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Alternative 2- Use environmental friendly technology in Oil extraction:

Alternatively, the bank can provide financial assistance to oil development projects undertaken by government or to oil and mining companies by providing them environmental friendly technology or machines on finance lease. The machineries/technology includes hydraulic fracturing, water powered drilling, directional drilling which might enable the energy sector to meet its production requirements and protect the environment. (HARC, 2020)

This option will ensure environmental cost and damage is reduced, water wastage is reduced, saves energy and requires low maintenance. Similarly, it will align the institution’s operations and activities with its goal of meeting economic growth and ensuring environmental sustainability. However, the hydraulic fracturing machinery might result in water wastage and shortage as it consumes a lot of water which is the region’s key concern.

Alternative 3- Finance environmental research programs or recovery of the species program:

Various companies operating in the energy sector requires finance to conduct environmental research to understand the challenges involved in oil extraction and develop environmental friendly solutions to these issues. Similarly, various oil and gas companies requires finance to fund the recovery of species at risktherefore, in order to meet its objectives, the institution can offer finance to these companies at 0% mark-up in order to support environmental sustainability and align its activities and operations with its objective.

Alternative 4- Environmental cost:

The bank can provide financial assistance to the energy sector by adding a new term in the financing contracts and specifying that the borrowing party will need to pay 5% of the total finance of the project as environmental cost i.e. costs of damaging the environment. This amount will be contributed to the government to conduct environmental research and implement solution to the environmental problem.

Decision and Implementation

It is recommended to the business to provide financial assistance to the energy sector by offering environmental friendly machinery on finance lease. Growth of energy sector is integral for the economic growth of the country and providing finance to companies with conservative production plans will hinder the economic growth of the country as the demand of oil is significantly high. Other options are also not recommended considering, environmental issues will not be resolved as result of implementation of environmental cost (Pedraza, 2014). Moreover, providing financial support to research programs will be effective in the long term as developing and implementing a friendly solution to environmental problems will take time.

As the company offers financial assistance to energy sector globally, the bank must have knowledge regarding environmental practices and friendly technology used by its clients. Therefore, the decision will be implemented by purchasing the technologies at reduced prices from these clients or other suppliers such as U.S. as the environmental friendly drilling program was initiated by U.S. In addition, the bank will need to estimate the annual installments, tenure of the lease, interest rates and other terms and conditions involved in financing lease contracts. Moreover, additional finance required for the project and managing other cost required in oil extraction will be provided by the bank after analyzing the oil extraction process of the company to ensure environment friendly practices are adopted by the company.

Measure of Success

Evaluation of Plan:

In order to evaluate the effectiveness of the recommendation provided, Sandra will use quantitative environmental measures such as percentage of water waste before and after using the new technology in oil extraction process, percentage of GHG emissions, trend in the number of death in aquatic life in order to assess the volume of toxicity in water, reduction inCO2 emissions, hydrocarbon spills to the environment, percentage of reused water and material. Other financial measures to evaluate effectiveness of the recommendation in controlling the environmental damage will include return on investment and profit margins.

Management’s Score:

The corporate citizenship department of Royal bank of Canada handled the situation effectively so far. The department received various emails from RAN, which also asked the wife of the bank’s CEO to pressurize him. Despite various emails and a backlash from RAN and other environmental activities, the institution remained stick to the decision of providing financial support and services to energy sector. In addition, Sandra’s conclusion of the decision seemed justified and reasonable as almost every industrial sector involves environmental consequences, for instance, farming involves the use of pesticides, cars involves gas guzzlers, many of its clients are smokers, but, that does not mean, the bank will discontinue providing services to these sectors. Therefore, the management will be given a score of 5.

Lesson from the case:

It is learned from the case that businesses’ and financial institutions have an objective of promoting corporate social responsibility and environmental sustainability. Businesses should ensure that their services and operations are aligned with the objective of environmental sustainability. However, despite casing environmental damage, a product or a service cannot be discontinued as that product might be crucial for the economic and social development of the project. Similarly, almost every business and activity have environmental risks attached with it. These environmental risk cannot be eliminated completely, however, steps can be taken by every organization to minimize it...........................

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