company, Unilever, was caught dumping toxic mercury onto land that was next to a school (Broughton). Governments need to become aware of what is at stake and regulate the responsibility of companies. When a companys management proceeds in an ethical manner and the government puts laws in place that force companies to take more responsibility, its easier for both parties to move forward.

Alternatives & Recommendation There are alternatives that companies can do to avoid environmental disasters. Companies need to change their behavior towards a more environmentally sustainable behavior, create strong ethical guidelines, implement safety regulations and modernize technology. If companies apply these measures into their business strategies disasters are less likely to occur. All corporations must change their behavior if they have not done so. Corporations behavior plays a huge role in being sustainable and precautious. Many corporations just want to be bigger and want to make more money in whatever way possible. This leads them to do unethical things to make more revenue. Corporations need to focus on being more environmentally conscious rather than just increasing in numbers. Environmental friendly will not only keep you away from harm but it also will better the environment for the people, landmarks, waterways and many more things. The company itself decides if they are going to pollute the water and land rather than spending on research to find a sustainable and safe way to release the waste. Enforcing ethical guidelines will not only allow you to function better, but will also make you aware of all your surroundings in the environment. If other corporations see that XYZ Company is clearing their waste properly without harm, most likely they will follow their example. Having all employees from factory line workers to the CEO that follow ethical guidelines will increase safety and production in all the company does. Ethical guidelines must be enforced but also having strict safety regulations for each employee to follow will help ensure that all equipment is running properly, in good working condition, and that it is being used and maintained properly. The Bhopal spilled could have been avoided if every employee had strict safety regulations and ethics to follow. When you have

these to follow you tend to ask yourself that if what you are doing is right and ethical. The spill happened because there wasnt proper management and most if not all safety procedures were not followed. Technology plays a major factor in avoiding disasters, having the right technology can make you more innovative and can allow you to compete with other big corporations. Apart from competing, having the right technology can allow you be warned before another catastrophe that could cause great harm to other people. Setting up your corporation for the long term will make you sustainable due to all the research you have put into the corporation. Conclusion With stricter regulations and more government involvement there will be a stronger obligation to follow the ethical and moral guidelines that can be put into place. Without incentives to follow rules and regulations there is no driving force capable of steering the ethical behavior of companies in a better direction. It is becoming easier to keep track of dangerous materials and wastes with the new technology that can keep track of everything down to a extremely minute number. Running a business is more than numbers, inventory and employees, business should strive to make ethical choices and help improve the environment around them.

Works Cited Broughton, Edward. "The Bhopal disaster and its aftermath: a review." Environmental Health 4.6 (2005). Web. 16 Nov. 2013. <http://www.ehjournal.net/content/4/1/6>. Chander J. Water contamination: a legacy of the union carbide disaster in Bhopal, India. Int J Occup Environ Health. 2001;7:7273. Corporate Crimes. Green Peace International , Aug. 2002. Web. 16 Nov. 2013. <http://www.greenpeace.se/files/1500-1599/file_1587.pdf>. Dutta, Sanjib. "The Bhopal Gas Tragedy." ECC Collection. ICFAI Center For Management and Research, 2002. Web. 16 Nov. 2013.<http://www.econ.upf.edu/~lemenestrel/IMG/pdf/ \ bhopal_gas_tragedy_dutta.pdf>. "Exxon Valdez." US Environmental Protection Agency. 01 11 2013: n. page. Web. 12 Nov. 2013. <http://www.epa.gov/oem/content/learning/exxon.htm>. "Gulf Oil Spill." Smithsonian Ocean Portal. 28 02 2010: n. page. Web. 12 Nov. 2013. <http://ocean.si.edu/gulf-oil-spill>. Rosenberg, Jennifer. "Poison Gas Leak in Bhopal."About.com. n.d. n. page. Web. 12 Nov. 2013. <http://history1900s.about.com/od/1980s/qt/bhopal.htm>. Responsible Care. American Chemistry Council Incorporation, n.d. Web. 16 Nov. 2013. <http://responsiblecare.americanchemistry.com/>. Sutcliffe, Virginia. "Bhopal's Legacy: New Vigilance in the Chemical Industry." Occupational Hazards (2008): 39. Web. 16 Nov. 2013.<http://web.ebscohost.com.libproxy.utdall as. edu/bsi/pdfviewer/pdfviewer?vid=5&sid=f0ae3a3d-a0a6-406a-9b75-638225c9408 a%40sessionmgr4&hid=22 >.