Chevron Corporation Case

Environmental risk is the possibility of degradation of the environment owing to human activities , resulting in direct or indirect harm to people. A good example is the Bhopal gas tragedy of 1984, which exposed the tremendous risks associated with poor safety and environmental management practices. Thousands of people lost their lives after methyl isocyanate gas leaked from the Union Carbide plant in Bhopal. Thousands more were injured and left homeless. Memories of Bhopal are still alive in the minds of most Indians. (See case at the end of the chapter for more details).

The 1986 Chernobyl nuclear disaster in Kiev, Ukraine is also etched in the minds of many people. The explosion of the nuclear reactor killed 31 people. It also released large quantities of radioactive substances into the atmosphere. In scale, complexity and long-term consequences, it was the most catastrophic incident in the entire history of atomic energy use across the world. Cancer spread across the region and farmlands became contaminated. At least 400,000 people were forced to leave their homes, never to return. Belarus became a zone of ecological disaster. Even today, the disaster continues to affect parts of Ukraine and Belarus.

Bhopal and Chernobyl served as wake-up calls to organizations. Environmental disasters have, however, continued to occur subsequently at regular intervals. The Valdez (United States) oil spill of 1989 and the Tokaimura (Japan) nuclear accident of 1999 are prominent examples. In developing countries like India, environmental issues often take the backseat and accidents are quite common.

Quite clearly, companies need to manage environmental risks carefully. But many do not have a clear idea of how to go about the task. Most companies view environmental risks differently from other risks. Typically, a health or safety department deals with issues concerning the environment. Moreover, environmental risks typically create confusion and vagueness in the minds of decision makers. Managers are not clear about what and how to invest in improving environmental performance since the benefits are difficult to